When Rachel Reeves takes to her feet in the Commons to deliver her spring statement next week, she will try to pull off what her inner circle describe as a “re-education” exercise over how Labour has used its early days in power.

“We want it to be a re-education on all the good things we’ve already done in office,” said one, listing achievements including increasing the minimum wage, cutting NHS waiting lists and improving workers’ rights. “We want everybody to hear it.”

That the chancellor feels she has to remind Labour MPs – and the wider public – that their first nine months in office have not been as bad as the polls might suggest is telling, reflecting concern at the top of government about gloominess over the party’s direction of travel.

Many on the left are deeply anxious about how, as they see it, things have turned sour so quickly for a Labour party which swept into power with a huge majority of 174 – just short of Tony Blair’s 1997 landslide.

Since then, Labour has dropped eight points in the national polls, and Keir Starmer’s personal approval ratings have plummeted 22 points, although both have been going slowly upwards since the turn of the year.

Few Labour MPs believe there is much reason for cheer, as there is little sign of the economy improving anytime soon, with growth forecasts expected to be downgraded again next week and Reeves announcing the biggest spending cuts since austerity.

The despair came to a head this week after Liz Kendall, the work and pensions secretary, announced £5bn of cuts to disability benefits. Despite No 10 arguing that it had a “moral case” for welfare reform as well as an economic one, many Labour MPs responded with dismay.

Diane Abbott, the veteran Labour MP, told Starmer at PMQs the decision was “not about morality” and instead “about the Treasury’s wish to balance the books on the back of the most vulnerable”.

Afterwards, one minister said: “It’s just not the sort of thing a Labour government should be doing.” Another added: “If we can’t protect the most vulnerable, regardless of the fiscal circumstances we inherited, then what are we for?”

The welfare cuts are just the latest example of a series of decisions that have sent ripples of discomfort across the wider Labour movement, starting with the winter fuel payment cut last July and more recently the halving of the international aid budget to pay for defence spending.

The decision over disability benefits has cut particularly deep, even though there is support for the principle of reform. After a meeting with Kendall and Stephen Timms, the social security minister, MPs reported “deep unhappiness” across the party, including on the right.

“It isn’t every day I find myself agreeing with Diane Abbott,” said one MP. “But we all have people in our constituencies who will be hit by the benefit cuts.”

No 10 officials argue the welfare system will collapse unless it is reformed, with the cost of working-age sickness and disability benefits forecast to rise to £70bn a year by the end of the decade. The polls suggest voters are in favour. What they miss, however, is that people do not support targeting the most vulnerable.

Government insiders are frustrated that much of what does chime with Labour values – nationalising the railways, imposing a windfall tax on oil and gas, and VAT on private schools – has been overshadowed.

“It’s such a gloomy national picture that people just bank the good stuff,” one said. Some feel the country – and despondent Labour MPs – need a wake-up call about how tough things actually are.

“We won because people had a sense that the country was broken and things weren’t working. The change they voted for doesn’t come without difficult decisions.”

There is, however, an ongoing internal debate that Labour was not bold enough in its ambitions going into the general election, given they anticipated a difficult inheritance. The party is now, in part, dealing with the fallout from that.

“It’s not that we knew things were really hard and the public didn’t,” said a cabinet source. “But you have to argue the case for your mandate. That didn’t happen, and that has now weakened our capacity to do difficult things.”

Specifically, some Labour MPs feel that Reeves boxed herself in on the economy by ruling out tax rises on working people or changing her fiscal rules. It has meant that as her fiscal headroom has shrunk, so too has her room for manoeuvre.

But Downing Street defends the decision. “We didn’t have any option,” one source said. “After Liz Truss we had a moment of opportunity on the economy. We took it. If we don’t show we’re serious about stability, we’ll be attacked as ‘same old Labour’. We’ll lose the advantage.”

Yet despite Reeves announcing she had looked at the books when she entered the Treasury and concluded things were worse than expected, there was no suggestion that could render any of Labour’s election promises obsolete.

“It feels like there’s a lack of political imagination at the top,” one senior Labour figure said. “There have been various moments over the last few months that we could’ve turned round and said: ‘Things are worse than we thought, so we need to take emergency measures.’ But we didn’t.”

Some Labour MPs have pushed for the government to follow Germany’s lead and change the fiscal rules to pay for further defence spending, which will be necessary in an ever more volatile world.

Treasury officials argue it would be impossible for the UK to do the same. “It’s bollocks,” one said, adding that it would cost £4bn a year – the equivalent of the annual prisons budget. While Germany’s debt is just 60% of GDP, the UK’s stands at 100%, meaning borrowing costs are higher.

Others have called for a wealth tax of 2% on assets over £10m, which they say could raise £24bn annually. Again, officials reject the idea, arguing the UK is on par with other G7 countries, with the top 5% of taxpayers projected to pay nearly half of all income tax in 2023-24.

Reeves now has few options left. She has chosen to go for more spending cuts, slashing Whitehall budgets next week by billions of pounds more than previously expected.

“It’s hugely depressing and it’s not what we came into government to do,” said one MP. “It’s also entirely counterproductive to our growth agenda. If we want to grow the economy, we have to invest. More austerity is not the answer.”

There is frustration inside government that their plans are characterised as austerity. While officials do not deny deep cuts are ahead – with some departments facing reductions of as much as 7% over the next four years – they say it is happening at half the pace as under George Osborne.

“It’s just lazy and unfair,” one source said. In the October budget the government announced £190bn of spending, £140bn of borrowing and increased taxes by £35bn more than forecast. “You can’t pour that amount of money into the state and call it austerity.”

The government has instead bet the house on growth. “We’re told it will be tough in the early years but we’ll eventually reap the benefits. Let’s hope they’re right,” said a cabinet source.

Amid all the despair, MPs are taking some comfort from the fact that Downing Street – which in the early months was buffeted by infighting, rows over freebies, and an apparent lack of a plan – appears more in control.

Experienced officials have been appointed – among them Jonathan Powell, who was Tony Blair’s chief of staff – and the operation has been calling on thinktanks more in an effort to drum up fresh ideas on reform of the state and saving money.

“It feels like the government really began in January,” said one person involved. They said No 10’s “mind has been focused by America” with a drive to pick up the pace of government and be seen to be doing things.

International volatility has also played to Starmer’s own strengths, with the prime minister’s handling of the Ukraine crisis impressing many. Whether that newfound purpose can be translated to the domestic sphere is another question.

And the US could yet change everything: the looming threat of Donald Trump’s trade tariffs has the potential to derail the government’s plans to get the economy growing.

For now, the government is trying to focus on the future. Some insiders have been alarmed by the despair that has seeped through the movement. “We do understand the frustrations,” said one cabinet minister. “But we need to stay the course.”

Morgan McSweeney, Starmer’s chief of staff, is said to believe that when push comes to shove, Labour’s core vote will come back to the party to keep the Tories, or even Nigel Farage, out. While some may simply choose not to vote, the polling indicates a majority would return to the fold.

“Of course MPs feel this is a daunting task. They should feel that because it is,” one senior party strategist said. “But it’s so important to actually start delivering again to give people hope for the future. That’s the price.”

But many in the party remain uncomfortable. “Labour is creating a rod for its own back by not being prepared to fight for a political economy of its own,” said one party figure.

“They’re sticking to their fiscal rules because they want to avoid a reputation for tax and spend. But now they’re pursuing un-Labour measures. And they’ll be judged on it.”