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Cabinet ministers have written to the Treasury to complain about proposed departmental cuts ahead of this month's budget and spending review.
Whitehall sources have suggested the Government faces a £40bn public service funding gap which is set to be made up through tax rises.
There was considerable concern in Cabinet about the spending cuts required to meet the spending limits proposed by the Treasury.
An agreement should have been reached on Wednesday evening as the last major measures of the budget were to be sent to the official forecaster, the Office for Budget Responsibility.
Closing the public service funding gap could lead to the biggest tax rise in a generation when Chancellor Rachel Reeves makes her statement on October 30.
Reeves decided to commit to a new borrowing rule that means daily expenses must be covered by tax revenue.
While the government insists it will stick to manifesto promises not to raise taxes on workers, the focus is now on extending national insurance to employers' pension contributions and on increasing some form of capital gains tax.
There is also speculation that lower gasoline prices could lead to higher fuel taxes.
