LONDON – Britain’s Conservative government will announce a key budget update on Wednesday aimed at boosting the economy and winning over voters as it trails badly in polls ahead of expected general elections next year.

Expectations of tax cuts rise when Finance Minister Jeremy Hunt presents the Tories’ tax and spending plans to Parliament at 12:30 GMT, along with the latest economic and financial forecasts.

Prime Minister Rishi Sunak was buoyed last week by news that he had met his target of halving inflation and received a further hike on Tuesday after year-to-date borrowing fell short of forecasts.

But the Conservatives are lagging behind the main opposition Labor party – whose leader Keir Starmer has benefited from public anger over a cost of living crisis that has led to wage cuts, strikes and millions of Britons struggling to pay their bills.

However, Sunak and Chancellor Hunt have warned against big gifts despite the recent fall in still-high inflation and pressure from some parliamentary colleagues.

Still, Sunak pledged this week to cut taxes “carefully and sustainably” over time after meeting his inflation-cutting target in October.

“We can’t do everything at once. This requires discipline and we have to set priorities. But over time we can and will reduce taxes,” he said.

He also vowed to crack down on welfare fraudsters to get more people back to work, pledging 4.5 billion pounds ($5.6 billion) to the automotive, aerospace, green energy and life sciences sectors, among others to invest.

‘NEXT PHASE’

Sunak said on Monday he was ready to move forward with the “next phase” of the government’s economic plan after the UK’s annual inflation rate fell to 4.6 percent last month from 10.1 percent in January.

At 4.6 percent, inflation in the UK remains the highest among the world’s richest G7 countries.

Expectations of tax cuts were reinforced on Tuesday when Finance Minister Laura Trott said: “Tomorrow we will talk about growth, and tax cuts, now we are in a position to talk about tax cuts.”

With another budget likely before the next election, economists said Hunt could either announce tax cuts on Wednesday that would take effect in the spring – or wait until the government’s budget update in March.

“With the general election looming, the Conservatives performing poorly in the polls, the government’s finances performing better than expected and Sunak’s target of halving inflation already achieved, the chancellor could resort to some winning tax cuts,” said Victoria Scholar, head of investment at Interactive Investor.

It is widely rumored that the government will announce cuts to inheritance tax and the levy on house purchases known as stamp duty.

Political analysts argue that such cuts could help Conservatives win over voters, even as calls grow louder for income tax cuts to help more people.

A cut in inheritance tax, or the amounts levied on estates upon death, would controversially benefit society’s wealthiest, while a cut in stamp duty was aimed at boosting Britain’s flagging property market.

Food inflation remains in double digits while households and businesses continue to pay high energy bills after the government scrapped subsidies last year.

Rents and mortgage repayments have skyrocketed for many after a series of interest rate hikes from the Bank of England that helped bring down decades of inflation.

Another big promise from Sunak was to keep the UK economy growing – but the risk of recession remains at risk by 2024 after it stalled in the third quarter of this year.