The chancellor has earmarked several billion pounds in draft spending cuts to welfare and other government departments ahead of the Spring Statement.
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 said “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 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.
The government has committed to get debt falling as a share of the economy during the course of this Parliament, and to only borrow to fund investment, not to cover day-to-day spending.
Such rules, put in place by most governments in wealthy nations, are designed to maintain credibility with financial markets. Reeves has repeatedly said her rules are “non-negotiable”.
The spending cuts drafted by the Treasury will help plug the gap that has emerged in recent months, ahead of the OBR publishing its forecast and Reeves giving a statement on 26 March.
Hellbound and Down 