Employers accused the Chancellor of imposing a tax on jobs as he announced an increase in national insurance - at the same time as a major Midland firm announced 140 redundancies.
Presenting a politically-charged pre-Budget report, Alistair Darling revealed he was increasing national insurance for every worker earning more than £20,000.
Meanwhile, Fujitsu Telecommunications told staff at its Solihull plant it was axing 140 posts.
The announcement was the latest blow to the West Midlands economy, which has the highest unemployment rate in the country. There are 270,000 people on the dole in the region.
But the Government warned that employers would have to pay more as part of a series of measures to help tackle a massive Treasury deficit.
These include spending cuts - with the details delayed until after next year’s General Election - and a pay cut in real terms for public sector workers.
There were gasps in the House of Commons as Mr Darling admitted the Government would borrow £178 billion this year to make ends meet - and another £176 billion next year.
He insisted: “Public sector debt has increased in every G20 country as a result of this global recession”.
Bur Mr Darling announced a painful plan of tax rises and cuts designed to close the spending gap.
National Insurance will increase by 0.5 per cent in 2011, so that anyone earning more than £20,000 will pay higher tax.
The contribution made by employers will also increase by 0.5 per cent, adding to costs on business.
The National Insurance change will bring in more than £3 billion annually by 2012-13 - by far the biggest tax increase in the budget.
Owen Trotter, a partner in the Birmingham office of Key Capital Partners. He said: “I find it absolutely amazing that Darling has seen fit to increase the tax on jobs. Job creation will be vital to the UK’s economic recovery, and this couldn’t have come at a worse time.