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When I wrote to you last Friday, we were expecting a new Prime Minister by the end of this week, and a fiscal statement from our chancellor on the 31st October. The news that Rishi Sunak is our new Prime Minister broke earlier than expected after Boris Johnson and Penny Mordaunt pulled out of the race, and since it was confirmed that Jeremy Hunt retains his role as chancellor, the fiscal statement (now resembling a good old-fashioned budget) has been moved to the 17th November.
Mr Sunak has already struck a sombre tone in his statements on the outlook for the UK and reimposed the moratorium on fracking to appease party members and to stand by his previous pledge on this topic. We now have political stability, at least for a period of time, and we hope that this can calm the markets. Mr Sunak’s construction of a diverse cabinet from across the party draws on experienced politicians and some key areas of continuity – such as Jeremy Hunt retaining his role and Michael Gove returning to his “Secretary of State for Levelling Up” role.
Should Sunak deal in miracles, this would not be the first time that the conservatives have come back from the brink – if indeed they are able to. We should not forget that the conservative party is the oldest and most successful political party in the UK. Time and time again, in fact, the party has found itself ideologically stuck and electorally beaten, only for voters to forgive and forget when, as inevitably happens, “the other lot” eventually mess up. True, that nearly always requires some time out of office as well as a new leader (or three).
Away from the UK, last weeks weak data from the US on first time buyers entering the market was attributed as evidence the US Federal Reserve (FED) interest rate policy is taking effect and markets rebounded on a short-term view that the FED pivot to stop raising rates is moving nearer. Next Wednesday we shall hear from the FED themselves and see what view they actually have.
The move to push back the autumn fiscal statement to the 17th November does sound sensible to ensure that the previous mistakes of a hastily announced fiscal plan shaking market confidence, however the Bank of England are due to make a further interest rate decision next Thursday 3rd November. I am sure they would rather have had time to digest the new fiscal plan prior to their announcement. Since Jeremy Hunt repealed the majority of Kwasi Kwarteng’s tax cuts the expectations of a 1% rate rise next week have been reduced to a likely 0.75%. In his first Prime Ministers questions, Mr Sunak backed Jeremy Hunt with a message that emphasised how the Government will need to “take difficult decisions to restore economic credibility”, adding that he would protect the most vulnerable and restore this credibility in a fair and compassionate way. A solid start, just what was required and I am sure that there are interesting times ahead.
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