Chancellor Philip Hammond faced an immediate backlash over plans for a massive tax hike for millions of self-employed workers.
Business groups hit out at the planned rises to National Insurance which are expected to hit almost 2.5 million people, costing them about £240 a year.
Under the reforms, self-employed workers will see contributions increase by one per cent to 10 per cent from April next year and a further one per cent in 2019.
He told MPs the difference between NI contributions (NICs) of employed and self-employed workers could no longer be justified.
But Labour accused the Chancellor of breaking a Conservative party manifesto pledge from 2015 in which the Tories promised not to raise NICs.
Labour deputy leader Tom Watson said: “The Tories put a promise not to raise National Insurance in their manifesto four times. Today they're breaking that promise."
The Conservatives’ 2015 manifesto included a commitment to "no increase in VAT, National Insurance contributions or income tax", a Labour spokesman said.
Sue Terpilowski OBE, London Policy Chair, Federation of Small Businesses, said: “The National Insurance rise to 10 per cent next year and 11 per cent in 2019 should be seen for what it is – a £1 billion tax hike on those who set themselves up in business.
“This undermines the Government’s own mission for the UK to be the best place to start and grow a business, and it drives up the cost of doing business.
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“Future growth of the UK’s 4.8 million-strong self-employed population is now at risk. Increasing this tax burden, effectively funded by a reduction in corporation tax over the same period, is the wrong way to go.”
Fiona Twycross, Labour’s London Assembly spokeswoman for the economy, said self-employed workers in London should not be penalised as opposed to other parts of the country.
"Over half of Londoners are employed by small and medium-sized enterprises, whether it is a tech start-up, a corner shop, an artisan maker or a business consultancy,” she said.
Employed staff on £32,000 a year pay £6,170 in NICs, jointly with their employer, compared with £2,300 for the self-employed.
The Chancellor said the lower payment for self-employed workers was not fair on the 85 per cent of workers who are directly employed.
Mr Hammond said higher paid self-employed workers will face increases of around 60p a week, raising an extra £145 million a year for the Exchequer by 2021-22.
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