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.”

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Mark Landler

Reporting from London

Rishi Sunak Wins Contest to Lead U.K. and Confront Economic Storm

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Rishi Sunak, center, outside Conservative Party headquarters in London on Monday.Credit...Henry Nicholls/Reuters

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.

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Former Prime Minister Boris Johnson at Gatwick Airport, after traveling on a flight from the Caribbean on Saturday.Credit...Henry Nicholls/Reuters

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.

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Penny Mordaunt withdrew her candidacy after failing to reach the threshold of 100 nominating votes from Conservative lawmakers.Credit...Henry Nicholls/Reuters

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.”

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Mr. Sunak and Liz Truss on the day she was announced as the Conservative Party leader in September.Credit...Pool photo by Stefan Rousseau

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.

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Mr. Sunak, his wife, Akshata Murty, and their daughters Anoushka and Krishna at a campaign event in Grantham, England, this summer.Credit...Peter Nicholls/Reuters

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.”

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Mr. Sunak in Scotland in 2020.Credit...Pool photo by Jeff J Mitchell

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.”

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The door to 10 Downing Street, the official residence of Britain's prime minister.Credit...Daniel Leal/Agence France-Presse — Getty Images

Saskia Solomon contributed reporting.

Yonette Joseph
Oct. 24, 2022, 5:40 p.m. ET

Mr. Sunak, the multimillionaire, goes to Downing Street.

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Rishi Sunak and his wife, Akshata Murty, at a reception in February for the British Asian Trust in London.Credit...Ian West/PA Image, via Alamy

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.

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Matthew Mpoke Bigg
Oct. 24, 2022, 3:42 p.m. ET

His ambiguity on the campaign trail leaves people guessing what policies Rishi Sunak supports.

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Rishi Sunak in Cardiff, Wales, in August. Mr. Sunak has said very little in the last week about how he will lead Britain. Credit...Peter Nicholls/Reuters

Rishi 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.

Isabella Kwai
Oct. 24, 2022, 3:17 p.m. ET

Reporting from London

A newspaper with the headline “Rishi Heads for Number 10.”

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Credit...Isabella Kwai
Mark Landler
Oct. 24, 2022, 2:45 p.m. ET

Reporting from London

The Conservative Party has made some progress in promoting women and people of color.

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Rishi Sunak, the new Conservative Party leader and incoming prime minister, arriving Monday at the Conservative Party headquarters after winning the party’s leadership contest.Credit...Daniel Leal/Agence France-Presse — Getty Images

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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The New York Times
Oct. 24, 2022, 2:33 p.m. ET

‘The Daily’ asks: How did Truss’s downfall happen so rapidly?

Prime 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.

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Listen to ‘The Daily’: The Rapid Downfall of Liz Truss

Ms. Truss is the shortest-serving prime minister in British history. How did she get here?
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transcript

Listen to ‘The Daily’: The Rapid Downfall of Liz Truss

Ms. Truss is the shortest-serving prime minister in British history. How did she get here?

This transcript was created using speech recognition software. While it has been reviewed by human transcribers, it may contain errors. Please review the episode audio before quoting from this transcript and email transcripts@nytimes.com with any questions.

michael barbaro

Hey, it’s Michael. We’re going to start today’s show in just a minute. But before we do that, I want to tell you about a new podcast on “The Times.” It’s called “Hard Fork.” You’re going to have to listen to figure out exactly why it’s called that.

But here’s why I like the show so much. It’s really like eavesdropping on the smartest possible conversations about what’s really becoming the biggest force in our lives right now, which is technology, a lot of it in ways we’re just beginning to understand — crypto, artificial intelligence, the metaverse, Twitter, Elon. It’s co-hosted by somebody you already know, Kevin Roose, a “Daily” regular and a “Daily” guest host. And his co-host is somebody else I really admire, the technology writer Casey Newton.

For me, Kevin, Casey, and their guests have demystified subject after subject. And I’m going to be honest. They make me laugh a lot. The show, again, is “Hard Fork.” And I encourage you to look for it, as they say, wherever you get your podcasts, which — wild guess — might be exactly where you’re listening to us. OK. Let’s start today’s show.

From “The New York Times,” I’m Michael Barbaro. This is “The Daily.”

[MUSIC PLAYING]

After just 44 days in office, British Prime Minister Liz Truss has resigned, making hers the shortest premiership in the country’s history. Today, my colleague, London Bureau Chief Mark Landler on what led to her downfall and why Britain has entered a period of such profound political dysfunction.

It’s Friday, October 21.

[MUSIC PLAYING]

Hey, Mark.

mark landler

Hey, Michael. How you doing?

michael barbaro

I mean, good lord! What a hot mess that country is.

mark landler

It’s really amazing.

michael barbaro

So we want to talk about how it is that the prime minister of the UK touched off an economic crisis and self-immolated. So tell us the story behind Liz Truss’s downfall, and what I think will be going down as the most disastrously short prime ministership in the history of Britain.

mark landler

Well, to really get to the beginning of this, you have to go back to the summer when Boris Johnson was forced out of office after a series of scandals.

michael barbaro

Right.

mark landler

And there’s a contest within the Conservative Party to decide who’s going to replace him. The two candidates who ultimately emerge are, of course, Liz Truss and a guy named Rishi Sunak. Truss was the Foreign Secretary under Boris Johnson. She served in the parliament for many years. And she’s a real die hard conservative who is trying to fashion herself as the next Margaret Thatcher, a sort of a free market evangelist very much in the Thatcher mode.

michael barbaro

Right.

mark landler

Sunak, on the other hand, is this wealthy former hedge fund manager, and he’s actually served as the equivalent of Treasury Secretary under Johnson.

michael barbaro

Right.

mark landler

But resigned from Johnson’s cabinet in the midst of all these scandals.

michael barbaro

And what was the defining dynamic of the Truss-Sunak contest?

mark landler

Well, it really broke down, if you want to get to the most simple terms, to the question of taxes. Liz Truss basically said, I’m going to cut your taxes. I’m going to cut corporations’ taxes. And in doing so, I’m going to unleash this new era of much faster economic growth.

Rishi Sunak said, wait a minute. I’m not opposed to reducing taxes, but we are in a period of double-digit inflation. Interest rates are going up. We need to tame inflation before we can start talking about reducing taxes.

michael barbaro

And Mark, can you just explain for the economically challenged why cutting taxes in the minds of people like Sunak would be a problem in an inflationary period, why he told her, and the country, that this was a bad idea.

mark landler

Well, basically, when you’re in an inflationary situation when prices are high and rising and you cut people’s taxes, essentially, you’re putting more money into their pockets, and you’re, in a sense, fueling the inflation, because people are going to spend more. And rather than curbing inflation, you’re actually adding to it.

michael barbaro

Right.

mark landler

And indeed, in addition to Sunak, you had lots of economists, and investors, and others who were also saying that Liz Truss’s policies were, in the words of Sunak, “a fairy tale.”

Nevertheless, Truss beats Sunak. And the reason she does has to do with a peculiarity of parliamentary law in Britain. Because Truss is replacing a sitting prime minister, she doesn’t need to win in a general election. She only needs to win in this intraparty contest, which in this case involves winning the votes of roughly 160,000 rank and file members of the party. And who are these people? Well, they tend to be older, whiter, richer, and more conservative than the country at large.

michael barbaro

Right.

mark landler

These are people for whom a tax cut is uniquely attractive. So that message is really tailored to them. And they respond to it, and she wins the contest.

archived recording (liz truss)

Good afternoon. I have just accepted Her Majesty the Queen’s kind invitation to form a new government.

mark landler

Truss takes office —

archived recording (liz truss)

I have a bold plan to grow the economy through tax cuts and reform.

mark landler

— on Tuesday, September 6.

archived recording (liz truss)

I am determined to deliver. Thank you.

[APPLAUSE]

mark landler

And two days later, Queen Elizabeth dies. This is a momentous, deeply emotional moment for the whole country. And Liz Truss becomes overnight one of the mourners-in-chief for Britain.

michael barbaro

Right.

mark landler

So it’s a moment of extremely high visibility for the new prime minister, but it also has the effect of taking her completely off what was going to be the rollout of her economic program. And the country really needs to wait almost for a full two weeks before the government can get back to the business of governing. So when Parliament does finally reconvene —

archived recording 1

I now call the Chancellor of the Exchequer to make a statement. Chancellor.

mark landler

Liz Truss sends her chancellor, a guy named Kwasi Kwarteng, the equivalent of the Treasury Secretary, to the House of Commons to roll out this package of tax cuts.

archived recording (kwasi kwarteng)

Now, Mr. Speaker, we come to tax, central to solving the riddle of growth.

mark landler

And it’s a stunner.

[MUSIC PLAYING]

archived recording (kwasi kwarteng)

I can announce today that we will cut the basic rate of income tax to 19 pence.

mark landler

It’s even more radical and sweeping than she talked about during the summer.

archived recording (kwasi kwarteng)

That means a tax cut for over 31 million people in just a few months’ time. This means —

mark landler

There are tax cuts for ordinary people.

archived recording (kwasi kwarteng)

The corporation tax rate will not rise to 25 percent. It will remain at 19 percent. And we will have the lowest rate of corporation tax in the G20.

mark landler

Tax breaks for corporations.

archived recording (kwasi kwarteng)

I have another measure, Mr. Speaker. Take the additional rate of income tax. At 45 percent, it is currently higher —

mark landler

There is also a tax cut for the wealthiest earners.

archived recording (kwasi kwarteng)

But I’m not going to cut the additional rate of tax today, Mr. Speaker. I’m going to abolish it altogether. From April —

mark landler

And the cumulative value of all of these tax cuts runs into the tens of billions of dollars.

archived recording (kwasi kwarteng)

Our growth plan has delivered all those promises and more, Mr. Speaker.

[CHEERING]

[MUSIC PLAYING]

mark landler

And what’s particularly startling about it is these are unfunded tax cuts, which means the government’s not offering corresponding cuts in spending to pay for this. They’re just announcing it kind of in the classic style of supply side economics, that these tax cuts will somehow pay for themselves through increased economic growth.

michael barbaro

So this is a plan that is very much in keeping with Liz Truss’s free market, Reagan-style approach, but ends up going much further than anyone expected, and therefore costs even more than anyone expected.

mark landler

That’s right. And it really rattles international financial markets, because, of course, it’s not just the UK that’s dealing with inflation. It’s a problem around the world.

Everyone is also trying to figure out how to deal with the impact of Russia’s war in Ukraine. So this is the last thing that anyone wants or needs to hear, that the United Kingdom, a major global financial player, is about to plunge itself into a deep hole of debt.

So the rejection of Liz Truss’s economic program in the financial markets is instant and ferocious. And in the following week, all hell breaks loose. First —

archived recording 2

The city of London woke up to a currency crisis.

archived recording 3

The pound dropped in value to just $1.34 early Monday morning, taking the currency to its lowest level since the early ‘70s.

mark landler

The pound plummets against the dollar.

archived recording 3

The decline against the common currency highlighted how the pound’s recent fall reflects concern about Britain’s economy.

mark landler

And it makes life more expensive for Brits.

michael barbaro

Right. Because when the value of your currency is lower, then everything gets more expensive at a moment when inflation is already a huge problem.

mark landler

Yeah. And the next thing that happens is —

archived recording 4

And we’re seeing epic bond market declines. UK rates climb as much as 50 basis points, triggering a sell-off.

mark landler

— that the price of British government bonds slumps, and the yield on those bonds spikes upwards. And that has two major effects.

archived recording 5

Worried about the credibility of the chancellor’s plans, traders have been selling government bonds, the instruments it uses to borrow money, forcing the government to pay much more in interest to borrow funds over the long term.

mark landler

One is that it makes it more expensive for the British government to borrow money, which makes the fiscal hole caused by the tax cuts even larger.

archived recording 6

Investors fear the big market moves are a particular threat to pension funds and could cause spillover damage across the financial sector.

mark landler

The other is that because UK pension funds are tied to government bonds, there’s suddenly a risk that there’s not going to be enough cash to keep them afloat.

archived recording 7

Where the Bank of England has made an emergency intervention, which it says is needed to maintain financial stability.

mark landler

Finally —

archived recording 8

I’ve said before, I’m worried there’s a ticking time bomb on mortgages.

mark landler

— the interest rates for mortgage loans start to increase.

archived recording 8

And then last week, that went up to a peak of 6.1 percent. And I’ll show you in a second.

mark landler

This is really important in Britain, because unlike in the US, where a lot of people have 30-year, fixed rate mortgages, many more people in the UK have either variable rate mortgages, or 5-year, or 2-year, at most 10-year mortgages. So when interest rates go up on mortgage loans, people begin to feel that right away.

[MUSIC PLAYING]

michael barbaro

And all of this, just to be clear, is because of the announcement of this massive unfunded tax cut program.

mark landler

Yes, that’s right. I mean, even though it appears to be almost impossible to imagine so much could spin out of one announcement, that announcement has the effect of really in a moment completely undermining investor confidence in the British economy. And so for millions of people in Britain who are negatively affected by all this, it quickly becomes clear who’s to blame. It’s Liz Truss and her tax cuts. And so suddenly this brand new prime minister is in a great deal of political trouble.

[MUSIC PLAYING]

michael barbaro

We’ll be right back.

So Mark, what is this very embattled Prime Minister Liz Truss do once she realizes that her economic plan has plunged her entire country into financial chaos?

mark landler

Well, her initial instinct is to be really defensive.

archived recording (liz truss)

Well, look. I understand it’s difficult times for people, and we’re facing a difficult winter.

mark landler

She puts the blame on a lot of other people. She says, interest rates —

archived recording (liz truss)

Interest rates have always been set since 1997 by the independent Bank of England.

mark landler

We don’t have anything to do with that.

archived recording (liz truss)

Politicians don’t get involved in setting interest rates.

mark landler

She blames inflation on —

archived recording (liz truss)

We have a very, very difficult economic global situation because of the war that Vladimir Putin has perpetrated in Ukraine.

mark landler

Vladimir Putin —

archived recording 9

But this isn’t Putin. This isn’t just about Putin. I mean, your chancellor on Friday opened up the stable door and spooked the horses so much you can almost see the economy being dragged behind them.

mark landler

And she sort of doesn’t take any responsibility for having influenced any of these things with her own policies. And she sort of says, change is hard. People are going to resist it. But everyone is going to benefit in the long run because the economy is going to grow so much faster. So it’s a very defiant, “stay the course,” “don’t give an inch” kind of response. And this goes on for a few days, but the markets continue to gyrate. Interest rates continue to spike. And she realizes that she’s going to have to backtrack on something.

archived recording 10

Big breaking news for you that will impact almost all of us — we’re hearing that Liz Truss is preparing to scrap plans to remove the 45 p top rate of income tax for the highest earners.

mark landler

So what she and Kwasi Kwarteng do is they decide to do a U-turn on one of the big tax cuts.

archived recording (liz truss)

The fact is that the abolition of the 45 p tax rate became a distraction.

mark landler

The one on the super wealthy.

archived recording (liz truss)

That is why we’re no longer proceeding with it. I get it, and I have listened.

[APPLAUSE]

mark landler

And that sort of calms the waters for a little while. But everyone realizes that tax cut only accounted for a very small part of the total cost of this program. So the markets are pretty much back to being unstable within a day or two. So what she does another week or so later is she calls Kwasi Kwarteng, arguably her closest associate in the government.

archived recording 11

You’ll be chancellor and Liz Truss will be prime minister this time next month.

archived recording (kwasi kwarteng)

Absolutely, 100 percent. I’m not going anywhere.

mark landler

She fires him.

He gets thrown under the bus. And that’s the first major high profile casualty of this whole affair. And she hopes that by basically giving the market Kwasi Kwarteng she can kind of calm the waters.

archived recording (liz truss)

My priority is making sure we deliver the economic stability that our country needs. That’s why I had to take the difficult decisions I’ve taken today.

mark landler

But guess what. It didn’t work. She had to do something more. And she did that in the form of selecting Jeremy Hunt to be the new chancellor.

archived recording 12

Why do you want to work with this government?

archived recording (jeremy hunt)

Because I want to do the right thing for the British people.

mark landler

Jeremy Hunt is a long-time, well-known conservative politician. He opposed Liz Truss during the leadership campaign. Indeed, he ran his own very short-lived and unsuccessful campaign for the job. He was a supporter of Rishi Sunak and an arch opponent of her economic program.

michael barbaro

Fascinating.

mark landler

And almost as soon as Hunt takes the job —

archived recording 13

Good morning. Liz Truss’s first chancellor lasted 38 days. This morning, we’ll hear from the new one.

mark landler

He goes on TV, and he begins peeling away planks of her agenda.

archived recording (jeremy hunt)

We are going to have to take some very difficult decisions, both on spending and on tax.

mark landler

Saying, you’re not going to get a tax cut.

archived recording (jeremy hunt)

And taxes are not going to go down as quickly as people thought, and some taxes are going to go up.

mark landler

Corporation taxes are actually going to increase.

archived recording (jeremy hunt)

So it’s going to be very, very difficult. And I think we have to be honest with people about that.

mark landler

It’s basically the reverse of what Liz Truss ran for office, promising to do.

michael barbaro

Right.

mark landler

And then you’ve got this vivid tableau where —

archived recording (jeremy hunt)

We’ve therefore decided to make further changes to the mini budget immediately.

mark landler

Monday morning rolls around, and Jeremy Hunt goes to the House of Commons to confirm before lawmakers that this is now the government’s policy.

archived recording (jeremy hunt)

We’ve decided on the following changes to support confidence and stability. Firstly, the prime minister and I agreed yesterday to reverse almost all the tax measures announced in the growth plan three weeks ago.

mark landler

And while he is delivering this message —

archived recording (jeremy hunt)

It is a deeply held conservative value, a value that I share, that people should keep more of the money they earn.

mark landler

Liz Truss is sitting behind him on the frontbench, with a sort of a faraway smile on her face, looking for all the world like a bystander in her own government.

archived recording (jeremy hunt)

But at a time when markets are asking serious questions about our commitment to sound public finances, we cannot afford a permanent discretionary increase in borrowing worth 6 billion pounds a year.

michael barbaro

I watched that scene, Mark, and suddenly, the question became, who exactly is prime minister here? Is it Liz Truss or is it Jeremy Hunt?

mark landler

Yeah. I mean, particularly for someone who ran primarily, almost exclusively on this free market economic message, it really felt like Liz Truss all of a sudden didn’t have much of a reason to be prime minister anymore. And as that realization dawns on people, it almost quickly becomes a political deathwatch.

And the British media in their typically dark, humorous way of looking at things begin to look for metaphors to capture just how tenuous Truss’s situation is. And the most memorable of these is in the tabloid “The Star,” where they actually get a head of lettuce from a local supermarket chain, and they put it next to a picture of Liz Truss. And they ask, which of these has a longer shelf life?

michael barbaro

Right. Well, what is the shelf life, Mark, of a head of lettuce?

mark landler

Well, Michael, I’m going to confess I don’t exactly know what the shelf life of a head of lettuce is, but I think we can safely assume it’s measured in days and not weeks.

michael barbaro

Right.

mark landler

And that turns out to be a pretty good bit of foreshadowing, because over the next 48 hours, Liz Truss’s prime ministership begins to unravel really quickly.

So on Wednesday, Truss goes to the House of Commons for an exercise called Prime Minister’s Questions.

archived recording 14

We now comes the leader of the opposition, Keir Starmer.

mark landler

That’s where members of the opposition get to grill the prime minister on whatever topic they want.

archived recording (keir starmer)

A book is being written about the prime minister’s time in office. Apparently, it’s going to be out by Christmas. Is that the release date or the title?

[LAUGHING]

mark landler

And she comes under immediate attack.

archived recording (keir starmer)

I’ve got the list here — 45 p tax cut, gone. Corporation tax cut, gone. 23 p tax cut, gone. So why is she still here?

mark landler

The leader of the Labour Party, Keir Starmer, essentially asks her why she’s still in office.

archived recording (liz truss)

Mr. Speaker, I am a fighter, and not a quitter.

mark landler

She insists that she’s going to stay the course, but within hours, there’s even more chaos engulfing her government. She’s forced to fire her Home Secretary. That’s now the second major cabinet minister she’s fired in a week.

archived recording 15

Order. Order.

mark landler

And the craziest thing happens on Wednesday evening when there’s a vote in parliament over whether the government should ban fracking. Conservative lawmakers are beginning to rebel against the government. They don’t want to cast this vote. And there are these really surreal scenes in the parliament, where —

archived recording (chris bryant)

I saw members being physically manhandled into another lobby.

mark landler

Lawmakers are being physically manhandled by senior cabinet ministers to come in and cast this vote backing the prime minister.

archived recording (charles walker)

To be perfectly honest, this whole affair is inexcusable.

mark landler

So by the end of Wednesday night, you have this situation where it’s clear that Liz Truss has not only lost control of her legislative agenda.

archived recording (charles walker)

This is absolute disgrace. As a Tory MP of 17 years, it is a pitiful reflection on the conservative parliamentary party at every level.

mark landler

She’s lost control of her party, and she’s lost control of the government.

archived recording (charles walker)

I think it’s a shambles and a disgrace. I think it is utterly appalling.

[MUSIC PLAYING]

mark landler

So by yesterday morning, the game was well and truly over. Conservative lawmakers were coming out one after the other, saying it was time for her to step down. It was clear that if she didn’t negotiate some sort of exit, she likely faced a vote of no confidence. And shortly after 1:00 PM, the prime minister’s office put out a statement saying she would speak to the nation. And a podium was put up in front of the famous number 10 door. And at about 1:30 —

archived recording (liz truss)

I came into office at a time of great economic and international instability.

mark landler

Liz Truss came out and said —

archived recording (liz truss)

Given the situation, I cannot deliver the mandate on which I was elected by the Conservative Party.

mark landler

I’ve called King Charles, and I’ve told him of my intention to step down.

archived recording (liz truss)

I will remain as prime minister until a successor has been chosen. Thank you.

michael barbaro

So in the end, she did not outlast the head of lettuce.

mark landler

She did not outlast the head of lettuce. She also set a record for being the shortest serving British Prime Minister in history — 44 days from the day she moved in to the day she announced she was leaving. If I remember my math correctly, it’s four Scaramuccis.

[LAUGHING]

If you want to go back and look at Anthony Scaramucci’s famous record as White House Communications Director.

michael barbaro

So Mark, it feels worth zooming out here for a moment. Because when we think about what’s happened to Liz Truss, and more importantly, what’s happened to the British economy, it feels like there are two big lessons that emerge. The first — and I’m thinking back to the warnings that were delivered during her campaign about this tax cut — is that you can’t defy the basic laws of economics and of inflation. You can’t cut taxes and borrow a bunch of money at a time when prices are already at a record high and hope that somehow the market and consumers will embrace that. That’s just not how it works.

mark landler

Yeah, that’s right. I mean, this was an economic program that was basically built on magical thinking. And magical thinking doesn’t work in a world where the markets are as powerful as they are. So even if she had managed to win over the population, and thumb her nose at the economic experts, she was never going to convince the markets that this was in any way credible.

The only country that can really get away with unfunded tax cuts, with ballooning the deficit is the United States. And the reason for that is the sheer size of the US economy. The fact that the US dollar is still the world’s reserve currency, it gives the US a freedom of maneuver that really no other economy has, and certainly not the British economy, which, for all its strengths, is much smaller. And so to pursue a Ronald Reagan style tax cutting program in Britain doesn’t really make any logical sense. And that’s what Liz Truss learned over a couple of very bruising weeks.

michael barbaro

And it feels like the second lesson, Mark, is that when you’re elected prime minister by a tiny portion of the electorate, as Liz Truss was because of the peculiar system you outlined, you’re likely to get an agenda that favors that small sliver of voters and not feel especially accountable to everyone else, because, after all, they didn’t vote for you. So there’s a lesson here about the very nature of British democracy.

mark landler

Yeah. That’s a big topic of conversation in Britain right now, because after all, this country is about to elect its fourth prime minister through this very peculiar system. And when you set up elections this way, it naturally leads to more extreme ideological positions. Because, after all, as we said earlier, Liz Truss knew exactly what she was doing in appealing to these Conservative Party members. And when she got into office, she actually delivered what she had promised. This was, to that extent, a crisis foretold.

[MUSIC PLAYING]

And the problem with having such a slender mandate is that when things go wrong, as they did in this case, you have no popular support to fall back on. When the markets turned on Liz Truss, the public turned on Liz Truss even more ferociously. And that’s why she wilted faster than that head of lettuce.

michael barbaro

Well, Mark, thank you very much.

mark landler

Thank you, Michael.

[MUSIC PLAYING]

michael barbaro

Members of Britain’s Conservative Party are expected to choose Liz Truss’s successor by the end of next week. Among the likely candidates are Rishi Sunak, the lawmaker who had warned that Truss’s tax cuts would backfire, and improbably, Boris Johnson, whose resignation as prime minister brought Liz Truss to power.

[MUSIC PLAYING]

We’ll be right back.

Here’s what else you need to know today. A new poll has found that the majority of the American public is prepared to keep paying high energy costs in order to help Ukraine win its war against Russia. 60 percent of Americans overall told pollsters from the University of Maryland that they will tolerate the higher costs, including 80 percent Democrats and 48 percent of Republicans. The result suggests that Russia’s hope that surging energy prices will undermine Western support for Ukraine, and ultimately help Russia defeat Ukraine is so far not working in the United States.

Today’s episode was produced by Michael Simon Johnson, Rachelle Bonja, and Will Reid, with help from Chris Wood and Sydney Harper. It was edited by Anita Badejo, contains original music by Marion Lozano, and was engineered by Chris Wood. Our theme music is by Jim Brunberg and Ben Landsverk of Wonderly.

[MUSIC PLAYING]

That’s it for “The Daily.” I’m Michael Barbaro. See you on Monday.

The New York Times
Oct. 24, 2022, 2:17 p.m. ET

Here is a schedule of events for Tuesday.

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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Isabella KwaiSaskia Solomon
Oct. 24, 2022, 1:14 p.m. ET
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Britons on Monday expressed frustration at how Rishi Sunak came to power without a public vote.Credit...Sam Bush for The New York Times

As 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.”

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Anne Bagley, 63, an N.H.S. worker, from the northeast of England outside King’s Cross Station in central London.Credit...Saskia Solomon/The New York Times
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Mohson Iqbal, 39, left, a financial adviser from East London, said he was unconvinced Mr. Sunak would make much of a difference.Credit...Saskia Solomon/The New York Times

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.”

Mujib Mashal
Oct. 24, 2022, 12:03 p.m. ET

In India, a subdued celebration of Sunak’s win as a historic moment.

Image
A light show in India on Sunday, the eve of Diwali, the Hindu festival of lights.Credit...Sanjay Kanojia/Agence France-Presse — Getty Images

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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Mark Landler
Oct. 24, 2022, 11:13 a.m. ET

Reporting 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.”

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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.

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Mark Landler
Oct. 24, 2022, 11:18 a.m. ET

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.

Mark Landler
Oct. 24, 2022, 11:26 a.m. ET

Reporting from London

His reference to governing with “integrity” draws a clear distinction with the scandal-scarred tenure of Boris Johnson.

Mark Landler
Oct. 24, 2022, 11:10 a.m. ET

Reporting from London

Among his other distinctions, Rishi Sunak, at 42, is the youngest British prime minister in two centuries.

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CreditCredit...Sky News via Associated Press
Eshe Nelson
Oct. 24, 2022, 10:31 a.m. ET

Reporting from London

The new prime minister will face difficult economic tests immediately.

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Canary Wharf, a finaincial center in London. The government is under pressure to show how it will keep borrowing in check, in an effort to restore Britain’s fiscal credibility in markets.Credit...Sam Bush for The New York Times

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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Megan Specia
Oct. 24, 2022, 10:04 a.m. ET

Members 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.

Megan Specia
Oct. 24, 2022, 10:02 a.m. ET

The Conservatives have a new leader. How does that person become prime minister?

Image
Queen Elizabeth II, in one of her last official duties, met with Liz Truss last month after the lawmaker was named the Tories’ leader.Credit...Pool photo by Jane Barlow

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.

Mark Landler
Oct. 24, 2022, 9:39 a.m. ET

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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Oct. 24, 2022, 9:22 a.m. ET

Rishi Sunak will make history as the first person of color to be Britain’s prime minister.

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Rishi Sunak, a former chancellor of the Exchequer, in August.Credit...Andy Buchanan/Agence France-Presse — Getty Images

Rishi 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.”

Mark Landler
Oct. 24, 2022, 9:13 a.m. ET

Reporting from London

Here are the latest developments.

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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Mark Landler
Oct. 24, 2022, 9:13 a.m. ET

Reporting 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.

Eshe Nelson
Oct. 24, 2022, 9:03 a.m. ET

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.”

Mark Landler
Oct. 24, 2022, 9:00 a.m. ET

Reporting from London

Penny Mordaunt has withdrawn. Rishi Sunak will be Britain’s next prime minister.

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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.

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CreditCredit...International Pool via Reuters
Mark Landler
Oct. 24, 2022, 9:01 a.m. ET

Reporting from London

Penny Mordaunt tweeted: “We all owe it to the country, to each other, and to Rishi to unite.”

Eshe Nelson
Oct. 24, 2022, 8:28 a.m. ET

Reporting from London

After a storm, Britain’s economy finds itself rudderless.

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In London this month. Britain’s next prime minister will face a long list of economic challenges, including annual inflation that topped 10 percent last month.Credit...Alex Ingram for The New York Times

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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Michael J. de la Merced
Oct. 24, 2022, 8:03 a.m. ET

The word from the business sector: ‘We don’t need more Cirque du Soleil.’

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Outside the Bank of England.Credit...Sam Bush for The New York Times

Britains’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.

Mark Landler
Oct. 24, 2022, 7:28 a.m. ET

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.

Max Fisher
Oct. 24, 2022, 7:17 a.m. ET

Truss’s six-week term highlights how primaries drive political dysfunction.

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Liz Truss walking back into 10 Downing Street last week after announcing her resignation as prime minister.Credit...Stefan Rousseau/Press Association, via Associated Press

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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Mark Landler
Oct. 24, 2022, 7:13 a.m. ET

Reporting 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.

Eshe Nelson
Oct. 24, 2022, 7:12 a.m. ET

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.”

Mark Landler
Oct. 24, 2022, 6:58 a.m. ET

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.

Mark Landler
Oct. 24, 2022, 7:03 a.m. ET

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.

Eshe Nelson
Oct. 24, 2022, 6:53 a.m. ET

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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Mark Landler
Oct. 24, 2022, 6:51 a.m. ET

Reporting from London

How the tumultuous forces of Brexit divided the Conservative Party.

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Brexit supporters gathering in front of a statue of Winston Churchill in London in January 2020 to celebrate Britain’s departure from the European Union.Credit...Mary Turner for The New York Times

When 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.”

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