Rishi Sunak is one of life's optimists. But the Boris Johnson psychodrama and rising interest rates brought a palpable gloom to his Downing Street operation this week, according to people close to the UK prime minister.
The Conservative premier styles himself on Warren Buffett and tries to stays calm by tuning out from day-to-day market movements while looking for long-term upsides. That wasn't possible this past week, according to members of the government who spoke to Bloomberg on condition of anonymity.
That's because of a damning report that found former Tory premier Johnson deliberately and repeatedly misled Parliament over the "Partygate" scandal, against a backdrop of turmoil in the UK mortgage market as providers scrap existing deals in anticipation of interest rates going up - spelling more pain for homeowners.
Some senior Conservatives fear the events of recent days have further closed their already narrow path to victory at the next general election, due by the end of January 2025. Politically and economically, Sunak's fortunes are heading in the wrong direction and it is getting harder to see how he can escape worst-case scenarios on each, a government minister said.
Sunak's team insist it's time to move on from the Westminster soap opera which saw Johnson resign from Parliament ahead of the report into his conduct and lash out at the Tory-majority committee that wrote it.
But with a House of Commons vote on his punishment due Monday, the first Covid inquiry hearings Tuesday and the Bank of England looking set to push ahead with a 13th consecutive interest rate hike on Thursday, that's easier said than done.
The Tories have been unable to follow the advice of their chief election strategist, Isaac Levido, to avoid distractions and focus on governing, one party planner said. The government has won the media narrative in just eight of the past 24 weeks, they said, flagging an excess of sideshows from Deputy Prime Minister Dominic Raab's resignation after being found to have abused his power to public sector strikes and poor performance on key policy areas, they concluded.
One official said presenting a positive message to voters is becoming impossible because the Tories are addicted to chaos.
Monday's vote over the Johnson report and his punishment has the potential to put on display Tory divisions yet again. Looking to avoid worsening the civil war with the former premier, the government has given Conservative MPs permission to abstain by staying away. A question remains over how Sunak himself will vote.
"Politically it's in his interests for it to be a firm verdict on Boris Johnson," said Hannah White, director of the Institute for Government. The balance is between upsetting Johnson supporters and "exerting his authority," she said.
Labour will use the vote to argue Sunak is weak, scared of Johnson and unwilling to protect standards in public life, a party official said. YouGov polling this week found just 20% of voters think Sunak is in control of his party, and 74% think the Tories are divided.
In the coming weeks, Downing Street will attempt a reset with a series of new policies and a possible reshuffle promoting younger faces, a government aide said. Another said the government plans a surge of announcements, including on cross-channel immigration, investment zones, and moving civil servants out of London.
But resetting will be difficult. Johnson is starting a new Daily Mail column that will be watched closely for criticisms of Sunak: the first one late on Friday steered clear of any political attacks. The Tories also face two special elections on July 20, both of which national polling suggest they could lose.
Another Tory MP, Nadine Dorries is yet to follow through on her plan to quit - which would precipitate a third special election. That could end up being in the fall, just as the Tories look toward their annual conference for a further refresh.
Meanwhile, Tory MPs on the parliamentary committee that found against Johnson - and those who back the report - are being targeted for de-selection by the right-wing grassroots Conservative Democratic Organisation.
"The party is trying to move on but Boris is a difficult person to move on from," Robert Hayward, a Conservative peer and elections analyst, told Bloomberg.
The problem is attention may then turn to the economy, which one minister said was far more worrying than sniping from Johnson.
Sunak has previously hoped that falling inflation and interest rates would mean he could cut personal and business taxes at the spring budget, ahead of an election later in 2024.
But markets expect rates to surpass 5.7% in early 2024, and there is increasing concern in the Treasury that they could reach 6% by February, people familiar with the matter said. That would add to the prospect of a recession in 2024, just as Britain is gearing up to go to the polls, they said.
The premier's options are limited. There is no alternative to rate hikes to bring down inflation, a government official said, adding there would be no fiscal measures to subsidize mortgage payments, as that would add to pricing pressure, and public finances are already tight.
Moreover, Sunak's troubles extend beyond the raw economics.
One of his five key promises to voters is to stop asylum seekers crossing the channel in small boats. Another is to getting National Health Service waiting lists down. But in the past 7 days, more than 1,500 people arrived in Britain by boat and doctors staged a three-day strike.
Until recently, Tory strategists argued the election's timing should depend on the economy and polling. Bad numbers on each would push the date back as far as possible. Now, a new school of thought is emerging. Increasing chances of a 2024 recession, coupled with projections for inflation to come down around the end of this year, means a spring poll may be the least bad outcome, some argue.
Still, that would be an exercise in limiting the scale of defeat rather than realistically trying to win, one Tory said.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)
