Things can only get worse! Is Rachel Reeves about to ditch Labour key manifesto promises?

It was an image that not only illustrated the intense pressure on Rachel Reeves but the bleak state of the UK economy.

The besieged Chancellor, sitting ashen-faced with heavy bags under her eyes, was being barracked by opposition MPs during the first PMQs of 2025.

Outside the Commons bear pit, markets were in meltdown, the pound was plummeting and borrowing costs were soaring.

Throw into the mix that the economy is flatlining and inflation is stubbornly higher than hoped for and it’s easy to understand why Reeves wasn’t looking refreshed so soon after the Christmas break.

So where has it all gone wrong for Rachel from accounts, just 80 days on from the Budget and six months after Labour swept to power promising economic growth would be their “priority”?

Within days of entering No 11 Reeves said she had “looked under the bonnet” and discovered a £22 billion black hole in the nation’s finances, blaming the Tory party for 14 years of economic mismanagement.

Shortly after she took a sledgehammer to pensioners, snatching the from all but the poorest of pensioners.

This decision, which has provoked an overwhelming public and political backlash, will save the Treasury £1.4 billion this financial year. Not a great deal in the grand scheme of things.

The mistakes continued through the Autumn.

Midway through October Reeves and Sir attempted to use the grandeur of the Guildhall building in London to inspire some global business tycoons to bet big on Britain.

But by this time the markets were already getting jittery, spooked by mounting pre-Budget speculation of tax rises and business constraints.

Long-term borrowing costs were also rising sharply, reflecting concern over Labour’s economic policies and how tax hikes would stifle growth.

Not only this, neither Starmer or Reeves bothered to invite to the jamboree, the ramifications of which will no doubt be felt for many years to come.

Despite the warnings, a fortnight later on October 30 Reeves delivered the largest tax-raising Budget in history, clobbering businesses, motorists, farmers and pension savers with an eye-watering £40 million raid.

It was even bigger than Norman Lamont’s 1993 mega-raid, which was worth around £38.5 billion in current prices.

That came in the aftermath of the Black Wednesday sterling crisis.

Her Halloween horror show axed winter fuel cash for 10 million pensioners, pummelled farmers with a 20% inheritance tax hike and ramped up the amount of national insurance that employers pay.

The Chancellor also changed debt rules, to allow her to borrow up to £74billion in the coming years for investment in infrastructure – prompting to accuse her of “fiddling the figures”.

Business confidence was immediately shattered with small and medium firms warning of recruitment freezes and job cuts.

Meanwhile, the economy was beginning to shrink with some economists putting Britain on “recession watch”, making a mockery of Labour’s promises of growth.

Inflation began to tick up again, having been driven down by Sunak in the final months of his premiership, heaping further pressure on the Chancellor as it put paid to any hopes of further cuts.

The spectre of ’s return to the White House, following his dramatic victory in November, had the global economy reeling at the prospect of a blizzard of trade tariffs.

It is a combination of Reeves’ horror budget and world economics which came to a head during last week’s market turmoil.

The meltdown saw UK borrowing costs hitting a 27-year high and the pound slumping to its lowest level since 2023, prompting questions over the chancellor’s future.

Markets were well and truly spooked, approaching levels last seen after Liz Truss and Kwasi Kwarteng’s emergency budget in September 2022.

No wonder Reeves appeared so beleaguered last Wednesday.

She faced further mockery this week after being accused of performing a “Peking duck” by fleeing to China to avoid Britain’s market meltdown.

And on Wednesday Tory leader Kemi Badenoch took great joy in “backing” Sir Keir if he sacked his Chancellor.

Such is the pickle she now finds herself in Reeves either has to make more spending cuts, raise taxes, which have been ruled out, or break her fiscal rules.

This will pit the Chancellor against some ministers who already claim she is sacrificing the manifesto promises they are expected to deliver – which will no longer be possible on tight budgets – so that she can fulfil her promises.

Reeves committed in the Budget to pay for day to day government spending through taxation rather than borrowing, something that has not been achieved for decades.

She left herself just £9.9 billion of leeway, out of a total bill for public spending that tops £1trillion.

But the worsening economic conditions mean that the buffer could now be as little as £1billion and could now be eroded altogether.

The Treasury is braced for the possibility that on the spring statement on 26 March, the Office for Budget Responsibility judges she is in breach of her fiscal rule, and would take immediate action to avert this.

In this event, Reeves would be left with no choice other than to shrink public spending budgets further.

Things could be about to get a whole lot worse for the Chancellor.