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Rishi Sunak has reached the top. The 42-year-old has enjoyed a rapid rise and has become head of government in the world’s fifth-largest economy just seven years after entering British politics. But the high-flyer will not be able to rest on its laurels. Huge challenges await him.
What the new British Prime Minister and Conservative Party leader could use right now would be superhuman strength. Sunak is a big Star Wars fan. As a teenager, the son of an immigrant family of Indian origin ran through his neighborhood in Southampton, southern England, in a Jedi costume and with a laser sword.
What next for the state finances?
His predecessor Liz Truss leaves him a financially and economically insecure country. Truss’ hasty tax cut plans have unsettled the financial markets; interest rates have skyrocketed as a result – making it more expensive for the state to borrow money and finance some of its tasks temporarily on credit.
Rishi Sunak will now have to prioritize. In the party’s internal election campaign in the summer, he said: “We have to return to a traditional, conservative economic policy – which is honest and responsible – instead of moving like in a fairy tale world.” What he means by this is that income and expenditure should be balanced in the medium term. Financing government tasks on credit is not sustainable.
But this principle will give Sunak sleepless nights from now on: There is an estimated gap of around 70 billion pounds in the British state budget. A significant part of this goes back to the energy price cap with which her predecessor, Liz Truss, immediately after taking office in early September, rushed to help households and companies that could no longer pay their energy bills. Sunak will not be able to touch these aid payments until next spring.
And with the largest expenditure items – health care, social services and education – there is no longer any significant leeway. On the contrary. The health care system is chronically underfunded and, with inflation at a good 10 percent, social assistance will also cost significantly more than budgeted.
What next for the EU?
Rishi Sunak’s second major construction site will be foreign trade. More precisely: the broken relationship with the EU. The consequences of Brexit are slowing down the British economy. Foreign trade is 16 percent below the level it is currently at – economists recently calculated that if the United Kingdom had not left the EU.
For Sunak this means: Quick clarification of the disputed issues with the EU is necessary to bring calm to relations with the most important trading partner.
What next for your own party?
Rishi Sunak also has a difficult legacy as party leader. His party is deeply divided – between several groups that are at war behind the scenes. Here he will have to ensure peace with carrot and stick. Pre-predecessor Johnson managed this masterfully for a long time – until he stumbled over Partygate and other affairs.
“Can the conservative party still be governed?” the Financial Times asked worriedly at the weekend – which aptly sums up another major challenge for the new political star Sunak. With Jedi magic powers, this task would also be much easier for him to solve.