LONDON — Rishi Sunak on Tuesday became the U.K.’s third prime minister of the year following a meeting with King Charles III.
The tradition sees the monarch invite the leader of the party with the highest number of MPs to form a government, which since the 2019 general election has been the Conservatives.
In a speech outside 10 Downing Street after the meeting, Sunak said: “Our country is facing a profound economic crisis. The aftermath of Covid still lingers, Putin’s war in Ukraine has destabilized energy markets and supply chains the world over.”
He paid tribute to his predecessor Liz Truss, who he said was “not wrong” to want to improve U.K. growth. But, he continued, “some mistakes were made,” not “borne of ill will or bad intentions” but “mistakes nonetheless” — and he had been elected “in part to fix them.”
“I will place economic stability and confidence at the heart of the government’s agenda. This will mean difficult decisions to come. But you saw me during Covid doing everything I could to protect people and businesses with schemes like furlough. There are always limits, more so than ever, but I promise you this. I will bring that same compassion to the challenges we face today.”
He then indicated he would implement the manifesto on which the Conservatives were elected in 2019.
The British pound was trading 0.4% higher against the dollar following the speech, at $1.1321. Sterling has failed to get a significant boost from Sunak’s appointment, but has recovered from the lows below $1.1 it reached earlier in the month.
Meanwhile, yields on short- and long-term U.K. sovereign bonds, known as gilts, dropped sharply Monday as it became clear Sunak would take office and continued to move lower Tuesday.
Sunak is now expected to begin appointing new cabinet figures in yet another reshuffle at the top of British politics.
He was elected party leader by fellow Conservative lawmakers on Monday following the resignation of Truss on Thursday.
The 42-year-old will be the youngest U.K. prime minister since 1812, and the first person of color to lead the country, which U.S. President Joe Biden said Monday was “a groundbreaking milestone.” Sunak’s parents are of Indian descent and in the 1960s moved from East Africa to the U.K.
Sunak also has the greatest personal wealth of any of his predecessors. His wife, Akshata Murthy, is daughter of Indian IT company Infosys co-founder N. R. Narayana Murthy, and the couple have a combined net worth of £730 million ($824 million), according to the Sunday Times Rich List, making them the joint 222nd wealthiest people in the U.K.
Earlier this year, Murthy made headlines over her non-domiciled tax status, which allows her to avoid paying millions in U.K. taxes on international earnings. She said she would start paying U.K. taxes on these earnings following the controversy.
Before entering politics, Sunak worked as an analyst as Goldman Sachs and a partner at billionaire Chris Hohn’s Children’s Investment Fund Management. He was privately educated in the U.K. and studied Philosophy, Politics and Economics at Oxford, like four prime ministers and dozens of senior political figures before him, followed later by an MBA at Stanford University.
He was elected Conservative MP for a constituency in North Yorkshire in the 2015 general election, and was finance minister under former Prime Minister Boris Johnson from February 2020 to July 2022. Through this he oversaw the U.K.’s economic response to the pandemic, including the program for furloughing millions of workers.
He ran for party leadership following Johnson’s resignation in July and was supported by MPs into the two-candidate battle against Truss, but lost in a vote by the Conservative Party’s roughly 200,000 members, who backed Truss against Sunak by 57% to 42.6%.
Many members favored Truss’ strong stance on slashing taxes and regulation as soon as she took office, which Sunak warned was misguided at a time of central bank tightening and increased spending on energy bill support. His warnings that the plan would cause a sell-off in British assets including gilts (sovereign bonds) and sterling proved prophetic.
Truss’ resignation came just 44 days into her tenure, on 10 of which government business was suspended due to the death of Queen Elizabeth II. A wave of Conservative MPs sent letters expressing a lack of confidence in her government after she oversaw a controversial “mini-budget” that rocked financial markets, making government borrowing more expensive and raising interest rate expectations.
Truss had sacked her finance minister, reversed the majority of the proposals and attempted to reassert her position. But pressure on her from within the party continued, particularly following a chaotic night which saw the resignation of her interior minister and reports of MPs in tears after being “bullied” into a vote on fracking, which was seen as a vote of confidence in the government.
Johnson’s departure was similarly chaotic, coming after months of outrage among the public and MPs over a series of scandals. They included both Johnson and Sunak being fined by police for events held in Downing Street during Covid-19 lockdowns, and Johnson’s appointment of a senior political figure despite knowing of previous misconduct allegations against him.
Sunak now faces a packed in-tray which includes numerous forecasts the U.K. is heading for a recession; a cost-of-living crisis with inflation above 10%; the ongoing issues of the European energy crisis and war in Ukraine; the weak pound; the planned revamped budget on Oct. 31, which Finance Minister Jeremy Hunt has said will contain “difficult decisions” on spending; and the need to reassure financial markets of the U.K.’s economic competency.
He will also be navigating calls for a general election, as advocated by the opposition Labour, Scottish National, Liberal Democrat, Plaid Cymru and Green parties, as well as a few Conservative MPs who did not support Sunak.
Many Conservative MPs are resistant to an election given the party’s current poor polling figures. The next election will take place in January 2025 unless one is called by the prime minister earlier. It is also possible for an election to be forced if a majority of the U.K.’s 650 MPs vote for one.
Truss held her final cabinet meeting Tuesday morning. In a speech outside 10 Downing Street, she said: “It has been a huge honor to be prime minister of this great country, in particular to lead the country in mourning the death of Her Majesty the Queen after 70 years of service and the accession of his Majesty King Charles III.”
Truss only took office on Sept. 6. She cited her short-lived administration’s accomplishments as supporting households and businesses with energy bills and reversing the planned rise in national insurance tax, one of the only tax cuts that remained from the package of fiscal policies she was forced to reverse after market chaos.
Repeating themes she campaigned and governed on, she said: “We simply cannot afford to be a low-growth country, where the government takes up an increasing share of our national wealth, and where there are huge divides between parts of the country. We need to take advantage of our Brexit freedoms to do things differently.”
“It means lower taxes so people can keep more of the money they earn. And it means delivering growth that will lead to more job security, higher wages and more opportunities for our children and grandchildren.”