The Treasury will put the proposed cuts to the government’s official forecaster, the Office for Budget Responsibility (OBR), on Wednesday amid expectations the chancellor’s financial buffer has been wiped out.

Sources said “the world has changed” since Rachel Reeves’s Budget last October, when the OBR indicated she had £9.9bn available to spend against her self-imposed borrowing rules.

The OBR’s forecast is likely to see that disappear because of global factors such as trade tariffs, as well as higher inflation and borrowing costs in the UK.

The Treasury will on Wednesday inform the OBR of its “major measures” -essentially changes to tax and spending in order to meet the chancellor’s self-imposed rules on borrowing money.

The government has committed to get debt falling as a share of the economy during the course of this Parliament, and to only borrow to fund investment, not to cover day-to-day spending.

Such rules, put in place by most governments in wealthy nations, are designed to maintain credibility with financial markets. Reeves has repeatedly said her rules are “non-negotiable”.

The spending cuts drafted by the Treasury will help plug the gap that has emerged in recent months, ahead of the OBR publishing its forecast and Reeves giving a statement on 26 March.

The Treasury has blamed several global factors, including trade tariffs and the war in Ukraine for pushing up government borrowing costs.

“Clearly the world has changed a lot since the autumn Budget. People are watching that change happen before their eyes,” a government insider told the BBC.

“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.”

Insiders expect “politically painful” new welfare cuts that are designed to reduce the huge growth in health-related benefits, which will be outlined in a forthcoming speech from Work and Pensions Secretary Liz Kendall.

Asked on Wednesday if welfare cuts were the right approach, Justice Secretary Shabana Mahmood told the BBC Radio 4’s Today programme there had been a “huge rise in the welfare budget” and there were “too many” young people not in work, education or training.

“There’s 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,” she added.

Reeves has previously pledged “fundamental” reform of the welfare system, with concerns over rising spending on health-related benefits.

Last year, the government spent £65bn on sickness benefits – a 25% increase from the year before the Covid pandemic. That figure is forecast to increase to around £100bn before the next general election.

Some of that is a legacy of Covid, but ministers have complained about incentives which encourage some to “game the system”.

People on universal credit must show evidence they have applied for jobs, or face sanctions – but people out of work who also qualify for sickness benefits both get more money and are not necessarily required to seek work.

Steve Wright, Fire Brigades Union general secretary, said any welfare cuts “would be an outrageous attack on the poorest and most vulnerable”.

The chancellor will argue she hasn’t changed her plans and that the government was always going to “fix welfare to get people back to work” and “make the NHS more productive”.

“Headroom or no headroom, the chancellor is determined to push through the change we need to make Britain more secure and prosperous, with the whole government making that argument in the coming weeks,” an insider told the BBC.

This week, US President Donald Trump imposed tariffs on its three biggest trading partners: Canada, Mexico and China.

Trump has indicated that the UK could avoid border taxes, but Reeves has told the BBC that even if the UK is not hit by tariffs, a global trade war would lower growth and raise inflation.

Uncertainty over the war in Ukraine also remains, with the UK deciding to boost defence spending by cutting international aid.

In the run-up to the Spring Statement, Cabinet Office minister Pat McFadden and Health Secretary Wes Streeting will also outline a significant efficiency drive within the civil service, which they hope will lead to significant headcount and cost savings.

It is understood that the euro area economy stagnating and lower UK productivity numbers have affected the OBR’s forecast.

But there have also been concerns raised about the impact of Reeves’s previously announced tax rises on businesses, which are set to take effect in April, on the UK economy.

Inflation, which measures the rate of price rises over time, is expected to rise in the coming months as households are hit with increases to energy, water and council tax bills.

In a speech to business leaders, the chancellor said Heathrow expansion, delayed for decades over environmental concerns, would “make Britain the world’s best connected place to do business”.

She told the BBC she wanted to get a planning application “signed off” before the next election.

Reeves also backed expansions at Luton and Gatwick airports, as well as a “growth corridor” between Oxford and Cambridge, which she claimed could be “Europe’s Silicon Valley”.

The Tories welcomed the plans, most of which leader Kemi Badenoch said had been stolen from her party.

But she claimed any prospect of growth would be “destroyed” by the government’s Employment Rights Bill, which she said would place more burdens on business.

In her speech in Oxford, Reeves sought to inject some optimism and confidence into the economy, which has taken a battering in recent months as growth has flatlined.

She hit back at Conservative claims that her “job destroying” Budget was to blame, insisting she had “no alternative” but to increase employers’ National Insurance to restore stability.

She did not explicitly rule out further tax increases in the spring – but insisted the government had “begun to turn things round” and was determined to go “further and faster” to boost growth.

She described the UK as a country of “huge potential” which had been “held back” for “too long” because politicians lacked the “courage” to challenge the status quo.

“Low growth is not our destiny, but growth will not come without a fight, without a government willing to take the right decisions now to change our country’s future for the better,” she added.

The government has made growth its top priority because so many of its other plans – to improve public services and living standards, as well as its chances of winning the next election – depend on it.

Ministers insist advances in aviation mean a third runway would not break its carbon reduction rules – but it is still being fiercely resisted by environmental campaigners and Labour’s London Mayor Sadiq Khan.

In an interview with the BBC’s economics editor Faisal Islam, Reeves said she wants a planning application for a third runway at Heathrow “signed off” before the next election, which must happen by 2029.

She said she wanted to “get going sooner than that” on the next phase of an East-West rail project that will eventually connect Oxford directly to Cambridge, via Milton Keynes and Bedford.

“I want spades in the ground. I want people to see in their areas, things happening, growth happening, their children and their grandchildren in the future having the opportunity to work in high-skilled high-paid jobs contributing to the economy with more money in their pockets,” she told the BBC.

Earlier she claimed the new Oxford and Cambridge “growth corridor”, which includes new reservoirs to address water shortages in the area and investment in high tech industries, would add up to £78bn to the UK economy by 2035.

Other projects announced today include a major redevelopment of Old Trafford, the area around a new stadium for Manchester United, and a plan to bring Doncaster/Sheffield airport back into use and boost industry at East Midlands airport.

Trade unions welcomed the Heathrow announcement and the airport’s chief executive Thomas Woldbye described the chancellor’s speech as “the bold, responsible vision the UK needs to thrive in the 21st century”.

But Sir Sadiq Khan said: “I’m simply not convinced that you can have hundreds of thousands of additional flights at Heathrow every year without a hugely damaging impact on our environment.”

Reeves she has been “genuinely shocked” at how slow the planning system is – adding developers should be able to stop worrying about “the bats and the newts”.

She claims new powers in the Planning and Infrastructure Bill would cut years off the lengthy periods it has taken to get major infrastructure projects off the ground.

And Sir Keir Starmer has vowed to get rid of a “thicket of red tape” that he claimed was deterring foreign investment, in an article for The Times.

The government is also relaxing restrictions on big pension funds to encourage them to invest more in UK businesses.

The government will also review the so-called Green Book rules – guidance issued by the Treasury on how to appraise policies, programmes and projects – which it said have in the past biased infrastructure spending to already fast growing areas, mainly in the south.

At prime minister’s questions, Kemi Badenoch took aim at the government’s Employment Rights Bill, which aims to strengthen workers’ rights.

The Conservative leader claimed it would “hammer” businesses and destroy growth, and urged the PM to scrap the parts that will extend entitlement to statutory sick pay.

She said extra sick pay will increase business costs by between £600m to £1bn, according to the government’s own estimates.

“That will mean higher prices, fewer jobs, less growth,” she told Sir Keir.

The prime minister insisted the new laws would be “good for workers and good for growth” and accused the Tories of being “a coalition of blockers”.

Lib Dem leader Sir Ed Davey called on Sir Keir to drop his objections to a UK-EU customs union and other “growth damaging trade barriers” on an upcoming trip to Brussels.

The SNP’s economy spokesman Dave Doogan said the chancellor’s speech “offered nothing for Scotland”, adding: “Instead of fixing broken Brexit Britain, Rachel Reeves has taken the UK economy in the wrong direction.”

The Treasury said Reeves’ visit to China delivered on a “commitment to explore deeper economic co-operation” between Prime Minister Sir Keir Starmer and President Xi, made last year.BBC economics editor Faisal Islam said other European nations such as Spain have encouraged China not just to set up factories but to transfer its advanced battery technology, for example, into Europe.He said the UK now risks upsetting the new US administration of Donald Trump if it encourages China’s role as part of its own green growth strategy.During Saturday’s meeting with the Chinese vice-premier, Reeves discussed Hong Kong and Russia’s invasion of Ukraine.She said: “We discussed that there will need to be areas where we disagree and it is important that we can have open and frank exchange on these issues.”That includes concerns on national and economic security, market access and impacts of subsidies and industrial policy to ensure a level playing field exists.”Tory MP and former security minister Tom Tugendhat told BBC Radio 4’s Today programme that the timing of Reeves’ visit to China was questionable.”She’s going at a time when her Budget has sacked the economy, we’ve got debt rates going up, and she looks like she’s going with a begging bowl, not with a trading deal,” he said. “That’s a real problem because actually it makes the UK look more vulnerable, and others around the world will see it too.”Tugendhat said Reeves had not made it “clear at all” what she has hoping to gain through her visit.”We don’t use the second most important person in government to do anything other than to fundamentally change a relationship,” he said. “Well, she hasn’t told us what that change is.”Liberal Democrat deputy leader and Treasury spokesperson Daisy Cooper urged the chancellor to return to the UK “to urgently address the ongoing crisis in the markets and announce a serious plan for growth”.