The scheme was launched with the hope it would help create 400,000 new companies over three years.
The government last night said it is “taking steps to improve take up of the national insurance holiday,” admitting that registrations to the scheme so far stand at just 5,600.
A spokesman added: “Businesses are also benefiting from the government’s decision to reverse the biggest impacts of the planned increase in national insurance that it inherited.”
Balls said: “After a week when we learned the economy has flatlined over the last nine months, these figures are another embarrassing setback for the chancellor.
“George Osborne hailed this flagship policy last year saying it could create 800,000 private sector jobs. But it’s turned out to be a total flop, with just one per cent of the 400,000 businesses he said would benefit taking advantage.”