Britain's tax and spending watchdog is preparing to slash its crucial growth forecast and pile pressure on Rachel Reeves to cut spending or raise taxes within weeks.
The Office for Budget Responsibility (OBR) on Tuesday night presented the Chancellor with its first assessment of the economy ahead of the Spring Statement on March 26, amid mounting claims that Ms Reeves will need to announce emergency measures to balance the books.
Economists warned that the OBR would almost certainly downgrade its forecast for 2024 and 2025 after the economy ground to a halt during Labour's first six months in power.
Sir Charlie Bean, a former senior official at the OBR and Bank of England, accused her of making a "cardinal error" by increasing the National insurance bill for employers by £25bn in her maiden Budget.
A string of recent surveys have laid bare the damaging impact of Ms Reeves's tax rises, as businesses have responded by slashing investment, raising prices and freezing recruitment.
Andrew Goodwin, chief UK economist at Oxford Economics, said that the OBR's current forecast for 2pc growth this year was all but impossible to achieve.
He said: "Unless there are favourable historical revisions, then to hit 2pc for 2025 you would need quarterly growth to average 0.75pc throughout this year. We've only had one quarter that's been that strong in the past couple of years."
However, Mr Goodwin added that the Chancellor was unlikely to require an emergency Budget if the OBR deemed the economy's recent performance to be a temporary blip.
Ruth Gregory at Capital Economics, who previously worked as an economist at the OBR, said she also expected a downgrade to the watchdog's near-term growth forecasts.
She said: "The OBR will almost certainly downgrade its 2024 and 2025 GDP growth forecast in response to the recent weakness in economic activity.
"The OBR may revise down its real GDP growth forecast for 2024 from 1.1pc closer to our own forecast of 0.7pc and its 2025 forecast from 2pc closer to the consensus forecast of 1.3pc."
Sir Charlie said the decision to lower the threshold at which employers start paying National Insurance on workers' earnings from £9,100 to £5,000 would drive up unemployment and make fixing Britain's worklessness crisis harder.
Sir Charlie, who also previously served as deputy governor of the Bank of England, said: "The cardinal error in the Budget was the particular way that she raised revenues.
"I think the rise in employers' National Insurance contributions - and particularly the reduction in the threshold - was a serious policy error."