Finance minister Jeremy Hunt said he will raise taxes and cut spending this week to show Britain can fix its public finances and restore its economic credibility after the financial market chaos sparked by former prime minister Liz Truss.

But he said poorer households should be spared much of the pain and cuts to public services would be balanced.

Speaking before announcing a budget plan on Thursday, Hunt said he did not want to aggravate an expected recession but he had to show he could lower a budget deficit which has soared after the COVID-19 pandemic and Russia’s invasion of Ukraine.

“You don’t want to do things that make any recession that you may be in worse,” Hunt told Sky News on Sunday.

“But on the other hand, if you do nothing, if you don’t show that we’re going to bring our debt down over time … interest rates get higher and you get a recession that’s made worse.”

After a bond market rout triggered by a string of unfunded tax cuts in Truss’s “mini-budget” in September, Hunt and Prime Minister Rishi Sunak have warned they will take tough decisions at a time when 10% inflation is already squeezing households.

“We’re all going to be paying a bit more tax, I’m afraid,” Hunt told Sky News.

“We will be asking everyone for sacrifices but I think in a fair society, as we are in the UK, we need to recognise that there’s only so much you can ask from people on the very lowest incomes.”

Many lawmakers in his governing Conservatives oppose higher taxes and big increases could revive the tensions in the party.

Asked about spending cuts, following more than a decade of tight budget controls, Hunt said a strong economy needed good public services and he would approach cuts in a “balanced way” as he sought to put Britain back on a path to stronger growth.

Hunt said he would address the problems in the labour market that have led to acute shortages of workers for companies.

Pressed on whether Brexit was the reason Britain was the only Group of Seven economy yet to recover its pre-pandemic size, Hunt told the BBC: “I don’t think that’s the biggest issue … I think it’s much more to do with other factors in the labour market.”

He also said he would set out a long-term plan for energy after Russia’s invasion of Ukraine led to a surge in gas prices which has forced the government to spend tens of billions of pounds to shield households from the worst of the surge.

Hunt said it was “very important” that the government supported households on energy bills with its six-month energy cap that is due to expire in April, but unlimited support for everyone was not sustainable.

Sources said on Saturday that Hunt was considering a big increase in a windfall tax on oil and gas firms and extending it to power generation firms.