Rachel Reeves set to unleash 'inevitable' tax rises to plug £50bn black hole in finances

Labour's economic ineptitude will unleash more tax rises and transport Britain to the 1970s, experts predict.

They warned hard-working families and businesses will be targeted as part of Chancellor Rachel Reeves's doomed tax, borrow, and spend plans.

And in a stark pre-autumn budget caution they say a financial crisis is almost certain unless reckless spending is reined in.

Shadow Chancellor Sir Mel Stride said: "The same pattern that has marked every Labour government in living memory is embodied under Reeves and (Sir Keir) Starmer. Tax more, spend more, and borrow even more.

"Labour are gambling with Britain's future in promises they cannot honour, financed with debts they have no plan to repay, leaving Britain facing the inevitable - more tax rises in the autumn."

The parlous state of public finances has led to fears Treasury number crunchers are eyeing a fresh assault on the middle classes in a desperate bid to balance the books.

The flatlining economy has sparked panic tax raids are unavoidable when Ms Reeves delivers her second budget in late October or early November.

After rowing back on plans to slash welfare spending experts predict she will attempt to plug a £50billion black hole with an assault on business, pensions, savings and property.

Ideas include cutting the threshold at which small businesses and sole traders have to register for VAT from the current £90,000 turnover to £30,000 in a move that will clobber tens of thousands of small firms and sole traders already struggling to survive.

The sobering assessment comes as economists, business leaders, and squeezed families hit hardest by the cost of living say Britain is paying a hefty price.

The Tories say Labour had driven the UK economy into a ditch in a matter of months by talking it down and taxing the life out of it, while racking up borrowing and killing growth. The upshot, the party said, is higher inflation, fewer jobs and lower wages.

Prices in the UK rose by 3.8% in the 12 months to July meaning inflation remains above the Bank of England's 2% target while sluggish productivity, high housing costs, household bills, a slump in living standards, and concern about what will be unleashed in the upcoming budget had created a feeling of Britain being stuck in a "doom loop".

Asda chairman Allan Leighton said: "There's no doubt all of this is hitting the pocket of the consumer. And when that happens, that's not particularly good for anybody. I think there's more gloom than we've seen for a long time.

"Growth isn't driven by government. Growth is driven by organisations and companies and people. And if they can't invest, then we will not grow, no matter what the government says or does."

The deepening crisis has even led some to suggest Labour's tax-and-spend gamble had set Britain on an irreversible path towards a 1970s-style debt crisis and bailout from the International Monetary Fund.

Households and businesses are still reeling from the £40billion of tax rises rained down in last year's budget - the first by Labour in 14 years after its return to power - which many blame for sucking the life out of growth.

In April, the rate of employer National Insurance Contributions increased by 1.2 percentage points to 15% while the earnings threshold, at which businesses start paying contributions, fell from £9,100 to £5,000.

The changes battered businesses already clinging to life on decimated high streets, and particularly those employing more lower-paid and part-time staff, like the social care and hospitality sectors.

Independent economist Julian Jessop said: "The public finances are now in an even bigger mess (than the 1970s). The Government needs to change course. The right approach would be to prioritise spending restraint over more tax increases and to refocus on boosting growth. Otherwise, the next financial crisis may be just around the corner."

In 1976, under Labour prime minister James Callaghan, the public finances were so dire the UK was forced to accept a US dollar loan to pay back other countries in an attempt to prop up the pound.

While interest rates were significantly higher, with the bank rate hitting 15% in 1976, the annual budget deficit was similar and, like now, public spending was out of control and wage pressures were strong.

Mr Jessop, who has more than 35 years experience with the Treasury, HSBC, and Standard Chartered Bank, said: "In my honest opinion the UK is in the early stages of the next crisis, but we're not heading to the IMF.

"Any IMF bailout would come with such punitive conditions - including big cuts in public spending - that it would be politically unacceptable. Put another way, if the UK government were willing to take these tough decisions, we wouldn't need the IMF in the first place.

"But it is perfectly reasonable to argue that the UK is heading for a 1970s-style crisis, even if the IMF is not part of the picture.

"The upshot is that any temporary good news on the economy, or from the markets, may simply delay the inevitable reckoning. It might even be better if the crash came sooner rather than later."

A Treasury spokesman told the Express: "We are a pro-business government - 380,000 jobs have been created since the start of this parliament and business confidence is at a ten year high according to a recent Lloyds Bank survey.

"Since the election, we have struck three major trade deals with the EU, US and India, business rates are being reformed, and corporation tax is capped at 25%.

"The tax decisions we took at the Budget last year mean that we have been able to deliver on the priorities of the British people, from investing in the NHS to cutting waiting lists and giving a wage boost for millions as we deliver on the Plan for Change."