A Cabinet minister has said he thinks this week’s Budget could be the “most honest” in years as the Prime Minister prepares to say that Wednesday’s statement will “embrace the harsh light of fiscal reality”.

Chancellor of the Duchy of Lancaster Pat McFadden said on Monday morning that Rachel Reeves’ first Budget would “end the fiscal fiction of things being announced which had no money set aside for them”.

His comments come ahead of a speech by Sir Keir Starmer later on Monday, in which he is expected to warn of “unprecedented” economic challenges.

Pat McFadden, the Chancellor of the Duchy of Lancaster, told BBC Radio 4’s Today programme on Monday morning: “I think you’re going to get the most honest Budget on Wednesday that you’ve had in many years.

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“We’re going to end the fiscal fiction of things being announced which had no money set aside for them.”

In a speech, Sir Keir is expected to promise that the Budget will “ignore the populist chorus of easy answers” amid a series of expected tax hikes, including an increase to employer national insurance by at least one percentage point.

Referring back to the governments of Tony Blair and David Cameron, the Prime Minister will tell people during his speech that “this is not 1997, when the economy was decent but public services were on their knees.

“And it’s not 2010, where public services were strong, but the public finances were weak. These are unprecedented circumstances.

“And that’s before we even get to the long-term challenges ignored for 14 years: an economy riddled with weakness on productivity and investment, a state that needs urgent modernisation to face down the challenge of a volatile world.”

He is also is expected to say he will not offer the UK’s problems as “an excuse”, adding: “Politics is always a choice. It’s time to choose a clear path, and embrace the harsh light of fiscal reality so we can come together behind a credible, long-term plan.”

Ministers have been facing repeated questions over the Government’s definition of “working people”, after Labour’s election manifesto pledged not to increase taxes on working people – explicitly ruling out a rise in VAT, national insurance and income tax.

They have come under pressure to spell out precisely who would and would not fall under this definition, given the extent of expected tax rises due to be announced this week.

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Mr McFadden suggested that “income levels and job descriptions is not the right way to look at” whether or not somebody classes as a working person.

When asked on BBC Radio 4’s Today programme what people who are not working people are called, he said: “When we talked about working people we referred to the promises that we made in the manifesto around the taxes on wages that people pay – they won’t go up when the Chancellor gets to her feet on Wednesday.”

Pushed further on the question of whether small business owners are working people, he added: “I don’t think it’s about the definition of wages, it’s about keeping your promises, and we will keep our promises when the Budget takes place on Wednesday.”

Asked again about whether people such as landlords class as working people, Mr McFadden said: “I honestly think this thing about income levels and job descriptions is not the right way to look at this.

“The right way to look at this is: will we stick to the manifesto promises that we made on tax? And we will, and you’ll see that when the Chancellor gets to her feet.”