U.K. Prime MinisterRishi Sunak Will Become the U.K.’s Next Prime Minister on Tuesday
The former chancellor of the Exchequer is set to become the first person of color to lead Britain. He will face a range of dire economic challenges and promised to bring his “party and country together.”
London London Tolga Akmen/EPA, via ShutterstockLondon International Pool via ReutersLondon Dan Kitwood/Getty ImagesLondon By The Associated Press
LONDON — Rishi Sunak prevailed in a chaotic three-day race for leader of Britain’s Conservative Party on Monday, a remarkable political comeback that doubled as a historical milestone, making him the first person of color to become prime minister in British history.
The 42-year-old son of Indian immigrants, whose political career has already had its ups and downs, Mr. Sunak won the contest to replace the short-lived prime minister, Liz Truss, when his only remaining opponent, Penny Mordaunt, withdrew after failing to reach the threshold of 100 nominating votes from Conservative lawmakers.
Mr. Sunak, a former chancellor of the Exchequer, is expected to pull Britain back to more mainstream policies after Ms. Truss’s failed experiment in trickle-down economics, which rattled financial markets and badly damaged Britain’s fiscal reputation. He is also likely to offer a stark contrast to the flamboyant style and erratic behavior of Boris Johnson, his former boss and Ms. Truss’s discredited predecessor.
But Mr. Sunak will confront the gravest economic crisis in Britain in a generation, and he will do so at the helm of a badly fractured Conservative Party. Healing the rifts in the party, and leading the country through the economic crosswinds of the months to come, will require political skills at least as adroit as those that enabled Mr. Sunak to navigate the leadership contest.
Mr. Johnson’s decision to pull out of the race on Sunday night cleared a path for Mr. Sunak, who had challenged Ms. Truss last summer but lost to her in a vote of the party’s rank-and-file members. With Mr. Sunak the only surviving candidate this time, he was not subject to another vote of the members.
It was a head-spinning reversal of fortune for Mr. Sunak, whose abrupt resignation from Mr. Johnson’s cabinet last July set in motion Mr. Johnson’s downfall and pitched Britain into upheaval, culminating in Ms. Truss’s brief, calamitous stint. After he lost the leadership contest to her, it seemed as if Mr. Sunak’s meteoric ascent had cratered as well.
Now, he will become Britain’s third prime minister in seven weeks, the youngest in two centuries and the first person of the Hindu faith to achieve its highest elected office.
A former investment banker whose wife is the daughter of an Indian technology billionaire, Mr. Sunak will also be one of the wealthiest people ever to occupy 10 Downing Street — something that could prove a vulnerability at a time when Britons are struggling to pay soaring gas bills. The Times of London this year estimated the couple’s worth at more than $800 million, placing them among the 250 wealthiest British people or families.
But if his victory swept away another barrier in British politics — putting Mr. Sunak in the same pathbreaking category as Margaret Thatcher, Britain’s first female prime minister, and Benjamin Disraeli, its only prime minister of Jewish heritage — it also thrust him into power at a singularly difficult moment.
“There is no doubt we face profound economic challenges,” Mr. Sunak said in brief, somewhat stiff, remarks after his victory. “We now need stability and unity, and I will make it my utmost priority to bring my party and country together.”
Britain is suffering the twin scourges of surging energy prices and a recession, as well as the self-inflicted damage of Ms. Truss’s free-market agenda: sweeping unfunded tax cuts that frightened markets, sent the pound into a tailspin and kicked off a rebellion of her own lawmakers.
The dramatic circumstances of Mr. Sunak’s rise reinforced the problems he will face in uniting a divided party. Had Ms. Mordaunt cobbled together the necessary 100 votes from lawmakers, polls suggested she would have stood a decent chance of beating him with the members, as Ms. Truss did.
Her failed challenge and Mr. Johnson’s aborted bid laid bare a party still torn by factions. Some members continue to view Mr. Sunak as Mr. Johnson’s political assassin, and the serial scandals of Mr. Johnson’s tenure, followed by the economic misfire of Ms. Truss’s, have left the popularity of the Tories in tatters.
The party now lags the opposition Labour Party by more than 30 percentage points in some opinion polls. The Labour leader, Keir Starmer, has demanded a general election, and those calls could grow louder as the new prime minister imposes a belt-tightening economic program in the midst of a cost-of-living crisis.
Still, political analysts said the party’s swift conclusion to the leadership contest, which avoided a vote by the members, suggested that for now, the feuding Tory factions were committed to rallying around Mr. Sunak. In her withdrawal statement, Ms. Mordaunt called for people to back her rival.
“After the trauma of the last four or five months, even factions that do not support Sunak are going to give him a fair wind,” said Tony Travers, a professor of politics at the London School of Economics. “They have to decide whether they want to win another election or spend a period out of government fighting with each other.”
British assets and the pound jumped after news of Mr. Sunak’s victory, raising hopes that his fiscal prudence and more technocratic style of governing would settle investors after the turbulence set off by Ms. Truss.
As a candidate, Mr. Sunak warned that her plan to reduce taxes at a time of double-digit inflation would be destabilizing. He called for keeping in place an increase in corporate taxes and holding off on a cut in income tax, both of which Mr. Sunak had proposed while chancellor. “Borrowing your way out of inflation isn’t a plan,” he said at a debate in July, “it’s a fairy-tale.”
Mr. Sunak said almost nothing about his plans during this more compressed race. But he is expected to hew to the agenda he laid out during the campaign last summer, which emphasized the need to curb inflation before reducing taxes. With Britain’s borrowing having risen as a result of Ms. Truss’s policies, he may be forced into deeper spending cuts than he once expected.
Some analysts expect him to retain Jeremy Hunt, the chancellor whom Ms. Truss recruited after she was forced to eject her first, Kwasi Kwarteng, the architect of the market-destabilizing tax cuts. Mr. Hunt reversed virtually all of Ms. Truss’s tax cuts, embracing ideas similar to Mr. Sunak’s.
“The pressure on him is to run the most stable, responsible, efficient government as is humanly possible,” Professor Travers said. “How the financial markets are going to respond is going to be major check on this government.”
The man chosen to face all these challenges was born in Southampton, on England’s south coast, to Indian immigrants who had moved to Britain from East Africa. His father was a family doctor; his mother ran a pharmacy. They saved to send him to Winchester College, one of Britain’s most academically rigorous high schools, and then to Oxford University, where he studied philosophy, politics and economics.
From there, Mr. Sunak worked at Goldman Sachs and at a hedge fund, and later earned an M.B.A. at Stanford University, where he met his wife, Akshata Murty. Her father is Narayana Murthy, the founder of Infosys, whose wealth Forbes magazine estimates at $4.5 billion.
Mr. Sunak entered Parliament in 2015, rising quickly to become chancellor in 2020, where he won instant popularity by handing out billions of pounds to protect those who lost jobs in the coronavirus pandemic.
But his career was nearly derailed by reports that Ms. Murty held a privileged tax status that allowed her to avoid paying millions of dollars in British taxes on some of her income. It also emerged that he had retained a U.S. green card, which would allow him to settle permanently in the United States.
Mr. Sunak gave up his green card and Ms. Murty changed her tax status, but the damage was done. Though he survived the episode, it left him with lingering vulnerability at a time of economic hardship for million of Britons.
Critics often tar him as a jet-setter, out of touch with the lives of ordinary people. It doesn’t help that he and Ms. Murty own expensive houses in London, in his parliamentary district in Yorkshire and in Santa Monica, Calif. Or that he works out on a Peloton exercise machine and has been photographed wearing $500 Prada suede loafers and using a $200 “smart” mug that keeps coffee at a precise temperature.
“It will hinge on what people see him doing,” said Anand Menon, a professor of European politics at Kings College London. “He will be vulnerable if he is seen as defending the privileged and the rich.”
Professor Menon said Mr. Sunak’s race was less of a factor in Britain than it would be for a comparable political figure in the United States. For one, he was elected by Conservative lawmakers rather than in a popular vote. While critics speculated that his Indian heritage might have hurt him with some party members last summer, his wealth was viewed as the bigger issue.
“It’s not like we’re living in some kind of post-racial nirvana here,” Professor Menon said. “We just do it somewhat differently than in the United States.”
On the streets of London, people reacted cautiously, perhaps reflecting weariness after months of turmoil in British politics.
“They need someone regular in charge — someone who knows what it’s really like out here, rather than looking down from the 26th floor,” said Hazel Wallace, 26, who works in an ice-cream parlor and views the cost of living as the biggest issue. “It’s survival of the fittest right now, what with everything going up.”
But David Smith, 69, a retired painter and decorator sipping a pint in the Bishop Blaize pub in Leyburn, said he was relieved that Mr. Sunak had replaced Ms. Truss. “He did warn the party that things wouldn’t be right with her, and nobody listened to him,” Mr. Smith said, adding that he expected Mr. Sunak to do “a fantastic job.”
Saskia Solomon contributed reporting.
As Rishi Sunak prepared to become Britain’s third prime minister this year, curiosity about his wealth hovered in the public’s mind like thought bubbles filled with crisp British pound notes.
Just how rich is he?
The Times of London estimated this year that Mr. Sunak and his wife, Akshata Murty, were worth more than $800 million, placing them among the 250 wealthiest British people or families. The source of their wealth? “Technology and hedge fund,” the report said.
Whatever the true numbers (the Sunaks could not be reached for comment and would hardly tell their exact fortune if they did), questions have swirled about whether, given his wealth, the multimillionaire and prime minister could relate to ordinary Britons grappling with a cost-of-living crisis. He is, after all, about to oversee tough measures to pull the country out of a deep financial hole and avoid a recession.
In August, Mr. Sunak confronted the questions about his personal wealth head-on, saying that while he was fortunate to be in his situation, he wasn’t “born like this.” He added, “I think in our country, we judge people not by their bank account; we judge them by their character and their actions.”
But judge him the British tabloids have, anointing him “Rishi Rich.” His wife, a fashion designer, is the daughter of the billionaire founder of the technology company Infosys. Mr. Sunak’s foes have pointed to his penchant for wearing suits that cost 3,500 pounds, about $4,300. They have noted that he wears Prada, once showing up at a construction site in a pair of that brand’s loafers — cost, £490. The couple also have homes in London; his parliamentary constituency in Yorkshire, England; and in Santa Monica, Calif.
Mr. Sunak’s wealth put him in an unwelcome spotlight this year after revelations that his wife had saved millions of pounds a year in taxes by claiming “non-domiciled” status on dividends from her shares in Infosys. The news threatened to stall his political aspirations, and Ms. Murty reversed course by saying she would pay taxes in Britain on her overseas income.
Born in Southampton, England, to a father who was a doctor and a mother who ran a pharmacy, he went to Winchester College, one of Britain’s most elite schools. He graduated from Oxford, attended Stanford and made his own fortune as an investment banker at companies like Goldman Sachs before entering Parliament in 2015 and becoming chancellor of the Exchequer in 2020 at age 39.
Now, he will be one of the wealthiest people ever to occupy 10 Downing Street.
This year, Mr. Sunak appeared to try to burnish his bona fides as an ordinary Briton, using a well-worn political trope by venturing into a store to pay for items. But what was clearly a photo opportunity went oh so wrong.
After delivering his mini-budget to the House of Commons in March, he walked into a gas station in New Cross, Lewisham, a mic clipped to his tie, cameras snapping and video cameras filming. Footage aired by Sky News showed the gas station worker raising a device to scan a can of Coke for Mr. Sunak. But the then-chancellor, not realizing the device wasn’t a card machine, awkwardly attempted to pay with his bank card through a plastic screen.
Social media users had no mercy, mocking him as anything but a man of the people.
At a spring statement photo opportunity, the bungling chancellor appeared to try and pay for a can of coke by scanning his debit card on the barcode reader. The hilarious footage shows the till worker gesture to the soft drink, before Mr Sunak eventually understands his error. pic.twitter.com/wUmJTGk6w8
— LondonWorld (@LondonWorldCom) March 24, 2022
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SKIP ADVERTISEMENTRishi Sunak won the contest to become Britain’s prime minister without making a single speech about policy.
His lack of rhetoric since the contest for Britain’s top job began last Thursday has inevitably created a demand for detail about his policy platform, particularly given the country’s economic crisis. The war in Ukraine, Britain’s delicate relationship with the European Union following Brexit and how he would approach immigration and climate change are also areas where there is an appetite for answers.
As a former chancellor of the Exchequer, he is known for spending during the pandemic that was designed to shield households and businesses from the economic fallout of the virus. But his plan to tackle Britain’s highest inflation in 40 years and a slowing economy isn’t as clear.
In a brief Twitter statement on Sunday to announce his candidacy, he said that, while Britain was a great country, it faced a “profound economic crisis” that he would fix. But the statement, in which he said he would implement the Conservative Party’s 2019 election manifesto, gave no details about how he would do that or approach other areas.
Political commentators have put his reticence to elaborate down to criticism he received in July, when he released a slickly produced campaign video outlining his plans to succeed Boris Johnson, then the prime minister. His rivals pounced on it as evidence that he had been preparing to run for the top job even while Mr. Johnson was still in office.
The campaign that followed, which he ultimately lost to Liz Truss, ran for nearly two months and provided a window into his platform.
On a campaign website from this summer, www.ready4rishi.com, he issued a 10-point plan for Britain, covering areas as diverse as tackling crime, cutting backlogs in the National Health Service and transforming education. But it was scarce on details.
Bullet point No. 4, for example, Delivering on Brexit, said simply “Scrapping all E.U. laws that hold the economy back before the next election.” It gave no hint of how he would negotiate with Brussels over the set of rules called the Northern Ireland Protocol, a dispute that has rumbled on for years.
Mr. Sunak voted for Brexit in 2016 and said in August that he would support a bill that would unilaterally override the Protocol, but he preferred a settlement negotiated with Brussels.
Over the summer, a series of televised debates with Ms. Truss, who eventually lasted just six weeks in the job, gave him an opportunity to flesh out those headlines. On one point, Ukraine, he pledged “total support” for the country in its war against Russia.
Two other issues are less clear. Climate change was not listed in Mr. Sunak’s 10-point plan, though on this summer’s campaign trail, he said he was committed to the government’s goal of reaching zero carbon emissions across the country’s economy by 2050. Activists say it should be faster and that, as chancellor, he had pursued policies that impeded the fight against climate change.
And on the National Health Service, Mr. Sunak spoke on the campaign trail about finding further efficiencies and savings in the systems, but he didn’t tackle ways to reduce long hospital waiting lists or tackle the pay and conditions of health care workers who are threatening to go on strike.
That would take money, which will be his biggest challenge given the economic crisis.
Reporting from London
A newspaper with the headline “Rishi Heads for Number 10.”
LONDON — Rishi Sunak’s ascent to 10 Downing Street is a milestone in giving Britain its first prime minister of color, and has come after the Conservative Party has spent recent years compiling a record of representation, promoting women and people of color to prominent positions.
Mr. Sunak, whose parents are immigrants of Indian origin, will replace Liz Truss, the third female Conservative prime minister after Margaret Thatcher and Theresa May. Ms. Truss named two Black men and a woman of color to her top three cabinet posts: chancellor of the Exchequer, foreign secretary and home secretary.
The opposition Labour Party, by contrast, has never elected a woman or a nonwhite person as leader, a fact that Conservatives frequently point out. However, critics argue that some of the party’s policies themselves are not progressive, including some that are viewed as anti-immigrant. Just last summer, former Prime Minister Boris Johnson’s government tried to institute a plan to send asylum seekers to Rwanda, a policy widely condemned by human rights groups.
The party has long been accused of anti-Muslim sentiment. An independent review published in 2021 found that Islamophobia remained a problem in the party.
The Conservative Party’s more recent efforts at increasing diversity within its ranks can be traced to a former prime minister, David Cameron, who, after becoming party leader in 2005, altered the selection process for potential Conservative lawmakers. That effectively forced local parties to choose parliamentary candidates from lists with a bigger proportion of female, Black and other minority backgrounds. Following the last general election in 2019, a quarter of Conservative lawmakers elected were women, with 6 percent of the party’s seats held by people of minority backgrounds, according to an analysis by The Guardian.
Critics also say the racial diversity in the party masks a lack of class diversity. Mr. Sunak, for example, was educated at the elite Winchester College before attending Oxford University and Stanford Business School and working at Goldman Sachs.
Mr. Cameron, however, noted that, in 2015, he named to his Cabinet Sajid Javid, whose Pakistani immigrant father drove a bus.
“The fact that the old fusty Conservative Party is managing to produce people like that says a lot,” Mr. Cameron said.
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SKIP ADVERTISEMENTPrime Minister Liz Truss had the shortest premiership in Britain’s history. A recent episode of “The Daily” podcast looks at what led to her downfall.
The BBC is reporting that Rishi Sunak will become prime minister on Tuesday after a meeting with King Charles III. Here is a list of scheduled events, in local time, according to the broadcaster:
9 a.m: Liz Truss, the departing prime minister, will chair a cabinet meeting.
10:15 a.m.: Ms. Truss will make a statement outside No. 10 Downing Street before heading to Buckingham Palace for her final audience with King Charles III. While there, she will formally resign.
Mr. Sunak, the new Conservative Party leader, will then go to the palace for his first audience with the king, who will ask him to form a government.
11:35 a.m.: Mr. Sunak, who will officially be prime minister, will then make his own statement before entering No. 10 Downing Street as Britain’s 57th prime minister.
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SKIP ADVERTISEMENTAs Rishi Sunak moved closer to No. 10 Downing Street, some Britons on Monday expressed pessimism at the future and frustration at how he came to power without a public vote. Others, though, saw Mr. Sunak, who helped bring the country through the pandemic, as exactly the right man for the job.
Anne Bagley, 63, a National Health Service worker from the northeast of England who was waiting for a train outside King’s Cross Station in central London, said she felt frustrated that the public didn’t have a say in the decision to put Mr. Sunak in office.
“I think we should have had a general election because of all the mistakes the previous two prime ministers made,” she said, referring to Boris Johnson, who resigned in July, and Liz Truss, who announced her resignation last week. Both were leaders of the Conservative Party.
In central London, Toufik Bayoudhi, 69, who runs a currency exchange service, said Mr. Sunak was the right choice.
“He managed to get us through the pandemic,” Mr. Bayoudhi said. “It won’t be easy for him, but I’m sure he’ll do a good job.”
Still, many were wary of Mr. Sunak. Like some others who spoke to reporters on Monday, Ms. Bagley shared concerns that the incoming prime minister was out of touch with the general public, citing his wealth and elite schooling. “He’s got too much money,” Ms. Bagley said. “He doesn’t understand the people on the ground.”
Lucy Ransom, 25, an administrator at a coffee company in east London, said, “I don’t have any love for him.” A Labour or Green Party voter, she said she was waiting to vote Mr. Sunak out in the next election.
Some felt it was futile to hope that continued conservative leadership would usher any meaningful change within the government.
“Essentially, the Tories are going to keep doing what they’re doing, and the rich will get richer and the poor will stay poor,” said Mohson Iqbal, 39, a financial adviser from East London.
But Gary Smith, 45, a butcher at Halls Family Butchers in Leyburn, in Mr. Sunak’s constituency of Richmond in North Yorkshire, said he was glad to see Mr. Sunak in office because, as chancellor of the Exchequer, he felt Mr. Sunak managed the pandemic well by subsidizing 11.6 million jobs.
Mr. Smith described the new prime minister as a “hands on” politician. “He spends a lot of time coming ’round to places.” Mr. Smith said. “He’s been to a lot of villages. He’s been to fairs and fund-raisers. It’s quite something to see a politician’s face around here, and not just on the telly. We’re happy that he’s become prime minister.”
NEW DELHI — In India, where Rishi Sunak traces his lineage and has family ties, reaction was relatively subdued to the news on Monday that a politician of Indian origin was ascending to Britain’s highest office. The country was busy celebrating Diwali during a long weekend of festivities.
But the historical context was not lost on those who responded to the news on social media and on India’s television news: The year when the South Asian nation has been marking 75 years of independence from British colonial rule, a British Hindu leader of Indian ancestry was moving into 10 Downing Street.
“Indian son rises over the empire,” said the breaking news ticker of one news channel.
“The Parliament here that would send viceroy after viceroy to India now sees someone of Indian origin coming in as prime minister,” said one Indian television reporter, speaking from outside Britain’s Parliament.
Prime Minister Narendra Modi, of India, congratulated Mr. Sunak and described the Indian community in Britain as a “living bridge” with his nation.
Shashi Tharoor, an opposition leader who has written extensively about the British Empire’s exploitation of India, said Britain had “done something very rare in the world, to place a member of a visible minority in the most powerful office.”
“As we Indians celebrate,” Mr. Tharoor, whose Indian National Congress party is a strong critic of the rising Hindu nationalism in India, said on Twitter, “let’s honestly ask: can it happen here?”
Mr. Sunak’s rise is the latest in a long list of leaders of Indian origin who have climbed to the highest offices in politics, business and technology around the world. Britain joins about a half-dozen countries, from Suriname to Guyana, whose heads of government trace their lineage to India. Vice President Kamala Harris and Leo Varadkar, Ireland’s deputy prime minister and former prime minister, also have Indian heritage.
Mr. Sunak’s Punjabi grandparents migrated to East Africa before his parents arrived in England, where he was born. His wife, Akshata Murthy, has Indian citizenship and is the daughter of N.R. Narayana Murthy, an Indian billionaire who founded the technology giant Infosys.
After Mr. Sunak became finance minister, Ms. Murthy’s “non-domiciled” tax status was a matter of prolonged debate. She eventually announced that she would pay British taxes on all of her income.
“My decision to pay U.K. tax on all my worldwide income will not change the fact that India remains the country of my birth, citizenship, parents’ home and place of domicile,” she said in April. “But I love the U.K. too.”
Mr. Sunak is also Hindu, and the news media in India covered his taking the oath of office on the Bhagavad Gita, a revered Hindu scripture, when he began a new term in Parliament in 2019.
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SKIP ADVERTISEMENTReporting from London
In his first public comments, Sunak said: “There is no doubt we face profound economic challenges. We now need stability and unity, and I will make it my utmost priority to bring my party and country together.”
transcript
WEBVTT 00:00:00.000 —> 00:00:02.250 I’d like to pay tribute to Liz Truss 00:00:02.250 —> 00:00:05.910 for her dedicated public service to the country. 00:00:05.910 —> 00:00:08.580 She has led with dignity and grace 00:00:08.580 —> 00:00:12.150 through a time of great change and under exceptionally 00:00:12.150 —> 00:00:16.770 difficult circumstances, both at home and abroad. 00:00:16.770 —> 00:00:19.710 I am humbled and honored to have 00:00:19.710 —> 00:00:22.410 the support of my parliamentary colleagues, 00:00:22.410 —> 00:00:25.622 and to be elected as leader of the Conservative 00:00:25.622 —> 00:00:27.930 and Unionist Party. 00:00:27.930 —> 00:00:30.690 It is the greatest privilege of my life 00:00:30.690 —> 00:00:33.390 to be able to serve the party I love 00:00:33.390 —> 00:00:38.580 and give back to the country I owe so much to. 00:00:38.580 —> 00:00:42.250 The United Kingdom is a great country, 00:00:42.250 —> 00:00:45.532 but there is no doubt we face a profound 00:00:45.532 —> 00:00:47.890 economic challenge. 00:00:47.890 —> 00:00:51.070 We now need stability and unity, 00:00:51.070 —> 00:00:54.010 and I will make it my utmost priority 00:00:54.010 —> 00:00:58.616 to bring our party and country together 00:00:58.616 —> 00:01:01.960 because that is the only way we will overcome 00:01:01.960 —> 00:01:05.740 the challenges we face and build a better, 00:01:05.740 —> 00:01:08.830 more prosperous future for our children 00:01:08.830 —> 00:01:11.260 and our grandchildren. 00:01:11.260 —> 00:01:17.350 I pledge that I will serve you with integrity and humility, 00:01:17.350 —> 00:01:22.060 and I will work day in, day out to deliver 00:01:22.060 —> 00:01:23.733 for the British people.
Reporting from London
Sunak’s praise of Liz Truss contrasts with her reaction after beating him in September. She did not shake his hand before climbing the stage to accept victory.
Reporting from London
His reference to governing with “integrity” draws a clear distinction with the scandal-scarred tenure of Boris Johnson.
Reporting from London
Among his other distinctions, Rishi Sunak, at 42, is the youngest British prime minister in two centuries.
Rishi Sunak already has experience steering Britain’s public finances through a crisis, but that is unlikely to make tackling the country’s economic challenges any less daunting.
As chancellor of the Exchequer from February 2020 to this July, Mr. Sunak spent heavily to shield households and businesses from some of the economic fallout from the coronavirus pandemic. Back then, inflation was low and the Bank of England was buying government debt, helping keep interest rates low as borrowing ballooned to pay for the large increase in spending.
Now, Mr. Sunak, who is set to be Britain’s next prime minister after being named leader of the Conservative Party on Monday, will face a very different economic backdrop: The inflation rate has topped 10 percent, the highest in 40 years and, like many countries, the economy is slowing down and at risk of falling into a recession. Meanwhile, the Bank of England is continuing to raise interest rates to curb inflation, and won’t be there to purchase government debt because starting next month it is planning to slowly sell its holdings of bonds. That means the government will rely more on investors, who have been demanding higher interest rates, than the central bank to buy bonds.
In these circumstances, Mr. Sunak has several urgent issues to resolve. One is how to support households squeezed by rising energy costs, after Russia’s war in Ukraine introduced huge volatility into global energy markets. As things stand, household bills have been frozen from this month through to April at an average of 2,500 pounds ($2,826) a year, but after that the government is expected to develop a cheaper policy to help the most vulnerable households. A similar policy is in place to help businesses for six months.
After setting aside tens of billions of pounds to keep energy bills down, the government is also under pressure to show how it will keep borrowing in check, in an effort to restore Britain’s fiscal credibility in markets. Jeremy Hunt, the finance minister recently installed by Liz Truss but a supporter of Mr. Sunak, is scheduled to deliver a fiscal statement on Oct. 31 that he said would show Britain’s debt falling as a share of national income over the medium term.
To bring down debt levels, “decisions of eye-watering difficulty” on spending and tax will need to be made, Mr. Hunt has said. He said he would ask every government department to find ways to save money despite their already stretched budgets. At the same time, Mr. Hunt said taxes were likely to rise as well. Mr. Sunak, however, is not obligated to keep Mr. Hunt as chancellor or stick to the current timetable for the fiscal statement, though many analysts expect him to.
“The United Kingdom is a great country, but there is no doubt we face a profound economic challenge,” Mr. Sunak said on Monday in a short speech. “We now need stability and unity.”
At this stage, Mr. Sunak hasn’t revealed details about his economic plan as prime minister, but investors appear to be taking the prospect of his premiership in stride.
The pound is trading at about $1.13, a little higher than it was on Sept. 22 before the tax-cutting plan by Ms. Truss that roiled markets, pushing the pound steeply lower and borrowing costs higher. Government bonds yields have fallen from their recent highs. On Monday afternoon, the yield on 10-year bonds was at about 3.75 percent, after closing at 4 percent on Friday. It’s the lowest level since the fiscal statement by Ms. Truss’s government in September.
Lower interest rates will be a comfort to Mr. Sunak. For one, lower rates will shrink the amount of money the Treasury will need to set aside for interest rate payments, which could ease spending cuts and tax increases. But there are other reminders of the economic difficulties Britain faces.
On Monday, a measure of economic activity in Britain dropped, as the services industry posted its worst monthly decline since January 2021, according to the Purchasing Managers’ Index, which measures economic trends. The index for both services and manufacturing activity fell to 47.2 points. A reading below 50 means a contraction in activity.
The data showed that the pace of economic decline was gathering momentum, said Chris Williamson, an economist at S&P Global Market Intelligence.
And on Friday, the credit ratings agency Moody’s changed its outlook on Britain to negative, from stable, while reaffirming the country’s current Aa3 investment grade rating. A lower credit rating tends to lead to higher government borrowing costs.
Moody’s said the outlook was changed to negative because of the “heightened unpredictability in policymaking amid weaker growth prospects and high inflation.” There was also a risk that increased borrowing would challenge Britain’s debt affordability, especially if there was a “sustained weakening in policy credibility.”
These are just the latest in a laundry list of the government’s economic concerns. They include supporting low-income households against the rising cost of living, encouraging investment to improve weak productivity growth, smoothing Britain’s trading relationship with the European Union and growing the labor market to ensure businesses can find people with the right skills.
“We need a clear long-term vision of how the new prime minister will deal with the challenges ahead,” Shevaun Haviland, the director general of the British Chambers of Commerce, said in a statement, “and create the business conditions that allow firms, and the communities that rely on them, to thrive.”
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SKIP ADVERTISEMENTMembers of the Gohil family were leaving their temple in northwest London after offering Diwali prayers when news broke that Mr. Sunak, a Hindu, would become Britain’s next prime minister. “We are very proud and very excited, being Hindus from India,” said Priya Gohil, who has lived with her husband in London for nearly 20 years.
Although Rishi Sunak has been named the new leader of Britain’s governing Conservative Party, another set of procedures is required before he becomes prime minister.
First, Liz Truss, who resigned as leader on Thursday, will visit Buckingham Palace to formally stand down. Mr. Sunak will then meet with the monarch, who will ask him to form a government in a ceremony known as “kissing hands,” though no hands are actually kissed.
For the first time, that monarch will be King Charles III. He ascended the throne last month after the death of his mother, Queen Elizabeth II, who appointed 15 prime ministers during her 70-year reign.
New party leaders typically arrive at Buckingham Palace in their own car and leave in the prime minister’s official vehicle. Mr. Sunak was also heading to Downing Street, the leader’s official residence, to make a speech that includes a statement of intent for his time in office before entering Number 10 to begin that work.
This process was slightly different for Ms. Truss, the final premier to appear before Queen Elizabeth II, just two days before the monarch’s death at the age of 96.
Ms. Truss was invited to form a new government at Balmoral Castle in Scotland, where the queen had been living in the final days of her life. An image of the frail but smiling former sovereign meeting Ms. Truss was the last image of Queen Elizabeth II to be released publicly. Ms. Truss, who announced her resignation on Thursday, is the shortest-serving prime minister in British history.
Reporting from London
King Charles III is returning to London this afternoon from Sandringham, the family’s country retreat in Norfolk. Rishi Sunak must see him to be officially installed as prime minister, after Liz Truss relinquishes the job.
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SKIP ADVERTISEMENTRishi Sunak is poised to make history as Britain’s first prime minister of color, a milestone for a polyglot nation that has become more ethnically diverse in recent decades, albeit one roiled by occasional anti-immigrant fervor.
Mr. Sunak, who rose swiftly from newbie member of Parliament to become chancellor of the Exchequer at age 39, was born in Southampton, on the southern English coast, to parents of Indian heritage who emigrated from British colonial East Africa six decades ago.
His father was a family doctor; his mother ran a pharmacy. On his official website, Mr. Sunak says that among his first experiences in business was working in his mother’s small shop. “I grew up watching my parents serve our local community with dedication,” he writes.
Mr. Sunak’s grandparents were originally from Punjab. He has said that he experienced little racism growing up, but recounted in a BBC interview an incident from his teenage years that has stayed with him. While with his two younger siblings at a fast-food restaurant, he said, he heard some other patrons refer to them using a racist epithet.
“It stung, I still remember, it’s seared in my memory,” he told the BBC. But he added that he “can’t conceive of that happening today” in Britain.
His parents saved money to send him to Winchester College, one of Britain’s most elite and academically rigorous fee-paying schools. After graduating with a top degree from Oxford University and then attending Stanford University, he went on to make a fortune in finance, including a spell at Goldman Sachs, before winning a seat in Parliament in 2015, representing a constituency in Yorkshire.
He became chancellor in 2020, and his popularity surged during the Covid pandemic when the Treasury dispensed billions to save jobs and support struggling Britons.
While at Stanford, he met his future wife, Akshata Murty, a fashion designer whose father, Narayana Murthy, co-founded the technology giant Infosys and is one of India’s richest men. They have two children and, according to news media reports, own homes in London, Yorkshire and Santa Monica, Calif.
But Mr. Sunak’s meteoric rise slowed this year with revelations that Ms. Murty had limited her tax exposure in Britain. After the furor, and days of negative headlines, she volunteered to pay the extra tax. Mr. Sunak was also criticized when it emerged that he had retained a U.S. green card, which would allow him to live permanently in the United States. He gave it up before making his first visit to the country as chancellor last October.
During this summer’s Conservative Party leadership contest, it was his appearance of privilege, more than his heritage, that appeared to give party members pause at a time of surging inflation and a cost-of-living crisis. A photo opportunity in which he seemed unsure how to pay at a gas station, and reports that he had worn a pair of Prada loafers valued at 490 pounds ($555) to visit a construction site, added to concerns that he was out of touch.
He has spoken of balancing his dual identities, as part of a generation born in Britain but with origins elsewhere. As a child, he told the BBC, he would spend weekends at the Hindu temple and at the matches of the local Southampton soccer club, the Saints.
“You do everything,” he said. “You do both.”
His victory on Monday coincided with Diwali, the annual Hindu festival that marks new beginnings. Mr. Sunak has talked about his faith as a source of strength, and when elected to Parliament, he swore his oath of allegiance on the Bhagavad Gita, the most revered Hindu text.
But in Britain, a politician’s religious affiliation is rarely a dominant topic, and Mr. Sunak has not made his faith a core element of his political identity.
“I am open about being a Hindu,” he told India’s Business Standard newspaper in 2020. But he went on to compare religion in Britain and America and said: “Religion pervades political life there, and that is not the case here, thankfully.”
LONDON — Rishi Sunak, who will become Britain’s prime minister on Tuesday, after prevailing in a chaotic Conservative Party leadership race, said on Monday that his focus would be “stability and unity.”
A former chancellor of the Exchequer who is the son of Indian immigrants, Mr. Sunak, 42, won the contest to replace the ousted Liz Truss, who resigned under pressure last Thursday after her economic agenda caused turmoil. Mr. Sunak will be Britain’s third leader in seven weeks and the first prime minister of color in its history.
“There is no doubt we face profound economic challenges,’’ Mr. Sunak said in a brief appearance Monday afternoon. “We now need stability and unity, and I will make it my utmost priority to bring my party and country together.”
The BBC reported that Mr. Sunak would become prime minister on Tuesday morning after meeting with King Charles III.
Here’s what to know about Mr. Sunak’s victory:
It puts him in the pathbreaking category of Margaret Thatcher, Britain’s first female prime minister, and Benjamin Disraeli, its only Jewish prime minister. But it also puts him in office at an acutely difficult moment.
Britain is suffering the global scourge of inflation, as well as the self-inflicted damage of Ms. Truss, whose free-market economic agenda, featuring sweeping tax cuts, upended markets and sent the pound into a tailspin.
Mr. Sunak faces steep hurdles in trying to unify a demoralized and divided Conservative Party. Boris Johnson’s aborted bid to return to the prime minister’s office after a series of scandals and Penny Mordaunt’s unsuccessful challenge will leave many members angry. And some still see Mr. Sunak’s resignation as Mr. Johnson’s finance minister this summer as leading to the end of his former boss’s time in office.
The Conservatives lag behind the opposition Labour Party by more than 30 percentage points in polls. Calls for a general election have started and are likely to intensify as the new prime minister embarks on a belt-tightening economic program during a cost-of-living crisis.
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SKIP ADVERTISEMENTReporting from London
Foreign Secretary James Cleverly, who backed Boris Johnson over Rishi Sunak, tells the BBC it is good to avoid another week of uncertainty in the Conservative Party.
Reporting from London
There has only been a small market reaction to the news that Penny Mordaunt has withdrawn and Rishi Sunak will be the next prime minister. Government bond yields fell slightly, and the pound rose a touch. Mr. Sunak was already the market’s favorite to win, so in the parlance of traders we could say that the result was already “priced in.”
Reporting from London
Penny Mordaunt has withdrawn. Rishi Sunak will be Britain’s next prime minister.
transcript
WEBVTT 00:00:00.000 —> 00:00:03.570 As returning officer in the leadership election, 00:00:03.570 —> 00:00:06.810 I can confirm that we have received 00:00:06.810 —> 00:00:09.138 one valid nomination. 00:00:09.138 —> 00:00:13.059 [applause] 00:00:15.980 —> 00:00:18.830 Rishi Sunak is therefore elected as leader 00:00:18.830 —> 00:00:21.310 of the Conservative Party.
Reporting from London
Penny Mordaunt tweeted: “We all owe it to the country, to each other, and to Rishi to unite.”
— Penny Mordaunt (@PennyMordaunt) October 24, 2022
The fall of Liz Truss, Britain’s prime minister for just six tumultuous weeks, has plunged the nation into another phase of economic uncertainty.
When Ms. Truss announced her resignation on Thursday as Conservative Party leader, saying that she would stand down as prime minister, the markets that had rebelled against her fiscal policies engaged in a weak and short-lived rally. Investors were left wondering who would be the new leader and what lay ahead for Britain’s economic policy.
“It’s a leap into the unknown,” Antoine Bouvet, an interest rates strategist at ING, said on Thursday.
Overall the initial reaction, Mr. Bouvet added, suggested that investors expect that a new prime minister will go ahead with fiscal plans generally supported by the market. But he said it was too early to be sure.
“Let’s see who gets elected leader and what they say on fiscal policy,” he said.
The next prime minister, the third this year, will face a long list of economic challenges. Annual inflation topped 10 percent last month as food prices rose at their fastest pace in more than 40 years. Wages haven’t kept up with rising prices, bringing about a cost-of-living crisis and labor unrest. Interest rates are set to rise even as the economy stagnates. And Russia’s war in Ukraine is still rippling through the global economy, especially the energy market.
For the British economy “there is very little prospect for strong growth,” said Jagjit Chadha, the director of the National Institute of Economic and Social Research, a think tank in London. “Everything we’ve seen over the past couple of weeks hasn’t particularly changed that.”
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SKIP ADVERTISEMENTBritains’s news media had a field day with the resignation of Liz Truss, but the leadership vacuum created by her exit leaves real questions about what lies ahead for Britain’s economy and business community.
The country’s already embattled economy needs government stability, fast. After initially improving on the Truss news, the pound and British government bond yields gave up their gains. Markets are wary of what the next prime minister — who would be its third this year — will put forth, though it is unlikely that the person would propose anything like Ms. Truss’s highly unpopular and unfunded tax cuts.
Some political commentators also worry that picking yet another prime minister without a general election would result in a leader without a true political mandate.
Businesses have had enough of the chaos.
“We don’t need more Cirque du Soleil,” said the chief of BusinessLDN, a trade group. What the corporate community is now hoping for, a senior executive at a big multinational told DealBook, is stability and moderation.
Reporting from London
A key ally of Penny Mordaunt, George Freeman, told the BBC that she needed to make a deal with Rishi Sunak that would make him prime minister for the sake of party unity.
The rise and fall of Liz Truss, Britain’s six-week prime minister who resigned on Thursday, embodies a seismic and long-mounting change in British politics, though its cause and consequences may not always be obvious. She was only the fourth British leader to win the job through a particularly American practice newly common in her country: a party primary.
As in most parliamentary democracies, British parties, for most of their history, chose their leaders, and therefore the prime minister, through a poll of party officials. But in recent elections Britain has shifted that power to party bases, which now select party leaders in elections somewhat like those held in the United States for party nominations.
This was intended to empower voters over back-room party bosses, elevating politicians who would be more representative and therefore more electable. But the consequences have been very different.
As in the United States, British primary voters tend to be more ideologically fervent and less inclined to moderation than are party bosses or even the median party supporter, surveys find.
This has, in both countries, tended to elevate candidates who are more extreme, with research suggesting that the effect has been to make politics more polarized and dysfunctional. Ms. Truss and the policies that precipitated her brief tenure have become prime examples.
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SKIP ADVERTISEMENTReporting from London
The European Research Group, an influential right-wing Tory group in Parliament, has not thrown its support behind either Rishi Sunak or Penny Mordaunt. That leaves the race between the two contenders more open than it might have been.
Reporting from London
Another thing for Britain’s next prime minister to think about: On Friday, the credit ratings agency Moody’s changed Britain’s outlook to negative, from stable, while reaffirming the country’s current Aa3 investment grade rating. Moody’s said the outlook was negative because of the “heightened unpredictability in policymaking amid weaker growth prospects and high inflation.”
There was also a risk that increased borrowing would cause a challenge to Britain’s debt affordability especially amid a “sustained weakening in policy credibility.”
Reporting from London
Penny Mordaunt’s allies claim that she has 90 votes of Conservative lawmakers, just shy of the 100 threshold, with two hours to go before nominating deadline.
Reporting from London
Reminder: Rishi Sunak has 185 declared votes, more than half of all Tory lawmakers, according to the BBC. Mordaunt has only 26.
Reporting from London
A reminder of the economic challenges the next prime minister will face arrived this morning. A measure of economic activity in Britain dropped in October, with the services industry posting its worst monthly decline since January 2021, according to the Purchasing Managers’ Index, which measures economic trends. The index for both services and manufacturing activity fell to 47.2, with a reading below 50 signaling a contraction in activity. The pace of economic decline is gathering momentum, said Chris Williamson, an economist at S&P Global Market Intelligence.
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SKIP ADVERTISEMENTWhen Liz Truss resigned as prime minister on Thursday, she spoke almost wistfully about how the collapse of her economic plans meant that she would never achieve her goal of creating a “low-tax, high-growth economy that would take advantage of the freedoms of Brexit.”
Her nostalgia for Britain’s exit from the European Union might be misplaced, at least when it comes to her Conservative Party. Brexit is the fault line that runs through Ms. Truss’s ill-fated attempt to transform Britain’s economy, just as it ran through Prime Minister Theresa May’s doomed government, and David Cameron’s before hers.
Except for Boris Johnson, who was forced out because of scandals related to his personal conduct, the forces unleashed by Brexit have undone every Conservative prime minister since 2016. They have also severely divided the party, creating bitter, ideologically opposed factions seemingly more interested in warring with each other than in governing a country with the world’s sixth-largest economy.
Ms. Truss’s calamitous tenure, critics said, is the most extreme example of post-Brexit politics that have now brought the Conservatives to crisis. In the process, it has damaged Britain’s economic standing, its credibility in the markets, and its reputation with the public.
“The Conservatives are never going to recover the coherence that will make for good governance,” said Timothy Garton Ash, a professor of European studies at Oxford University. “This is a party that is tearing itself apart.”