Treasury earmarks billions in spending cuts

The UK Treasury has initially allocated billions of pounds in spending cuts, affecting welfare and other government departments. It is anticipated that the Chancellor of the Exchequer's room for maneuver has almost completely disappeared.

The Treasury will submit the proposed cuts to the official forecasting body, the Office for Budget Responsibility (OBR), this Wednesday in preparation for the Spring Statement later this month. Sources say that "the world has changed" since the October budget, when the OBR stated that Chancellor Rachel Reeves still had £9.9 billion of headroom under her self-imposed borrowing targets.

Due to global economic headwinds and changes in the UK's long-term economic performance, the OBR's forecast (which will be released alongside the Spring Statement) is likely to show that this headroom has vanished. The Treasury will inform the OBR on Wednesday of its "significant measures," essentially adjustments to taxes and spending to get public finances back on track, thereby meeting the Chancellor's self-imposed rules.

The Treasury attributes the rising cost of government borrowing to global economic policy and geopolitical uncertainty. The Eurozone economy is also stagnating, and declines in UK productivity data have also impacted the forecast. A government insider stated: "Clearly, the world has changed a lot since the Autumn Budget. People are witnessing this change firsthand. The Office for Budget Responsibility will reflect this changing world in its forecast later this month, and that changing world will be a central feature of the Chancellor's response later this month."

Corrective budgetary measures will reflect existing policy objectives but will also help to close the gaps that have emerged in recent months. Insiders anticipate "politically painful" new welfare cuts aimed at reducing the enormous growth in health-related benefits. These measures will be outlined in an upcoming speech by the Secretary of State for Work and Pensions, Liz Kendall. Ahead of the Spring Statement, Cabinet Office Minister Pat McFadden and Health Secretary Wes Streeting will outline significant efficiency improvement plans within the civil service, which they hope will lead to substantial staff and cost savings.

The Chancellor will argue that the government has always intended to "fix the welfare system, getting people back to work" and "improve the efficiency of the NHS." An insider told the BBC: "Whether or not there is headroom, the Chancellor is determined to press ahead with the changes we need to make Britain more secure and prosperous, and the whole of government will be making that argument in the weeks ahead."