The lowest paid and savers could lose out in the Government Spending Review this week, according to reports.

Chancellor Rishi Sunak is due to address the Commons on Wednesday to set out where money will be spent and cut back as the UK deals with the economic shock of Covid-19.

Some spending – including tens of millions on a counter-terrorism operations centre – has already been mooted, but at the weekend Mr Sunak warned there was a need to find out “what the best way of returning to sustainable public finances is”.

The Times reported a 5.6% increase to the national living wage – which was due to increase to £9.21 an hour in April – will be cut back to £8.90 an hour, a rise of 2%.

The paper said it followed a report from the Low Pay Commission – who said there were around two million workers paid at or below the minimum wage in April 2019 – claiming the full rise from the current rate of £8.72 an hour was unaffordable.

Employees aged 25 and over are entitled to the National Living Wage, with lower rates – the national minimum wage – applying to those who are younger.

In March’s budget, Mr Sunak gave the commission, which recommends the wage rates, a formal target that as long as economic conditions allow, by 2024, the statutory rate will reach two thirds of median earnings.

However, lockdown brought economic activity to a halt, with tax revenues drying up, while the Treasury has paid out more than £200 billion on furlough and other schemes to try to nurse the economy through the crisis.

The latest official figures for October show public sector debt passed the £2 trillion mark for the first time in history.

Meanwhile, the Daily Telegraph said an “inflation shake-up”, where the measure will switch from the Retail Prices Index (RPI) to the generally lower Consumer Prices Index plus housing costs (CPIH), will cost investors more than £100 billion.

The Government and UK Statistics Authority has previously consulted on the plans which proposed implementing the changes between 2025 and 2030, and the paper said Mr Sunak will press ahead with the recommendations.

The RPI was 1.3% in October, compared with the CPIH – the Office of National Statistics’ preferred measure of inflation – which stood at 0.9%.

The Telegraph said the change will save the Treasury around £2 billion a year on interest payments for index-linked gilts, or bonds issued by the Government, as a higher inflation rate means higher payments to holders.

In August, the Association of British Insurers said implementing the plans by 2025 could leave those affected worse off by up to £122 billion by reducing the value of gilts tied to inflation.

It said some long-term saving products, especially defined benefit pensions, are linked to the RPI measure of inflation, and a change to CPIH would “significantly reduce the expected returns on these assets, leaving savers out of pocket”.