Ahead of next week’s budget, the chancellor is said to have been handed good news by the independent Office for Budget Responsibility (OBR), which has cut borrowing forecasts until 2022.
According to the Financial Times, the OBR had underestimated the recent strength of personal tax receipts and corporation tax revenues.
It means the deficit will be cut by about £13bn for the 2018-19 financial year, the newspaper added.
Any improvement in the public finances will give Mr Hammond more room to fund government spending pledges, such as Prime Minister Theresa May’s promise of an extra £20bn a year for the NHS in England by 2023.
The chancellor had previously left open the door to raising taxes in next week’s budget to pay for the NHS pledge, but the Financial Times said the commitment could now be covered until the next general election in 2022 by the improved OBR forecasts.
Both the DUP, which Mrs May relies upon to prop up her government at Westminster, and Tory Brexiteers have threatened to vote against the budget in protest at the prime minister’s plan for leaving the EU.
Meanwhile, Mr Hammond is having to deal with growing expectations of a spending splurge after Mrs May used her Conservative Party conference speech to declare austerity will be “over” once a Brexit deal is secured.
The chancellor is also under pressure to find more cash to ease the roll-out of universal credit welfare changes.
The Sun reported 54 Tory MPs have signed a letter to Mr Hammond to demand he scrap an inflation-linked 3.5% tax rise on beer.
The letter states: “Beer duty acts as a tax on our nation’s pubs, and has the unintended consequence of driving consumers away from community businesses to cheaper alternatives to buy beer, which is then consumed in the home.
“We should be doing everything we can to ensure that we reverse this worrying trend of people foregoing a visit to the pub in favour of drinking in an unregulated environment.”