Rishi Sunak to be UK prime minister: What you need to know

By: 2 years ago

Britain’s Conservative MP Rishi Sunak walks next to his campaign headquarters in London, Britain, October 24, 2022. REUTERS

LONDON — Rishi Sunak will become Britain’s first prime minister of color on Tuesday after he won the race to lead the Conservative Party.

Following are latest events, comments and context:

Politics

* Sunak, the 42-year-old former finance minister, will become Britain’s third prime minister in less than two months.

* Sunak will have to address multiple economic and political crises as soon as he takes office.

* He is tasked with steering a deeply divided country through an economic downturn set to leave millions of people poorer.

* His predecessor Liz Truss was brought down after just six weeks in office by her economic program which roiled financial markets and pushed up living costs for voters.

* After being chosen, Sunak told the country it faced a “profound economic challenge”.

“We now need stability and unity, and I will make it my utmost priority to bring our party and our country together,” he said.

* Sunak, one of the wealthiest politicians in Westminster, will be appointed prime minister by King Charles on Tuesday.

* A former Goldman Sachs analyst, Sunak will be Britain’s first prime minister of Indian origin.

* A nationwide election need not be called for another two years, but opposition parties said voters should now be given a say. The Labor Party leads the government by more than 30 points in some opinion polls.

* Sunak has ruled out an election, according to lawmakers present at a speech he gave on Monday.

Reaction

* Many Indians are delighted at the rise of Sunak, a Hindu, to Britain’s top job.

* Indian Prime Minister Narendra Modi called him a bridge between the two countries.

“Special Diwali wishes to the ‘living bridge’ of UK Indians, as we transform our historic ties into a modern partnership,” said Modi.

* Many Britons of Asian heritage held up Sunak’s elevation as a cultural milestone.

Markets

* British government bond prices rose sharply after Sunak cruised to victory in the race to succeed Truss, removing at least one source of uncertainty for bond investors.

* Ten-year British government bond yields fell to their lowest level since former finance minister Kwasi Kwarteng’s “mini budget” on Sept. 23.

* Sterling took support from news of Sunak’s victory.

* The medium term outlook was less clear.

“Because the markets are still somewhat spooked and they are going to be wanting to see some clear and decisive action, perhaps more than they would have required (if) we had not had all this upset over the last few weeks,” said Paul Johnson, Director, Institute for Fiscal Studies.

Economy

* Bank of England Deputy Governor Dave Ramsden said credibility was returning to British economic policymaking, judging by a recovery in the government bond market.

* Ruth Gregory, senior UK economist at Capital Economics in London said: “The fall in gilt yields on the news today that Rishi Sunak will become the UK’s next Prime Minister has reduced the chances of a significant fiscal consolidation. Even so, the new PM will still have to work hard to restore stability in the eyes of the financial markets.”

What’s behind the crisis?

* Britain’s financial markets were plunged into turmoil on Sept. 23 after then-new finance minister Kwasi Kwarteng announced billions of pounds of unfunded tax cuts.

* The Bank of England was forced into emergency bond-buying to stem a sharp sell-off in Britain’s $2.3 trillion government bond market that threatened to wreak havoc in the pension industry and increase recession risks.

* Kwarteng’s replacement Jeremy Hunt on Monday scrapped “nearly all” of the economic plan and scaled back Truss’s vast energy support scheme, announced in September, in a historic U-turn to try restore investor confidence.

* The BoE interventions have highlighted a growing segment of Britain’s pensions sector – liability-driven investment.