Sunak faces dose of reality as economic and political woes mount
Rishi Sunak won an endorsement from financial markets in his first days as prime minister, and even some favorable polling numbers from the British public. His first full week in power may be more challenging.
The new premier’s economic policy is set to face scrutiny as the Bank of England delivers what could be its biggest interest-rate hike in more than 30 years, and the government looks to fill the multi-billion hole in the nation’s finances before a fiscal statement next month.
Meanwhile, questions continue to swirl over security breaches by his Home Secretary Suella Braverman, calling into doubt Sunak’s political judgment in reappointing her to the position.
It all adds up to a difficult challenge for Sunak, who put economic competence and integrity at the heart of his pitch to voters.
Despite the turmoil caused by his predecessor Liz Truss, polling last weekend showed Sunak and his party have overturned Labour’s lead in terms of who voters trust most to manage the economy. He’s also eaten into the opposition’s record advantage in surveys of voting intentions.
But those bounces risk fading once Sunak is confronted with the economic reality of soaring borrowing costs and the risk of a prolonged recession. Those dangers could be laid bare by the BOE on Thursday, when it presents economic forecasts along with its latest rate decision.
Households are already paying more for new mortgages, and businesses are complaining about the rising cost of credit.
But instead of being in a position to offer long-term aid and policies to boost growth, Sunak is scrambling to cut spending and restore the country’s fiscal credibility in the wake of Truss’ disastrous administration.
The government is considering freezing the foreign aid budget for another two years, backtracking on a 2020 plan to revert to pre-pandemic levels of international development spending, while some Cabinet ministers are pushing for a tax on non-UK citizens who live overseas and own property in Britain.
Sunak is considering getting rid of an energy revenue cap plan proposed by his predecessor and instead expanding a windfall tax on producers, while cooling on plans for a similar levy on banks.
But, if the delay of the government’s fiscal plan, which had been due tomorrow, means economic decisions can be slightly deferred for now, questions about the home secretary are becoming increasingly pressing.
Sunak has come under fire for reappointing Braverman from both the opposition Labour Party and some Tory allies.
Labour has called for the government to make public its review of the security breach and denounced the reappointment as a “grubby deal” that was payback for supporting Sunak’s bid to replace Truss.
Braverman stepped down on Oct 19 after acknowledging sending sensitive information in an email from her personal account, and said she “rapidly” reported it as soon as she realized the breach.
Sunak reappointed her six days after her resignation when he replaced Truss.
Cabinet minister Michael Gove defended her reappointment on Sunday, saying the public and the media shouldn’t rush to judgment.
He said that making more details public could itself be a threat to national security, but that he was glad Sunak gave Braverman a second chance and that she was “absolutely” a politician of integrity.