Labour must ‘come clean’ over who will pay for its ‘jobs-killing’ workers’ rights bonanza, businesses have warned.

The Office for Budget Responsibility (OBR) will include an estimate of the impact of Angela Rayner‘s radical Employment Rights Bill in its autumn forecast. Ministers expect it to cost £5billion a year – potentially blowing another hole in the Chancellor’s desperate bid to balance the books.

The Federation of Small Businesses (FSB) is on Monday urging Rachel Reeves to explain how she will cover the cost of the plan. Its policy chair, Tina McKenzie, told the Mail that the prospect of Ms Reeves having to raise so much money when the tax bill is already so high was ‘alarming’.

On Sunday night Ms McKenzie said: ‘The OBR has now added the spectre of higher taxes or more cuts to pay for this jobs-killing Bill. Ministers need to come clean with taxpayers about who is going to pay for a higher benefits bill and fewer taxes from wages – or better still, fix the Bill so it’s not clobbering business, wages and jobs.

‘Taxpayers now face a six-month wait to find out just how much the watchdog thinks the new legislation will cost.

‘The Government’s own estimate of the cost to businesses being £5billion doesn’t even account for the biggest changes, like more ability for job-seekers to sue their new employer from the first day at work.

‘And the cost to business could pale in comparison to the lifetime costs from locking people out of work on benefits.

‘The idea of the Chancellor having to raise anything like that amount is alarming at a time when the tax burden is already incredibly high.’

The Federation of Small Businesses (FSB) is urging Rachel Reeves to explain how she will cover the cost of the plan

The Office for Budget Responsibility (OBR) will include an estimate of the impact of Angela Rayner’s radical Employment Rights Bill in its autumn forecast

The Government’s own figures on the direct effects of illustrative tax changes show that raising £5billion equates to an extra 1 percentage point on every employee’s national insurance payments.

Such a sum could also be raised by a 3.5-percentage-point increase in the higher rate of tax, or by reducing the tax-free personal allowance by around £650. Alternatively, Ms Reeves could look to cut child benefit for a first or only child by £14.50 a week.

The Chancellor could also raise £5billion by a 5.5-percentage-point hike in stamp duty on properties valued between £125,000 and £950,000.

The FSB’s plea comes amid reports that the Chancellor is expected to try to water down Ms Rayner’s legislation after the dire cost warnings.