Rachel Reeves has admitted she was “wrong” to say higher taxes were not needed during the election campaign – but businesses will have to make less money or pay staff less to cover their tax increase.

A month before Labour won the July election, the chancellor said “we don’t need higher taxes, what we need is growth”.

On Wednesday, the chancellor raised taxes by £40bn – the highest amount since 1993.

She told Sky News’ Sunday Morning with Trevor Phillips: “I was wrong on 11 June, I didn’t know everything, because when I arrived at the Treasury on July 5, so just under a month after I said those words, I was taken into a room by the senior officials at the Treasury and they set out the huge black hole in the public finances beyond which anybody knew about at the time of the general election.”

She accused the previous government of having “hid it from the country, they hid it from parliament and indeed, they hid it from the official independent forecaster, the OBR”.

Follow live: Chancellor admits she was ‘wrong’

The lion’s share of the £40bn in tax rises will be shouldered by businesses as employers’ national insurance (NI) will go up by 1.2 percentage points to 15% from April, while the earnings threshold at which employers start paying NI has been slashed from £9,100 to £5,000.

Ms Reeves said this will raise £25bn over the next five years.

The tax rise has been heavily criticised but the chancellor defended her decision as she said the government “made a choice” to get employers to pay the rise instead of employees.

She told Trevor Phillips: “Yes, businesses will now have to make a choice, whether they will absorb that through efficiency and productivity gains, whether it will be through lower profits or perhaps through lower wage growth.”

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