The Chancellor yesterday gave the strongest hint yet that she could hike national insurance contributions for employers in the Budget in what the Tories branded ‘Labour’s jobs tax’.

In a fresh blow for businesses, Rachel Reeves claimed increasing the levy on employers was not ruled out in her party’s election manifesto.

Yet leading economists at the Institute for Fiscal Studies (IFS) think-tank warned that hiking employer NI would be a ‘straightforward breach of a manifesto commitment’.

During the election, Labour vowed not to raise income tax, VAT or national insurance – but the party is now claiming this did not include the employer part of national insurance.

Bosses pay NI at a rate of 13.8 per cent on all employees’ earnings above £175 per week. Increasing it by just 1p could raise £17 billion a year for the Treasury, economists say.

The Chancellor is at the centre of a major row over employers’ national insurance contributions (NICs) ands whether they will be hiked at the end of the month

Business sources last night warned that hiking the rate would force employers to freeze pay or cut jobs.

Speaking to reporters at the Government’s International Investment Summit yesterday, Ms Reeves said: ‘We were really clear in our manifesto that we weren’t going to increase the key taxes paid by working people – income tax, national insurance and VAT –and on the business side our commitment was that we would cap corporation tax at its current rate of 25per cent which is the lowest in the G7.

‘We will stick to the commitments we made in our manifesto but you know that there’s a £22 billion black hole over and above anything that we knew about going into the election that we need to fill and that’s not just for one year but that persists throughout the forecast period.’

In a separate interview with GB News, the Chancellor was pressed on whether the manifesto commitments included employers’ contributions.

She said: ‘That was not in the manifesto.’

Keir Starmer was warned yesterday that raiding employers’ national insurance in the Budget would be a ‘straighforward breach’ of Labour ‘s manifesto

The head of the IFS, Paul Johnson, said the Labour manifesto was ‘clear’ on NICs

Paul Johnson, director of the IFS, told Times Radio: ‘I went back and read the manifesto and it says very clearly we will not raise rates of national insurance. It doesn’t specify employee national insurance.’

However, Mr Johnson said Ms Reeves would ‘almost certainly’ have to breach the manifesto in ‘one way or another’ if she wants to raise significant amounts of money.

He said: ‘It’s probably less damaging to raise national insurance or income tax or VAT than it would be to try to get similar amounts in other ways.’

But business sources blasted the idea.

One industry figure said: ‘The main question for firms would be whether to freeze pay or cut jobs.’

And shadow chancellor Jeremy Hunt said: ‘It’s obvious to most people that raising National Insurance would breach Labour’s manifesto pledge to… not raise National Insurance!

‘Rachel Reeves herself previously called it anti-business, and we agree – it is a tax on work that will deter investment, employment and growth, and the OBR [Office for Budget Responsibility] says it will lower wages.’