Rishi Sunak, who is Britain’s first prime minister of colour, had previously warned that former Prime Minister Liz Truss’ ‘fairytale’ economic plans would lead the country into a crisis.
On October 24, Sunak won the election to lead the British Conservative Party. Sunak, 42, one of the wealthiest politicians in Westminster, will take office during one of the most turbulent periods in British political history and will be the nation’s third leader in less than two months. He will also be the nation’s youngest leader in modern times.
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He succeeds Liz Truss, who served only 44 days before announcing her resignation, citing the need to restore stability to a country reeling from years of political and economic turmoil and leading a party that has fractured along ideological lines.
Sunak warned Truss repeatedly that her strategy was imprudent long before the International Monetary Fund (IMF) and Bank of England were forced to intervene. Sunak had previously called his rival’s promise of unfunded tax cuts “fairytale” during a leadership debate on July 15.
Sunak criticized Truss’ economic plans
He said, “Liz, we have to be honest. Borrowing your way out of inflation isn’t a plan, it’s a fairytale.” Truss, however, remained unconvinced and responded with a conservative slogan, “You cannot tax your way to growth.”
Later in the campaign, Sunak expanded on his criticism. Sunak’s campaign team issued a statement on August 21 warning that Truss’ economic policies could lead to an “inflationary spiral.”
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Sunak’s spokesperson said, “The reality is that Truss cannot deliver a support package as well as come good on £50bn worth of unfunded, permanent tax cuts in one go. To do so would mean increasing borrowing to historic and dangerous levels, putting the public finances in serious jeopardy and plunging the economy into an inflation spiral.”
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After ex-PM Truss and her chancellor of the exchequer, Kwasi Kwarteng, announced a £45 billion tax cut package as part of the new Conservative government’s “Growth Plan,” the United Kingdom’s economy was thrown into disarray. The markets did not react favourably to the unfunded tax cuts.
Sterling’s value against the dollar plunged to all-time lows, and the cost of borrowing money from the government shot up. Truss’ recent mini-budget, which precipitated her downfall, increased borrowing costs and mortgage rates while driving investors away. British government bonds surged in the run-up to Sunak’s victory, and their gains were extended on October 24.
