"The UK is a great country, but there is no doubt that we face profound economic challenges."
On October 25, local time, Rishi Sunak, who had just been elected as the leader of the British Conservative Party, accepted the formal appointment of King Charles III of the United Kingdom at Buckingham Palace and became the new prime minister of the United Kingdom.
New British Prime Minister Sunak Figure source network (the same below)
As the new prime minister, Sunak is full of "labels": Britain's first Indian prime minister, a Hindu, the youngest prime minister since 1812, with a billionaire worth ... In today's "politically correct" Western politics, can the buff-filled Sunak save Britain from crisis? What kind of problem does he face?
The economy is in stagflation, what kind of prescription will Sunak give?
It has to be said that Sunak took over from former Prime Minister Truss a true "hot potato".
After the announcement of a large-scale tax cut, the British financial market was volatile, the pound hit a record low against the dollar, government bonds were sold off, and pension funds faced a liquidity crisis. Despite subsequent remedial measures by the government and central banks, the UK economy still faces significant uncertainty.
This has left the market lacking confidence in the UK economy. The IMF predicts that the UK will be the worst economy in the G7 in 2023; Goldman Sachs predicts that the British economy will fall into recession in the fourth quarter of this year.
At the same time, Britons are also struggling with high inflation. From April to July 2022, UK inflation hit a 40-year high, with the consumer price index (CPI) rising 10.1% year-on-year in September, reaching its highest level in nearly 40 years.
City of London
So for Sunak, the priority after taking office is to save the credibility of the British economy, and it is necessary to stabilize financial markets and tackle inflation and energy problems.
As a former Chancellor of the Exchequer, Sunak has extensive experience and expertise in the financial industry.
When he and Truss were running for the head of the Conservative Party, Sunak warned that Truss's proposed tax cuts were a "fairy tale". At a time when inflation is in double digits, massive tax cuts will be destabilizing. Subsequent developments also confirmed Sunak's speculation, which was a big factor in his success again.
But Conservatives value Sunak's impressive achievements as Chancellor of the Exchequer even more. At that time, the outbreak of the epidemic coincided, and Sunak proposed to defend the British economy at all costs. Therefore, he introduced a paid leave system to keep jobs stable by increasing fiscal spending.
But Sunak's bailout of the economy is a contingency in a crisis and cannot be sustained forever. The UK is currently facing internal and external challenges, accumulating a large amount of debt, high inflation, weak growth and, in fact, mired in economic stagflation.
So how will Sunak fix the British economy?
Since the election of the British party leader this summer, Sunak has stressed that he will restructure the government budget and reduce debt as soon as possible, but has not proposed a detailed plan to save the economy. In his brief inaugural speech after his victory, Mr. Sunak also made no mention of his specific plans — he blamed Putin for energy and his predecessors for economic policy mistakes.
Goodwin, chief economist at Oxford Institute for Economics, said Sunak was unlikely to risk another anger in the market, such as by pursuing tax cuts or increasing public spending, but would instead pursue the fiscal austerity proposed by the current chancellor. The current Chancellor of the Exchequer, Hunt, is also a supporter of Sunak.
Chancellor of the Exchequer Hunt
But this is also bad for the British economy. "The tax burden will now be higher than previously expected, putting more pressure on families with declining real incomes." In the face of a recession, increasing taxes and limiting public spending have the potential to make the economy weaker. "After the expiration of the energy price guarantee that limits energy bills (next April), the UK's inflation outlook will become more unpredictable and its inflation risks have clearly turned to the upside.
British Labour MP Richard Bergonne quipped on social media that when Sunak said in his inaugural speech that he would make "difficult decisions", he was not referring to making it difficult for him, but to making it difficult for workers.
Therefore, the measures that Sunak can take now are probably to switch between the goals of maintaining the pound's credit, economic growth and reducing inflation. But economic stagnation is a stubborn disease, which requires both sound and strong policies and firm will, after all, there is a cost to treating this economic disease. But whether Sunak can afford this cost is a big question mark.
With the Conservatives divided, where will British politics go?
At the same time, Sunak will also need to make efforts to strengthen party unity and bridge the split in the Conservative Party caused by multiple election campaigns.
The first is that Sunak's prime minister has only two years left to last.
As a descendant of immigrants, Sunak's labels may also be his baggage. His mistakes as prime minister could be amplified and turned into his political crisis. In fact, some Conservative MPs have consistently expressed unease or even dissatisfaction with Sunak's ethnic and religious background.
Sunak is a Hindu
Jerry, a member of the Conservative Party, once said, "In the eyes of most people, Sunak is not even British." He was a businessman of Indian origin."
Some analysts believe that the support of Conservative MPs for Sunak is more of a helpless move. Because of Truss's tax cut plan, the public's patience with the Conservative Party has reached its limit. Since the beginning of this year, the Conservative Party's poll support has been declining, and the Labour Party once led the Conservative Party by more than 30%, the largest gap since the 90s of the last century. Therefore, instead of dying slowly like a frog boiled in warm water, it is better to fight on your back and let Sunak give it a go.
At its peak of the last century, the Conservatives had three million members, three times the level of the Labour Party. By the time the party members elected Cameron, there were four and a half million party members. At present, there are only 160,000 people. In just a few years, the Conservative Party has lost more than half of its membership. As a result, the Conservative Party has become less and less attractive to ordinary people.
Just as Sunak went to Downing Street to deliver his inaugural speech, thousands of Britons took to the streets to protest and directly gave Sunak a "big gift". They chanted: "Sunak is out" and "The Conservatives are down".
But more serious are Britain's deep-seated political problems. After five prime ministers in six years, three prime ministers a year, 10 Downing Street is like a "revolving door", which actually reflects the many shortcomings of British politics.
Johnson, Truss and Sunak
One is the "election of a small circle of prime ministers".
In the British general election, the leader of the party that wins the most seats is automatically appointed as prime minister. This means that every contest for the leader of the majority party is a contest for the prime minister. This great allure of power has led cabinet members to sometimes force the prime minister to step down and then pass the party leadership election.
This has brought about serious internal friction within the party. In every party leadership election, all MPs are forced to take sides, and then a considerable number of people are liquidated, temporarily or permanently.
Second, the tension between British elite and grassroots politics.
Britain is the birthplace of representative democracy, and the elected parliamentarians should be the spokespersons of the people's interests, but now the mainstream political elite, for the sake of their own interests and the interests of the small circle and the so-called political correctness, no longer listen to and pay attention to the voices of the people at the bottom, making the difference between popular democracy and parliamentary democracy wider.
Brexit is a case in point. Cameron, who has always advocated Remain, actually proposed a Brexit referendum, the purpose of which was originally to calm the discontent of the domestic Brexiteers and use this as a weight to negotiate with the EU. If it is voted on by Parliament, Remain is a high probability event; Once the referendum was resorted to, due to the relative sense of exploitation of the lower strata of society, Brexit became a "black swan event" that year.
Former Prime Minister David Cameron
Some scholars argue that Brexit "poses a serious challenge to the very principle of parliamentary sovereignty, the cornerstone of Britain's constitutional system" and has created "meritocracies in trouble."
It is true that one of the great advantages of democratic politics is that it relies on trial and error, and seeks the optimal solution through continuous trial and error. But the former first in the class in the United Kingdom recently turned in the answer sheet was unqualified, as if he had been making mistakes on the road of trial and error. Behind Sunak's election, it does not mean that the British political scene is calm, but there are undercurrents, and perhaps a terrifying wave is brewing.