Sunak's prize for predicting Truss chaos: He gets to clean up the mess

Rishi Sunak spent the summer trying to warn the Conservative Party that Liz Truss would trash the economy if she became UK prime minister. He failed to win the top job then -- but is now on the hook for cleaning up her mess.
 

Just seven weeks after Truss traveled to meet Queen Elizabeth II to become premier, Sunak will meet King Charles III on Tuesday to formally replace her. It marks an extraordinary turnaround in his political fortunes, during an astonishing period that saw the death of Britain’s longest-reigning monarch and the exit of its shortest-serving prime minister.

He’s been at the forefront of much of the recent turmoil, starting with his resignation as Chancellor of the Exchequer in July. That helped precipitate Boris Johnson’s downfall but critically also damaged his standing with grassroots Tory members, who opted to put Truss into 10 Downing Street.

A second chance at the biggest job in British politics has come sooner than anyone could have expected. When Truss’s premiership disintegrated at record speed, Tory MPs remembered Sunak’s dire predictions and when his rivals fell away -- including Johnson’s outrageous but aborted attempt at a comeback -- he became Conservative Party leader unopposed on Monday.

At 42, Sunak will become the UK’s youngest prime minister in more than two centuries. And while Britain has previously had a prime minister with Jewish origins in Benjamin Disraeli, Sunak will be the first from an ethnic minority. Both of his parents are of Indian origin, who emigrated to the U.K. from east Africa in the 1960s. The man who’ll be Britain’s first Hindu premier poignantly became Tory leader on Diwali.

In many ways, though, Sunak is also a product of the establishment. He was educated at one of the country’s most exclusive private high schools and Oxford University, and entered politics after a career in finance: he’s the first former hedge fund manager to become premier.

Repair Job
 

His first task is to repair the damage of Truss’s short spell in charge, after her massive package of unfunded tax cuts roiled financial markets and drove up mortgage costs for millions of Britons. The UK is staring down the barrel of a prolonged recession, which may have already started.

The Conservative Party is facing an “existential threat,” Sunak told MPs in a closed doors meeting, according to one of those present.

The Tory party is tearing itself apart on key issues including Brexit and the economy. The Conservatives, who face growing questions about their mandate to govern after two changes of leader since the 2019 general election, are far behind Keir Starmer’s opposition Labour Party in opinion polls.

A national vote must be called by January 2025 at the latest, and in his first address to Tory MPs as leader, Sunak ruled out a snap poll.

If there is a bright spot for Sunak, it’s that he got a major credibility boost from Truss’s failures -- because he saw the mayhem coming. 

‘Misery for Millions’
 

“I’m worried that Liz Truss’s plans will make the situation worse,” he said in a leadership debate on Aug. 4. “If we just put fuel on the fire of this inflation spiral, all of us, all of you, are just going to end up with higher mortgage rates, savings and pensions that are eaten away, and misery for millions.”

Sunak enters Downing Street relaxed after spending time in Yorkshire, California and London since his defeat to Truss, according to a person familiar with the matter. He even managed to find time for mid-week movies with his two daughters, something he hadn’t done for several years, the person said.

The new premier now has less than a week to put the finishing touches on an economic plan to get the country’s finances back on an even keel over the medium term, with a fiscal statement due on Oct. 31. 

Though he hasn’t said so, he’s widely expected to keep supporter Jeremy Hunt in his role, after the Chancellor of the Exchequer helped steady the markets in his first 10 days in office.

It’s not the first time Sunak has come to a big job under time pressure. When Johnson unexpectedly promoted him to chancellor in February 2020, he had less than a month to prepare a budget just as the pandemic was hitting.

Pandemic Spending
 

He responded over the next two years by rolling out unprecedented levels of government aid -- some £376 billion ($426 billion) -- to support businesses and workers. That’s widely credited with preventing a huge spike in unemployment, though he faced criticism for a lack of checks in emergency business lending programs that left them open to fraud. 

Meanwhile his “Eat Out to Help Out” program to encourage people back into restaurants and arguably did more than anything to catapult Sunak into the public consciousness, triggered a backlash from critics who said it helped to spread coronavirus.

His tenure as chancellor also burnished a reputation as a capable media performer with a slick social media operation. But his use of personal branding -- including his signature -- on tweets advertising government policies didn’t always go down well with Tory MPs. 

And while his pandemic programs made him the most popular cabinet minister within the party -- and one of the most recognized and liked politicians among the broader electorate -- his approval rating took a major hit during the furore earlier this year over his wife’s tax affairs and his US visa status, exposing a political naivety.

His wife Akshata Murthy -- a multimillionaire -- has since renounced her non-domiciled tax status and vowed to pay British taxes on her worldwide earnings, and Sunak has given up his US green card. Yet the family’s vast wealth still raises questions about the incoming premier’s ability to connect with voters in the midst of the worst cost of living crisis in decades.

He also didn’t emerge unscathed from the “Partygate” scandal that played a major part in Johnson’s demise, with both of them fined by police for attending an illegal gathering during the pandemic.

Open displays of his wealth, including exercise sessions on his Peloton exercise bike, being photographed in expensive footwear, and keeping a coffee cup worth £180 on his desk, have raised questions over whether Sunak can connect with the UK public facing the worst squeeze on incomes in decades.

Work over the summer to build a leisure complex including a swimming pool at his mansion in his Yorkshire constituency has also attracted negative coverage in the UK press, which has contrasted it with the plight of ordinary Britons.

Financial Force
 

Sunak was born in Southampton, on England’s south coast, the son of a pharmacist and a doctor. He was educated at one of England’s most renowned schools, Winchester, and then at Oxford. A Star Wars fan, Sunak’s childhood dream was to grow up to become a Jedi knight.

Instead it was a career in the city, including three years at Goldman Sachs, before later gaining an MBA from Stanford in California. That was where he met his wife, the daughter of Indian billionaire, Infosys Ltd. co-founder Narayana Murthy.

For three years or so, Sunak worked at billionaire activist hedge fund manager Chris Hohn’s TCI Fund Management, before moving to join his TCI colleague Patrick Degorce’s hedge fund Theleme Partners.

Working in the city of London during the financial crisis made an impact, and in 2019 he told the BBC’s “Political Thinking” podcast that he’d had sleepless nights as investments shed hundreds of millions of pounds in value. “You are responsible for people’s savings,” he said. “When that’s all kind of evaporating in front of your eyes, that’s quite stressful thing.”

Northern Politics
 

Sunak entered Parliament in the 2015 general election after winning the intimidating vacancy left by a former party leader, foreign secretary and party heavyweight William Hague in the northern English district of Richmond.

He spoke about his skin color in his first Parliament speech, recounting how he was introduced to a farmer during the campaign as the “new William Hague.” 

“He looked at me, quizzically, then said, ‘Ah yes, Haguey! Good bloke. I like him. Bit pale, though. This one’s got a better tan,’” Sunak recalled.

He campaigned for Brexit and enjoyed an accelerated rise through the government ranks -- becoming a junior minister in Theresa May’s administration in early 2018, winning promotion to the cabinet as Chief Secretary to the Treasury under Johnson the following year, and earning his surprise elevation to the Treasury’s top job when Javid quit. 

Tory Unease
 

There, Sunak earned a reputation as a details man, poring over spreadsheets and mastering the intricacies of economic policy. But while he was admired in his party for his policies during the pandemic, there was also unease on the ideological right at the vast sums being added to the national debt.

That dynamic could yet cause trouble for Sunak, especially after his resignation as chancellor helped set in train an avalanche of ministerial resignations that led to Johnson’s departure two days later. 

A teetotaler not known for schmoozing in Parliament’s bars, he still managed to top every ballot of Tory MPs in the leadership contest won by Truss -- despite not having a large following among parliamentary colleagues. In the runoff, grassroots members voted 57% to 43% in favor of Truss.

This time, his position is buttressed by having the backing of over half of Tory MPs, while grassroots members had no chance to deliver their verdict. But he’s still likely to have a tricky time appeasing party factions, especially those who called for Johnson’s return.

Many Tories are unhappy that as chancellor, Sunak put the UK on track to its highest tax burden in 70 years, and with the finances in a worse state than when he quit his post just over three months ago, he faces what Hunt has described as “decisions of eye-watering difficulty” on tax and spending. 

“There is no doubt we face a profound economic challenge,” Sunak said in short televised address on Monday, which included a thinly-veiled dig at Johnson. “I pledge that I will serve you with integrity and humility.”