A senior Cabinet minister admitted businesses will be hit by Labour’s national insurance hike.

Leader of the House of Commons, Lucy Powell, conceded the state of the economy was “disappointing” as she insisted “we are starting to turn this oil tanker around”.

But, in an alarming admission, Ms Powell admitted the £25bn hike in employers’ national insurance contributions, coming into effect in April, would have “consequences” for businesses.

She insisted it was needed to put more cash into the NHS.

The Commons Leader told Sky News: “We inherited this big black hole in the public finances, which we had to put right, so fixing the foundations of the economy.

“But we also have a fundamental view that in order to have a growing economy over the medium and long-term, you also have to have a healthy economy and a healthy society as well.

“Because it’s no coincidence that we’ve got seven million people waiting for an operation in this country and we’ve got such high numbers of people out of work, inactive and on sickness benefits and so on, in this country.

“And that’s why we took the decision in the Budget, it was a difficult decision, and it’s had consequences for businesses, I understand that, with the national insurance rise, but we took the decision to put a record level of investment into our National Health Service to bring down those waiting lists.”

Chancellor Rachel Reeves said she would give “no apologies” for the many unpopular decisions she has made since the election, including a £25 billion tax raid and an inheritance tax hike for business owners.

Labour has also been accused of punishing pensioners by cutting the winter fuel allowance and refusing compensation for Waspi women.

The Office for National Statistics estimated the economy contracted by 0.1% in both September and October, while the Bank of England expects no growth at all in October-December.

Commons leader Ms Powell told Sky News’s Sunday Morning With Trevor Phillips programme: “Obviously it’s disappointing, these figures. Of course, we want to see these things happening faster. We want to see more growth in the economy, and we want to see that faster, really so that it can be felt by ordinary people around the country.

“But this is a bit like turning round some huge oil tanker and the underlying problems that the country faces, which are unprecedented and huge – which is why people voted for change, because they could see, quite honestly, going into that election, the country was going down the Swanee.

“We had living standards falling for the first time in our history going into that general election.

“We’ve had public services, particularly health and education, absolutely on their knees in dire states of investment.

“Coming into Government, we’ve had to really take some very difficult decisions. The inheritance and the public finances were even worse than we thought… but we are starting to turn that oil tanker around.”

The governor of the Bank of England, Andrew Bailey, has said the way businesses react to the national insurance increase is the “biggest issue” after the budget from the new Labour Party government.

Mr Bailey said: “The level of uncertainty is rising at the moment. Certainly, some of that is domestic and some of that is global.

“I think the biggest issue now in the immediate future is the response to the national insurance change; how companies balance the mixture of prices, wages, the level of employment, what is taken on margin, is an important judgment for us.”

Asked whether she regrets how the means-testing of winter fuel payments had been rolled out, Ms Powell said: “We’ve had to find some in-year savings for this year, because, if we hadn’t (implemented means testing), what you and I would be talking about now are really, really big cuts to public services.

“I think most people would agree that means-testing the winter fuel allowance was the right direction to go in.”

She continued: “We’ve had this big drive to get people on pension credit. As of the last count, over 40,000 more people now signed up to pension credit.

“Councils are distributing their household support budget to those just above, as well, the pension credit threshold and those who get that council tax support.

“We’ve tried to put in place as much mitigations as we can.”