Rishi Sunak leadership: What challenges must the new Prime Minister tackle once he gets the keys to Downing Street?

Rishi Sunak, the former chancellor and loser of the Conservative Party’s summer leadership campaign, will become Prime Minister after securing the backing of the parliamentary Tory party.

In an astonishing reversal of fate just weeks after he was defeated by Liz Truss in the party’s first leadership election of the year, Mr Sunak was confirmed as the only nominee for the role of party leader by Sir Graham Brady, chairman of the 1922 Committee. He will later meet the King to be formally confirmed as Prime Minister.

But what are the biggest challenges facing the new Prime Minister as he gains the keys to Number 10?

Re-uniting the Conservative Party

By far Mr Sunak’s biggest challenge is the need for the Conservatives to re-unite behind one vision for the country. This is an existential problem for him and his party, and one that will not be solved simply by his promotion to the top job.

It could be argued the party is irrevocable divided down the Sunak/Boris Johnson chasm, which opened up while the latter was prime minister. Johnson loyalists, and there are many, blame Mr Sunak alone for the downfall of their ‘Big Dog’ in the summer, arguing his resignation as chancellor was the key domino leading to Mr Johnson’s defenestration.

The vicious briefing from behind both Number 10 and 11 will have left lasting scars of lieutenants on both sides that are not easily forgotten by a leadership change. The summer swing behind Ms Truss by Mr Johnson supporters and the ex-prime minister’s doomed attempted return also demonstrates the divide between the camps are wide and lasting.

One mistake by Ms Truss was failing to appease her leadership rival’s support base by providing a handful of top jobs. While her premiership was doomed from the moment of the mini-budget, avoiding that same mistake will likely be Mr Sunak’s first port of call. Who he picks for those roles will be key in determining whether he can more easily rely on certain factions of the party on key votes.

Rishi Sunak is set to become the United Kingdom's next Prime Minister.

For Mr Sunak, however, his job will be to demonstrate that he can credibly govern his own party first, and therefore the country. Expect olive branches to haters of the Northern Ireland protocol, to the culture warriors, and proponents of a smaller state. But there remains serious questions on whether such a disliked figure by his own MPs can credibly govern the at-least 50-strong and allegedly 100-strong group who wished to see Mr Johnson’s return. Those voices, some of them former Cabinet colleagues, will not simply go away and shut up.

Mr Sunak will also be forced to cut public spending, oversee a winter of a surging cost-of-living crisis he failed to deal with as chancellor, and reverse tax cuts he pledged in his old job.

Ensuring support for that political prospectus within the Conservative Party could simply be impossible.

The economy

Rishi Sunak’s premiership will live or die by the reaction of the markets to his fiscal plans. A former Goldman Sachs employee and hedge fund manager, he will be given more of the benefit of the doubt than former chancellor Kwasi Kwarteng’s think-tank backed implosion due to his previous stint in the same role and his predictions in the summer that Ms Truss’s plans would create chaos.

The facts are, however, that as chancellor, Mr Sunak consistently claimed to want lower taxes, something that is now politically and fiscally impossible. Spending cuts, now necessary after the bonfire of money following the mini-budget, must be made and where the axe lands could lead to painful political moments should defence spending or benefit cuts be required.

His overall approach to the economy, something we have heard nothing about during this expedited leadership campaign, will define the market response and another rush to growth in the style of Truss/Kwarteng would be disastrous. A reining-in of his pro-Brexit, regulation-busting tendencies may be required to steady the ship. Such a move would also help the process of rebuilding the Tory image as a fiscally responsible handler of taxpayer money and steward of the economy after it was demolished by Ms Truss and Mr Kwarteng.

But Mr Sunak will face demands, both morally and economically, to uprate benefits in line with inflation, to expand the energy bill support scheme beyond April should prices continue to spike, and protect or limit the impact of interest rate increases on mortgage payers caused by his own party’s actions.

It is close to an impossible balancing act.

Tackling Labour’s poll lead

Mr Sunak will inherit a Conservative Party that has forfeited its reputation as economically competent and responsible to the Labour Party. It is an almost complete reversal of the public’s assessment of the two parties from 2010 when former PM David Cameron used the spectre of fiscal irresponsibility and the financial crisis to ride into Downing Street with the help of Nick Clegg.

Sir Keir Starmer is now also viewed not only as a genuine potential prime minister, but by many as the preferred prime minister. He has reimagined the Labour Party in the image of the 2010 Conservatives, not in terms of policy – though that is certainly true of the party’s stance on immigration – but as an economically competent alternative to decline and recession. Labour’s polling numbers in the face of total capitulation by the Conservatives suggests this has worked, to a degree.

There are also signs, with the cost-of-living crisis overtaking all priorities for individuals, the culture war issues which were previously so potent in preventing Conservative voters from switching over to Labour, are less potent. Asking people to pay for missed NHS appointments, as trailed during the summer by the Sunak campaign, may also wind people up as they struggle to access a declining and chronically underfunded health service during a winter crisis.

Whether Labour’s polling numbers will resist the return of someone who, with the furlough scheme, was for a period of time during the Covid-19 pandemic the most popular politician in the UK, will be a key test for Sir Keir. For Mr Sunak, it will also demonstrate the true scale of the challenge of how to best rescue an economy crashed by your own side.

Fending off demands for a general election

Self-preservation of the Tories in power will be what Mr Sunak leans on internally the most in coming months when responding to calls for a general election. A snap election before the end of 2022 would be a rout and would likely lead to an existential conversation in the Conservative party.

The problem is with Mr Johnson and his anointed successor gone, there will be loud demands for a general election from internal dissenters to speed up the accession of another in the Johnson mould, or even Mr Johnson himself, by the membership. This position is summed up by former culture secretary Nadine Dorries, one of Mr Johnson’s strongest allies, who argued after his decision to pull out of the race for Number 10 that an election was “impossible to avoid”. She also retweeted a post labelling the lack of a membership vote as akin to a “banana republic democracy”. A period in opposition following a general election defeat with the party rebuilt around that image is that faction’s only route back to control.

The ‘official’ arguments against a general election are also weak. Mr Sunak will likely rely on arguments favouring the need for stability during an economic crisis, while opposition point out just who caused it. The suggestion anyone has a personal electoral mandate is constitutionally nonsensical, but one relied on by the Conservatives to hold on to Mr Johnson for as long as they did. The result is Mr Sunak will likely need his own to point at to fend off internal opposition from Johnsonites.

A May election, following a difficult winter in which Tory MPs hope Mr Sunak will expertly navigate and begin his party’s recovery in the polls, is a distinct possibility. Any longer and his own weak position within a party that rejected him less than two months ago will continue to deteriorate, probably terminally. The hope will be Labour falter in the campaign and Mr Sunak somehow repeats the John Major’s feat in 1992 of winning an election everyone thought was lost.

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