BLUNDERING George Osborne was told to tear up his entire Budget yesterday after being forced into a humiliating climbdown over cuts to disability benefits amid Tory chaos.

The Chancellor’s U-turn over vicious plans to slash personal independence payments (PIP) for the disabled — which even Tory welfare axeman Iain Duncan Smith branded “unfair” — has blown another £4 billion hole in a budget which already included £3.5bn of unspecific spending cuts.

Now he faces calls to take the unprecedented step of withdrawing the Budget and starting again less than a week after presenting it to Parliament.

Shadow chancellor John McDonnell said: “I can’t see how this Budget can proceed this week and I think something has got to happen between David Cameron and George Osborne where they come to Parliament and explain, most probably, that they’ve got to withdraw this Budget and start again.”

A back-bench Tory rebellion over spending cuts became a full-blown crisis for Mr Osborne on Friday night when Mr Duncan Smith resigned as work and pensions secretary.

Mr Duncan Smith, considered to be to the right of the Chancellor, escalated his protest yesterday in an extraordinary interview on the BBC’s Andrew Marr Show.

He admitted to signing off on the cuts to PIP, but claimed he had not known they would be made alongside handouts to the rich.

Cutting corporation tax to just 17 per cent cost the Treasury £1bn, while cutting the top rate of capital gains tax cost £2.5bn.

Mr Duncan Smith said: “That is deeply unfair and is perceived to be unfair. That unfairness is damaging to the government.”

Despite pushing through savage cuts for years, he also called for the “welfare cap” to be scrapped and warned that the government was “drifting in a direction that divides society.”

Prime Minister David Cameron said he was “puzzled and disappointed” at the resignation, which was submitted despite the Treasury’s agreement to drop the PIP cuts from the budget.

But Mr Duncan Smith pointed out that the “the money required from the Department for Work and Pensions still sits in the red book” and needs to be found.

Mr McDonnell said the only way to plug that gap would be to cancel the giveaways to the rich.

He told Radio 5 Live: “You’re paying for that by cuts in disability benefits.

“That is unfair and unjust. If you didn’t go ahead with those tax cuts to the rich and the corporations, you wouldn’t have to cut disability benefits.”

Mr Osborne faces another excruciating afternoon in the Commons today when the Budget debate continues ahead of a vote tomorrow.

Back-bench Tory MPs indicated that they were ready to bring down the entire Budget if the PIP cuts were not removed completely.

Heidi Allen, who also led the rebellion against cuts to tax credits, said: “We need to look at the whole process again and start from scratch.

“The PIP process, the whole assessment process, just doesn’t work for so many groups of ill and disabled people, so tinkering with two tiny little points frankly isn’t good enough.”

Meanwhile, Mr Duncan Smith was accused of “shocking” hypocrisy as he attempted to rebrand himself as a principled social reformer in the wake of his resignation.

Tory peer Ros Altmann said: “Having worked alongside him as a minister, I have seen that he championed the very package of reforms to disability benefits he now says is the reason he has resigned,” she said.

And Disabled People Against Cuts spokeswoman Linda Burnip told the Star: “I don’t believe for a second that he’s suddenly found a conscience.

“From closing the Independent Living Fund to recent cuts to Employment and Support Allowance, everything he’s done has hurt disabled people and driven many to death and suicide.”