CUTS are coming as Labour ministers flounder in the face of mounting pressure from financial speculators.

With the price of government debt escalating, ministers are on course for renewed austerity even as they squirm to avoid using the term.

As the wriggle room Chancellor Rachel Reeves tried to give herself in last autumn’s Budget evaporates under the impact of rising interest payments, her deputy Darren Jones was forced to come to the Commons to defend the government’s record.

The Chief Secretary to the Treasury made it clear that Labour’s priorities are sticking to Treasury debt rules and keeping to pledges not to further raise taxes.

“There should be no doubt of the government’s commitment to economic stability and sound public finances,” he said.

“This is why meeting the fiscal rules is non-negotiable.”

He was standing in for Ms Reeves, who is heading on a trade mission to China which the Tories vainly demanded be cancelled.

Conservative MPs queued up to point out the plain meaning of Mr Jones’s position. Graham Stuart said: “If he sticks to his word, there will not be any more borrowing, or any more tax rises.

“Given the numbers, that leaves only one option: cuts in public services.” 

And Bernard Jenkin warned that “by underlining that there will not be any tax or borrowing increases, he is saying that austerity is back.”

Even Labour’s Meg Hillier, who chairs the influential Commons Treasury Committee, appeared to accept that cuts were on the way.

She told Mr Jones that “fiscal rules and certainty are vital for the markets” and therefore asked him to “explain what notice he will give to departments about extra cuts that they may have to make in order to meet the fiscal rules?”

Mr Jones was anxious to disclaim the word “austerity,” claiming that the Tory cuts had been driven by “blind ideology.”

But his commitments on protecting services were not as watertight as those in relation to debt and tax levels.

Notably no left MP, whether inside or outside Labour, intervened in the Commons exchanges.  However, new MP Torsten Bell did argue that “one of the lessons of the developments in recent days is that we must pay for day-to-day spending through tax rises, however tough that is.”

The spectre of fresh spending cuts came amid a darkening political situation, with the first opinion poll released putting Reform as the largest party in the next parliament.

The survey, by Findoutnow UK, put Labour and Reform both on 25 per cent of the vote, but with Nigel Farage’s party ahead on seats, by 209 to 203. 

The Tories and Liberal Democrats had a projected 82 and 75 seats respectively.

Spreading more gloom, a Bank of England survey of finance executives found that most expected to raise prices and cut jobs, while more than a third were also looking to pay lower wages than previously intended as a result of Labour policies.

City analysts mostly anticipated worse to come. Kathleen Brooks, research director at XTB, said the situation was “perilous,” adding that the debt sell-off was “a warning shot from the bond vigilantes.”

And Michael Brown, senior research strategist at brokerage Pepperstone, warned that “things are also getting rather ugly,” with investors losing confidence.

“We’re not at the Truss/Kwarteng stage just yet, but things are clearly on very shaky ground indeed,” he said.

And Liz Truss herself, in a move bizarre even by her exacting standards, sent a legal letter to Sir Keir Starmer demanding that the Prime Minister “cease and desist” from claiming that she “crashed the economy.”

She asserted that the charge was untrue and defamatory and may have contributed to the calamitous ex-premier losing her Commons seat at the general election last year.

No 10 indicated that it was unlikely to accede to Truss’s unusual demand, since blaming her for the state of the country is central to Sir Keir’s political strategy.

Legal experts concurred that any libel case brought by Ms Truss would have scant chance of success.