LONDON, Oct 25 (BNA) – Rishi Sunak became Britain’s third prime minister in two months on Tuesday, tasked with tackling a mounting economic crisis, a warring political party and a deeply divided country in one of the biggest challenges facing any new leader. .
King Charles has asked the 42-year-old former hedge fund chief to form a government, and will seek to end the infighting and fighting in Westminster that has terrified investors and upset international allies.
Sunak, one of the richest men in parliament, will have to find deep spending cuts to plug an estimated 40 billion pound ($45 billion) gap in public finances caused by the economic slowdown, rising borrowing costs and a six-month support program for people’s energy bills.
With his party’s popularity waning, Sunak will also face growing calls for an election if he strays too far from the political manifesto that elected the Conservative Party in 2019, when then-leader Boris Johnson pledged to invest heavily in the country.
Economists and investors have said Sunak’s appointment will calm markets, but they caution he has few easy options as millions grapple with a cost-of-living crisis.
“With the possibility of an economic recession in 2023 increasingly likely and the next general election in just two years, Rishi Sunak can expect a difficult prime minister,” Echo Seifert of rating agency Scope told Reuters.
Sunak warned his colleagues that they faced an “existential crisis” if they did not help steer the country through soaring inflation and record energy bills that are forcing many households and businesses to cut spending.
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“Now we need stability and unity, and I will make it my highest priority to bring our party and our country together,” he said while being elected by lawmakers on Monday.
financial turmoil
Sunak, Britain’s youngest prime minister in more than 200 years, replaced Liz Truss, who resigned after 44 days after a “small budget” sparked turmoil in financial markets.
With debt interest costs rising and the outlook for the economy deteriorating, he will now need to review all spending, including on politically sensitive areas such as health, education, defence, welfare and pensions.
Reflecting the near-constant state of turmoil in British politics this year, politicians, journalists and photographers crammed back into Downing Street on Tuesday to hear Truss’ departure speech.
Speaking seven weeks after her arrival as prime minister, Truss made no apologies for her short tenure and said she knew Britain was ready for brighter days.
During her time in office, the pound hit a record low against the dollar, borrowing costs and mortgage rates soared, and the Bank of England was forced to step in to protect pension funds from collapse.
Sunak will now begin to form his cabinet, with some conservative lawmakers hoping it will include politicians from all wings of the party.
Jeremy Hunt is expected to remain as finance minister after the former foreign and health secretary helped calm volatile bond markets by shredding most of the Truss economic programme.
Investors will also want to know if Sunak still plans to publish a new budget along with its borrowing and growth forecast on October 31, which will help inform the BoE’s rate decision on November 3.
political machines
Sunak, a Goldman Sachs analyst who only entered Parliament in 2015, must unite his party, realizing that voters are increasingly angry at Westminster’s antics as the economy heads into recession.
He was blamed by many in the party when he resigned as Chancellor of the Exchequer in the summer, leading to a wider rebellion that brought down Johnson.
While many expressed relief that the party settled on a new leader quickly, there was still a sense of mistrust among some while others questioned whether struggling families would bond with a millionaire or vote at all.
“I think this decision drowns us as a party in the upcoming elections,” a Conservative MP told Reuters, asking not to be named.
Historian and political biographer Anthony Seldon told Reuters that Sunak will also be influenced by the mistakes of his predecessor.
“There is no room for him to be anything but extraordinarily conservative and cautious,” he said.
Sunak’s appointment was welcomed by many politicians and officials abroad, having watched a country once seen as a pillar of economic and political stability descend into brutal internal conflict.
Sunak, a Hindu, also became the first British Prime Minister of Indian descent.
US President Joe Biden called it a “highlight,” while leaders from India and elsewhere welcomed the news. Sonak’s billionaire father-in-law, N R Narayana Murthy, said he would serve the UK well.
“We are proud of him and wish him success,” the founder of software giant Infosys said in a statement.