BENEFITS were slashed for millions and a bonfire of civil service jobs was lit in Rachel Reeves' gloom-ridden Spring Statement today.
Amid a dire economic forecast, the Chancellor swung the axe at Britain's bloated welfare bill – shredding it by £3.4bn.
Ms Reeves also confirmed that at least 10,000 civil service pen-pushers will have their jobs abolished, with desperately needed cash redirected to front-line services such as policing.
In a bitter blow to the Chancellor, the OBR downgraded its economic forecast for 2025 from 2 to an anaemic 1 per cent.
Inflation is also set to go up, with figures averaging 3.8 per cent in July this year before falling to 2.1 per cent in 2026.
Theunemployment rate is forecast to rise to 4.5 per cent in 2025, up from 4.3 per cent in 2024.
The budget defecit will remain high at 4.8 per cent of GDP in 2024-25, then falling to2.1 per cent by 2029-30.
The economic watchdog also predicted that the measures announced in the Spring Statement will result in Treasury coffers achieving a surplus of £6bn in 2027-28 and £9.9bn in 2029-30.
The reforms will also permanently increase levels of real GDP – but only by a meagre 0.2 per cent, translating to £6.8bn, by 2029-30.
Meanwhile, house-building will hit a 40-year high.
What does this Spring Statement mean for Rachel Reeves?
By Ryan Sabey, Deputy Political Editor
RACHEL Reeves is trying shift any blame away from herself and the Labour government as it grapples with the sluggish economy.
The Chancellor is telling MPs that the “world had changed”; meaning she has to take drastic action when it comes to spending and welfare.
The trouble for Ms Reeves and Sir Keir Starmer is that they put growth as their “number one”; mission and that, to put it mildly, is stalling.
The independent watchdog say growth forecasts has halved for this year and the financial headroom wiped out – hence the savings to be made elsewhere.
But for Ms Reeves all this puts her in a very tight spot insisting she will stick to her iron clad rules – with her looking to find up to £15 billion of savings.
The Tories and commentators are aiming their fire over how she hasn’t helped herself as growth has fallen.
They point out that she was the person who decided to go on a £40 billion tax raid at October’s Budget – with £25 billion of it falling on the shoulders of business.
The upcoming Donald Trump-led tariff war ledcould easily throw the government off course again unless a limited trade deal can be struck.
Rachel Reeves will be pushing every leaver possible to get that over the line before it kicks in next week to give her some breathing space.
But we could be back at square one come the autumn with the Budget to balance the books – with speculation there could be tax rises and Whitehall departments scratching around for more savings.
Addressing a sea of furious faces on the Labour Commons benches, Ms Reeves said: “As the previous government learned to their detriment – there are no shortcuts to economic growth.
“It will take long-term decisions. It will take hard yards.
“It will take time for the reforms we are introducing to be felt in the everyday economy.”
Justifying her billions worth of cuts, Ms Reeves added: “Our task is to secure Britain’s future in a world that is changing before our eyes.
“The threat facing our continent was transformed when Putin invaded Ukraine.
“At the same time, 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.
“This moment demands an active government.
“A government not stepping back, but stepping up.”
In her crackdown on benefits, Ms Reeves froze key Universal Credit payments for those too ill to work until 2030, meaning they will get less help every year as prices rise.
A small cut to the basic rate ofUniversal Creditin 2029 has also been announced, clawing back even more cash from the welfare budget.
Changes announced last week will also make it harder to claim disability payments like PIP from 2026, with tougher tests and more face-to-face assessments.
The Work Capability Assessment will be scrapped in 2028 and replaced with a single test, based on PIP.
New incapacity claimants will see their payments slashed from £97 to £50 a week, while existing ones will have their payments frozen until 2030.
The Chancellor said: “We are reforming our welfare system making it more sustainable, protecting the most vulnerable and supporting more people back into work.” 
What is the Spring Statement?
By Ryan Sabey, Deputy Political Editor
Rachel Reeves is delivering the Spring Statement – nearly fifty years after the first such “mini-Budget”; was delivered.
The statement, which over the years has been delivered in both autumn and Spring, was started in 1976 at the end of the year.
The law changed in 1975 to ensure there were two economic forecasts every year as opposition MPs and the public could keep track of government plans.
Rachel Reeves has insisted there will only be one major fiscal event each year with a Budget planned for the autumn – so no tax hikes or reductions this year.
Her Labour predecessor Gordon Brown held the Budget in the the autumn and each autumn he would deliver a Pre-Budget Report giving an update on the state of the country’s finances.
Fast forward to 2010 and George Osborne, Chancellor until 2016, set up the Office for Budget Responsibility, to provide an independent forecast.
They were also there to dissect the state of the economy – producing five-year forecasts twice a year.
But the OBR weren’t asked for a forecast by short-lived Prime Minister Liz Truss in 2022 despite their mini-Budget containing an array of tax cuts causing a market meltdown.
Turning to the mega size of Whitehall, Ms Reeves insisted “we can make our state leaner, and more agile, delivering more resources to the frontline.”
She confirmed tens of thousands of back office civil service jobs will go, leading to £3.5bn of day-to-day savings by 2029-30.
Ms Reeves also announced a clampdown on tax evaders by investing in AI to catch financial criminals.
The cutting edge technology will increase the number of tax fraudsters charged each year by 20 per cent and add £1bn to Treasury coffers.
In a boost for the UK's depleted defence sector, the Chancellor announced she will pump an extra £2bn into defence spending.
Cash will help fit warships with guns that can hit a £1 coin at 1,000 metres and down drones from three miles.
Drawn from Treasury reserves and the overseas aid budget, it will push defence spending to 2.36 per cent of GDP — with a commitment to hit 2.5 per cent in 2027.
Ms Reeves vowed to turn Britain into a “defence industrial superpower”.
She pledged to spend a minimum of 10 per cent of the Ministry of Defence’s equipment budget on new tech such as drones and AI enabled weapons.
The Chancellor promised to drive forward advanced manufacturing production in locations including Glasgow, Derby and Newport.
What is the Office for Budget Responsibility?
THE Office for Budget Responsibility is an independent watchdog that analysis the government's spending plans.
Among other things, it makes projections on how much taxes will raise, how much policies will cost, and how much growth will go up or down.
These forecasts have become central to Budgets and Statements in recent years.
George Osborne set up the OBR when Chancellor to avoid accusations the Treasury was “marking its own homework” with its own forecast.
But critics say it has become too powerful by forcing ministers to perpetuate the “tax and spend” doom loop to satisfy the OBR.
Liz Truss famously did not commission an OBR forecast for her notorious mini-Budget, which spooked the markets into meltdown.
