The Chancellor, Alistair Darling, is spending the weekend putting the final touches to a package of tax cuts and big increases in public spending.
The measures, designed to revive the flagging economy, are to be announced in Monday's pre-Budget report.
It is understood Mr Darling will say tax cuts will only be short-lived and taxes will have to rise in the future.
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Reassuring the markets
It is thought the Chancellor will say his recovery formula of extra government spending - combined with tax cuts - will leave Britain with a Ј100bn debt that the country will have to pay back later in the form of higher taxes.
Other measures expected to be included in the package are help for people in mortgage arrears and loans for small businesses.
His anticipated announcement is designed to reassure the financial markets he can restore stability to the economy and to take the sting out of the Conservatives' claims that the government is storing up a secret tax bombshell.
But the Lib Dems say Mr Darling should be doing more still.
They suggest the government should lend directly to businesses through the Post Office, local authorities or even by creating an entirely new government-owned bank.
Ed Davey, the party's foreign affairs spokesman, said the government should use Bradford and Bingley and Northern Rock, which they own, as a "bargaining chip" with the private banks.
"And boy would they start getting worried and they might be forced into lending and start actually facing responsibilities that they owe the British people and the British economy," he told BBC Radio 4's Any Questions.
The BBC's political editor Nick Robinson said: "A collapse in the tax the government receives from house sales and from the City of London means we're heading for an annual overdraft worth one twelfth of the country's annual income - a figure that will raise a few eyebrows.
"It's not been seen since Denis Healey was chancellor - back in the 1970s, the last time Labour were in power."
BBC business editor Robert Peston said in his blog that the chancellor will have to announce deferred tax rises and cuts in public spending "to kick in when the economy has recovered a bit", perhaps in 2010 or even in 2011 - the year after the latest possible date that the next general election can be held.
Mr Peston said: "I am certain that on Monday the chancellor will also announce a significant package of measures to stimulate the economy.
"These will include tax cuts and spending increases funded by extra borrowing, equivalent perhaps to as much as 2% of GDP.
"And the bulk of the tax cuts will be directed at those on lowest incomes, partly because they have the highest propensity to spend - for the good of the economy - and also for reasons of social justice."
'Difficult period'
The prime minister's official spokesman declined to comment on the contents of the pre-Budget report, beyond saying it would include "help for small businesses to get them through this difficult period".
He said both Mr Darling and Gordon Brown were determined to see banks and building societies fulfilling their commitments to lend to small businesses.
He added that the government wanted to work constructively with the banks and were "in dialogue" with them.
Shadow Chancellor George Osborne has said a Conservative government would step in to guarantee loans made by banks and would even loan money directly to businesses as a "radical" last resort.
(BBC)
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