Under-siege Rachel Reeves to slash billions from Britain’s bloated welfare budget in desperate bid to balance books

UNDER-fire Rachel Reeves has signalled painful spending cuts are on the way as she vowed to “take action” to balance the books.

The Chancellor will slash billions from the welfare budget after market turmoil wreaked havoc on the nation’s finances.

But she faces a growing Cabinet revolt as government insiders warn that some departments are already “cut to the bone” and will struggle to make more savings.

Ms Reeves is also facing a barrage of criticism from within government ranks for being too gloomy ahead of the Budget, putting investors off and sending the economy spiralling into a doom loop.

After a press conference in Beijing, Ms Reeves told journalists: “I have been really clear that our fiscal rules are non-negotiable — that we will pay for day-to-day spending through tax receipts and we will get debt down as a share of GDP.

“Those fiscal rules that I set out in the Budget in October are non-negotiable and we will take actions to ensure we meet them.”

Her comments signal much deeper public sector cuts than previously expected — after she promised business she will not clobber them with more tax hikes.

The under-fire Treasury chief spoke out after days of market turmoil sparked fears of a 1970s-style stagflation crisis.

Labour has already promised to slash £1.3billion from the sickness and disability benefits bill every year — with more details coming in the spring.

And the Sun on Sunday has been told the Treasury wants to go further — with more measures to get people back to work.

The Chancellor is scrambling to come up with ways to reassure the markets after a disastrous week overshadowed her trip to China.

She will deliver a growth speech at the end of the month where she will spell out plans to cut red tape, boost trade and usher in market reforms to boost the economy.

A Treasury source said: “She will leave no stone unturned on growth.”

Ministers have been ordered to carry out a “line by line” spending review to find savings and come up with ways to boost growth.

A senior Whitehall insider said: “This review is going to be painful. There could be a Cabinet revolt.”

One department insider said they were desperately trying to be as cost-efficient as possible, adding: “We’re not in panic mode, yet.”

A senior frontbencher said: “Her gloomy warnings about the state of the public finances may have made sense politically — but investors were listening and it looks like they have been spooked.”

‘Nightmare’

Borrowing costs rocketed to levels beyond the worst of the disastrous Liz Truss era.

Fingers were pointed at the Chancellor’s tax-raising Budget, which hiked employers’ National Insurance contributions.

One boss at a major retailer said Ms Reeves’ Budget had been a “nightmare” for many.

They urged the Government to ditch plans to slap bosses with more red tape when it comes to workers’ rights to ease the burden and help boost growth.

One said: “The Government is putting more regulations on business.

“They have adopted an anti-obesity drive that will make it illegal to advertise a mince pie before 9pm on the telly, and they want to put a grocery tax on packaging.

I don’t think Reeves is going anywhere any time soon.

Labour minister

“If you want to go all-guns- blazing on growth, this stuff doesn’t make sense.”

Last year, several ministers wrote formal letters to the Treasury and PM Keir Starmer objecting to the scale of the cuts demanded of them.

The market turmoil over recent weeks has led some in Westminster to suggest that Ms Reeves could even be sacked as Chancellor if she does not turn things around.

But most Labour ministers and aides think it is “not that bad yet” and point out that Sir Keir and Ms Reeves have worked “hand in glove”.

One said: “I don’t think Reeves is going anywhere any time soon.”

Behind the scenes, many in government are openly questioning why Ms Reeves has not come up with a growth plan sooner. One said: “She is meant to be in charge of growth. What has taken her so long?”

All eyes will be on the markets tomorrow. If the cost of borrowing rises further, Ms Reeves will find herself under fresh pressure.