London Britain has a new head of government – the third in three months. Rishi Sunak has won the Conservative Party leadership race to become Britain’s next prime minister. The 42-year-old former Chancellor of the Exchequer was the only candidate to receive the support of well over 100 Tory MPs in the British House of Commons.
The Tory party had set the 100 mark as the hurdle for all candidates. His last remaining rival, the Conservative majority leader in Parliament, Penny Mordaunt, had recently withdrawn her candidacy.
The government crisis in London, which has been going on for weeks, has thus reached another peak. The internal party elections became necessary after the disastrous economic and political false start of the still incumbent Prime Minister Liz Truss. She resigned on Thursday after just 44 days in office as party leader and will become King Charles III on Tuesday. to ask for her dismissal as Prime Minister. Shortly thereafter, Sunak can be officially appointed as the new head of government.
The financial markets had already reacted positively to Sunak’s victory in the run-up to the election results. The pound appreciated against the US dollar and yields fell, particularly on two-year UK government bonds. According to analysts, this also expressed the relief that ex-Prime Minister Boris Johnson had refrained from running again.
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Benjamin Nabarro, an economist at the US bank Citigroup in London, expects a government under Sunak to “cement” the U-turn towards a more solid fiscal policy announced by Treasury Secretary Jeremy Hunt last week and “further tightening of fiscal policy next week imminent.”
Shevaun Haviland, head of the British Chambers of Commerce, said economic uncertainty “must end now”. However, Citibank economist Nabarro is skeptical that the calm following the political chaos will last long. “Can a government be formed with the legitimacy to deal with the current economic challenges?” the economist asks, noting that “the weekend’s political machinations pointed to a divided party.”
Labor party calls for new elections
The opposition Labor Party takes a similar view and is calling for immediate new elections. Labor leads the governing Tories by more than 30 percentage points in the latest polls. However, Sunak ruled out short-term new elections.
In fact, the economic and political risks for the prime minister-elect are considerable. First, Sunak is dealing with a fragmented party in which Boris Johnson’s supporters still harbor grudges against the former Treasury Secretary. Sunak initiated Johnson’s case with his resignation in the summer.
“Unless we have someone at the top of Parliament who has the support and respect of the group, we are effectively ungovernable,” Johnson supporter Christopher Chope told the BBC. Sunak has no mandate from the country or from Conservative Party members.
Listen to our podcast here: That says Great Britain correspondent Torsten Riecke
Although the new prime minister has not made any public statements in recent weeks, there are already indications of the course he will take. As Chancellor of the Exchequer, Sunak had led the country on an austerity course with tax increases. This also included a wage cap in the public sector below the double-digit inflation rate.
It will be interesting to see how Sunak and Hunt want to plug the budget hole of around 40 billion pounds (46 billion euros). Truss had to drop her plan not to let pensions rise with inflation as planned after opposition from the Tories. The new prime minister has already made it clear that reducing national debt – the debt ratio is after all around 100 percent of gross domestic product (GDP) – and fighting inflation should take precedence over tax breaks.
Sunak’s last remaining rival withdrew.
(Photo: dpa)
“I will never lower taxes in a way that only drives up inflation,” Sunak promised in the summer. As Chancellor of the Exchequer, he had also frozen tax credits for four years, leading many Britons to fall into what is known as “cold progression” higher tax rates.
The majority of Tories want to increase defense spending to 3 percent by 2030. Secretary of Defense Ben Wallace threatens to resign if he shakes it. Sunak has so far refused to promise that publicly because he has to save money – including on defense.
Northern Ireland dispute: Sunak could take a more pragmatic approach
The future course towards the EU could also lead to conflicts with his own party. Sunak has been a Brexit supporter from the very beginning and, like his predecessor Truss, has announced a radical dismantling of EU rules in the City of London. The main focus here is on the capital regulations for insurance companies (Solvency II).
At the same time, in the dispute with Brussels over trade with the province of Northern Ireland (Northern Ireland Protocol), he showed more pragmatism than the right-wing party. “Time is of the essence on Northern Ireland as the ailing parliament in Belfast is likely to dissolve on Friday and call new elections,” said Tim Bale, professor of politics at Queen Mary University in London. Bale reckons Sunak will quickly try to reach an agreement with Brussels.
The economic fallout from Brexit could prove to be the biggest challenge for the new homeowner at 10 Downing Street, having failed three other prime ministers before him since the 2016 referendum. If the Tory party admits its mistake and is led by someone with the intellectual capacity and authority to renegotiate Brexit, there is a way to turn the economy around, but without it the economy is doomed. warned British investor Guy Hands, head of private equity firm Terra Firma.
More: Rishi Sunak – He is popular in the markets but distrusted by the people