Philip Hammond is reportedly planning to raise some taxes to cover extra spending commitments in this week's Budget.
Despite an improved economic outlook, the chancellor will apparently reject calls to borrow extra to fund priority areas such as social care and business rate relief.
The Office for Budget Responsibility is expected to upgrade its growth forecast for this year from 1.4% to nearer 2%, with an improved picture on government borrowing also giving Hammond extra leeway.
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However, The Times reports that he will not use that headroom to borrow any more money, instead relying on a combination of tax rises and cuts in other spending to fund any more giveaways.
He has limited room for manoeuvre, as the last Tory manifesto committed the government not to raise income tax, VAT or national insurance.
One area Hammond may target is self-employed people, who currently pay lower national insurance contributions than employees. Duties on tobacco and alcohol could also be increased.
Along with more action on health and business rates, the government has already announced a £23bn plan to improve productivity and a £500m a year revamp of technical education.