At least we now know who will be making the decisions on the UK economy for the foreseeable future. And, with the benefit of recent events and his own experience as chancellor of the exchequer, you’d have to assume Rishi Sunak will not make the same catastrophic mistakes that torpedoed the brief term of office of his predecessor.
But the outlook for his government, and particularly whomever he names as chancellor, is even more challenging than it was those few brief weeks ago when Liz Truss took office.
Billionaire businessman Guy Hands, the founder of private equity group Terra Firma, wasn’t mincing his words when he said on Monday ahead of Sunak’s victory that the Conservatives had put the UK “on a path to be the sick man of Europe”. A long-time Tory supporter, he called for the new government to renegotiate Brexit – which he opposed before the referendum – stating that otherwise the British economy was “frankly doomed”.
Hands said the party needed to start “admitting some of the mistakes they have made over the last six years”. Without a renegotiation of Brexit, Britain would face “steadily increasing taxes, steadily reducing benefits and social services, higher interest rates and eventually the need for a bailout from the IMF like we were in the 1070s”.
His comments echo those of former Bank of England governor Mervyn King, who warned over the weekend that average earners in Britain, rather than the wealthy, will have to pay significantly higher taxes to finance higher public spending.
Britons, he said, face years of financial hardship, with households facing both higher taxes and higher mortgage rates. “If we want European levels of welfare payments and public spending you cannot finance that with American levels of tax rates. So we may need to confront the need to have significantly higher taxes on the average person. There isn’t enough money there among the rich to get it back.”
Keeping voters onside while reassuring markets that Britain can be trusted again to govern responsibly will tax the ability of any UK administration. Having “friendly” voices lay the groundwork in such stark terms can only help as long as Sunak and his team can offer some hope of better times ahead, if not quite the long-promised “sunlit uplands”.
