Britain is stuck in a tax 'doom loop' warns former LABOUR cabinet minister - as John Healey urged to drop plans for Budget tax hikes

Further Budget tax rises could lock Britain into a tax 'doom loop', a former Labour Cabinet minister has warned.

Former welfare secretary Liz Kendall urged John Healey to focus on kickstarting growth in this month's Budget, instead of hitting families and businesses with another round of tax hikes.

In an echo of Tory criticism of Labour's first two Budgets, Ms Kendall said Britain was getting trapped in a 'doom loop of ever higher taxes and ever higher borrowing'.

She told Sky News: 'We cannot tax and borrow our way out of the problems that we're in.'

She added: 'He (Healey) needs to stay the course on the public finances and he needs to focus on getting that growth that we desperately need. Because otherwise we will... Britain will remain in this kind of doom loop of ever higher taxes and ever higher borrowing.'

Ms Kendall, whose bid to trim the benefits bill last year was torpedoed by Labour MPs, also said the government should 'set a path for... starting to bring down that growth (in welfare spending) because the growth in the cost is too much'.

Her intervention came as Mr Healey warned that middle class families will get no help with 'punishing' energy prices this winter.

In a series of downbeat interviews, the Chancellor acknowledged that many families and businesses face a 'period of deep economic shock and pressure' in the coming months.

He said the British economy had shown itself 'resilient', with better than expected growth. But he said the public finances were too stretched to repeat the universal energy freeze brought in by the last Conservative government in the wake of Russia's full-scale invasion of Ukraine in 2022.

Instead, assistance in this month's Budget is set to be limited to families on benefits and very low incomes.

Experts predict the energy price cap will jump by around 20 per cent in January and could top £2,000.

The Chancellor told ITV News he is 'really conscious as everyone is, whether they're in business or trying to make a household finances meet, that energy costs are punishing at the moment.'

But he said that the state of the public finances meant that government support 'needs to be targeted and it should be temporary'.

Mr Healey suggested there would be no new money for government departments pushing for help to fund public sector pay deals, saying: 'People recognise these times that are tough for everyone, and what they do expect of a Government is to manage with the budgets we've got, deliver the public services they need.'

The Chancellor is expected to offer a package of measures designed to tackle youth unemployment by cutting the cost of hiring young people.

But the government yesterday ruled out adopting Tory plans to slash employer National Insurance contributions for the under-25s.

In a response to a Commons committee, the government defended Rachel Reeves's £25 billion raid on employers' NI, saying it was part of 'fair and necessary decisions… to restore the public finances, protect economic stability and fund the public services'.

Shadow chancellor Andrew Griffith urged Mr Healey to relent, saying: 'Labour have led Britain into a youth employment crisis. Their Jobs Tax has priced young people out of the labour market and their trade union-inspired employment red tape deters firms from hiring.

'The Budget is a last chance for many of Britain's young people to get their shot at a decent job.'

Meanwhile, a new report calls for the minimum wage to be frozen for five years to tackle unemployment.

The study by the Prosperity Institute think tank said steep rises in the minimum wage in recent years had been 'corrosive to young people's employment prospects' and said a five-year freeze could create up to 600,000 jobs.

Tory shadow business minister described the report's findings as 'very sound' and urged the government to adopt them.