Critics refute Rachel Reeves’ assertion of restoring economic stability as growth forecast is significantly lowered and anticipate further tax increases.

Rachel Reeves was branded delusional last night after insisting her economic plans are working as official growth forecasts were halved.

It was a humiliating day for the Chancellor as she had to announce a £14 billion package of emergency spending cuts to prevent breaking fiscal rules that she had established just five months ago.

Economists have raised concerns about the fragile state of public finances, suggesting that the Chancellor may need to implement additional tax hikes later in the year.

When asked about the possibility of future tax increases, the Chancellor did not dismiss the idea, stating to the press, ‘I’m not going to plan out Budgets for the next four years’.

The Chancellor insisted her plan ‘is working’, but said Britain faced new challenges from ‘a world that is changing before our eyes’.

But Kemi Badenoch said the Chancellor was ‘deluded’ – and should accept the blame for Britain’s plunging growth.

And the economic watchdog said the Chancellor’s plans could be derailed as soon as next week if Donald Trump presses ahead with a threatened tariff war. 

The Office for Budget Responsibility warned that huge tax rises being introduced by Ms Reeves next week will push Britain’s overall tax burden to a record high.

Chancellor of the Exchequer Rachel Reeves MP (pictured) leaves 11 Downing Street to present her Spring Statement to Parliament on Wednesday

The Chancellor was all smiles on her way to Parliament despite being forced to deliver a £14 billion package of emergency spending cuts to avoid breaking fiscal rules

Reeves stressed the grim realities facing the country as she delivered her Spring Statement to the Commons, arguing the ‘world has changed’ 

Tory leader Mrs Badenoch told the Mail: ‘Labour’s emergency Budget is a direct result of the economic chaos created in Downing Street by Rachel Reeves and Keir Starmer. 

‘With growth halved, inflation rising, taxes at record highs, and unemployment on the up, Rachel Reeves must be deluded if she thinks her plan is working.’ 

It came as:

• The OBR slashed its growth forecast for this year from 2 per cent to just one; 
• The Chancellor faced a growing Labour backlash after figures showed her welfare cuts will drive 250,000 people into poverty, including 50,000 children; 
• Treasury Chief Secretary Darren Jones was urged to apologise after likening cuts in disability benefits to cutting his children’s pocket money; 
• Ms Reeves admitted the cost of living crisis ‘is still very real’ as new forecasts suggested inflation will hit 3.8 per cent this summer; 
• Official forecasts showed living standards will stagnate next year as tax hikes bite; The OBR warned that Labour’s controversial workers’ rights charter was ‘likely’ to cost jobs, raise prices and damage productivity; 
• Ms Reeves defended her decision to accept £600 tickets to a Sabrina Carpenter concert on security grounds but acknowledged it looked ‘a bit odd’; 
• Experts questioned her claim that people will be an average £500 better off by the end of the decade; 
• The Chancellor pledged to make Britain a ‘defence industrial superpower’ as she pledged an extra £2.2 billion for military spending.

Ms Reeves had originally promised to make no major interventions to accompany the OBR’s spring forecast on the economy, saying she wanted to return to holding one fiscal event a year ‘to give families and businesses stability and certainty’.

Kemi Badenoch speaking during Prime Minister’s Questions on Wednesday. She branded Rachel Reeves delusional for insisting her economic plans are working

Chancellor Rachel Reeves leaves 11 Downing Street in London before Wednesday’s spring statement

Chancellor Rachel Reeves on her way to deliver her Spring statement in which she tried to blame world events for UK’s economic woes

But the plunge in economic fortunes since the Budget forced her hand, with the OBR warning she would break her own fiscal rules unless she acted following a £14 billion deterioration in the public finances since October.

Addressing MPs yesterday, the Chancellor tried to blame world events. 

‘The global economy has become more uncertain, bringing insecurity at home as trading patterns become more unstable and borrowing costs rise for many major economies,’ she said.

Ms Reeves kept to her pledge not to raise taxes further after levying a record £40 billion in new taxes at the Budget – a move widely blamed for killing off the UK’s growth prospects. Instead, she cut £3.4 billion from welfare, trimmed public spending and ordered a government efficiency drive in a bid to make up the £14 billion deficit.

The OBR upgraded its growth forecasts for later years, partly on the basis that government planning reforms succeed in delivering a major increase in housebuilding.

But overall GDP growth is still set to be lower than it was at the time of the Chancellor’s Budget in October.

Shadow Chancellor Mel Stride said the decline in the public finances under Labour was ‘jaw-dropping’ – and accused Ms Reeves of trying to shift the blame to ‘anyone but her’.

He told MPs that she was ‘the architect of her own misfortune’, adding: ‘She borrowed and spent and taxed as if it were the 1970s. Little wonder that the Chancellor has tanked the economy, little wonder that we have an emergency Budget, all because of her choices.’

Economists warned that by leaving just £9.9 billion of ‘headroom’ against her fiscal rules, Ms Reeves was likely to have to return with more tax rises in the autumn.

The OBR said there was a 50:50 chance that the Chancellor would have to come back for more.

Paul Johnson, director of the Institute for Fiscal Studies, said: ‘We might be in for another blockbuster autumn Budget. What the Chancellor has all but guaranteed is another six months of damaging speculation and uncertainty over tax policy.’

Rob Wood, UK economist at Pantheon Macroeconomics, said the ‘perilous’ outlook meant ‘further tax hikes and borrowing are coming’.

Tom Clougherty, of the Institute of Economic Affairs, said the Chancellor’s measures amounted to little more than ‘rearranging the deck chairs on the Titanic’.