Rachel Reeves admitted that ’employees’ will face tax increases after the Budget, while companies will be affected by a national insurance increase of up to two per cent.

“It’s not possible to close the gap in our public finances without having to make tough decisions,” the Chancellor told LBC last night, asking whether some workers would face higher taxes after next week’s Budget.

‘I choose not to increase the basic taxes paid by employees.’

Labor is facing fierce backlash over its U-turn on the tax, having promised in its manifesto that workers would not face higher contributions.

The Prime Minister has been under pressure this week to define ‘working people’ amid concerns about where the tax burden will fall, and it has been suggested that shareholders and homeowners may not fall within the scope of the commitment.

It is expected that the tax burden on companies will fall only on the private sector, and public sector employees will be reimbursed by the Treasury to avoid cuts.

Firms can expect national insurance rates to rise by up to two per cent in next week’s Autumn Budget to help fund NHS investment and repair England’s finances.

Ms Reeves expected to increase national insurance rates by up to two per cent in budget

File. NHS to get extra 3 to 4 per cent funding from Budget

The Chancellor plans to find £40bn for public spending, largely from tax rises rather than spending cuts.

Employers are expected to find an extra one to two percent interest compared to the current rate of 13.8 percent.

Such an increase would not directly affect workers, but business leaders have warned that the extra spending would cripple growth and lead to falling wages as companies pass the additional cost on to workers.

Ms Reeves is also expected to make a ‘significant’ cut to the thresholds at which employers will start paying national insurance contributions.

Between them, the changes are expected to raise around £20bn.

Around half of this is expected to go towards urgent NHS improvement, which is expected to receive a three to four per cent funding increase from the Budget.

This equates to approximately 10 billion pounds a year.

Tax rises could go hand in hand with a change to the government’s fiscal rules on borrowing, allowing it to raise an additional £50bn for public investment, it told Sky News on Thursday.

Ms Reeves stopped short of applying national insurance contributions to employers’ pension contributions, fearing such a policy would leave people worse off after retirement.

The move could raise an additional £10bn.

But the Chancellor insisted on Friday that the tax grab was not contrary to Labour’s first manifesto commitment.

‘We made a clear commitment in our manifesto not to increase the basic taxes paid by workers, National Insurance, income tax and VAT,’ he continued.

His comments came after the Prime Minister was pressured to define a ‘working person’ under the manifesto.

Asked on Sky News whether ‘someone who is employed but also derives income from assets such as shares and property’ qualifies, Sir Keir Starmer replied: ‘They don’t come within my definition.’

He described working people as someone who ‘goes out and earns a living, usually paying it off with some sort of monthly check’ but does not have the skills to ‘write a check to get out of difficulties’.

“I think people who watch this will know if they’re in that group,” he added.

However, following public outcry, Downing Street was forced to clarify that Sir Keir meant people who ‘derive their income primarily from assets’.

‘He accepts that people have some savings. “These could be cash savings, stocks and shares ISA savings or things like that,” the Prime Minister’s spokesman said.

‘So this doesn’t preclude people with small savings. These individuals are clearly working people.’

Prime Minister asked to explain what a ‘working person’ is amid backlash over tax rises

File. No10 explains that people with ‘little savings’ are still ‘clearly working people’

Sir Keir was asked whether he was ‘planning a war on central Britain’ at a press conference at the end of the Commonwealth heads of government meeting (Chogm) in Samoa today.

‘NO. “Let’s clarify this issue,” he said. There are two things we did in the budget.

‘The first is to repair the foundations, dealing with the legacy we have, including the £22bn black hole. We have to deal with this.

‘Leaders in the past have overcome these problems and created fictions, and I’m not ready to do that.’

Asked whether he had misled the public with the Labor manifesto, the Prime Minister replied: ‘No, we were very clear about the tax increases that we had to do as a matter of necessity, regardless of the circumstances, and you listed them there, and I don’t know how many times I listed them in the campaign.

‘We have made it equally clear in the manifesto and in the campaign that we will not increase taxes on working people, and we have explained what we mean by that in terms of income tax, NICs and VAT, and we intend to keep the promises we made in our manifesto.’

Labor is also expected to help the poorest with a move to universal credit. protector appeared today.

More than a million households are expected to be £420 a year better off from the ‘Fair Repayment Rate’ change to be announced next week.

‘This is a down payment on poverty alleviation. “It is unacceptable that people are in such deep poverty and this is a small victory for people in deep poverty,” a Whitehall source told the press.

The change is expected to come into force from next April, which will limit the amount that can be deducted from social welfare payments each month to repay short-term loans and debts.

The budget will be submitted on October 30.