Wage rises for workers will be lower as a result of the Budget, Rachel Reeves has admitted.

The chancellor said her decision to increase the amount of National Insurance paid by employers will end of affecting the pay packets of their staff.

Reeves hopes to raise around £25 billion through the NI increase, which she insisted did not break Labour’s manifesto commitment not to put up taxes on “working people”.

But appearing on BBC Breakfast this morning, she acknowledged that there will be “consequences” for firms, which will be passed on to their employees.

She said: “It will mean that businesses will have to absorb some of this through profits and it is likely to mean that wage increases might be slightly less than they otherwise would have been.

“But overall, the Office for Budget Responsibility forecasts that household incomes will increase during this parliament. That is a world away from the last parliament, which was the worst parliament ever for living standards.

“They also forecast that employment will increase and unemployment will decrease. So if you take the package as a whole, the forecasters say that wages will increase, that unemployment will come down and more people will be working.

“But I do recognise that the National Insurance change was a difficult one.”