After the UK was hit by bond market turmoil, Whitehall pushed for spending cuts.

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Whitehall departments are scrambling for tough spending cuts this summer as the Treasury seeks savings following a jump in borrowing costs.

Officials have warned of “really tough choices” in the upcoming spending review – warning that cuts in recent years in some departments will be difficult to cope with.

One Home Office official said: “We need to think about how we can do what we’re planning to do on a smaller scale. “We’re concerned.”

The official said that the overall work on the cost review strategy has not yet started, but there is a growing concern in the department that the cost will be cut.

There is a concern that “we will be forced to look at how we can spend our money more effectively or how we can grow our money with partners.”

However, Downing Street admitted the Home Office had secured a particularly “strong settlement” – with a 3 per cent annual spending cut – hoping they could survive the pain down the line. Next cost review.

An education department official also said that the increase in gilt production – which reduces the government’s fiscal core – is increasing the spending limit in the coming months.

Another aide said he felt the markets were “testing” the Labor administration, adding that the government needed to show it could be trusted in the economy by pushing through austerity plans to reassure investors.

“There will be some very difficult choices in the spending review in a few months,” the person added.

The upheaval was followed by a surge in UK output that some predict would have cost the chancellor the chancellor’s headroom compared to the Treasury’s self-imposed fiscal rules.

Isabelle Stockton, an economist at the Institute for Fiscal Studies, warned that much of the “razor-thin margin” on the UK’s fiscal rules could easily erode if borrowing costs continue to rise recently.

The government sought to ease jitters in financial markets on Thursday, with Chief Secretary to the Treasury Darren Jones saying he would not breach the budget rules and investors showing healthy appetite for UK government debt.

On Thursday, the 10-year gilt yield rose to 4.93 percent, the highest since 2008, before easing to 4.81 percent. The pound fell as much as 1 percent against the dollar to its lowest level in more than a year.

Higher bond yields will affect the Office for Budget Responsibility’s estimate of the government’s future accounts for debt interest payments of more than £100bn a year. The OBR is due to release forecasts on March 26, which will accompany a statement to Parliament from Chancellor Rachel Reeves.

Reeves will meet her key current law, which excludes borrowing for investment, by a margin of £9.9 billion, according to estimates linked to the October Budget. Analysts now believe that headroom has evaporated due to market activity – even before changes in growth and inflation.

Jones told Commons the Treasury is working on a multi-year spending review this summer based on estimates set out in the October Budget. Forecasts from the OBR will influence discussions with ministers.

Additional reporting by Ian Smith in London