Rishi Sunak and Jeremy Hunt are set to rule out a cut to corporation tax in next week’s “slimmed down” Budget, putting them on a collision course with Boris Johnson and Liz Truss.

Striking unions are also expected to be disappointed as the Treasury is poised to rule out any major public sector pay rises in a bid to keep the country’s finances under control.

The Prime Minister’s immediate predecessors are among a significant cohort of Tories urging the Government to slash business taxes as part of wider calls to boost the economy.

Mr Johnson openly challenged his successor to cut corporation tax to “Irish levels or lower” in a wide-ranging speech last week, despite him failing to enact such a policy during his time in No 10.

Cutting corporation tax is also believed to be part of the Conservative Growth Group’s dossier of demands that was submitted to the Chancellor last week as part of its efforts to shape the Budget.

The caucus of Tory MPs was set up by staunch supporters of Ms Truss and while allies of the former prime minister told i that she will not seek to undermine Mr Sunak or Mr Hunt, the source added she is “likely to get behind any policies that are developed by the group”.

The Office for Budget Responsibility submitted its final round of forecasts for the Budget on Friday last week, with the watchdog expected to put forward a significantly improved economic picture from Mr Hunt’s Autumn Statement in November.

Back then, the Chancellor was looking at having to raise taxes in an attempt to deal with the fallout of Ms Truss’s calamitous “mini-Budget”, but officials have been surprised by better than expected economic news recently.

But Treasury sources have played down any suggestion that the improved economic forecasts would lead to a change in direction for the Government.

Instead officials highlighted the Institute for Fiscal Studies’s pre-Budget analysis that one-off measures, such as prolonging the freeze on fuel duty and extending energy bills support would be affordable, but not large public sector pay rises or a cut to corporation tax.

“They backed up what we have been saying for months,” a Treasury source told i, adding that next week’s fiscal statement is likely to be much thinner than usual.

“It will be steady as you go. Very little has changed this month compared to November.”

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Such an approach is expected to go down badly among vast swathes of the Tory benches, many of whom fear a “do nothing” approach to the economy will play badly for them electorally.

Mr Hunt is also expected to announce a smaller increase in defence spending than was being called for by the Ministry of Defence.

Defence Secretary Ben Wallace was pushing for between a £9bn and £11bn uplift in defence budgets to counteract the impact of inflation, but reports have suggested the final amount will be well short of such figures.

Chair of the Defence Select Committee, Tobias Ellwood, told i that it looked as though the Treasury was “managing expectations”. “[The MOD] won’t get what they are requesting or what is needed given the growing security threats,” he said.

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