Chancellor Rachel Reeves will make the announcement in her Spring statement on Wednesday (Image: Getty)

       Rachel Reeves will announce further welfare cuts after the budget watchdog warned of a ￡1.6 billion shortfall, according to reports. The Office for Budget Responsibility (OBR) has rejected the Government's estimate that measures unveiled last week to slash the benefits bill would save ￡5 billion, instead putting the figure at ￡3.4 billion.

       The Chancellor will set out further welfare savings of about ￡500 million in the spring statement tomorrow, The Times reported. The move is likely to spark further disquiet from some Labour backbenchers over the changes.

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       It comes as Ms Reeves will deliver her spring statement in the Commons tomorrow.

       She will acknowledge she needs to go "further and faster to kickstart growth" as she scrambles for savings to help balance the nation's books without hiking taxes.

       The Chancellor will be forced to take action to stick to her rule of meeting day-to-day spending through tax receipts, rather than extra borrowing, in response to gloomy forecasts from the budget watchdog.

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       The OBR is widely expected to slash its forecast for economic growth, following similar recent revisions by the Bank of England and Organisation for Economic Co-operation and Development (OECD).

       The Government has also borrowed more than previously expected, with the cost of those loans rising - in part due to global turbulence.

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       Lower-than-expected growth will lead to smaller tax receipts than had previously been budgeted for.

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       Rachel Reeves warned of ￡15bn black hole as shocking welfare spending exposed

       27 Comments

       Desperate Rachel Reeves makes Treasury power grab with major demand

       34 Comments

       Rachel Reeves faces huge Spring Statement setback amid warning tax rises 'inevitable'

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       Rachel Reeves warned of ￡15bn black hole as shocking welfare spending exposed

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       Rachel Reeves slammed as average UK household set to 'lose ￡1,400' a year by 2030

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       The latest official borrowing figures, for February, were ￡4.2 billion higher than had been forecast by the OBR.

       Ms Reeves's self-imposed rule to meet day-to-day spending at the end of the five-year forecast through receipts rather than borrowing was forecast to be met with ￡9.9 billion of headroom to spare in the OBR's October assessment.

       But the lack of growth and the increased cost of borrowing will eat into that headroom, forcing the Chancellor to take action to ensure she continues to meet the rule - which is designed to show that Labour can be trusted with the public finances.