Historic moment for Britain

Manal Lotfy in London , Wednesday 26 Oct 2022

The appointment of Rishi Sunak as the new British prime minister is a historic moment for the UK, but he faces momentous problems before him.

Historic moment for Britain
Truss delivers her final speech outside 10 Downing Street in central London

 

Rishi Sunak became Britain’s third prime minister since July on Tuesday and has been tasked with taming an economic crisis that has left the country’s finances in a precarious state and millions struggling to pay their food and energy bills.

The new prime minister is the UK’s first head of government of colour, making this an important moment in the country’s history. Twenty years ago, the country did not have a single representative of colour or ethnic minority in the parliament in Westminster.

Sunak’s election will have a positive impact on Britain’s international image, particularly in the Commonwealth as it struggles to keep some Commonwealth nations under the British crown. However, due to the political and economic difficulties the country is facing, celebrations at Sunak’s appointment soon gave way to a focus on the crisis.

“I fully appreciate how hard things are,” Sunak said outside the prime minister’s 10 Downing Street residence in his first public speech. “And I understand, too, that I have work to do to restore trust after all that has happened. All I can say is that I am not daunted.”

When he was Treasury chief, Sunak became popular with the public by handing out billions in support to shuttered businesses and laid-off workers during the Covid-19 pandemic. But now he will have to oversee tax hikes and public spending cuts as he tries to bring inflation and government debt under control.

Acknowledging the “difficult decisions to come,” Sunak tried to draw a line under the chaos that engulfed former prime minister Liz Truss and her predecessor Boris Johnson. He said his government “will have integrity, professionalism, and accountability at every level”.

He said of Truss that “she was not wrong to want to improve growth in this country. It is a noble aim, and I admired her restlessness to create change. But some mistakes were made, not borne of ill will or bad intentions, quite the opposite in fact. But mistakes, nonetheless, and I have been elected leader of my party and your prime minister in part to fix them.”

“I will place economic stability and confidence at the heart of this government’s agenda.”

Sunak will have to make tough decisions on a list of issues in the coming months. Some of these may deepen the economic difficulties felt by British citizens. Finance Minister Jeremy Hunt hinted that the budget that will be announced on 31 October will include a cut in public spending and the start of new austerity measures that bring back bad memories of the austerity programme after the 2008 financial crisis.

The new prime minister will face difficult economic decisions in his early days in office. The Treasury is facing a shortfall of £40 billion. Hunt is working to bridge the gap, but he will wait for the new prime minister’s decisions, which will be determined by economic and political considerations.

The new government wants to take a balanced approach between austerity and tax cuts to avoid a negative market reaction similar to what happened during the Truss administration. These decisions have clear political, economic, and social consequences.

If the government decides not to raise welfare benefits, pensions, and the salaries of public-sector workers in line with inflation, which is more than 10 per cent, Sunak may suffer an immediate hit to his support, making calls for early general elections even more urgent.

Nurses, healthcare workers, ambulance drivers, teachers, train drivers, civil servants, and university lecturers are all planning to go on strike this winter to protest at low wages. Major strikes would plunge the new government into a severe crisis.

But there is also an economic logic to raising salaries, pensions, and social benefits in line with the rate of inflation as many Conservative Party MPs argue that stagnant wages mean that the public will refrain from spending, leading the British economy to shrink further.

But raising them in line with inflation will cost billions. Raising pensions at the same rate as inflation would cost the budget around five billion pounds, making such choices critical.

Meanwhile, people who want to make an appointment with a doctor in Britain under the public healthcare system have to wait for several weeks, and there is a waiting list of seven million waiting for treatment.

This is one of the most serious crises facing the new prime minister. Ministry of Health officials say the government should increase the budget, but the most likely scenario is that any increase will be limited. With winter approaching, the crisis will become more serious, as these are the months that are most stressful for the public healthcare system.

The Truss government provided subsidies on energy bills only until next April but did not specify how much the government would provide after that date, leaving the task to the new prime minister.

Several factors will determine the new government’s response to the problem, including the continuation of the Russo-Ukrainian war, a lack of gas supplies across Europe, and rising prices. One of the new prime minister’s first actions may be to announce a windfall tax on energy companies to help fund the government’s aid package for British citizens.

The issue of the Northern Ireland Protocol also remains unresolved with the EU, and the new prime minister will have to resume negotiations in his early days in office. Britain’s relationship with the EU worsened after the Brexit vote in 2016 and differences over the Protocol, even though there are massive economic, security, and defence interests between Brussels and London.

The new prime minister will try to reassure the continent that he is a trustworthy friend. To give a boost to relations with Europe, Sunak’s first visit abroad is expected to be to France, an important partner for London because of intertwined issues between the two countries that neither one of them can solve alone.

Defence spending was due to rise to three per cent of GDP by 2030 under a pledge by the Truss government, but cancelling this pledge is one of the options under consideration for the new government as it seeks to balance the budget. This may open the door to differences between the Ministry of Defence and Downing Street, especially since Defence Secretary Ben Wallace has hinted at resigning unless the budget is increased.

Sunak’s government will not pledge to increase defence spending while cutting spending on health and education, and some ministers may find Wallace’s resignation a small price to pay.

A row over immigration raged in the hours before the departures of former home secretary Suella Braverman and Truss. Truss wanted to ease restrictions on immigration to boost growth, but Braverman resisted because one of the Brexit pledges was to reduce immigration to tens of thousands a year.

The new prime minister is likely to want to continue Truss’ approach. Economic sectors from the agricultural services, and construction sectors to health are facing a severe shortage of labour that threatens economic growth rates in Britain.

So, Sunak has difficult challenges to face and only 18 months to sort them out. He has to convince the financial markets that he can get Britain out of the crisis it is experiencing, and he has to unite his party behind him and put an end to the war between its far right and centre-right. He has to convince the British public that he is the right man in the right place at the right time. This may be the most difficult challenge before him, as he is a billionaire in a country suffering from a cost-of-living crisis.

Sunak has said that he used to work at an Indian restaurant in Southampton when he was young to help with his school fees. He later graduated from Oxford and Stanford Universities, where he met his wife, Akshata Murthy, daughter of Narayana Murthy, an Indian billionaire who made his fortune in the technology industry.

One of his first jobs was as a financial analyst at the US financial firm Goldman Sachs. Because of his work in investment, and in addition to his wife’s share in her father’s company, the couple began to amass a fortune estimated at $877 million, according to the UK newspaper the Sunday Times.

Some sources estimate Sunak and Murthy’s net worth at up to $1.2 billion.

He rose at rocket speed from a new MP to UK prime minister at 42 and the youngest in 200 years. It’s a brilliant success story, but it may not bring him close to the average Briton. Many people associated him with “wealth” and “money,” though they also associate him with “efficiency” and “discipline”.

*A version of this article appears in print in the 27 October, 2022 edition of Al-Ahram Weekly.

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