David Cameron has pledged more help for people to cope with the rising cost of living, saying it is the "big issue" facing families across the UK.
The prime minister said the rising cost of petrol and other goods was "painful" and he wanted to mitigate the impact.
There has been speculation that the 1p rise in fuel duty due in April will be scrapped in this month's Budget.
Labour have warned of a "crisis" if rises in living costs outstrip wage increases for low and average earners.
Mr Cameron told BBC One's The One Show that he would not "soft-soap people" and pretend 2011 would not be a tough year for many people.
Ministers are under pressure to use the Budget on 23 March to help alleviate the impact of rising oil prices, the squeeze on take-home pay and inflation running at 4%.
The prime minister said the government had already taken action to freeze council tax in England, to raise income tax thresholds for the lowest paid and to reinstate the link between pensions and earnings - all of which he said would help people.
But he added: "I hope during the Budget we will be able to do more. Because the cost of living is the big issue today. We have seen the VAT rise, the fuel price increase at the petrol pump.
"When it costs £1.30 for a litre of diesel it is incredibly painful for families and business."
Mr Cameron said he could not comment on what would be in the Budget amid reports that the 1p fuel rise due to come into force next month - announced by the last government - would be axed.
But he stressed: "I understand it is the cost of living that is hurting people right now. We have got to try and help. We need to look at what else we can do to help families right now. I am not going to hide it from people that this is going to be a tough and difficult year.
"There is no point trying to soft-soap people and you have to give it to people straight."
Labour have called on ministers to help hard-pressed families by reversing January's VAT rise on petrol, which they say has added £1.35 to the cost of filling up a 50-litre tank.
Speaking recently, opposition leader Ed Miliband said the majority of people were "struggling to keep up" and had been "locked out of the benefits of economic growth".