UK Chancellor Alistair Darling will this week stake his government's future on tax rises for the rich to pay for continued support for the recession-hit economy and to bring down a record budget deficit.

With an election due within six months, Wednesday's pre-budget report may well be the last throw of the dice for Mr Darling and Prime Minister Gordon Brown's Labour Party to narrow the Conservatives' lead in opinion polls.

A windfall tax on banks is also a possibility after the government bailed out the sector at the height of the global credit crisis.

Treasury sources told Reuters the £175 billion deficit pencilled in for this fiscal year will be revised slightly higher as Mr Darling will have to admit the economy will shrink by 4.75 per cent in 2009, much deeper than he forecast in April.

But he will stick to his forecast of GDP rising by one to 1.5 per cent in 2010 and say that he had always said growth would resume at the turn of the year.

Beyond that Mr Darling will try to reassure financial markets jittery about Britain's creditworthiness by sketching out spending cuts, targeted tax hikes and billions of pounds of savings from moving civil servants out of expensive London.

Final decisions have yet to be taken but government sources have said there will be a balance of tax rises for the better off and giveaways for the most vulnerable as Labour tries to draw a clear dividing line between it and the Conservatives.

"You want to see the people who benefited most from the boom to pay something back," one source said. "There will be one very clear story after."

After a decade of prosperity fuelled by cheap borrowing, the economy crashed spectacularly after the global credit crunch took hold in 2007 and has now been in recession for 18 months, putting nearly a million people out of work.

Public anger has mostly been directed at the banks, many of which have only survived because of billions of pounds of state handouts but are still paying out huge bonuses to their staff.

Many newspaper front pages led on Friday with a report by the spending watchdog that put the total value of steps taken to bail out some banks and support the sector in general at some £850 billion.

The treasury has said the final cost to the taxpayer will be much lower, but some analysts speculate the government might choose to slap a windfall tax on the banks, which are enjoying a return to bumper profits.

"It is an option," one government source said.

Such a move would be highly symbolic given Labour kicked off its rule in 1997 with a highly popular tax raid on privatised utility companies but could also be counterproductive given some of the biggest banks are partly owned by the state.

Punitive tax rates on very high earners could be another option. Labour already announced a new 50 per cent tax rate in April and accountants Ernst and Young have calculated a 60 per cent rate on those earning more than half a million pounds could raise two billion.

Changes to inheritance and capital gains tax could also be on the cards. Any such populist measures would probably not be enough to put a major dent in the yawning budget gap but would put pressure on the Conservatives to spell out their own plans.

So far, the Conservatives have pledged to start deficit reduction earlier and sketched out a very tight squeeze on the public sector with pay freezes for millions of workers. They have also said they would hold an emergency budget within 50 days of taking office, if elected.

Buoyed by two recent polls showing the Conservative lead narrowing and pointing to the possibility of a hung Parliament where no one has an outright majority, Labour officials are hoping the pre-budget report will map out divisions between the two main parties.

But few doubt that tax rises and a massive squeeze on spending are inevitable whoever wins the next election.