December 6, 2022

Rishi Sunak faces a huge task as he takes over as Prime Minister of Britain

  • Sunak will meet King Charles on Tuesday morning
  • Cabinet formation is expected to begin
  • Sunak faces a huge challenge to restore stability

LONDON, Oct 25 (Reuters) – Rishi Sunak was sworn in as Britain’s third prime minister in two months on Tuesday, tasked with dealing with a mounting economic crisis, warring political parties and a deeply divided country.

The 42-year-old former hedge fund boss was asked to form a government by King Charles and will seek to end the infighting and infighting at Westminster that has horrified investors and alarmed international allies.

He will soon address the nation from Downing Street and then begin forming his cabinet of senior ministers.

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Mr Sunak, one of the richest people in parliament, must find deep spending cuts to plug a 40 billion pound ($45 billion) hole in the public purse due to the recession, high borrowing costs and a six-month bailout plan. For people’s energy bills.

If he moves too far from the policy manifesto that elected the Conservatives in 2019, Sunak could face calls for an election as his party’s popularity rises, when President Boris Johnson promises to invest more in the country.

Economists and investors have said Sunak’s appointment will calm markets, but they warn he has few easy options as millions struggle with a cost-of-living crisis.

“With an increased chance of a recession in 2023 and the next general election just two years away, Rishi Sunak can expect a challenging premiership,” Eiko Sievert at ratings agency Scope told Reuters.

Sunak has warned his colleagues that they face an “existential crisis” if they don’t help guide the country through rising inflation and record energy bills that are forcing many households and businesses to cut costs.

“We need stability and unity now and I will make it my highest priority to bring our party and the country together,” he said on Monday when he was elected by his fellow legislators.

Financial turmoil

Mr Sunack, Britain’s youngest prime minister for more than 200 years and its first colored leader, replaced Liz Truss, who resigned 44 days after a “mini budget” that sent financial markets into turmoil.

As debt interest costs rise and the economy worsens, he must now review all spending, including politically sensitive areas such as health, education, defense, welfare and pensions.

Reflecting the turbulent state of British politics this year, politicians, journalists and photographers flocked to Downing Street on Tuesday to hear Truss’ departure speech.

Seven weeks after she became prime minister, Truss made no apologies for her short tenure and said she knew Britain was set for brighter days.

During his tenure the pound hit record lows against the dollar, borrowing costs and mortgage rates rose, and the Bank of England was forced to intervene to protect pension funds from collapsing.

Sunak will now begin forming his cabinet, and some conservative lawmakers believe he will include politicians from all wings of the party.

He is expected to retain Jeremy Hunt as finance minister after the former foreign and health secretary helped calm volatile bond markets by tearing up most of Truss’s economic plan.

Investors will want to know whether Sunac still plans to release a new budget with borrowing and growth forecasts on October 31, which will help inform the Bank of England’s interest rate decision on November 3.

Political maneuvers

Sunak, a Goldman Sachs analyst who entered parliament in 2015, must unite his party, aware that voters are increasingly angered by the antics in Westminster as the economy heads into recession.

He was blamed by many in the party when he resigned as finance minister in the summer, sparking a wider revolt that ousted Johnson.

While many expressed happiness that the party had settled on a new leader soon, there was a sense of pessimism among some, with others questioning whether struggling families would vote for a millionaire or not.

“I think this decision will sink us as a party for the next election,” a conservative lawmaker told Reuters on condition of anonymity.

Historian and political biographer Anthony Selden told Reuters that Sunak would be constrained by the mistakes of his predecessor.

“He was anything but unusually conservative and cautious,” he said.

Many politicians and officials abroad welcomed Sunak’s appointment, seeing a country once seen as a pillar of economic and political stability descend into brutal infighting.

A Hindu, Sunak also became Britain’s first Indian-origin Prime Minister.

US President Joe Biden hailed the news as a “landmark milestone” while leaders from India and other countries welcomed it. Sunak’s billionaire father-in-law, NR Narayana Murthy, said he would serve the UK well.

“We are proud of him and wish him every success,” the founder of software giant Infosys said in a statement.

($1 = 0.8864 pounds)

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Report by Kate Holden; Editing by Hugh Lawson

Our Standards: Thomson Reuters Trust Principles.