LABOUR are considering several billion pounds in draft spending cuts to welfare and other departments ahead of the Spring Statement, according to reports.
The Treasury will put the proposed cuts to the government's official forecaster, the Office for Budget Responsibility (OBR), on Wednesday amid expectations the chancellor's financial buffer has been wiped out.
Sources told The BBC that "the world has changed" since Rachel Reeves's Budget last October, when the OBR indicated she had £9.9bn available to spend against her self-imposed borrowing rules.
The OBR's forecast is likely to see that disappear because of global factors such as trade tariffs, as well as higher inflation and borrowing costs in the UK.
The Chancellor’s October budget saw tax burdens reach an historic high, while borrowing increases by an average £32.3 billion a year. Changes to national insurance and inheritance tax has seen widespread criticism of Labour’s spending plans.
This comes amidst a backdrop of Labour slashing foreign aid in order to fund an increase in defence spending.
The previous budget promised £125m for GB Energy, which still does not have its own headquarters.
The Treasury will on Wednesday inform the OBR of its "major measures" -essentially changes to tax and spending in order to meet the chancellor's self-imposed rules on borrowing money.
Insiders expect "politically painful" new welfare cuts that are designed to reduce the huge growth in health-related benefits, which will be outlined in a forthcoming speech from Work and Pensions Secretary Liz Kendall.
The Treasury has blamed global economic policy and geopolitical uncertainty for hiking up government borrowing costs.
Reeves will argue that the government was always going to "fix welfare to get people back to work" and "make the NHS more productive".
An insider told the BBC: "Headroom or no headroom, the chancellor is determined to push through the change we need to make Britain more secure and prosperous, with the whole government making that argument in the coming weeks."
