Does the next British leader have a plan?

On May22, 2024, British Prime Minister Rishi Sunak called snap elections for July 04, 2024. Polls suggest that the opposition Labour Party—led by the centrist MP Keir Starmer—will sweep to victory, putting an end to 14 years of Conservative leadership. But what are Keir Starmer’s economic policies?

Thus far, Starmer has focused on small-scale policy pledges, such as hiring extra teachers, cutting hospital waiting times, and improving border security—a cautious approach to policymaking that contrasts with the large challenges the country faces.

Sluggish economic growth

One key challenge for Starmer will be improving Britain’s economy. After easily and consistently outperforming the Euro area economy in the years prior to the 2016 Brexit vote, the Britain has underperformed since. This is despite the tailwind of a population which has boomed by around 2.5 million in the intervening years on surging immigration from outside the EU.

Analysts forecast Britain GDP growth to roughly track Euro area GDP growth over our forecast horizon to 2028. Given higher population growth in the UK, this means the Britain’s GDP per capita growth will actually lag behind that of the Euro area. Starmer has pledged to make Britain the G7’s top-performing economy; but analysts see little chance of this happening. That said, the labor market will be one saving grace: The unemployment rate is hovering close to 4% and should remain there in the coming years, which would be below the G7 average.

Strained public finances

Government finances are likely to present Starmer with further difficulties. Weak growth, together with rising spending pressure from an aging population and the Covid-19 pandemic, has translated into a large budget deficit and stubbornly high public debt in recent years. And public debt is set to stay above 100% of GDP over our forecast horizon.

This will likely tie Starmer’s hands and prevent lavish new spending commitments—particularly given the still-fresh memory of the ill-fated attempt by former PM Liz Truss to play fast and loose with fiscal discipline, which resulted in a sharp spike in market interest rates.

Damaged cross-Channel trade ties

Finally, Starmer will have to grapple with the Britain-EU relations. The Britain-EU trade deal has led to a raft of non-tariff barriers on both goods and services trade with Europe which have hampered both British exports and investment into the country.

While Sunak has succeeded in making ties with Brussels more cordial following persistent political frictions under the premiership of Boris Johnson, the trade deal remains threadbare. A Labour government would likely look to work more closely with the bloc in certain economic sectors, but has pledged not to region the EU, the Single Market, or the customs union, which will continue to hamper exports and investment ahead.

Insight from Analysts

 “Much will depend on the size of Labour’s potential majority: a comfortable majority would make some of the party’s policies, such as overhauling the labour market, realistic and actionable.

However, few of the Labour members of parliament (MPs) that will end up in government as junior ministers have experience in government. Labour will face significant challenges, given that many of the major issues facing the next administration will require large amounts of money to fix (including the National Health Service). Its period in office is therefore likely to be challenging.”

Economic situation

 “The Britain economy has underperformed the US and the Eurozone since the start of the pandemic. The slump in 2020 was deeper and the subsequent recovery levelled off in 2022 even more so than in the Eurozone in the wake of the surge in energy and food prices. The strong Q1 GDP data partly correct an unexpectedly weak finish to 2023. The sharp 2.3% drop in imports, which boosted the net trade component in Q1, was probably a one-off. However, the data also suggest that the UK economy may have started to make up some of the lost ground.

 

 

 

Sunak follows Biden to Israel to show support

Israel pounded Gaza with more air strikes on Thursday and Egypt took steps to let in aid, as British Prime Minister Rishi Sunak followed US President Joe Biden on visits to demonstrate Western support for the war against Hamas.

Sunak borrowed a phrase associated with British wartime leader Winston Churchill, pledging to stand by Israel "in its darkest hour" following the October 07 rampage by Hamas gunmen who killed 1,400 Israelis.

Israel has responded to the deadliest attack in its 75-year history by vowing to annihilate Hamas, putting the entire Gaza Strip's 2.3 million people under a total siege, and bombarding the enclave in strikes that have killed thousands and made more than a million homeless.

Western countries have tried to balance their support for Israel with calls to ease the plight of Gazans, but Sunak's emphasis was firmly on the former.

"Above all, I'm here to express my solidarity with the Israeli people. You have suffered an unspeakable, horrific act of terrorism and I want you to know that the United Kingdom and I stand with you," Sunak told reporters after landing in Tel Aviv hours after Biden left.

Later appearing beside Prime Minister Benjamin Netanyahu, he said, "We will stand with you in solidarity. We will stand with your people. And we also want you to win."

British PM Rishi Sunak visits Ukraine

British Prime Minister, Rishi Sunak travelled to Ukraine to meet President Volodymyr Zelensky and confirmed a major new package of air defence for the war-torn country.

This is Sunak’s first visit to the region since he became prime minister and follows the footsteps of his predecessor Boris Johnson, who developed a personal friendship with its leader.

The £50 million package includes 125 anti-aircraft guns and technology to counter deadly Iranian-supplied drones, including dozens of radars and anti-drone electronic warfare capability. It follows more than 1,000 new anti-air missiles announced by the Defence Secretary earlier in November.

Earlier, Sunak used the G20 Summit in Bali to urge other world leaders to take a harder line against Russian aggression.

Sunak said, "Britain knows what it means to fight for freedom."We are with you all the way", he told President Zelensky in a tweet.

His pledge of continued support follows in the footsteps of both Johnson and Truss, when she was in Downing Street.

A Number-10 spokesperson said, "The Prime Minister is in Ukraine today for his first visit to Kyiv to meet President Zelensky and confirm continued UK support."

By the end of his time in office Johnson was much mocked amid claims he would use official phonecalls with the Ukranian leader to attempt to shore up his own popularity at home.

Sunak had condemned Russia for the invasion of Ukraine. He said the UK would continue to support Ukrainians in defending themselves against Russian action, and to help ensure Kyiv is in a position of strength when they decide the time is right for peace talks.

He told reporters travelling with him to Bali that the Russin leader Vladimir Putin had skipped the summit of world leaders.

"Russia is becoming a pariah state and he’s not there to take responsibility for what he’s doing," he said. "But I’m going to use the opportunity to put on the record my condemnation of what they’re doing.”

 

British PM Sunak extends support to Ukraine

British Prime Minister Rishi Sunak on Tuesday extended his support for Ukraine at the G20 summit while confirming a long-planned order for warships from BAE Systems.

The announcements come as Britain prepares for a budget on November 17, 2022 in which the government will lay out spending cuts and tax rises.

Russian President Vladimir Putin's regime would hear the chorus of global opposition to its actions, Sunak said.

"Russia's actions put all of us at risk," he said at the summit in Bali, Indonesia. "As we give the Ukrainian people the support they need, we are also harnessing the breadth and depth of UK expertise to protect ourselves and our allies."

Sunak also announced a 4.2 billion pound (US$4.94 billion) contract to BAE Systems to build five ships for the Royal Navy, a government statement said.

This contract, in addition to the three ships already under construction, comes as the next phase in the Type 26 frigate program and all the eight of the Type 26 frigates are expected to be completed by the mid-2030s, the statement said.

The British government has planned to build a total of eight Type 26s since 2015, when it cut the program from 13 ships.

Ships of the class will be advanced warships to be used in anti-submarine warfare to protect the British nuclear deterrent at sea, according to the government.

The prime minister and fellow leaders would stress at this week's meeting that Russia's role in the international system would never be normalized while the war in Ukraine continued, the statement added.

Sunak arrived at the summit in Bali, Indonesia, on Monday for a meeting that Russian Foreign Minister Sergei Lavrov will also attend.

In support to Ukraine, Britain said last week it would soon complete delivery of 1,000 additional surface-to-air missiles to the Ukraine's armed forces. Britain also announced delivery of a further 12,000 sleeping kits for extreme cold weather.

 

Rishi Sunak faces huge task as Prime Minister

Rishi Sunak became Britain's third prime minister in two months on Tuesday, tasked with tackling a mounting economic crisis, a warring political party and a deeply divided country in one of the greatest challenges to confront any new leader.

The 42-year-old former hedge fund boss was asked to form a government by King Charles, and will seek to bring an end to the infighting and feuding at Westminster that has horrified investors and alarmed international allies.

Sunak, one of the richest men in parliament, will have to find deep spending cuts to plug an estimated 40 billion pound ($45 billion) hole in the public finances due to an economic slowdown, higher borrowing costs and a six-month program of support for people's energy bills.

With his party's popularity in freefall, Sunak will also face growing calls for an election if he moves too far from the policy manifesto that elected the Conservative Party in 2019, when then leader Boris Johnson pledged to invest heavily in the country.

Economists and investors have said Sunak's appointment will calm markets, but they warn that he has few easy options when millions are battling a cost of living crunch.

"With a recession in 2023 now increasingly likely, and the next general election in only two years' time, Rishi Sunak can expect a challenging premiership," Eiko Sievert at the Scope ratings agency told Reuters.

Sunak has warned his colleagues they face an "existential crisis" if they do not help to steer the country through the surging inflation and record energy bills that are forcing many households and businesses to cut back spending.

"We now need stability and unity, and I will make it my utmost priority to bring our party and our country together," he said as he was elected by his lawmakers on Monday.

Sunak, Britain's youngest prime minister for more than 200 years and its first leader of colour, replaced Liz Truss who resigned after 44 days following a "mini budget" that sparked turmoil in financial markets.

With debt interest costs rising and the outlook for the economy deteriorating, he will now need to review all spending, including on politically sensitive areas such as health, education, defence, welfare and pensions.

Reflecting the near constant state of turmoil in British politics this year, politicians, journalists and photographers once again crammed into Downing Street on Tuesday to hear a departing speech from Truss.

Speaking seven weeks to the day after she arrived as prime minister, Truss did not apologize for her short tenure and said she knew Britain was set for brighter days.

During her time in office the pound hit a record low against the dollar, borrowing costs and mortgage rates surged, and the Bank of England was forced to intervene to protect pension funds from collapsing.

Sunak will now start forming his cabinet, with some Conservative lawmakers hoping he will include politicians from all wings of the party.

He is expected to retain Jeremy Hunt as finance minister after the former foreign and health secretary helped calm volatile bond markets by ripping up most of Truss's economic program.

Investors will also want to know if Sunak still plans to publish a new budget alongside borrowing and growth forecasts on October 31, 2022 which would help inform the Bank of England's interest rate decision on November 03, 2022.

Sunak, a Goldman Sachs analyst who only entered parliament in 2015, must unite his party, aware that voters are increasingly angry over the antics at Westminster as the economy heads for recession.

He was blamed by many in the party when he quit as finance minister in the summer, triggering a wider rebellion that brought down Johnson.

While many expressed relief that the party settled on a new leader quickly, a sense of distrust remains among some while others questioned whether struggling families would relate, or ever vote, for a multimillionaire.

"I think this decision sinks us as a party for the next election," one Conservative lawmaker told Reuters on condition of anonymity.

Historian and political biographer Anthony Seldon told Reuters that Sunak would also be constrained by the mistakes of his predecessor.

"There is no leeway on him being anything other than extraordinarily conservative and cautious," he said.

Many politicians and officials abroad, having watched as a country once seen as a pillar of economic and political stability descended into brutal infighting, welcomed Sunak's appointment.

Sunak becomes Britain's first prime minister of Indian origin.

 

Will Rishi Sunak be next Prime Minister of Britain?

Rishi Sunak looked set to become next Prime Minister of Britain after Boris Johnson withdrew from the contest on Sunday. Although he enjoys enough support to make the final ballot he realizes the country and the Conservative Party needed unity.

If chosen, Sunak would be the first prime minister of Indian origin in the United Kingdom.

Johnson had raced home from a holiday in the Caribbean to try and secure the backing of 100 lawmakers to enter Monday's contest to replace Liz Truss, the woman who succeeded him in September after he was forced to quit over a string of scandals.

He said he had secured the backing of 102 lawmakers and could have been "back in Downing Street", but that he had failed to persuade either Sunak, or the other contender Penny Mordaunt, to come together "in the national interest".

"I believe I have much to offer but I am afraid that this is simply not the right time," Johnson said late on Sunday.

The former prime minister had secured the public backing of just under 60 Conservative lawmakers by Sunday, well under half of the nearly 150 endorsements Sunak had received.

Johnson's statement likely paves the way for his arch rival, the 42-year-old former finance minister Sunak, to become prime minister, possibly as soon as Monday. If confirmed, he would replace Truss who was forced to resign after she launched an economic program that triggered turmoil on financial markets.

According to the rules, if only one candidate secures the backing of 100 Conservative lawmakers, they will be named prime minister on Monday.

If two candidates pass the threshold, they will go forward to a vote of the party membership, with the winner announced on Friday, just days before new finance minister Jeremy Hunt lays bare the state of the country's finances in a budget plan due to be released on October 31, 2022.

That had raised concerns that Johnson would return to Downing Street with the backing of the party members, and not a majority of lawmakers in parliament, leaving the party badly divided. Hunt declared his backing for Sunak late on Sunday.

Some Johnson supporters could switch to Mordaunt, who has presented herself as the unity candidate, but many immediately switched to Sunak. A source close to the Mordaunt campaign said the former defence minister would continue in the contest.

"She is the unifying candidate who is most likely to keep the wings of the Conservative Party together," the source said.

Johnson has loomed large over British politics ever since he became mayor of London in 2008 and went on to become the face of the Brexit vote in 2016. While he led the Conservative Party to a landslide election in 2019, he was forced out just three years later by a rebellion of his ministers.

Sunak said he hoped Johnson would continue to contribute to public life "at home and abroad".

One Sunak supporter, who asked not to be named, said his main reaction was relief because if Johnson had won the "party would have torn itself apart".

Another Conservative lawmaker Lucy Allan said on Twitter: "I backed Boris for PM, but I think he has done the right thing for the country."

Other Johnson backers immediately jumped ship.

Cabinet office minister Nadhim Zahawi, who minutes earlier had published an article on the Daily Telegraph website praising Johnson, said "a day is a long time in politics".

"Rishi is immensely talented, will command a strong majority in the parliamentary Conservative Party, and will have my full support and loyalty," he said.

Earlier, many of the Conservative lawmakers who normally back Johnson switched their support to Sunak, saying the country needed a period of stability after months of turmoil that has sparked headlines - and raised alarm - around the world.

Johnson is also still facing a privileges committee investigation into whether he misled parliament over Downing Street parties during COVID-19 lockdowns. He could be forced to resign or be suspended from office if found guilty.

Sunak first came to national attention when, aged 39, he became finance minister under Johnson just as the COVID-19 pandemic arrived in Britain, developing a furlough scheme to support millions of people through multiple lockdowns.

"I served as your chancellor, helping to steer our economy through the toughest of times," Sunak said in a statement on Sunday. "The challenges we face now are even greater. But the opportunities - if we make the right choice - are phenomenal."

His family migrated to Britain in the 1960s, a period when many people from Britain's former colonies arrived to help rebuild the country after the Second World War.

After graduating from Oxford University, he later went to Stanford University where he met his wife Akshata Murthy, whose father is Indian billionaire N. R. Narayana Murthy, founder of outsourcing giant Infosys Ltd.

 

Who will be the next Prime Minister of Britain?

Members of Britain’s Conservative party will choose their next leader to succeed the ousted Boris Johnson as the next Prime Minister. Let us have a look at the two frontrunners.

The frontrunner in the leadership contest is current Foreign Secretary Liz Truss, 47, the daughter of a Labour-supporting maths professor and teacher who went to a state school but made it to Oxford where she took the course studied by many future prime ministers: philosophy, politics and economics (PPE). After a brief career as an accountant she became an MP in 2010 and rose steadily through the Tory ranks despite her past membership of the centrist Lib Dems. She campaigned in favour of remain in the fateful 2016 EU referendum campaign. But she made up for this by quickly becoming a hardline Brexiter and leveraging her loyalty to one Tory election hero – Boris Johnson – and by often being compared to another, Margaret Thatcher.

Rishi Sunak, 42, is the son of east African parents of Punjabi descent who moved to Britain in the 1960s. Their work as a GP and pharmacist enabled them to send their boy to one of Britain’s most expensive private schools, Winchester. He also went to Oxford and also studied PPE, before making millions in hedge funds and becoming a Tory MP in 2015. A Brexit supporter, he was soon picked out as a future leader and became Chancellor of the Exchequer soon after Johnson won his big election victory in February 2020. Also like Truss, he is married with two daughters.

A year ago, Sunak had the world at his feet, basking in the success of the Treasury’s Covid furlough scheme. But his reputation has waned – not helped by revelations about his billionaire wife’s tax status – and he went into the leadership fight being blamed for everything from the cost of living crisis to knifing Johnson in the back.

Truss, on the other hand, started from the back of the pack but the invasion of Ukraine gave her the platform to do her best Iron Lady impersonation with tough anti-Putin rhetoric. This delighted the Tory press and the older, middle-class men who largely make up the party members who are choosing the new PM. Once she made it into the final two to take on Sunak, she has never looked like losing.

The cost of living crisis, what the government should do about it and how that should be paid for has dominated. Truss launched her campaign with promises of big tax cuts and suggested her government could increase borrowing to pay for them.

Her plan to tell people what they want to hear – see this week’s ruling out of energy rationing – has left Sunak with no other choice than to stick to his orthodox stance that the country can’t afford tax cuts given the pandemic and the war in Ukraine. He hasn’t been able to make his accusations of fantasy economics stick, nor has he benefited from reminding everyone that his rival was a remainer. Truss has made the Ukraine issue her own, and has also profited from the press narrative that Johnson was shafted by the “Westminster elites”, for whom read “Sunak”.

As you might expect in British politics, class has played a big part and was unexpectedly overt when clips emerged of a young Sunak on a TV documentary joking about how he didn’t have any working-class friends. This played out while the professor’s daughter criticized her (actually very good) state school for failing working-class kids. Truss’s much less polished style has been marked but she has avoided any eccentric moments on a par with her infamous “blessed are the cheese makers” speech at party conference in 2014. Her potentially damaging failure to describe France as an ally was straight from the Johnson playbook and she also escaped too much damage from a leaked tape of her calling British workers lazy.

The longest leadership race in living memory will end when the winner is announced on Monday lunchtime British time, although despite the buildup it’s not much of a cliffhanger. Truss has had a huge lead in the polls throughout the contest, with the most recent roundup of surveys giving her 59% of the vote to Sunak’s 32%.

Victory will make her the third woman to lead Britain after Thatcher and Theresa May, all Conservatives. If Truss wins as expected, she – and Johnson – will then have to travel 500 miles to Balmoral on Tuesday for the traditional audience with the Queen who is unable to leave her Scottish redoubt because of an episodic mobility issue.