Rachel Reeves will announce a fresh round of welfare cuts as she delivers her make-or-break Spring Statement.
In a major embarrassment for the government, the Office for Budget Responsibility says benefits reforms announced last week will raise £1.6 billion less than the chancellor had hoped.
As a result, Reeves will be forced to impose even deeper cuts as she desperately tries to balance the nation’s books.
The move, to be confirmed in the Commons this afternoon, is likely spark more fury among Labour MPs and disability campaigners.
Work and pensions secretary Liz Kendall announced last week that she planned to slash the welfare bill by £5bn, mainly by making it harder for people to claim Personal Independence Payments (PIP).
But in their assessment of the state of government’s finances, the OBR will say that will only raise £3.4bn.
According to The Times, Reeves will announce another £500 million-worth of welfare cuts as she tries to make up the shortfall.
She is expected to say that Universal Credit incapacity benefits for new claimants will be frozen until 2030, while the basic rate of UC will also be reduced from 2029.
Overall, the chancellor will announce around £15bn-worth of spending cuts because the state of the economy has worsened since last autumn’s Budget.
The OBR will also downgrade its forecast for UK economic growth this year from 2% to 1% in a further blow for Reeves.
In an attempt to sweeten the pill, Reeves will announce a £2.2bn boost to defence spending on new hi-tech weapons and better homes for military families.
Despite the gloomy backdrop, she will say she is “proud of what we have delivered in just nine months”.
“Now our task is to secure Britain’s future in a world that is changing before our eyes,” the chancellor will tell MPs.
“The job of a responsible government is not simply to watch this change.
“This moment demands an active government stepping up to secure Britain’s future. A government on the side of working people.
“To grasp the opportunities that we now have and help Britain reach its full potential, we need to go further and faster to kickstart growth, protect national security and make people better off through our plan for change.”