Rachel Reeves has been warned her National Insurance hike, coming into force today (Sunday), will drive up prices, cut staff hours and damage job creation.

The Chancellor's decision to raise employer National Insurance contributions (NICs) by 1.2 percentage points – from 13.8% to 15% – is now in effect. At the same time, the threshold at which payments kick in drops from £9,100 to £5,000. Ministers have warned the move, which follows a 6.7% rise in the minimum wage, will heap more pressure on struggling firms and put jobs at risk. Kate Nicholls, chief executive of UKHospitality, said: "The increases to employer National Insurance contributions are going to hit businesses and workers right across the UK. The impacts will be stark, with hours for staff reduced, trading hours shortened, prices increased and, in the worst case scenario, jobs lost.

"These damaging rises not only hit cherished hospitality venues and communities, but the Government's ambition to get people back into work.

"It needs sectors like hospitality to create the jobs to get people out of the welfare system but these tax rises will have the opposite effect on job creation."

Ms Reeves announced the measure at last year's Budget, claiming it would raise £25 billion a year by 2029.

At the time, she insisted she had not "taken this decision lightly".

But the Conservatives have branded the increase a "jobs tax", with Shadow Business and Trade Secretary Andrew Griffith saying it would add further strain to already fragile firms.

He said: "British firms are already on their knees – now Labour delivers a one-two punch that could flatten them.

"They don't understand that it's business, not big government, that drives growth.

"If they don't reverse course fast, working people will pay the price."

The start of April also brought fresh hikes in Council Tax and energy bills, adding to the financial pressure facing households.

Labour leader Sir Keir Starmer admitted the cost-of-living crisis is ongoing but highlighted the recent boost to the minimum wage.

He told Sky News: "I think for most people, they would say the cost-of-living crisis is ongoing, and they feel the pressure financially.

"That's why it's so important we make good on our pledge that people would feel better off and the national living wage going up today by an average of £1,400 is going to affect millions of people."