Business groups hit out after the chancellor signals she will raise the amount employers pay in National Insurance.

In their manifesto, Labour pledged not to increase “taxes on working people,” ruling out changes to national insurance contributions (NICs), income tax or VAT. This has given them “little room for manoeuvre” says Institute for Fiscal Studies director Paul Johnson, as the top three sources of Treasury revenue are sealed off.

UK chancellor Rachel Reeves has identified a £40bn funding gap ahead of her Budget in two weeks — far more than previously expected — as she prepares big tax rises to patch up the NHS. The figure represents the funding that Reeves needs to protect key government departments from real-terms spending cuts,

The chancellor was speaking at the government's International Investment Summit, where deals worth £63bn were hailed.

The tax expert adds that in the extreme case that an increase of one pence per pound in employer NICs was passed on to employees in the form of lower wages, the measure would only net £4.5 billion a year. He adds that the end figure would probably be a little higher than this, but much less than a previous HMRC estimate of £8.5 billion.

He believes part of the £40billion will be smaller rises in spending in some parts of the public sector. But this would still leave the Treasury having to find a hefty chunk of t

The Chancellor told ministers on Monday that plans to fill a £22 billion black hole would be enough only to ‘keep public services standing still’.