Rishi Sunak will become Britain’s third prime minister in as many months as his only rival for the Tory leadership dropped out of the race.
A victory by the former chancellor over Penny Mordaunt marks “quite some turnaround for a guy who was soundly beaten into second place by Liz Truss during the last Tory leadership contest, just seven bonkers weeks ago”, said Politico’s London Playbook. But Sunak “will not be celebrating long”, Rachel Wearmouth predicted in The New Statesman.
With the UK engulfed in political and economic crisis, some huge challenges lie ahead for the the next Tory leader.
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Stabilise the markets
The tax-slashing mini budget rolled out only a month ago by Liz Truss and Kwasi Kwarteng caused a panic on the financial markets that led to the duo’s downfall. Kwarteng was swiftly sacked as chancellor and replaced by Jeremy Hunt, who in a final blow to so-called Trussonomics, scrapped almost all of her tax cuts.
Hunt’s bid to steady the markets succeeded in stabilising the pound. And the pound rose further against the dollar this morning, after Boris Johnson ruled himself out of the Tory leadership race. But “analysts reckon that markets will need some time to thoroughly shake off the political risk premium built over recent weeks”, reported Reuters.
Government bonds – which “determine ordinary people’s mortgage bills and the government’s borrowing costs” – are still “nowhere close to bouncing back to where they started”, said the Financial Times’s markets editor Katie Martin.
“The fact that yields are still elevated despite Truss’s departure is a warning sign to her successor,” Martin wrote. “Clearly, the new prime minister will have to work hard to regain the market’s trust. In other words, markets will have a lot of sway on the direction government takes.”
Get the economy back on track
Sunak “will face a long list of economic challenges”, said The New York Times’s London-based business reporter Eshe Nelson. The cost-of-living crisis is being driven by soaring energy prices and 40-year-high inflation compounded by rising interest rates. With a £40bn hole in the public finances causing further misery, the UK economy is expected to be in recession until the middle of 2023.
“The country has been getting poorer,” the BBC’s Laura Kuenssberg, “and the public are feeling it.”
Nikhil Sanghani, managing director of research at the Official Monetary and Financial Institutions Forum, told Vox that voters were likely to face further suffering. “Whoever takes over, they’ll probably have to enact some sort of prudent fiscal policy, which probably means some form of austerity,” Sanghani said.
Hunt has reportedly told government departments apart from health and defence to reduce their budgets by as much as 15% already, and has put an April 2023 deadline on energy support payments, in what pundits say effectively amounts to “austerity 2.0”.
Former Bank of England governor Mervyn King delivered what The Guardian called “a stark message for consumers” yesterday, warning that Britons face years of financial hardship that could be “more difficult” than during the age of austerity a decade ago.
Rescue public services
Amid speculation about widespread cuts to public services, “the NHS is braced for its toughest ever winter”, said Wearmouth in The New Statesman. Covid cases are climbing, waiting lists and A&E delays are at record highs, and around 100,000 NHS jobs are vacant.
At the same time, UK workers are experiencing the biggest falls in real pay adjusted for inflation since 1977, which has led to widespread industrial action by groups ranging from transport and postal staff to barristers.
Yet “strikingly”, none of the Tory leadership candidates “have faced scrutiny over what they plan to do with power”, said Wearmouth. She questioned whether Sunak would “look to, say, the defence budget (due to rise to 3% of GDP by 2030), levelling-up projects or foreign aid for savings? If he plans to break the promise he made as chancellor to raise benefits in line with inflation, there is no way for the public to hold him accountable.”
Unite the Tory party
As the Conservatives prepare to elect their third leader of 2022, “senior Tory figures are asking whether their party is now broken beyond repair”, said PoliticsHome’s political reporter Adam Payne.
“I’ve never seen such division within the party,” wrote Iain Dale in The Telegraph. Tory MPs need to unite “behind a new leader who will appeal not just to all groups within the parliamentary party, but also who will reach out to members and voters with a positive, optimistic message of renewal and hope”.
Yet having disposed of four leaders in six years and descended into a state of near-constant civil war, “there is widespread belief in Westminster that the Conservative Party as it stands may now be ungovernable, and can only be retrieved after a time out of power, during which it can locate a common purpose”, said PoliticsHome’s Payne.
Win back the public
While uniting the Tory party seems like a mammoth task, winning back voters may prove even harder. Politico’s latest polling aggregator puts Labour on 53%, more than 30 points ahead of the Conservatives on 21%.
The next general election does not have to take place for another two years, but as the country prepares for the arrival of the second unelected leader of this parliament, the next PM is likely to “come under pressure to secure a mandate”, said Sky News. Labour, the Lib Dems, the SNP and Greens have all called for an early general election.
And a YouGov poll last week of more than 2,000 people found that 63% also believed that voters should be given a say immediately.
Yet for all the challenges facing the next PM, there may still be cause for hope, according to Tony Travers, director of LSE London.
“It would be genuinely shocking if the Conservative Party didn’t survive,” Travers told Vox. “It’s an incredibly long-established and durable political party, one of the longest-established and most durable in the world, and it has incredible capacities to adapt and change and revive itself and move on.”
