Rachel Reeves will on Wednesday deliver her first Spring statement since Labour were elected – and there’s a lot riding on it.
The government has so far failed in its number one mission to boost economic growth, meaning there is less money in the Treasury’s coffers than previously expected.
The £10 billion of so-called “headroom” - spare cash - that the chancellor thought she would have when she delivered the Budget last October has already been wiped out.
Meanwhile, the Office for Budget Responsibility is set to forecast that the UK economy will only grow by 1% this year, not the 2% it had previously predicted.
So are the Tories right to say that the Spring statement - which was originally meant to be a minor event - is effectively an “emergency Budget” as Reeves prepares to unveil deep spending cuts to repair the nation’s finances?
Here’s what you need to know.
What is the Spring statement?
This is one of two annual financial events where the chancellor makes a statement to the Commons about the state of the country’s finances.
It was introduced by then-Tory chancellor Phillip Hammond in 2018 to mark the end of the financial year at the start of April.
The Spring statement is usually a relatively small event where the government provides an update on the economy.
The government tends to only reveal its major plans for taxes and spending for the year in the Autumn Budget.
Labour has also pledged to deliver only one formal budget per year, and it already announced a slew of controversial cuts to public services and £40bn of tax hikes back in October.
So why is it being dubbed an ‘emergency budget’?
The Conservatives have been repeatedly calling the long-anticipated statement an “emergency budget”.
As shadow chancellor Mel Stride said on Sunday: “It’s absolutely clear that the chancellor must change course at her emergency budget this week before it’s too late.”
But it is worth noting that the economy’s performance is currently falling short of Labour’s extensive promises to put “growth” at the centre of government.
In fact, the economy shrunk by 0.1% in January.
The cost of government borrowing has also hit a decades-long high, even worse than in the aftermath of Liz Truss’ disastrous mini-Budget.
Inflation is also creeping back up, having risen to 3% in the 12 months to January (2% is the Bank of England’s target rate).
As Reeves told the Confederation of British Industry (CBI) in November she would not put up taxes or borrowing again, she is expected to turn to squeeze departmental spending instead.
So while her announcement is not expected to be anywhere near as pivotal as the autumn Budget, it is still an important moment for Reeves and the Treasury.
What can we expect?
Work and pensions secretary Liz Kendall announced plance to cut the welfare budget by £5bn earlier this month, while Reeves has confirmed that she wants to cut government running costs by 15%.
Unprotected government departments also face having to slash their budgets as the Treasury squeezes funding.
Reeves’ own fiscal rules mean she cannot borrow for day-to-day spending, and so she is expected to outline which other services she plans to target for cuts.
There will also be a forecast from the OBR on growth and inflation, which sets out the parameters of Reeves’ spending.
The OBR will estimate how the cost of living is doing under the Labour government and say whether it has followed its own rules on borrowing and spending.
Reeves will deliver the statement after PMQs on Wednesday.