The Chancellor has insisted that increasing employers’ National Insurance contributions in the Budget won’t break Labour’s promise to protect working people from tax rises.

Rachel Reeves on Monday hinted that she would launch a tax raid on jobs in the Budget, warning of “tough” measures to boost public services and balance the books.

She insisted that a manifesto pledge not to increase income tax, National Insurance (NI) or VAT only applied to “working people”, and not the companies that employed them.

The Chancellor refused to rule out an increase in NI contributions paid by employers, despite previously warning that such an increase would take “money out of people’s pockets”.

The Government’s tax and spending watchdog has also warned that the levy would be “passed through quite quickly into lower pay”.

It came as Labour unveiled £63bn of investment to “support wealth creation and increases business investment” at an investment summit in London that the Government claimed would create 38,000 jobs.

Asked about employers’ National Insurance, 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, insurance and VAT.”

Asked on GB News if that included employers’ contributions, she said: “That was not in the manifesto.”

Ms Reeves added that her only pledge to business was keeping corporation tax at 25pc, which the Chancellor said would remain the case until the end of Parliament.

However, the Chancellor made clear that tax increases of some form would be necessary in the Budget. She said: “You know that there’s a £22bn black hole, over and above anything that we knew about going into the election, that we need to fill.”

National Insurance is a levy on companies and their staff, which raised £180bn last year.

Employers currently pay 13.8pc on staff earnings, with some allowances for small businesses. Contributions to employee pension schemes are exempt.

Speculation that the Government is preparing to increase the tax – or apply it to pension contributions – has ramped up in recent weeks after ministers began saying Labour had only promised to not increase employee National Insurance contributions (NICs).

However, critics say a change to employers’ NIC would break Labour’s manifesto pledge.

Paul Johnson, director of the Institute for Fiscal Studies (IFS), said Ms Reeves would be guilty of a “straightforward breach”.

He 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.”

Jeremy Hunt, the shadow chancellor, wrote on X, formerly Twitter: “It’s obvious to most people that raising National Insurance would breach Labour’s manifesto pledge to … not raise National Insurance!”

Laura Trott, shadow chief secretary to the Treasury, said: “If Labour raise employer NICs it will be a tax on jobs, break their manifesto commitment and mean lower pay for employees according to the OBR.

“Rachel Reeves herself criticised the move as anti-business in opposition, but now is trying to convince us otherwise.”

Business leaders warned that the threat of a “punitive Budget” on Oct 30 was hanging over the summit.

Sir Nicholas Lyons, chairman of FTSE 100 insurer Phoenix, the UK’s biggest long-term savings business, warned that piling an ever greater burden on business was not cost-free.

“Whenever you think about taxing employers, you’re taxing jobs, you’re taxing enterprise,” he said.

“You have to look at the potential collateral damage. All of these things might look good on paper, but you have to really look through and see, what are the implications of this [and] what are the potential impacts.”

Craig Beaumont, executive director at the Federation of Small Businesses, said his members would be hit hardest.

He said: “Making every local job more expensive to maintain would hit job creation and hurt wages right across the UK.”

Robert Jenrick, one of two MPs in the running to become the next Conservative Party leader, has said raising employer National Insurance would amount to a “tax on jobs” that would hurt wages and hiring.

Sir Nicholas said: “We have hanging over us the Budget on Oct 30, which will tell us whether they really do mean they want to encourage wealth. Because if it’s a punitive Budget, I think that will be a message that’s very negatively received by the City of London.”

The former Lord Mayor also warned that a big raid on capital gains would send a “negative message about investment”.

It follows reports that the Government was looking at raising the capital gains tax rate to as high as 39pc. However, Sir Keir Starmer such speculation was “wide of the mark”.

The Office for Budget Responsibility (OBR), the Government’s tax and spending watchdog, has previously said that increases in employers’ national insurance contributions would lead to lower wages.

Following Rishi Sunak’s 2021 decision to increase employers’ NI via the health and social care levy, the OBR said: “The employer element of it is expected to be passed through quite quickly into lower pay for employees in the private sector.”

Ms Reeves has previously branded employers’ NI the “wrong tax on the wrong people at the wrong time”, adding that it “takes money out of people’s pockets”.

The Chancellor is also considering introducing NI on employer pension contributions as a way of raising billions of pounds of extra cash in her maiden Budget.

Employers currently pay NI at a rate of 13.8pc on salary paid directly to staff but pension contributions are exempt.

The Institute for Fiscal Studies (IFS) has estimated that if employer NICs were introduced on contributions at the current rate of 13.8pc in full it would raise about £17bn a year.

Ms Reeves said on Monday: “Our manifesto was really clear […] it says working people, and then lists those three taxes paid by working people.

“We are going to stick to those manifesto commitments.”

Ms Reeves also insisted that she was sticking to a pledge not to return to austerity, which the IFS has warned will require up to £25bn in tax rises.

“Public services are in a mess […] and our public finances are in a mess,” she said. “I don’t think it’s any surprise to British people that the first budget of this new Labour government is going to be tough to get public services back on a firm footing.”

Sir Keir on Monday pledged “tough love” for the public finances in a sign that big tax rises were likely in the Budget. He said Labour would act “quickly” to “fix our public services” and “stabilise our economy”.

The Government is widely expected to launch a raid on capital gains, pensions and inheritance in her Budget speech.

In an interview that was recorded prior to Monday’s International Investment Summit, Ms Reeves said those with the “broadest shoulders” would be most affected.

She told the New Statesman’s NS podcast: “I said during the election campaign we’re not going to be introducing a wealth tax.

“But I think people will be in no doubt when we do the Budget that those with the broadest shoulders will be bearing the largest burden.

“You saw that in our manifesto campaign. You know, non-doms, private equity, the windfall tax on the big profits the energy companies are making and putting VAT and business rates on private schools.”