The measures outlined in Rishi Sunak’s Autumn Statement pose a “significant risk” of a drop in consumer confidence, according to Sunak.
Meanwhile, Dr Yueh, an economist, urged Mr. Sunak to implement a “growth strategy” by next Spring. This is similar to Liz Truss’ fiscal policy, which focused on growing the economy through tax cuts in her so-called “mini-budget.”
However, in last week’s Autumn Statement, the Chancellor announced a £55 billion package of tax increases and spending cuts.
Ms Yeuh warned of a “significant risk” of a drop in consumer confidence in the aftermath of Mr Sunak’s budget, noting that “consumer confidence has already dropped quite a lot.”
She elaborated: “The closest analogy to this recession is from the 1970s.
“When it’s a supply side shock like this, people do become extremely worried – especially when they hear that inflation is caused by global factors – so it’s out of the control of the Government.
“So I think the stresses that are made around growth is indeed to try and show that the spending today is targeted to help those that need it the most, because that helps people to look forward.”
Carl Emmerson, Deputy Director of the Institute for Fiscal Studies, also issued a stern warning to Mr Sunak, claiming that the Chancellor’s failure to reform taxes before imposing them could cause economic harm.
He explained: “I think virtually all of the UK’s taxes could be made to work better. [Mr Sunak] has not been chancellor for very long but if we have a crisis and need to shove up taxes, I’d rather – if we’re going to take unpleasant decisions – to reform the taxes and then put them up.
“That’s not to say tax rises are ever going to be easy to do, but there would be fewer negative impacts if we designed those taxes well.”
The economist added: “Pushing up unreformed taxes is more damaging for the economy than reforming taxes and pushing them up.”