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Moves towards a “death tax” to meet rising social care costs are set to be floated in the Budget, it emerged today.

Government sources say dipping into people’s assets after they have died to pay care costs is being considered by Chancellor Philip Hammond.

It would be a massive U-turn by the Conservatives, who in 2007 savaged a similar idea suggested by Labour, branding it a tax on the dead and unveiling posters showing headstones with the words “RIP OFF”. A source said there would be no “big bang” in the Budget but did not rule out a consultation or study being commissioned.

It comes amid Treasury signals that money will be tight in the March 8 Budget. Government departments were last night asked by the Treasury to identify savings of three to six per cent for the year before the election.

In a letter to Cabinet colleagues David Gauke, the Treasury Secretary, indicated that councils that find savings will be allowed to keep the money to spend on adult social care.

The shopping list of potential cutbacks was issued ahead of Philip Hammond’s Budget in which he is expected to say future help for businesses and families should come from efficiencies rather than borrowing or taxes.

Tory Right-wingers meanwhile demanded “bolder” spending reforms including possible payments for NHS services to fill the gaps.

Esher MP Dominic Raab, writing on ConservativeHome, asked: “Are we nearing the moment to broach, at least for the long term, some element of a contributions-based approach to NHS and welfare funding? That would enable us to reconcile the financial pressures in the system, with protections to guarantee extra support for the most vulnerable in our society.”

He said there was no shortage of targets for cuts if Mr Hammond was prepared to be bold.

He proposed capping child benefit at two or three children, to save up to £1 billion per year, and limiting annual leave in the public sector, which averages 27 days, to the private sector average of 25 days, which might save £1.5 billion.

Some £2 billion could be saved in admin by merging the Department for International Development with the Foreign Office. Elderly perks, such as free bus passes and eye tests, should be means tested.

on the Budget measures, he urged: “I hope they are bold ... The more courage we show now, the more ambitious our domestic reform agenda can be in the future.”