I no longer want to help and let him out as I find it so distressing especially the way he runs indoors and gets back in his crate - to me it feels like he is becoming institutionalised. I would appreciate any views and comments.I'm afraid I would be suffering as much as the dog.........couldn't bare to watch it. Owners like this should have hamsters......
You have three choices....
1/ Continue and feel distressed - as you have a conscience.
2/ Walk away in protest - but you will be left worrying no doubt, that the dog now has an even worse life now. People who get a dog without putting in place their care, are unlikely to pay a professional once the kind neighbour steps aside. However, this may then give you grounds to call the RSPCA if the dog is left all day.
3/ Take the dog over to yours, where he can interact with yourself and your dog, taking him home to the crate when you've had enough.
Personally I would do 3, life's too short .........as you have the key and the trust, but I certainly would continue to say to your neighbour that the dog would thrive in a home that has the time and can give more attention, as without you the dog would be miserable.
I would give this dog some sort of life......unfortunately, it seems that it's you that can offer that.