Remorseless Rachel Reeves admitted workers will suffer lower pay rises after her brutal tax raid on business.

The Chancellor conceded the £40 billion bombshell will “have consequences” as firms shrink wage bills to cope with higher demands from the taxman.

Business leaders warned that hundreds of thousands jobs will be lost while economists said the national insurance rise was a “tax on working people”.

Market jitters over the Chancellor’s plan for a massive borrowing binge sent the cost of government debt up.

Shadow Chancellor Jeremy Hunt accused Ms Reeves of ripping up Labour’s election promises “without remorse” despite saying 30 times she would not put up taxes.

Writing in the Express, he said: “In fact she even said she wanted to bring the burden of tax down.

“And yet here we are, with the Budget set to raise taxes to their highest ever level, with ordinary families footing the bill.

“Without remorse and without hesitation, this government has ripped up their word to the public, and launched the biggest ever assault on our economic competitiveness.

“So it’s no surprise they felt the need to invent a fictitious black hole in the public finances. It was simply a tool to cover up the tax rises they planned all along.

“And be in no doubt, these are all taxes that will hurt working people.”

Tories claimed the Budget amounts an extra £2,237 in tax for the average working household a year.

The analysis showed that over the next five years it would mean a total tax bill of over £9,700.

Former Treasury minister Andrew Griffith wrote to Sir Robert Chote, Chairman of the UK Statistics Authority, to say that Tory claims during the election that Labour would land households with a £2,094 tax bill were misleading.

He added: “In fact, the correct position appears to be significantly higher than this. After the Chancellor of the Exchequer’s Budget on 30 October 2024, it’s clear that the per-household cost of Labour’s tax plans is in fact £2,238 – and this figure is for each year, rather than across a parliament.

“I regret that this mistake occurred and that we – like so many people across the UK – took at face value the Labour Party’s claims at the election.”

Ms Reeves defended her reforms, insisting: “This Budget was to wipe the slate clean after the mismanagement and the cover-up of the previous government.

“I had to make big choices. I don’t want to repeat a Budget like this ever again, but it was necessary to get our public finances and our public services on a stable trajectory.”

But she admitted that national insurance hikes would have an impact on pay.

“I said that it will have consequences,” she said.

“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.”

Government borrowing costs hit their highest level in a year while the pound fell by a third of a percent against the dollar.

Kathleen Brooks, an analyst at trading firm XTB, said the movement indicated that the Budget “has not been well received” by markets.

Economists warned the government will still need to raise up to another £9 billion after next year to avoid cutting spending on unprotected departments.

Although day-to-day spending is set to rise rapidly it slows down from 2026 to 1.3%.

Paul Johnson, director of the Institute for Fiscal Studies (IFS), said that level would be “extremely challenging, to put it mildly” and Ms Reeves’s plans “will not survive contact with her Cabinet colleagues”.

He added: “I am willing to bet a substantial sum that day-to-day public service spending will in fact increase considerably more quickly than supposedly planned after next year.

“1.3% a year overall would almost certainly mean real-terms cuts for some departments. It would be odd indeed to increase spending rapidly this year and next, only to start cutting back again in subsequent years.

“I’m afraid, at least on the surface, this looks rather like the same silly games playing we got used to with the last lot – pencil in implausibly low spending increases for the future in order to make the fiscal arithmetic balance.”

Mr Johnson said it meant there “must be a risk” that taxes will have to rise again, especially if the Chancellor does not receive good news on growth, debt interest or welfare.

He said: “If nothing else changes in the forecast (except spending), and particularly if we choose not to increase petrol duty, I think other taxes will have to rise.”

Downing Street denied tax rises will be needed to address the squeeze on departmental spending.