Rachel Reeves has admitted workers’ wages may not increase as much because of her £40billion tax-r aising budget.

The Chancellor accepted that people would get lower pay rises as a result of her decision to increase employers’ national insurance.

She said: “I said that [the national insurance increase] will have consequences.

“It will mean that businesses will have to absorb some of this through profits and it is likely to mean that wage increases might be slightly less than they otherwise would have been.

“But, overall, the Office of Budget Responsibility forecast that household incomes will increase during this parliament.

“That is a world away from the last parliament, which was the worst Parliament ever for living standards.”

Among the measures announced yesterday was a 1.2 percentage point increase for employers’ national insurance contributions to 15% in April 2025. The threshold for paying them will fall from £9,100 per year to £5,000.

Jeremy Hunt has insisted life will get “tougher for ordinary people” following Rachel Reeves’ Budget.

The shadow chancellor welcomed more investment in the NHS but says the Budget’s tax increase will hurt economic growth.

He said picking the pockets of businesses and raising taxes” is the easy thing for any chancellor to do.

The senior Tory added: “We are going to have lower living standards, we are going to have higher prices, fewer jobs, more expensive mortgages, life is going to get tougher for ordinary people.

Mr Hunt also claimed the public is angry at Rachel Reeves for the “biggest tax-raising Budget in history”.

The shadow chancellor told BBC Breakfast: “If she had wanted to do this, before the election she should have said so, we could have had this debate.

“I think what is making people very angry this morning is that she said 30 times before the election that she wouldn’t increase taxes beyond what was spelled out in the Labour manifesto and many people believed her.

“Many people thought this was a new Labour prospectus, not a traditional tax and spend prospectus, and they have woken up to a Chancellor who has given us the biggest tax-raising Budget in history.”

Mr Hunt said he understood the Chancellor wanted “more money for the NHS” and other services but criticised tax rises in the Budget as they would hamper a “successful, strong economy”.

He added: “We are going to have lower living standards, we are going to have higher prices, fewer jobs, more expensive mortgages, life is going to get tougher for ordinary people.”

Reeves’ budget will hit working people because of the rise in employers’ national insurance, the boss of a research institute has said.

Paul Johnson, director of the Institute for Fiscal Studies (IFS), warned the spending plans announced in yesterday’s Budget are not as generous as they appear to be, adding that there will be lots of additional spending this year and next.

Mr Johnson predicted that spending will be more than is currently planned, saying “that will probably mean more tax rises to come next year or the year after”.