Rishi Sunak will set out a package of support to address the soaring cost of living on Thursday.
The Chancellor is expected to unveil his plan as the Government seeks to draw a line under the partygate row and focus on the squeeze in living standards caused by soaring inflation.
A windfall tax on oil and gas giants, who have benefited from globally high prices, is widely expected to help fund measures which will be targeted at the most vulnerable.
Measures which have been discussed as part of a package worth around £10 billion could include a further increase to the warm homes discount to help low-income households cope with rising energy bills.
Other measures which have been discussed include increases in the winter fuel allowance, a further cut in council tax or a VAT cut.
The need for extra help was illustrated by Ofgem chief executive Jonathan Brearley’s indication that the energy price cap to increase by a further £830 to £2,800 in October.
The Chancellor will need to be careful that any extra help he puts in to the economy does not add further to inflation, which is currently running at a 40-year high.
A Treasury spokesman said: “We understand that people are struggling with rising prices, which is why we’ve provided £22 billion of support to date.
“The Chancellor was clear that as the situation evolves, so will our response, with the most vulnerable being his number one priority.
“He will set out more details tomorrow.”
On the issue of a windfall tax, which ministers have previously resisted because of the potential impact on investment, a Tory source said the arguments had been “tested rigorously” within both the Treasury and wider government.
“There’s a high threshold that any package that we bring forward delivers more gain than pain, that the gain is worth the pain, that it does not jeopardise the investment,” the source said.
“You don’t introduce random taxes that make the economic environment unpredictable.”
As well as the possible impact on inflation, the Chancellor’s ability to help beyond the £22 billion package already announced will also be restricted by the state of the nation’s finances.
Prime Minister Boris Johnson said the hundreds of billions poured in to dealing with the Covid pandemic had left a “very difficult fiscal position”.
At a Downing Street press conference he acknowledged households “are going to see pressures for a while to come” as a result of the spike in global energy prices and supply chain problems following the pandemic.
But he said: “We will continue to respond, just as we responded throughout the pandemic.
“It won’t be easy, we won’t be able to fix everything.
“But what I would also say is we will get through it and we will get through it well.”
Environment Secretary George Eustice told LBC: “We are treading a very difficult path here because if we just borrow lots more money and throw it at the situation we could compound inflation, we could make the situation worse and see prices rise further.
“So we have got to try to dampen that inflation and that means showing some restraint but, equally, helping people, particularly those on the lowest incomes, who will struggle with some of these price rises.”
Mr Eustice, whose portfolio includes the food industry, suggested consumers are already switching to cheaper brands to cut their grocery bills.
He previously suggested that is a way to save money but insisted: “I wasn’t lecturing or telling anyone what they should do.
“What I was pointing out is that last time we had this price spike, in 2008, what actually happened was that household spending on food didn’t rise by as much as food prices and that’s because people did change their shopping habits, they bought different items and in some cases, yes, they downtraded to some of the value brands.
“That’s just an observational comment; it’s what some families did in 2008 and it is what people will be doing now.”
As well as food, the cost-of-living squeeze is being driven by soaring energy prices.
There has also been speculation that a windfall tax could extend to electricity generators.
But the chief executive of energy company SSE, Alistair Phillips-Davies, told BBC Radio 4’s Today programme: “I don’t think this Government is going to impose a windfall tax on successful sectors that are delivering for the UK and creating jobs and making sure that we avoid these crises in the future by bringing in lower-cost energy from indigenous sources.”
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