Rishi Sunak of the Conservative Party has become the new leader of the UK after the end of Liz Truss’s brief 49-day prime ministerial term. Sunak has become the new prime minister without even needing British citizens’ votes; following the resignation of Boris Johnson, together with Liz Truss, he was one of the new candidates for prime minister but had lost the race to his predecessor.
Brought down by Truss and Sunak, Boris Johnson’s understanding of the economy during and after the Covid crisis was somewhat “heterodox” and “populist”: Contrary to the general downsizing trend in western countries, Johnson had prioritized economic growth and low taxes and declared that he favored measures to pump demand. In fact, Johnson had signaled that he could implement state-led fiscal policies that were not well received by the mainstream.
Boris Johnson took office after the Brexit process, when Britain left the EU, and acted to bring his country back on the world stage as a strong player. When Covid was added to the great recession that plagued capitalist economies, Johnson’s “unstable” actions lead to his downfall. Johnson, who wanted to pursue a looser monetary policy, was thought not to have a coherent and comprehensive economic policy towards the Bank of England’s and the finance’s “orthodox” understanding.
And that’s when Liz Truss became Johnson’s successor. In her debate with Sunak, she also talked about economic growth and the reduction of taxes. She also tried to implement this plan: a $50 billion tax deduction package came into effect to be compensated by borrowing, but the response of the “markets” was harsh. Sterling has declined to unprecedented levels, panicked investors have sold $500 million in assets, and the real estate industry is on the brink. The Bank of England launched an emergency bond-buying program to prevent pension funds from going bankrupt, and the IMF criticized Truss and urged her to reconsider the program.
Perhaps the sign of the resignation came from her ally on the other side of the Atlantic: on October 16, US President Joe Biden called Liz Truss’s tax package a “mistake”. Liz Truss had already begun her U-turn and fired finance minister Kwasi Kwarteng, but it was too late.
Britain’s stalemate
We must accept that Sunak “warned” Truss in a way. During the debate, he said that Truss’s promises of tax cuts, borrowing and economic growth were unrealistic and argued that these policies would not work in an inflationary environment: Raising borrowing to historic and dangerous levels would mean pouring gasoline over the fire.
Speaking to the Financial Times before Truss’s resignation, he said the new prime minister and the new government’s overriding priority was to control inflation. He explains that Truss’ unfunded debts will exacerbate the situation and fuel inflation, and calls out directly to her, “Liz, we have to be honest. Borrowing your way out of inflation isn’t a plan, it’s a fairytale.”
Thus, ex-Goldman Sachs executive and parliament’s richest deputy, Rishi Sunak, emerged as a heartfelt supporter of monetary policies in developed capitalist countries: focusing on fighting inflation, cutting spending, raising interest rates, tight monetary policy. The new prime minister says he supports the Bank of England’s “independence” but promises tax cuts only after inflation is controlled.
But the dilemma persists. Britain went into recession as of October, according to polls published by Financial Times. Interest rate increases and monetary tightening have not been able to reduce inflation fueled by rising energy costs due to the Ukraine-Russia war and sanctions imposed on Russia. Sunak’s plan to cut expenditures seems to trigger the social crisis even more, given the increasing number of people in need of help in society. Besides, when he was the Ministry of Finance between 2020 and 2022, Sunak brought in the highest taxes Britain had seen since the 1950s. Again, even though he preaches “discipline”, Sunak promises higher public expenditures.
There is no jolt in the foreign policy line
Sunak was a supporter of Brexit policy, but there are those in his party who think he has too much sympathy for Brussels. The debate on the Northern Ireland Protocol (NIP) will also be a test for Sunak in this sense. NIP kept Northern Ireland within the EU’s integrated market for goods; it left it loose on its border with the Republic of Ireland and subjected it to additional controls in trade with the rest of Britain. NIP, signed by Boris Johnson in 2020, is criticized by Sunak, but Sunak believes a more conciliatory language is needed, unlike the hardcore Brexiters in his party.
Rishi Sunak, on the other hand, wants to tighten border controls, especially on the issue of immigrants, and to get rid of the European Court of Human Rights (ECHR) “obstacle.” Arguing that the ECHR was exploited by “lefty ” lawyers and its designation was gradually expanding, he said that the option to leave the ECHR was also on the table. Sunak also supported the plan to send asylum seekers to Rwanda.
Stressing the “special relationship” between the United States and Britain in a phone call with Joe Biden, Sunak reiterated his support for Ukraine and said they would stand up to China. In Ukraine, the prospect of Boris Johnson’s return was welcomed, and after Truss’s resignation, the government’s official Twitter account even tweeted about Boris and quickly deleted it, but Sunak’s appointment of the ministries of defense and foreign affairs to Ben Wallace and James Cleverly, who also served in the previous cabinet, was recorded as a gesture that Ukrainian politics would remain unchanged. It was also meaningful that Sunak’s first telephone conversation as prime minister was with Ukrainian leader Volodymyr Zelenskyy. However, Sunak does not support Liz Truss’s and Ben Wallace’s promise to raise defence spending to 3% of GDP. In addition, allies of Johnson’s pushed rumors that during his polemic with Sunak, the new prime minister was less committed to the war than Johnson, and a deal would one day have to be done with Putin.
Internal tensions of the Conservatives and The Talented Mr. Sunak
On the other hand, Sunak is not settled on a solid ground within the party. Boris Johnson’s leadership was the result of contradictions within the Conservative Party (Tories). Most of the Tory MPs in parliament depend on the politics of low taxation and free market sovereignty. But on the other hand, especially representatives from the northern regions of the party demand more government spending, a larger and more interventionist state, and they are very influential within the party.
The Northern Research Group (NRG), an influential team within the party, called on Liz Truss to continue the Tories’ levelling-up policy in the 2019 election manifesto. The NRG is composed of Tories selected from regions traditionally held by the Labour Party and wants more investment in the north.
Johnson chose to manage these contradictions rather than solve them. He was both conservative and pro-free market; he had promised to increase government spending and cut taxes. His speeches in the Brexit campaign included “more prosperity, less Europe”, “more freedom, less regulation”, “more dynamism, less migration.”
Apparently, Rishi Sunak is the answer given in Britain to these contradictions and the current trends of world capitalism. The economy needs to be reorganized under titles such as “green transition” and large investments are required, and the public power needs to increase at a time when private sector investments are in the bottom due to the crisis. The distance between capital groups and the state should be shorter. In addition, the ongoing war in Europe means that the regulatory authority of the state over the society is also extended to wider areas.
All this highlights a figure like Rishi Sunak. He is the member of an Indian family, who were cooperative during the colonial period, ex-Goldman Sachs manager; wealthy; professional and self-educated child of cooperative families of former colonial countries who had migrated to the West in the 1960s and had the opportunity to get into good universities…
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