Liz Truss could put off a decision on benefits for weeks – leaving millions of families dangling as they wait to find out if they will be hundreds of pounds worse off.
Ministers admitted the Prime Minister could wait until the end of next month to make a call on whether to increase payouts in line with rising prices next April.
A working couple with two kids would lose £752 over the year if benefits including Universal Credit rise in line with average wage increases instead, according to the Resolution Foundation.
Lib Dem Work and Pensions spokeswoman Wendy Chamberlain said the delay leaves millions in a “grim limbo”.
Tory MPs urged a quick decision as they face a backlash from worried constituents. One said: “We cannot take any more pain."
Cabinet sources suggested pressure on the PM over the issue could mean it is fast-tracked with an announcement in two weeks’ time.
It came as experts issued a bombshell warning that Chancellor Kwasi Kwarteng would need to unleash more than £60billion of spending cuts to get Britain’s public finances back under control.
Some government departments risked having their budgets slashed by more than a quarter under scenarios spelt out by the Institute for Fiscal Studies in a damning report out on Tuesday.
The PM wants to break a promise made by Boris Johnson to put up benefits in line with rising prices next April.
A single unemployed adult would lose £185, a single disabled adult would lose £380 and a working couple with two children would lose £752, if the increases match the rises in average earnings rather than inflation, according to the Resolution Foundation.
Ministers admitted Ms Truss may not make a decision until as late as the end of next month, which would put further strain on struggling families worried about how they are going to make ends meet.
But Cabinet sources last night suggested pressure on the PM over the issue could mean it is fast-tracked with an announcement in the last week of October.
The Mirror understands Work and Pensions Secretary Chloe Smith is privately arguing the government must stick to its promise to increase payments in line with inflation.
Tory MPs last night urged the government to make a decision quickly to end the uncertainty as they face a backlash from worried constituents. One backbencher said: “We cannot take any more pain.”
As the benefits revolt got even bigger, former chancellor Sajid Javid became the latest senior Tory to demand they “must stay in line with inflation”.
Conservative peer Philippa Stroud, who helped set up Universal Credit, argued: “You don’t build growth in the backs of the poor” as she warned a real terms cut would be blocked by MPs.
In an attempt to appease his critics, Mr Kwarteng bowed to pressure to bring forward his wider economic plan to Halloween.
He had said he would wait until November 23 to explain how he intends to balance the books alongside the publication of independent economic forecasts, but this will now happen on October 31.
The IFS criticised Mr Kwarteng’s bungled mini-Budget, warned public borrowing was likely to soar and debt interest payments double to more than £100billion a year.
In its “Green Budget ” report, the IFS said the weakness of the UK economy meant getting the public finances under control would mean “big and painful spending cuts”.
The IFS concluded that Mr Kwarteng would need to announce “fiscal tightening” of £62billion to meet his own Government debt pledge by 2026/27.
Even in the highly unlikely scenario where Mr Kwarteng cancelled all his £43billion planned tax cuts, the IFS warned savings would still be needed.
“The government might be inclined to deliver any fiscal tightening through spending cuts,” it said.
Increasing working age benefits in line with average wages, rather than inflation, could save £13billion.
But it warned the impact would be mostly felt by the least well-off households.
Labour has said it will use Parliament in a bid to pile pressure on the embattled Chancellor, while also calling on Tory MPs to make concerns about the Government's financial plans public.
Shadow chancellor Rachel Reeves said: "Labour have forced this Tory government to U-turn throughout the cost-of-living crisis and we will do all we can in our power to do so again to get them to reverse this disastrous, kamikaze budget."
