UK Political Update

The new Prime Minister has, perhaps unsurprisingly, chosen to retain Jeremy Hunt as his Chancellor and we should expect a return to Treasury orthodoxy under his leadership. Mr Hunt had already dropped most of his predecessor’s mini budget and today the Prime Minister’s Spokesperson signalled that the reversal of policy was now complete with the words: “there are no plans for the supply-side reforms as we previously discussed.”

But we will need to wait a little longer for the detail of how the Prime Minister and Chancellor intend to balance the books, with the fiscal statement delayed from 31st October to 17th November. That is likely to be the most consequential event for this administration, with difficult decisions to be made not only on taxes and revenue raising measures, but also on spending cuts. Where they fall will tell us much about the political priorities of this government over the next two years, should it last that long.

Mr Sunak is undoubtedly a trailblazer – our country’s first British Asian Prime Minister and one of our youngest at the age of just 42. Yet in putting together his first Cabinet, although he removed several Truss appointments, he nevertheless showed a degree of caution, preferring to appoint those with previous Cabinet experience rather than a slew of new faces. Inheriting the leadership of a party with a large majority, but riven with factions, he was also careful to try and ensure representation from different wings of the party. While this may calm the party, it may make it harder to portray this as a new administration or a party renewing itself in office.

After a roller-coaster last few years, the electorate may be relieved and look forward to a period of relative stability, with a steady hand on the tiller. Expect to see something of a Sunak bounce in the polls, although given Labour’s record 35-point lead over Truss, that may well be represented by a narrowing in the gap between the parties rather than a true Conservative revival. The fundamental challenges of the economy and restoring the UK’s international financial credibility, tackling inflation, addressing the cost of living, high energy prices and public services creaking under pressure, remain.

The most controversial appointment seized upon by commentators and political opponents was the re-appointment of Suella Braverman as Home Secretary, just six days after she was forced to resign. Whether you believe that her resignation was the result of a “technicality” or a fundamental breach of her responsibilities as a holder of one of the great offices of state, there is certainly risk on both sides in her appointment. For Ms Braverman, she will need to back up her rhetoric on immigration and asylum with policy that actually works. For Mr Sunak, he has a Minister whose nickname amongst some in Whitehall is “Leaky Sue” and more fundamentally is committed to a policy on reducing immigration numbers that will place her directly at odds with the Chancellor Jeremy Hunt and the needs of most businesses and the economy. At some point the Prime Minister will need to choose a side, a potential crunch point for this government.

Although there had been some speculation that the Department for Business, Energy & Industrial Policy would be split into two, that did not come to pass, with Grant Shapps appointed as its new Secretary of State. He is likely to take a prominent role in the media defending the government and its policies, with Conservative strategists seeing him as a safe pair of hands. Ideologically flexible – he once described himself as a “Brexit moderate who voted Remain” – Mr Shapps is likely to take a pragmatic and pro-Business approach to policy, looking at the replacement of EU regulation on a case-by-case basis.

After the Truss experiment that sought to turn the page on 12 years of Conservative government, blaming its predecessors almost as much as the Opposition, the new Prime Minister has made it clear that he regards a return to the 2019 manifesto as his government’s policy guide and mandate for being in office. That serves the twin goals of demonstrating a clearly recognisable agenda and an argument for why it is legitimate for him to assume the office of Prime Minister without an election. Labour’s demands for an early election will continue, but with the polls pointing towards a change in government, perhaps decisively so, there is little incentive for Mr Sunak to go to the country before 2024.