Rachel Reeves risks Budget revolt over benefits cuts despite buckling to rebels with £3billion giveaway

Despite putting forward measures to slash Britain's ballooning benefits bill by £5billion, the Prime Minister was forced to make last-minute concessions to Labour rebels to prevent a humiliating defeat at the hands of his own MPs.

The Chancellor is already looking to charm left-wing Labour MPs by abolishing the two-child benefit cap to the tune of £3billion.

Ms Reeves had wanted to introduce a taper system which would have seen eligible families receive reduced payments for third and subsequent children.

However, the Chancellor faced relentless pressure from backbench Labour MPs and Education Secretary Bridget Phillipson.

Ms Reeves is also set to boost payouts for "working-age benefits" like Universal Credit, Personal Independence Payment (PIP) and child benefits up in line with inflation, or 3.8 per cent, from April.

But Ms Reeves remains committed to introducing wider reforms to welfare.

She claimed the changes would change the welfare system from one “designed to punish, trapping millions of people on ­benefits rather than helping them into work, into a system designed to help people succeed”.

“She has to hint that something on cutting the bill is coming,” a Labour source added.

“There are so many other audiences out there, it’s not just the [Parliamentary Labour Party].

"They have to say to the PLP ‘we will give you this, but you have to back us on other things’.”

No10 also confirmed Sir Keir's Government is pushing ahead with significant changes to the welfare system.

"The welfare system is not fair or sustainable - we are driving reform to change that," the Prime Minister's official spokesman said.

"Our priority is helping people into work and equipping them with the skills."

The spokesman added: "The Budget will deliver on mandate for change, cutting cost of living."

Despite looking at significant changes to the welfare system, Tory leader Kemi Badenoch today suggested Ms Reeves could make one simple change to produce growth.

Speaking to business leaders at the CBI in London, Mrs Badenoch said: "If Rachel Reeves is serious about growth, if the Government really cares about the future of British business, there is one easy, cost-free decision that they can take.

"And that is to scrap the Employment Rights Bill. This bill does not raise a single pound in revenue, it does not help a single unemployed person into work, it does not add a single unit of productivity.

"It is a pure political project. Killing it would be a sign to the world that Britain still understands what makes an economy grow.

"If the Chancellor had any sense, and any regard for business, she would use the Budget to say that 'we got this one wrong' and then she would drop it."

Responding to Mrs Badenoch's speech, a Labour Party spokesman said: “Kemi Badenoch has zero credibility when it comes to supporting businesses. As Business and Trade Secretary, the Tory leader hammered firms.

“In Government, the Tories crashed the economy, interest rates rocketed, and growth flatlined. This piled misery onto businesses and workers. It’s beyond the pale that Badenoch is now trying to airbrush this abject Tory failure from history.

“This Labour Government is pro-business and pro-worker. Our Plan for Change has seen three historic trade deals secured, the conditions created for interest rates to fall, and new support for high-intensive industries with their energy bills – to lower costs for business.

"And we’re driving productivity and growth through our modern industrial strategy and small business plan, which we’ve created in partnership with business.”