Preet Bharara:

From Cafe and the Vox Media Podcast Network, this is Stay Tuned, In Brief. I’m Preet Bharara. Today we’re going to talk about the crisis unfolding across the pond. In just the past two months, the United Kingdom has had three different prime ministers. First there was Boris Johnson. Then 10 days ago, Liz Truss resigned from the role after 44 days in office, making her the shortest serving Prime Minister in UK history. On Tuesday, a 42 year old named Rishi Sunak officially took over as Britain’s new leader, becoming the first person of color to serve as Prime Minister. He takes the reigns as the UK faces a deepening economic downturn. Whenever I want to understand British politics, I turn to my friend Ed Luce. Ed is the US national editor and columnist at the Financial Times. Ed, welcome back.

Ed Luce:

It’s a pleasure to be with you again, Preet.

Preet Bharara:

So we spoke about three months ago and there was a lot of turmoil. Boris Johnson was on the verge of resigning and you made some predictions about who would replace him. And there were three names you mentioned and you were right twice, actually.

Ed Luce:

Liz Truss and Rishi Sunak, in that order, which makes me think you’re going to ask for my next three predictions.

Preet Bharara:

I was going to, but first of all, how surprising is this to you that Liz Truss lasted only 44 days?

Ed Luce:

I hate to say, not at all surprising. And even though I anticipated as this sort of Ultra Johnson loyalist, she would probably win, replace him, I still, along with many people, conservative and non-conservative in Britain, or from Britain, am astonished that she ever reached 10 Downing Street. Just quite astonished. And I think we see why that there was that astonishment.

Preet Bharara:

If it was foreseeable by intelligent people that her term would be short and a failure, how did she manage to eek out the victory against Rishi Sunak?

Ed Luce:

Well, it’s a very peculiar system. It’s like a primary, but it’s a giant national primary amongst conservative party members. And she proved to be the most ultra Boris-esque or Johnsonian of the loyalists in the field. Rishi Sunak, of course, was the Brutus who played assassin to Johnson’s Caesar, and therefore he had ruled himself out amongst the party membership. Truss was the one who pounded to the most and the bigger the tax cut you offer, which is what she ran on, and the more Euro-phobic you sounded, the more cartoonishly you came across, the more popular you were with party membership and it worked.

Preet Bharara:

What is the thing that she did, either with economic policy or otherwise, that led to her downfall?

Ed Luce:

She announced, it would’ve been straight away, but because the queen died a couple of days after she took office, about 10 days into her office, this mini budget. The mini budget involved a really huge tax cut, the largest for almost 50 years, at a time when the cost of borrowing and interest rates are going up and up. We’re in a very new phase, we’re in a period of monetary contraction and it was an unfunded tax cut, and the British public knew it would be accompanied a few weeks later, by big spending cuts. So it was A, politically toned deaf, but B, fiscally very irresponsible. And the bond markets acted as judge and jury, essentially said, “No, this isn’t either fiscally sustainable or politically credible at this time”, at a time when the British people are going to be facing sky high energy bills and cuts to spending. And so, it was remarkable. She’s the ultimate Reaganite, well cartoonish, Reaganite free marketeer.

Preet Bharara:

I’m still finding it very… I’m asking the same question one more time. Her tax cut policy was not a surprise, was it?

Ed Luce:

It wasn’t a surprise, but I think that the markets and voters know the difference between the extravagant promises you make to win a campaign, and then what you do when you open the proverbial books when you get into office.

Preet Bharara:

So the markets did not predict correct, because you would think when Liz Truss’s name was on the verge of being declared the winner, maybe I’m getting this totally wrong, but why wouldn’t the markets have tanked then in anticipation of ruinous tax cuts?

Ed Luce:

The pound had been going down all year. So the trend had been downwards and it had continued after she won the leadership contest. But I think there’s a difference between hearing a promise in the abstract and seeing the actual mathematics, or lack of mathematics, behind that promise when it is formally delivered to the House of Commons. And that was the moment, and I remember the day, it was September the 23rd, I was in New York that day, Kwasi Kwarteng, the then chancellor announced it and as he spoke, the pound dropped like a lead balloon.

Preet Bharara:

Is the death of the Queen to be blamed on Liz Truss?

Ed Luce:

No, but somebody just mentioned —

Preet Bharara:

That was a joke.

Ed Luce:

We went from one Liz to another Liz, and we preferred the first Liz.

Preet Bharara:

So Rishi Sunak, 42 years old, of Indian origin like me. You talked about him when we spoke three months ago and you said, “Well, if he became the Prime Minister, that would be a watershed moment for various reasons.” Is this a watershed moment?

Ed Luce:

It is. The fact that it’s the first non-white Prime Minister Britain’s had, first Hindu Prime Minister Britain’s had as well. And it’s a fairly unexceptionable… No, nobody’s surprised by it. It’s not caused a big racist backlash, is a landmark moment for sure. It’s worth mentioning that the Conservative Party, ironically, is way more diverse at its senior levels, than the Labor Party, which has only ever had white male leaders. Conservatives had three female prime ministers, a Jewish Prime Minister in the 19th century, and now the first Hindu Prime Minister. But I think what the British people are focusing on, is the fact that he’s super, super rich. He married a billionaire’s daughter, Narayana Murty, who is the founder of Infosys, one of India’s biggest IT companies, his daughter Akshata, to whom he met at Stanford. And that this super wealthy Prime Minister will be delivering spending cuts soon. So I’d say his Achilles heel, where he is in danger is in classic British terms, not so much from his race as his class.

Preet Bharara:

When Liz Truss was in trouble and stepping down, were you concerned for a short period of time that Boris Johnson was going to make a comeback?

Ed Luce:

I was, and I made the mistake of checking the bookie agencies, Ladbrokes and Paddy Power and all the like, and they had him as odds on favorite, and he of course himself had himself as odds on favorite. And you needed to get 100 members of parliament, because the first round is the members of Parliament, a slightly more sophisticated electorate. The second round is the membership nationwide. He needed 100 members of parliament to get through to the final two, who would’ve been put to the membership and he couldn’t get to 100. And I suspect the reason he couldn’t get to 100 is that, the reason why he was evicted from Downing Street last July is because he was the least popular British Prime Minister since polling began. Now Liz Truss overtook him-

Preet Bharara:

I was going to say, now he’s in second place.

Ed Luce:

And now he’s in second place. And he might have overestimated. For goodness sake, he came back from a two week vacation in the Dominican Republic in order to throw his hat. This is two weeks-

Preet Bharara:

Back in the ring.

Ed Luce:

Of maximum parliamentary drama, when the pound is under threat, Britain’s very reputation and credibility is being shredded before our eyes and he’s on the beach with a cocktail. So his lack of seriousness I think, it wasn’t hard to remind members of Parliament that this guy is fundamentally lazy and unserious.

Preet Bharara:

So does Prime Minister Sunak benefit from the fact that he had a very unpopular, historically unpopular predecessor, or did she bullocks things up so much that he’s in a lot of trouble. And I want you to appreciate my use of bullocks.

Ed Luce:

Yeah. I was going to give you an A grade, Preet. Bullocks, I was impressed by that. Well, the first rule of jobs, as you know, is always follow an underperformer. So he starts off in a relatively good place. He’s followed arguably for underperformers. So an even better place, is a low bar to sort of being an acceptably competent Prime Minister. Unfortunately for him though, he inherits finances, an accounting situation, if you like, that is really unenviable. If he wants to please the markets and stabilize the gilt market, as is in Britain, the government bond markets and the pound, he has to be fiscally responsible, which means spending cuts and tax increases. And no politician ever got popular doing either of those things, let alone both at the same time. But if he doesn’t do that, then the markets will resume their tumbrils and they will decapitate him at the guillotine, just like they did Liz Truss. So he’s got a horrible choice and I suspect the only one that’s realistic, is to be fiscally responsible and politically unpopular.

Preet Bharara:

I want to get back to substance in a moment, but before that, I want to ask you about some optics. So in the first speech he gave as the new Prime Minister, I was very, very struck by the tone he struck and the statement he made, and he used the passive voice in referring to his predecessor. He said, “Mistakes were made.” I thought that was a phrase that only could be used ironically in the modern era.

Ed Luce:

Yeah.

Preet Bharara:

Mistakes were made.

Ed Luce:

I guess that was tactical. Sorry, tactful… Well and tactical, but if you remember the leadership campaign, the long torturous summer of conservative contest, he warned again and again in the many debates that they had, that if Liz Truss’s plans were put into action, the pound would sink, the cost of borrowing would skyrocket and Britain would be immediately into economic crisis. And he was quite correct. It didn’t take any great genius to foresee that, but he was absolutely correct, much quicker than I expect he thought he would be. And so, she bullocks’d up in a right royal fashion, and that’s why he became Prime Minister within 44 days. I’ve never seen… None of us have ever seen anything like this. Britain’s putting Italy into the shave.

Preet Bharara:

No offense to Italy.

Ed Luce:

No offense to Italy.

Preet Bharara:

Can we talk about the economy of Britain for another moment? Do you have a sense or an understanding of why Britain is in the position it’s in? Derek Thompson wrote in the Atlantic recently, referring to the UK as, “One of the poorest countries in Western Europe.” What’s going on?

Ed Luce:

He’s correct. It was funny I mentioned in September the 23rd, that day I was with Mark Carney, the former Governor of the Bank of England, highly respected, a Canadian in fact, but he was Governor of the Bank of England. And I said, “Can you give me your value neutral take on Brexit?” Because as a public servant, he can’t give a political view. And he said, “In 2016, when Britain voted to leave the European Union, the British economy was 90% the size of Germany’s. That day, on those market rates, before the mini budget was announced, Britain had dropped to 70% the size of Germany’s economy.” Now that I think, captures what has happened in a short frame of time, that Britain went from being the fastest growing economy in Europe, to the slowest growing economy in Europe. And although it wasn’t the dramatic recession following the referendum that the Remain campaign warned would happen, which was called Project Fear.

We have had a slow puncture, and six years of slow puncture begins to look like a crash, accumulatively. Impact on lowering wages, the impact on completely stagnant productivity growth and the impact on Britain’s trade position, which having thumbed its nose at the largest trading block in the world, on its doorstep, is cumulatively adding up to a pretty hefty bill. And unfortunately, unless we get some very magical, improbable scenario where Britain A, decides it wants to rejoin Europe, but even more probably Europe decides we want to let you back in, which I wouldn’t imagine they would. Then there’s going to be five to 10 years more of lost economic growth before the economy completely stabilizes and reorients itself.

Preet Bharara:

What does Prime Minister Sunak in the leadership role, mean for the relationship between the United States and Britain?

Ed Luce:

He’s very pro-American and he’s quite a Silicon Valley pro-American. The Stanford years had an impact on him. And so, I think he begins with very warm premise in terms of the special relationship, as the British call it. He’s said the right things in terms of Britain’s continuity in Ukraine, supporting Ukrainian resistance to Russia, supplying weapons, financial support. So I don’t think there’ll be any great change there. And that’s actually one of the remarkable things about all this, whichever leader there is or whichever party were in power, everybody agrees Ukraine needs to be backed. That’s the one constant you can rely on. Everything else though, if I were Biden and Biden made a very warm statement and he recognized the fact this is the first Indian British Prime Minister, but if I were Biden, I would obviously continue to be warm. Britain is a close ally, but I wouldn’t invest too much until you got past 44 days.

Preet Bharara:

Wasn’t he warm about Liz Truss also?

Ed Luce:

Yeah, he was.

Preet Bharara:

That’s nice.

Ed Luce:

He’s a consummate statesman.

Preet Bharara:

But you have to be nice. What do you think will happen to Sunak? Does he have a risk of having a very brief tenure also? Is he going to come to learn, and pardon me for this in advance, that the tenure of a UK prime minister is nasty, British, and short. I can’t be the first person to have done that.

Ed Luce:

It’s the first time I’ve heard it, and chapeau for the second time, Preet.

Preet Bharara:

All day, I’ve waiting to say that to you.

Ed Luce:

Well, and also-

Preet Bharara:

Thomas Hobbes.

Ed Luce:

People are very, very surprised when they meet Sunak, that he’s only 5’7. So the short bit would work, but he’s definitely not nasty. He’s a grown up, he used three terms, three words in his acceptance speech that he would govern with professionalism, accountability, and integrity. Now clearly, this was an implicit drawing align with his two predecessors, but I think broadly speaking, his tenure as Chancellor of the Exchequer, one of the very big jobs in British politics, bore that out that he was a grown up and there’s precious few of those around. And that he has every incentive to try and stabilize things. The conservative Party know that whenever the election is held, and they can drag this out for two years, they’re going to lose. Labor is going to come back in. The brand is so discredited, that even if Sunak does well, Labor is the next government.

Preet Bharara:

So he’s essentially a lame duck.

Ed Luce:

Let’s pick up the Italy scenario. Italy goes through this comicop for politics, and then about every five, 10 years, they think, “Te better have a technocrat for a year or two, just because we woke up with a hangover.” And then they put somebody like Mario Draghi in charge and it stabilizes everything. In a way, Sunak, if things go well, would be kind of fulfilling that role, even though of course he a politician.

Preet Bharara:

Well, I guess we will see what happens. Ed Luce, thank you for helping us to understand what’s going on in the UK once again.

Ed Luce:

It’s a delight. Thank you, Preet.

Preet Bharara:

For more analysis of legal and political issues making the headlines, become a member of the Cafe Insider. Members get access to exclusive content, including the weekly podcast I co-host with former US attorney, Joyce Vance. Head to cafe.com/insider to sign up for a trial. That’s cafe.com/insider. If you like what we do, rate and review the show on Apple Podcasts or wherever you listen. Every positive review helps new listeners find the show. Send me your questions about news, politics, and justice. Tweet them to me @PreetBharara with the hashtag, #askpreet. Or you can call and leave me a message at (669) 247-7338. That’s (669) 24-preet, or you can send an email to letters@cafe.com. Stay Tuned is presented by Cafe and the Vox Media Podcast Network. The executive producer is Tamara Sepper. The technical director is David Tatasciore. The senior producer is Adam Waller. The editorial producers are Sam Ozer-Staton and Noa Azulai. The audio producer is Nat Wiener, and the Cafe team is Matthew Billy, David Kurlander, Jake Kaplan, Namita Shag, and Claudia Hernandez. Our music is by Andrew Dost. I’m your host, Preet Bharara. Stay tuned.