Prime Minister Gordon Brown has fuelled expectations of tax cuts in the upcoming Pre-Budget Report by stating there is an 'emerging consensus' internationally on the need for fiscal policy to support the interest rate cuts announced by the Bank of England and European Central Bank.

But the Treasury has refused to comment on the contents of Darling's PBR, to be delivered within the next few weeks, and has dismissed as 'speculative' a report in the Financial Times which says he was considering an emergency package of tax cuts and public spending, The Press Association reports.

'There's going to be a major package of tax cuts and public spending,' the Sunday Mirror cites an unnamed 'senior ministerial source' as saying.'We're not trying to spend our way out of trouble, but urgent action is needed to stimulate the economy. We're talking about measures totalling between £10bn and £15bn.'

The paper suggests Darling could increase tax credits for low-income families, extend the stamp-duty 'holiday' on less expensive homes, boost the winter fuel payment for the elderly, delay planned hikes in petrol duty - even cut the basic rate of income tax.

Further reading:

KPMG predicts focus on economic forecasts in PBR