Britain’s new prime minister is facing a ‘heightened risk of recession’
(Picture: PA Archive)Britain should not talk itself into a "worse economic situation" than it is already facing, a leading banking boss insisted on Tuesday.
Natwest chairman Sir Howard Davies said consumer spending and the mortgage market in the UK was still "robust" despite warnings over surging inflation and spiralling bills.
New Prime Minister Liz Truss is expected to roll out an emergency support package to deal with the energy crisis, which could cost as much as £100billion, and has promised sweeping tax cuts.
Sir Howard, a former Deputy Governor of the Bank of England, said the Treasury will have to make some "hard" decisions on whether it is the correct time to cut taxes while subsidising energy bills.
“Financial markets and foreign investors are fully expecting something to be done in the energy markets," he told BBC Radio 4's Today Programme.
"Clearly some sizeable intervention to prevent this squeezing customers and squeezing consumer expenditure massively is expected.
"What the Treasury is going to need to think very hard about is whether you can afford to do that and the price tag is pretty large and have across the board tax cuts at the same time.
"As they think about that they ought to note that actually the economy is not in that bad a shape.
"We have seen at the bank that consumer spending has been fairly robust. People’s deposits have actually still gone up in the first half of this year.
"We aren’t seeing significant distress in the mortgage market. I think it is important not to talk ourselves into a worse situation than we are actually in.”
Ms Truss promised a "bold" economic plan in her victory speech on Monday, after she beat former Chancellor Rishi Sunak in the race to replace Boris Johnson.
Experts have predicted her tax cut pledge, which includes scrapping the National Insurance rise, will cost the Treasury up to £50billion a year.
A number of the former Foreign Secretary's key allies and supporters have already been pencilled in for top cabinet roles, including Kwasi Kwarteng who is expected to take up the Chancellor job and Jacob Rees-Mogg moving to Business Secretary.
