Former Chancellor, Rishi Sunak becomes Prime Minister of the United Kingdom after succeeding Liz Truss. The 42-year-old will be the first person of colour and the first Hindu to spearhead the country’s affairs. Ms. Truss went down in history as the shortest-serving Prime Minister of Britain serving from September 6, 2022, to October 25, 2022. Her resignation followed after investors failed to embrace her leading economic strategy to stimulate the economy with tax reductions during growing inflations. This resulted in an overwhelming fall of the pound and an intervention in bond markets by the Bank of England to balance the price of U.K. government debt.
The choice brings to an end Mr. Sunak’s second attempt in recent months to win the position of Prime Minister. During the summer, he ran for British leader but lost to Ms. Truss. He also opposed Ms. Truss’ proposal to borrow money to immediately lower taxes during the campaign. Mr. Sunak asserted that any tax reductions should come after addressing Britain’s high inflation rate, which is currently at 10.1%.
Predictions for Mr. Sunak’s Tenure
Although Mr. Sunak’s fiscal conservatism would temporarily calm the markets, his administration will still have to make difficult expenditure decisions. The U.K. treasury is anticipated to present measures on October 31 to reduce spending and maybe increase taxes to close a projected 40 billion pounds deficit. The Prime Minister needs to find a way to bring together a party that is bitterly split by the governance of the UK’s economy and how to handle the effects of Brexit.
The overall picture however remains bleak. Mr. Sunak will probably experience a winter of unhappiness as inflation accelerates past wage growth due to the war in Ukraine’s soaring energy costs, and a recession sets in that economists predict might last a full year. Worker strikes and concerns about the necessity of blackouts during his first few months in office are anticipated to be frequent occurrences due to Russia’s restrictions on gas supplies to Europe.
Despite being a Eurosceptic, Mr. Sunak is more tolerant of Europe than Ms. Truss or Mr. Johnson. He ran for office in the past promoting both fiscal conservatism and immigration restrictions. He may however have to cut down on military expenditure though he has stated his support for assisting Ukraine in resisting Russia’s invasion.
The State of the British Economy
The UK’s economy hasn’t yet reached its pre-epidemic level, in contrast to the majority of other wealthy nations. The economy of the United Kingdom barely expanded in the three months that ended in June, leaving it 0.2% smaller than in the last quarter of 2019—the last before the Coronavirus disease started to spread. Perhaps Mr. Sunak will be able to restore the falling economy of the United Kingdom.
New UK Prime Minister Pledges to Fix Britain’s Many Problems
As Britain’s third prime minister in two months, Rishi Sunak declared on Tuesday that he was unfazed by the scope of the challenge and promised to restore confidence and lead the nation through an economic catastrophe.
The job at hand for the 42-year-old former hedge fund manager, who has only been in electoral politics for seven years, is to put an end to the squabbling and infighting at Westminster that has terrified investors and alarmed international allies.
“I fully appreciate how hard things are,” he said outside the prime minister’s residence at Downing Street where he shunned the normal tradition of standing with his family and political supporters.
“I understand too that I have work to do to restore trust after all that has happened. All I can say is that I am not daunted. I know the high office I have accepted and I hope to live up to its demands.”
A 40 billion pound ($45 billion) hole in the public finances is expected to be filled by Sunak, one of the wealthiest members of parliament, by cutting spending. This hole was caused by the slowdown in the economy, higher borrowing costs, and a six-month program to help people with their energy bills.
If Sunak deviates too far from the policy platform that helped the Conservative Party win the 2019 election when then-leader Boris Johnson promised to make significant investments in the nation, his party’s popularity, which is in free fall, will see increased calls for an election.
Sunak’s appointment, according to economists and investors, will calm the markets, but they caution that he has few simple options when millions of people are struggling with a cost-of-living crisis.
“I will place economic stability and confidence at the heart of this government’s agenda,” he said, shortly after he accepted King Charles’s request to form a government. “This will mean difficult decisions to come.”
Priscilla Fumadorh
Priscilla is an entrepreneur and a creative communicator who loves to communicate through writing. She is passionate about national economic issues and does not miss a chance to offer her opinions on them for the good of the country.