Rachel Reeves earmarks BILLIONS in spending cuts with benefits in the firing line ahead of Spring Statement

RACHEL Reeves is set to slash BILLIONS from Britain's inflated welfare budget ahead of the Spring Statement in March.

The Chancellor will today send her proposals to drastically cut public spending across Whitehall to the UK's economy watchdog, the Office for Budget Responsibility.

Treasury sources said "the world has changed" since Ms Reeves presented her Autumn Budget last year, where the OBR reported she had £9.9bn of fiscal headroom.

An onslaught of global factors including war in Ukraine, Donald Trump's proposed tariffs, high inflation and interest rates mean the figure is expected to be far worse.

The Chancellor won't announce tax hikes at the Spring Statement on March 25, and her fiscal rules ban the government from borrowing to fund day-to-day costs.

That leaves spending cuts as the only option for the Chancellor to balance the books.

Britain currently spends a whopping £137.4bn on benefits.

Meanwhile, more than 9 million Brits aged 16 to 64 are economically inactive.

A Treasury source said: "Clearly the world has changed a lot since the autumn Budget. People are watching that change happen before their eyes.

"The Office for Budget Responsibility will reflect that changing world in its forecasts later this month and a changing world will be a core feature of the chancellor's response later this month."

This morning Justice Secretary Shabana Mahmood declared there is a "moral case" for slashing the welfare bill.

She said: "There is a moral case here for making sure that people who can work are able to work and there's a practical point here as well, because our current situation is unsustainable.

"We know that there are many people who are currently receiving state support for being out of work who want to be in work.

"We know that we have too many of our young people currently out of work, not in education, employment or training."

Major spending cuts will almost certainly trigger an uproar among Labour MPs.

Backbenchers were left reeling after ministers slashed winter fuel payments and used the Budget to whack a national insurance hike on business while raising inheritance tax for farmer's and family firms.

Already left-wing think tanks have fired off criticism - with the Resolution Foundation this morning begging the Chancellor to keep income tax thresholds frozen rather than impose spending cuts.