The National Institute of Economic and Social Research (NIESR) has estimated that duties of that scale could deepen the woes for Rachel Reeves

Leaked details – effectively confirmed by the Treasury permanent secretary this afternoon – suggest the independent body has followed the Bank of England (pictured) in slashing predictions for the economy’s performance

Treasury mandarin James Bowler told MPs that a leak inquiry was being conducted

‘Without changing taxation and spending plans, this means that there is no buffer through which to absorb cyclical economic shocks were they to materialise over the remainder of the parliament,’ its latest outlook report said.

NIESR said it was projecting that the UK economy would grow by 1.5 per cent this year, lifting its previous forecast of 1.2 per cent.

It said the growth would be driven mainly by the increased spending programme announced in the October Budget, which it expected would have a ‘tangible effect’ throughout the year.

But the organisation said this was likely to ‘only be a temporary boost’ for growth.

That forecast, prepared at the end of January, is far more optimistic than the Bank of England, which last week downgraded GDP predictions for this year from 1.5 per cent to just 0.75 per cent.

In October, the Government said it planned to increase spending by around £70billion a year, supported by increased borrowing and higher business taxes.

But firms have warned they are being forced to curb investment and hiring as they shoulder tax rises, such as increased national insurance contributions, and wage increases from April.

The PM’s official spokesman insisted he would not ‘get ahead of the OBR forecast’, but added: ‘In recent weeks and months the OECD and the IMF have upgraded our growth forecast over the next three years.

He added: ‘The Government remains relentlessly focused on growth as the only way of sustainably raising living standards and delivering the investment that we need in our public services.’

Shadow chancellor Mel Stride said: ‘This government needs to stop playing politics and come up with some serious solutions to the significant economic problems they’ve created.

‘With the Bank of England predicting growth falling and inflation rising, it is clear that this Chancellor needs to make urgent course corrections, before the damage she is doing to the economy becomes permanent.

‘Rachel Reeves and Keir Starmer are clearly out of their depth, and the British public cannot afford it. Under new leadership, the Conservatives will set out a clear plan to bring growth back to the country, and support businesses and working people.’

Meanwhile, speculation is mounting about the hit to the economy if Donald Trump pushes ahead with ‘reciprocal’ tariffs.

There are fears the US president could impose 21 per cent levy on goods from Britain in order to offset the impact of VAT.

The National Institute of Economic and Social Research (NIESR) has estimated that duties of that scale could deepen the woes for Ms Reeves by knocking 0.4 percentage points off GDP growth for the next two years.

That would be equivalent to around £24billion.

Mr Trump has already slapped a 25 per cent duty on steel imports, including from the UK, but has promised to unveil another wave of tariffs by today.

The US does not have the equivalent of VAT at a federal level, with states levying their own taxes.

George Saravelos, the global head of FX Research at Deutsche Bank, pointed to concerns that the US would target VAT as part of the ‘reciprocal’ tariffs.

He told the Telegraph that would be ‘much more damaging’ for the UK, potentially meaning a 21 per cent tariff on imports instead of just 1 per cent.

There are fears Donald Trump could impose 21 per cent levy on goods from Britain in order to offset the impact of VAT