New Prime Minister Rishi Sunak vows to pull Britain out of economic crisis

LONDON (Reuters) – Rishi Sunak became Britain’s third prime minister in two months on Tuesday, pledging to lead the country out of a deep economic crisis and rebuild confidence in politics.

Soon, Sunak reappointed Jeremy Hunt as his finance minister in a move aimed at calming markets that had rejected his predecessor’s debt-fueled economic plans.

The former hedge fund chief has said he will unite the country and is expected to name a government from all wings of the party to end infighting and sudden changes in policy that have terrified investors and alarmed international allies.

Speaking outside his official Downing Street residence, Sunak praised his predecessor Liz Truss’ ambition to reignite economic growth but acknowledged mistakes had been made.

“I have been elected as my party leader and your prime minister, in part to reform them,” said Sunak, who broke with the tradition of standing by his family and cheering his political supporters.

“I also understand that I have work to do to restore confidence, after all that has happened. All I can say is that I am not afraid. I know the high position I have accepted and I hope to live up to its demands.”

Sunak said tough decisions await him as he looks to cut public spending. Appointed by Truss to calm markets struggling with their rush to growth, Hunt was preparing a new budget alongside borrowing and growth forecasts due for release on Monday, and reiterated his warning on Tuesday that “it’s going to be tough.”

He also reinstated new Prime Minister Dominic Raab as Deputy Prime Minister, a role he had lost within Truss’s 44 days in office, but reappointed James Cleverly as Secretary of State and Ben Wallace as Defense.

Penny Mordaunt, who finished her bid to win the leadership contest against Sunak on Monday, has retained her position as leader of the House of Commons, the role that regulates government business in the lower house of parliament.

Sources said she wants to become foreign minister.

With the new appointments, Sunak was seen as attracting ministers from across the Conservative Party while leaving others in office – a move that would allay fears that Sunak might appoint loyalists rather than try to unite the party.

tough decisions

Sunak, one of the richest men in parliament, is expected to cut spending to plug an estimated 40 billion pounds ($45 billion) gap in public finances as a result of the economic slowdown, rising borrowing costs and an energy subsidy scheme.

He will now need to review all spending, including on politically sensitive areas such as health, education, defense, welfare and pensions. But with his party’s popularity declining, he will face growing calls for an election if he reneges on many of the promises the Conservative Party is making for an election in 2019.

Economists and investors have welcomed Sunak’s appointment — Michael O’Leary, Ryanair’s president, said adults have taken charge again — but caution he has few options to fix the country’s finances as millions grapple with a cost-of-living crisis.

Sunak, who ran the Treasury during the COVID-19 pandemic, promised to put economic stability and confidence at the center of the agenda. “This means making tough decisions,” he said shortly after accepting King Charles’ request to form a government.

Sunak also pledged to put the public’s need above politics, in recognition of the growing anger at Britain’s political class and the ideological battles that have erupted since the landmark 2016 vote to leave the European Union.

The 42-year-old Sunak, Britain’s youngest prime minister in more than 200 years and first color leader, said Sunak, 42, appeared to be the best of a bad bunch, working towards the City of London.

“I think he’s qualified, and that’s really what we should be hoping for right now,” said management consultant James Eastbock, 43.

With two prime ministers appointed in two months without a popular vote, some have called a general election now but others are hoping for Sunak to stay until the next scheduled election, due by January 2025.

political machines

Sunak, the Goldman Sachs analyst, who only entered Parliament in 2015, faces a challenge to end the factional infighting that has deteriorated his party. Many Conservatives remain angry at him for his resignation as chancellor in July and fomenting a wider rebellion that ended Boris Johnson’s premiership.

Others wonder how a millionaire can lead the country when millions of people struggle with rising food and energy bills.

“I think this decision is sinking us as a party into the next election,” a Conservative MP told Reuters.

Historian and political biographer Anthony Seldon has said that Sunak would also be limited by the mistakes of his immediate predecessor.

“There is no room for him to be anything other than extraordinarily conservative and cautious,” he told Reuters.

Sunak’s appointment was welcomed by many politicians and officials abroad, having watched a country once seen as a pillar of economic and political stability descend into brutal internal conflict.

Sunak, a Hindu, also became the first British Prime Minister of Indian descent.

US President Joe Biden called it a “milestone”, while leaders from India and elsewhere welcomed the news. Sonak’s billionaire father-in-law, N R Narayana Murthy, said he would serve the UK well.

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

(dollar = 0.8864 pounds)

Written by Kate Holton and Elizabeth Piper; Editing by Hugh Lawson and John Boyle

Our criteria: Thomson Reuters Trust Principles.