- Sunak meets King Charles on Tuesday morning
- The formation of a cabinet is expected to begin
- Sunak faces a huge challenge to rebuild stability
LONDON, Oct 25 (Reuters) – Rishi Sunak became Britain’s third prime minister in two months on Tuesday, tasked with dealing with a growing economic crisis, a warring political party and a deeply divided country over one of its most pressing challenges. big for any new leader to face.
The 42-year-old former hedge fund boss was asked to form a government by King Charles and will seek to end the row and wrangling at Westminster that has spooked investors and alarmed international allies.
He will address the nation from Downing Street soon and then begin building his cabinet of senior ministers.
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Sunak, one of the richest men in parliament, will have to find deep spending cuts to plug an estimated 40 billion pound ($45 billion) hole in public finances due to an economic slowdown, higher costs high borrowing rates and a six-month support program. for people’s energy bills.
With his party’s popularity in freefall, Sunak will also face growing calls for an election if he moves too far from the policy manifesto that elected the Conservative Party in 2019, when then-leader Boris Johnson pledged to invest heavily in place.
Economists and investors have said Sunak’s appointment will calm markets, but they warn he has few easy options when millions of people are facing a cost-of-living crisis.
“With a recession in 2023 now increasingly likely, and the next general election just two years away, Rishi Sunak could expect a challenging prime minister,” Eiko Sievert at ratings agency Scope told Reuters.
Sunak has warned his colleagues that they face an “existential crisis” if they do not help steer the country through soaring inflation and record energy bills that are forcing many households and businesses to cut spending.
“Now we need stability and unity and I will make it my biggest priority to unite our party and our country,” he said as he was elected by his lawmakers on Monday.
Sunak, Britain’s youngest prime minister for more than 200 years and its first female leader of colour, replaced Liz Truss who resigned after 44 days following a “mini-budget” that sent financial markets into turmoil.
With debt interest costs rising and the outlook for the economy deteriorating, he will now have to review all spending, including 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 again flocked to Downing Street on Tuesday to hear Truss give a farewell speech.
Speaking seven weeks after becoming prime minister, Truss made no apologies for her short tenure and said she knew Britain was set for brighter days.
During her time in office, the pound hit a record low against the dollar, borrowing costs and mortgage rates rose and the Bank of England was forced to step in to protect pension funds from collapse.
Sunak will now begin forming his cabinet, with some conservative lawmakers hoping it 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 calm volatile bond markets by scrapping much of Truss’s economic programme.
Investors will also want to know whether Sunak still plans to publish a new budget alongside borrowing and growth forecasts on October 31, which would help inform the Bank of England’s interest rate decision on November 3.
Sunak, a Goldman Sachs analyst who only entered parliament in 2015, must rally his party, aware that voters are increasingly angry about the actions in Westminster as the economy heads into recession.
He was blamed by many in the party when he resigned as finance minister in the summer, sparking a wider rebellion that ousted Johnson.
While many expressed relief that the party quickly settled on a new leader, a sense of disbelief remains among some, while others questioned whether struggling families would ever bond with or vote for a multimillionaire.
“I think this decision sinks us as a party for the next election,” a conservative lawmaker told Reuters on condition of anonymity.
Historian and political biographer Anthony Seldon told Reuters that Sunak would also be limited by the mistakes of his predecessor.
“There is no leeway for him to be anything other than extremely conservative and cautious,” he said.
Many politicians and officials abroad, having seen a country once seen as a pillar of economic and political stability degrade into brutal infighting, welcomed Sunak’s appointment.
Sunak, a Hindu, also becomes Britain’s first Indian-origin Prime Minister.
US President Joe Biden described it as “a ground-breaking milestone”, while leaders from India and elsewhere welcomed the news. Sunak’s billionaire father-in-law, NR Narayana Murthy, said he would serve the UK well.
“We are proud of him and wish him every success,” the founder of software giant Infosys said in a statement.
($1 = 0.8864 pounds)
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Reporting by Kate Holton; Editing by Hugh Lawson
Our Standards: The Thomson Reuters Trust Principles.