Sir Keir Starmer was told to rein in Angela Rayner’s new labour laws last night amid claims they could lead to a £1 billion tax hike.

The Tories have already warned the rules would clobber business and severely damage the economy. 

Last night Shadow Business Secretary Andrew Griffith said that would have the knock-on effect of companies paying less tax – with Labour ministers inevitably hiking tax rates to make up the shortfall.

He urged the Prime Minister to take advantage of a delay to Ms Rayner’s Employment Rights Bill becoming law to rethink the whole plan.

Mr Griffith said: ‘I appeal to Sir Keir to realise that his Deputy’s Prime Minister’s madcap plans will have a terrible effect on businesses already struggling with this year’s National Insurances rises. 

‘The Government’s own impact assessment says Ms Rayner’s plans will cost businesses about £5 billion a year and cost the economy some 50,000 jobs.

‘These are companies who pay a lot of tax and contribute mightily to funding public services and that shortfall could well lead to this Government imposing £1 billion of new tax rises on the rest of us.’

In a surprise development last week, it emerged the reforms – including repeal of Tory trade union laws which will reduce the threshold for strike action, plus ending zero-hour contracts – will now not become law at the end of this month and instead be delayed until the autumn.

The delay, partly the result of Tory peers’ opposition in the Lords, came to light just days after an open letter in which the Conservatives urged businesses to rise up and fight Ms Rayner’s plans or be ‘sleepwalked into disaster’.

Critics have warned that the proposals will make it more burdensome to employ workers and make union funding of the Labour Party automatic. 

The Bill also contains strengthened redundancy rights, more flexible working and the power for ministers to take companies to employment tribunals on behalf of employees, even if they do not want to sue.

Last week Lord Karan Bilimoria, founder of Cobra beer and UK chairman of the International Chamber of Commerce, warned: ‘This is like the 1970s and look where that got us.’

But Labour MPs hailed Ms Rayner for pushing her reforms through.

Chancellor Rachel Reeves last night breathed a sigh of relief after Donald Trump decided to drop plans for a ‘revenge tax’ which could have devastated some of Britain’s largest businesses.

He is removing a clause in his ‘One Big Beautiful Bill’ which would have allowed the US to slap retaliatory levies on foreign firms whose home countries had tax policies that displeased him.

Such penalties would deal a heavy blow to major UK firms such as drugmaker AstraZeneca and defence giant BAE Systems which rely on the US for a large chunk of their business.