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Rachel Reeves will seek to make around £3 billion of cuts to welfare over the next four years by restricting access to sickness benefits, it is understood.
The Chancellor is expected to commit to the previous Tory government’s plans to save the sum by reforming work capability rules, as first reported by The Telegraph.
Under the Conservative proposals, welfare eligibility would be tightened to require an extra 400,000 people who are signed off long term to prepare for a return to employment, reducing the benefits bill by £3 billion by 2028/29.
It is understood that Ms Reeves will commit to the same savings figure, but Work and Pensions Secretary Liz Kendall will decide how the system will be changed.
A Government spokesperson said: “We have always said that the Work Capability Assessment is not working and needs to be reformed or replaced alongside a proper plan to support disabled people to work.
“We will deliver savings through our own reforms, including genuine support to help disabled people into work.”
Ms Reeves is looking to raise up to £40 billion from tax hikes and spending cuts in the Budget as the Government seeks to avoid a return to austerity.
Sir Keir Starmer on Thursday faced a Cabinet backlash over the planned measures, with several ministers writing to the Prime Minister directly to express concern about proposals to reduce their departmental spending by as much as 20%.
Downing Street warned that “not every department will be able to do everything they want to” and “tough decisions” would have to be made.
The Prime Minister’s official spokesman confirmed Sir Keir and Ms Reeves have agreed the “major measures” of the Budget, including the “spending envelope” that sets out limits for individual Whitehall departments.
While some spending cuts are all but inevitable, tax rises are expected to form the centrepiece of Ms Reeves’ plans to fill what the Labour Government calls a “black hole” in the public finances left behind by its Tory predecessors.
Reports suggest capital gains tax and inheritance tax are among some of the levers the Chancellor will pull to raise revenue as she seeks to put the economy on a firmer footing.
The Budget will be delivered on October 30.
