Dec 3rd 2022

Rishi Sunak's Daunting Challenge

by Chris Patten

Chris Patten is a former EU Commissioner for External Relations, Chairman of the British Conservative Party, and was the last British Governor of Hong Kong. He is currently Chancellor of Oxford University and a member of the British House of Lords.

LONDON – Fate has not dealt Rishi Sunak, the United Kingdom’s first prime minister of color and its third prime minister in two months, a winning electoral hand.

Sunak entered office following two horrendous displays of prime ministerial incompetence. Boris Johnson, who served as prime minister from 2019 to September of this year, combined idleness with mendacity to create “cakeism,” a governing philosophy based on the notion that it is possible to have your cake and eat it. Promise voters whatever they appear to want while paying little regard to whether it is realistic or whether it contradicts other promises.

Johnson was followed by another Conservative Party darling, Liz Truss, who lasted just 44 costly days in office, becoming the UK’s shortest-serving prime minister. With her reckless chancellor of the Exchequer, Kwasi Kwarteng, Truss tried to borrow her way to an economic miracle, announcing massive tax cuts that would have overwhelmingly benefited the rich.

But while many Conservatives and their favorite newspapers cheered her on, bond markets gave Truss’s “mini-budget” an emphatic thumbs down. During the Brexit campaign, right-wingers used to ask, “Who runs Britain?” Last month, they got an answer: the holders of British government bonds who do not want to be on the hook for billions of pounds’ worth of bad debt.

Following Johnson and Truss’s egregious mismanagement, it has become abundantly clear that the Brexiteers require adult supervision. Enter Sunak, whom Truss had beaten for the top job only weeks before, and his new chancellor, Jeremy Hunt. Sunak headed the Treasury until relatively recently, so it is safe to assume that, unlike Truss and Kwarteng, he is familiar with how budgets work. And Hunt – a moderate – will also likely favor fiscal prudence over irresponsible borrowing.

This is not to say that Sunak is perfect. He has made some disastrous political decisions, including his support for Johnson’s bid for the premiership. He is also a dyed-in-the-wool Brexiteer: Leaving the European Union, he argued, would make the UK “freer, fairer, and more prosperous,” and amounted to a “once-in-a-generation opportunity for our country to take back control of its destiny.”

Moreover, Sunak’s political judgment has often been amiss. He has made some silly errors in his efforts to distract attention from his extreme wealth. But his ability to make intelligent decisions, be decent, and distinguish right from wrong should matter more than his (lack of) populist credentials.

Conservatives would like to think that Sunak could easily knock things into shape and prevent an electoral disaster for the party in the next general election, scheduled to take place no later than January 2025. By then, it will have been more than 14 years since the last Labour Party-led government. But recent polls give Labour, under the leadership of the competent (if not very exciting) Keir Starmer, a huge lead over the Tories.

But to have any hope of avoiding a humiliating electoral defeat, Sunak and Hunt must first climb a mountain of daunting economic challenges. Within four years, the UK’s tax burden is expected to exceed 37% of GDP, a postwar record, despite the Conservative Party’s stated belief in lower taxes. The economy is predicted to shrink by 1.4% next year, and inflation is expected to be 7.4%, eroding real wages and likely provoking a wave of industrial action.

Living standards, moreover, look set to fall by 7% over the next two years, the biggest decline in six decades. On top of that, £30 billion ($35.9 billion) in spending cuts will likely be needed to fill the fiscal hole created by Truss’s catastrophic plan.

All of this adds up to a less-than-compelling election message. Conservatives will likely present the coming economic pain as necessary and attempt to deflect attention from their own culpability.

Russian President Vladimir Putin’s invasion of Ukraine is the leading cause of rising energy prices, they will say, and the massive hole in the country’s public finances is the result of helping people through the COVID-19 pandemic. But what about Brexit? Experts estimate its economic cost at 4% of GDP, which is why the Tories have been trying to bully us all into not talking about it. The hunt for the opportunities allegedly opened up by Brexit has proved to be a wild goose chase.

Meanwhile, efforts to restore some sense to British public policy have been hampered by right-wing ideologues who plot under the banner of the European Reform Group. Despite its name, the group is not interested in reform – or in Europe. Its goal is to block any effort to enhance the UK’s relations with the EU countries that make up its largest economic market, or to improve the dreadful Brexit deal negotiated by Johnson.

Even though it undermines both national and party interests, some of these right-wingers oppose the government’s plans to stimulate house building by reforming the planning laws, a move opposed by voters in many of their wealthy constituencies. As the French statesman Talleyrand famously said of the Bourbons, these zealots have “learned nothing and forgot nothing.”

Alas, Sunak’s ability to resist far-right Conservatives is limited by his apparent belief that he must pander to them. To retain their political support, he has had to make several awful ministerial appointments, including that of Suella Braverman as home secretary. But, as always, the more the right gets, the more it wants.

The Conservative leadership must stand up to the party’s extremists, and it must do so sooner rather than later. If moderates cannot defeat the hardliners by the next election, and the outcome turns out to be as bad for the Tories as recent polls suggest, they will find they have the same fight on their hands in opposition.

Conservatives must never underestimate the importance of their moderate supporters. If the Party continues to disregard centrists whenever the Brexiteer right stamps its feet, it may find itself out of power for a long time to come.

Chris Patten, the last British governor of Hong Kong and a former EU commissioner for external affairs, is Chancellor of the University of Oxford and the author of The Hong Kong Diaries (Allen Lane, 2022).

© Project Syndicate 1995–2022

 


This article is brought to you by Project Syndicate that is a not for profit organization.

Project Syndicate brings original, engaging, and thought-provoking commentaries by esteemed leaders and thinkers from around the world to readers everywhere. By offering incisive perspectives on our changing world from those who are shaping its economics, politics, science, and culture, Project Syndicate has created an unrivalled venue for informed public debate. Please see: www.project-syndicate.org.

Should you want to support Project Syndicate you can do it by using the PayPal icon below. Your donation is paid to Project Syndicate in full after PayPal has deducted its transaction fee. Facts & Arts neither receives information about your donation nor a commission.

 

 

Browse articles by author

More Current Affairs

Mar 18th 2024
EXTRACT: "....the UK’s current economic woes – falling exports, slowing growth, low productivity, high taxes, and strained public finances – underscore the urgency of confronting Brexit’s catastrophic consequences."
Mar 18th 2024
EXTRACTS: Most significant of all, Russia’s Black Sea fleet has suffered significant losses over the past two years. As a result of these Ukrainian successes, the Kremlin decided to relocate the Black Sea fleet from Sevastopol to Novorossiysk on the Russian mainland. Compare that with the situation prior to the annexation of Crimea in 2014 when Russia had a secure lease on the naval base of Sevastopol until 2042." --- "Ukrainian efforts have clearly demonstrated, however, that the Kremlin’s, and Putin’s personal, commitment may not be enough to secure Russia’s hold forever. Kyiv’s western partners would do well to remember that among the spreading gloom over the trajectory of the war."
Mar 8th 2024
EXTRACT: "As the saying goes, 'It’s the economy, stupid.' Trump’s proposed economic-policy agenda is now the greatest threat to economies and markets around the world."
Mar 8th 2024
EXTRACT: "Russia, of course, brought all these problems on itself. It most certainly is not winning the war, either militarily or on the economic front. Ukraine is recovering from the initial shock, and if robust foreign assistance continues, it will have an upper hand in the war of attrition."
Mar 8th 2024
EXTRACT: "...... with good timing and good luck, enabled Trump to defeat [in 2016] political icon Hillary Clinton in a race that appeared tailor-made for her. But contrary to what Trump might claim, his victory was extremely narrow. In fact, he lost the popular vote by 2.8 million votes – a larger margin than any other US president in history. Since then, Trump has proved toxic at the ballot box. " -----"The old wisdom that 'demographics is destiny' – coined by the French philosopher Auguste Comte – may well be more relevant to the outcome than it has been to any previous presidential election. "----- "Between the 2016 and 2024 elections, some 20 million older voters will have died, and about 32 million younger Americans will have reached voting age. Many young voters disdain both parties, and Republicans are actively recruiting (mostly white men) on college campuses. But the issues that are dearest to Gen Z’s heart – such as reproductive rights, democracy, and the environment – will keep most of them voting Democratic."
Mar 8th 2024
EXTRACTS: "How can America’s fundamentalist Christians be so enthusiastic about so thoroughly un-Christian a politician?" ---- "If you see and think outside the hermeneutic code of Christian fundamentalism, you might be forgiven for viewing Trump as a ruthless, wholly self-interested man intent on maximizing power, wealth, and carnal pleasure. What your spiritual blindness prevents you from seeing is how the Holy Spirit uses him – channeling the 'secret power of lawlessness,' as the Book of 2 Thessalonians describes it – to restrain the advent of ultimate evil, or to produce something immeasurably greater: the eschaton (end of history), when the messiah comes again."
Mar 1st 2024
EXTRACT: "The lesson is that laws and regulatory structures are critical to state activities that produce local-level benefits. If citizens are to push for reforms and interventions that increase efficiency, promote inclusion, and enable entrepreneurship, innovation, and long-term growth, they need to recognize this. The kind of effective civil society Nilekani envisions thus requires civic engagement, empowerment, and education, including an understanding of the rights and responsibilities implied by citizenship."
Feb 9th 2024
EXTRACT: "Despite the widespread belief that the global economy is headed for a soft landing, recent trends offer little cause for optimism."
Feb 9th 2024
EXTRACT: " Consider, for example, the ongoing revolution in robotics and automation, which will soon lead to the development of robots with human-like features that can learn and multitask the way we do. Or consider what AI will do for biotech, medicine, and ultimately human health and lifespans. No less intriguing are the developments in quantum computing, which will eventually merge with AI to produce advanced cryptography and cybersecurity applications."
Feb 9th 2024
EXTRACTS: "The implication is clear. If Hamas is toppled, and there is no legitimate Palestinian political authority capable of filling the vacuum it leaves behind, Israel will probably find itself in a new kind of hell." ----- "As long as the PLO fails to co-opt Hamas into the political process, it will be impossible to establish a legitimate Palestinian government in post-conflict Gaza, let alone achieve the dream of Palestinian statehood. This is bad news for both Israelis and Palestinians. But it serves Netanyahu and his coalition of extremists just fine."
Jan 28th 2024
EXTRACTS: "According to estimates by the United Nations, China’s working-age population peaked in 2015 and will decline by nearly 220 million by 2049. Basic economics tells us that maintaining steady GDP growth with fewer workers requires extracting more value-added from each one, meaning that productivity growth is vital. But with China now drawing more support from low-productivity state-owned enterprises, and with the higher-productivity private sector remaining under intense regulatory pressure, the prospects for an acceleration of productivity growth appear dim."
Jan 28th 2024
EXTRACT: "When Chamberlain negotiated the notorious Munich agreement with Hitler in September 1938, The Times did not oppose the transfer of the Sudetenland to Germany without Czech consent. Instead, Britain’s most prestigious establishment broadsheet declared that: “The volume of applause for Mr Chamberlain, which continues to grow throughout the globe, registers a popular judgement that neither politicians nor historians are likely to reverse.” "
Jan 4th 2024
EXTRACTS: "Another Trump presidency, however, represents the greatest threat to global stability, because the fate of liberal democracy would be entrusted to a leader who attacks its fundamental principles." ------"While European countries have relied too heavily on US security guarantees, America has been the greatest beneficiary of the post-war political and economic order. By persuading much of the world to embrace the principles of liberal democracy (at least rhetorically), the US expanded its global influence and established itself as the world’s “shining city on a hill.” Given China and Russia’s growing assertiveness, it is not an exaggeration to say that the rules-based international order might not survive a second Trump term."
Dec 28th 2023
EXTRACT: "For the most vulnerable countries, we must create conditions that enable them to finance their climate-change mitigation" ........ "The results are already there: in two years, following the initiative we took in Paris in the spring of 2021, we have released over $100 billion in special drawing rights (SDRs, the International Monetary Fund’s reserve asset) for vulnerable countries.By activating this “dormant asset,” we are extending 20-year loans at near-zero interest rates to finance climate action and pandemic preparedness in the poorest countries. We have begun to change debt rules to suspend payments for such countries, should a climate shock occur. And we have changed the mandate of multilateral development banks, such as the World Bank, so that they take more risks and mobilize more private money."
Dec 27th 2023
EXTRACT: "....if AI causes truly catastrophic increases in inequality – say, if the top 1% were to receive all pretax income – there might be limits to what tax reforms could accomplish. Consider a country where the top 1% earns 20% of pretax income – roughly the current world average. If, owing to AI, this group eventually received all pretax income, it would need to be taxed at a rate of 80%, with the revenue redistributed as tax credits to the 99%, just to achieve today’s pretax income distribution; funding the government and achieving today’s post-tax income distribution would require an even higher rate. Given that such high rates could discourage work, we would likely have to settle for partial inequality insurance, analogous to having a deductible on a conventional insurance policy to reduce moral hazard."
Dec 21st 2023
EXTRACT: "Shocks are here to stay, and our task is not to predict the next one – although someone always does – but to sharpen our focus on resilience. Staying the course of politically mandated policies while minimizing the inevitable dislocations is easier said than done. But that is no excuse to fall for the myth of being victimized by the unprecedented."
Dec 21st 2023
EXTRACTS: "A new world is indeed emerging. It will be characterized not only by more interdependencies, but also by more insecurity, danger, and war. Stability in international relations will become a foreign concept from a bygone age – one that we did not fully appreciate until it was gone."
Dec 14th 2023
EXTRACT: "Yet one must never forget that Putin is first and foremost an intelligence officer whose dominant trait is suspicion."
Dec 2nd 2023
EXTRACTS: "In a recent commentary for the Financial Times, Martin Wolf trots out the specter of a 'public-debt disaster,' that recurrent staple of bond-market chatter. The essence of his argument is that since debt-to-GDP ratios are high, and eminent authorities are alarmed, 'fiscal crises' in the form of debt defaults or inflation “loom. And that means something must be done.' ----- "If, as Wolf fears, 'real interest rates might be permanently higher than they used to be,' the culprit is monetary policy, and the real risk is not rich-country public-debt defaults or inflation. It is recession, bankruptcies, and unemployment, along with inflation." ---- "Wolf surely knows that the proper remedy is for rich-country central banks to bring interest rates back down. Yet he doesn’t want to say it. He seems to be caught up, possibly against his better judgment, in bond vigilantes’ evergreen campaign against the remnants of the welfare state."
Nov 27th 2023
EXTRACT: "The first Russia, comprising those living in Russia’s two biggest cities, Moscow and Saint Petersburg, can pretend there is no war at all." ---- "Then there is the other Russia, the one you find in small towns and villages scattered across the country’s massive territory. Here, the Ukraine war is a source of patriotic pride,"