The chancellor, Rishi Sunak, is to offer 700,000 shops, pubs, restaurants, hotels and other businesses, grants of up to £18,000 each as part of a £5bn rescue scheme to prevent mass bankruptcies. News of the plan – to be announced in Wednesday’s budget – comes as Sunak faces increasing pressure to avoid or postpone significant corporation tax rises, as companies struggle to weather the latest Covid-19 lockdown in a strong enough state to reopen. While there were questions last night over the extent to which the grants were extensions to schemes due to finish at the end of March or new beefed-up initiatives, the move reflects growing panic in government that many small firms on the high streets and elsewhere are now on the brink of extinction. Last week almost 400 leaders of small and medium-sized firms from the “Fighting Back for Business” campaign wrote to the chancellor calling for debts accrued through government-backed loans to be entirely written off to avoid many tens of thousands of companies crashing into insolvency. Under the budget plans, non-essential retail businesses will be eligible for direct cash grants of up to £6,000 a site to help them start trading again when allowed to do so. Hospitality, accommodation, leisure, personal care and gym businesses in England – which will remain closed for longer under the government’s roadmap out of lockdown – will be able to apply for grants of £18,000 per site. Sunak said last night: “Our local businesses have been hit hard by the pandemic – which is why we went big and went early with a multibillion pound package of support. There’s now light at the end of the tunnel and this £5bn of extra cash grants will ensure our high streets can open their doors with optimism.” Local authorities in England will also get an extra £425m to distribute to businesses not eligible for the restart grants but nonetheless experiencing a severe impact on their business due to public health restrictions. As business grants are a devolved issue, the administrations in Scotland, Wales and Northern Ireland will receive £794m of extra funding to distribute to businesses. Sunak’s budget is expected to see the total cost of Covid-related business, employment and other support measures rise to more than £300bn. While rumours have been circulating that the chancellor has been looking to order a sharp rise in corporation tax to try to claw back money spent during the pandemic, there has been heavy lobbying from Tory MPs, particularly in red wall seats, to spare businesses any more pain. The chancellor is also expected to announce measures to support house buying, including a time-limited extension to the stamp duty holiday on sales, and help for people hoping to get on the property ladder. But as he faces a series of painful choices, he is expected to ignore calls from NHS leaders for another £10bn for the health service to help it cope with the huge backlog of operations, the growing impact of “long Covid” and a surge in people needing mental health support. According to senior NHS sources, Sunak plans to ignore the demands and give the service no more than a few hundred million. “We’re expecting to be disappointed on Wednesday,” said one. Another NHS insider said he expected the chancellor to give the service no extra cash at all and to postpone any decision about increasing its budget from this Wednesday until this year’s autumn statement. As the budget approaches there are more signs that the government may be winning back some public support for its handling of Covid-19. In the latest Opinium poll for the Observer, the Tories have stretched their lead to 7 points over Labour, the highest since July last year. The Tories are also still seen as more trusted on the economy after a year of the pandemic, with 39% saying they trust Sunak and Boris Johnson most on economic issues, against 25% who would trust Labour leader Keir Starmer and shadow chancellor Anneliese Dodds. Last night business leaders said the £5bn in grants to help small firms would be vital for helping those businesses that have suffered as a result of circumstances beyond their control. Kate Nicholls, chief executive of UKHospitality, said: “Closure costs are still racking up. This money will go a long way to covering those costs and setting businesses up for a successful restart.” Craig Beaumont, chief of external affairs at the Federation of Small Businesses, heralded the “significant cash injection”, which he said would “help thousands of businesses survive through these final restrictions, and then help drive the vaccine-enabled recovery”. With Sunak struggling to identify ways to claw back funds into the exchequer, the independent Resolution Foundation said on Sunday that freezing tax thresholds would raise £6bn a year by 2024-25, a significant contribution to the post-crisis fiscal consolidation that will be required. It added that a staggered rise in corporation tax, from 19% to 22% by the end of the parliament, would raise £10bn a year by 2024-25. Even delaying the start of the freeze until next year would raise similar revenues, as low inflation means tax thresholds are not due to rise by much this year anyway.