Rachel Reeves admits 'valid argument' that she should not have hiked national insurance amid rising youth unemployment

Rachel Reeves today conceded there is a 'valid argument' that she should not have hiked national insurance.

The Chancellor said she 'recognised' the case against the controversial move in her first Budget, amid rising unemployment - particularly among young people.

But appearing before the Treasury Select Committee, Ms Reeves insisted she had needed money to 'fund public services'. 

Concerns have been growing about the effects of increasing NICs contributions for employers. Critics say heaping extra costs on staffing has battered the jobs market and crippled the prospects of the younger generation.

Pressed on what she was doing to tackle unemployment, Ms Reeves said: 'We did make the decision to increase national insurance in my first budget and that's because we needed to properly fund public services, including the National Health Service, which got a £29 billion-a-year uplift.

'So, I do recognise, and it's a valid argument to say that that should not have happened. But if that didn't happen, we wouldn't have been able to put the money into the NHS and reduce waiting lists.

'And reducing waiting lists in the NHS is also good for business, because it means that more people are available for work, and the workforce is is healthier.

'But I do recognise there are particular issues around youth unemployment.

'A lot of that, with respect, we inherited with a big increase in the young people not in education, employment or training, but we are facing into that with actions coming on stream from next month.'

The Chancellor said the Government was expanding apprenticeship opportunities for young people and pointed to her 'youth guarantee', committing to offer guaranteed paid work for every eligible young person who has been out of education or work for 18 months.

The number of young people not in employment, education or training - so-called NEETs - increased in the final months of last year and edged closer to one million, according to official figures last month.

The ONS said the number of so-called Neets aged 16 to 24 was reported at 957,000 in the three months from October to December – an increase from 946,000 in the previous quarter.

Separate figures earlier in February showed the overall unemployment rate for Britons rose to 5.2 per cent for the three months to November.

Some businesses have slowed hiring as they have seen the cost of employing workers rise on the back of policy measures including the hike in employers' national insurance contributions and a rise in the minimum wage.