Sunak faces daunting task as he becomes UK prime minister

Posted on October 25, 2022Comments Off on Sunak faces daunting task as he becomes UK prime minister
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© Reuters. New leader of the Britain’s Conservative Party Rishi Sunak walks outside the Conservative Campaign Headquarters, in London, Britain October 24, 2022. REUTERS/Hannah McKay

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By Kate Holton and Elizabeth Piper

LONDON (Reuters) – Rishi Sunak will face one of the greatest challenges of any new leader when he becomes British prime minister on Tuesday, needing to tackle a mounting economic crisis, a warring political party and a deeply divided country.

The 42-year-old former finance minister becomes Britain’s third prime minister in less than two months, after infighting and feuding at Westminster that has horrified investors and alarmed international allies.

The former hedge fund boss – and one of the richest politicians in parliament – will now need to find deep spending cuts to plug a 40 billion pound ($45 billion) hole in the public finances at a time when his party’s standing in the country has plummeted.

He warned his Conservative colleagues on Monday that the party faced an “existential crisis” if it did not help to steer the country through what he described as a “profound economic challenge.

“We now need stability and unity, and I will make it my utmost priority to bring our party and our country together,” he said.

Sunak, Britain’s youngest prime minister for more than 200 years and its first leader of colour, will replace Liz Truss who resigned after 44 days following a “mini budget” that sparked turmoil in financial markets.

With debt interest costs rising and the outlook for the economy deteriorating, he will need to review all spending, including on politically sensitive areas such as health, education, defence, welfare and pensions.

MOUNTING PROBLEMS

His first task, after being appointed by King Charles at Buckingham Palace, will be to select a cabinet of senior ministers that some Conservative lawmakers hope will include politicians from all wings of the party.

He is expected to retain Jeremy Hunt as finance minister after the former foreign and health secretary helped to calm volatile bond markets by ripping up most of Truss’s economic programme.

Investors will also want to know if Sunak will stick to a plan to publish a new budget alongside borrowing and growth forecasts on Oct. 31, which would help inform the Bank of England’s next move on interest rates on Nov. 3.

Sunak, a Goldman Sachs (NYSE:) analyst who only entered parliament in 2015, will also need to unite his party, aware that voters are increasingly angry over the antics of politicians at Westminster as the economy heads for recession, spurred by rising energy and food costs.

Sunak was blamed by many in the party when he quit as finance minister in the summer, triggering a wider rebellion that brought down the-then leader Boris Johnson.

While many expressed relief on Monday that the party had settled on a new leader quickly, a sense of distrust remained among some while others questioned whether struggling families would relate, or ever vote, for a multimillionaire.

“I think this decision sinks us as a party for the next election,” one Conservative lawmaker told Reuters on condition of anonymity.

Historian and political biographer Anthony Seldon told Reuters that Sunak had the most difficult economic and political inheritance of any British leader since World War Two, and would be constrained by the mistakes of his predecessor.

“There is no leeway on him being anything other than extraordinarily conservative and cautious,” he said.

After politicians and officials in foreign capitals looked on in horror as a country once seen as a pillar of economic and political stability embarked on a bout of brutal infighting, many welcomed Sunak’s appointment as a fresh start.

His appointment also marks a first in Britain as Sunak, a Hindu, becomes its first prime minister of Indian origin.

U.S. President Joe Biden described the appointment as a “groundbreaking milestone”, while leaders from India and elsewhere welcomed Sunak to the job. His billionaire father-in-law, N.R. Narayana Murthy, said Sunak would do the best for the people of the United Kingdom.

“We are proud of him and we wish him success,” the founder of software giant Infosys said in a statement.

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