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Gordon Brown today suggested the government will announce tax cuts in the forthcoming pre-budget report to push the UK out of recession.
In an interview with GMTV this morning, the prime minister said: "What I am determined to do is to get all countries around the world trying to get their economies moving again and one way you can do that is by putting more money into the economy by tax cuts or by public spending rises," he said.
"That's something that we've got to look at in the next few weeks."
At the weekend the Financial Times reported that ministers were drawing up an emergency package of tax cuts. It said that, according to experts, cuts would have to be worth about £15bn to have much effect.
Government sources have played down the prospects of tax cuts on that scale, although Brown's words today suggest that a significant package is being prepared.
Brown also said the pre-budget report was coming "in the next few days". One report today said it would be unveiled next week.
Brown has made clear he does not want to cut public spending so any tax cuts are likely to have to be funded from borrowing.
The Conservatives have attacked that approach – warning it risked pushing up interest rates and requiring tax rises once the economy recovered.
"He's talking about borrowing even more. And what does that mean? The risk of higher interest rates – and mortgage bills – and higher taxes to pay off the debt tomorrow," party leader David Cameron said at the weekend.
The opposition is expected to announce plans tomorrow for tax cuts funded from savings in government spending.
No details have been confirmed but reports suggest they will involve scrapping National Insurance payments for new workers to make it easier for employers to take staff on.
The Liberal Democrat leader, Nick Clegg, whose party promises tax cuts for most people paid for by extra levies on high earners and higher green taxes, told Sky News the government would be "playing smoke and mirrors with the British electorate" if it promised tax cuts paid for by borrowing.
"You are in effect saying we will give you tax cuts today which you have to pay for tomorrow. That is wrong. You need permanent, big tax cuts."
The answer was to close "multi-billion pound tax loopholes" exploited by the super-rich, he said.
Brown will use his foreign policy speech tonight at the Lord Mayor of London's banquet at Guildhall to say the summit of the G20 biggest world economies must establish consensus on a new Bretton Woods-style framework for the international financial system, featuring a reformed International Monetary Fund which will act as a global early-warning system for financial problems.
Following last month's co-ordinated international moves to refinance the banks and slash interest rates, Mr Brown will say that it offers "the chance to forge a new multilateralism that is both hard-headed and progressive".
And he will outline five great challenges facing the world: to win the battle of ideas for democracy over extremism and terror; strengthen the global economy; tackle climate change; resolve conflicts and rebuild fragile states; and meet the UN's Millennium Development Goals.
"In Washington this weekend, the British government will work with its G20 partners to establish that consensus and with it to begin to build a new Bretton Woods with a new IMF that offers, by its surveillance of every economy, an early warning system and a crisis prevention mechanism for the whole world.
"My message is that we must be: internationalist not protectionist; interventionist not neutral; progressive not reactive; and forward-looking not frozen by events. We can seize the moment and in doing so build a truly global society," he will say.
Brown's arrival will be greeted by anti-poverty and environmental protesters urging him to call time on the global greed which they hold responsible for the financial crisis.
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