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First Move with Julia Chatterley
Conservative Lawmakers in U.K. Set to Choose Next Leader & PM; Mordaunt Competes with Sunak to be Next PM. Aired 8:30-9a ET
Aired October 24, 2022 - 08:30 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
JULIA CHATTERLEY, CNN ANCHOR: You're watching CNN. I'm Julia Chatterley in New York. After a dramatic weekend of developments, we're waiting to find
out who will be the UK's third Prime Minister in just seven weeks. The answer will come either today or on Friday following a vote by conservative
party members. The fields of candidates have been narrowed down now to just two, former Finance Minister or Chancellor. Rishi Sunak is the front runner
after Boris Johnson ousted as Prime Minister back in the summer backed out of the race over the weekend. Sunak faces competition from Penny Mordaunt,
the leader of the House of Commons. In the previous leadership contest, she in fact finished third.
All of this coming to ahead after Liz Truss quit as Prime Minister last week, following a disastrous term, the UK's its shortest serving leader
ever. We've got all the angles covered for you. Max Foster is outside the House of Commons, Bianca Nobilo is at Downing Street for us, and Anna
Stewart joins us from our London newsroom too.
Everyone, welcome. Max, I'm going to come to you first. I think it has a very difficult different feel today than it might have done, had Boris
Johnson not backed out over the weekend. Now, we're down to two, Rishi versus Penny. He has to be the favorite. He clearly is among members of
MAX FOSTER, CNN LONDON CORRESPONDENT: It's interesting, isn't it? So, he's clearly, I think you're right, way out in front of the moment on this first
stage of the election if you like. So, he's got the most support from conservative members of parliament. We'll wait to see in the next half hour
or so whether or not Penny Mordaunt can reach that 100 figure. She needs the support of 100 members to move forward in this. If she does get that,
she wants to take it to a wider party vote. Later on in the week, she feels pretty confident about winning that side of the vote. So, it's not over
yet. It's whether or not she gets to that 100 figure, though. And we'll find out in half an hour she does. If she hasn't got 100 conservative
members of parliament behind her then Rishi will automatically become the next British Prime Minister.
CHATTERLEY: And Bianca, this is where it gets complicated, because there is an argument to be made. And you're already seeing some voices suggesting
that now Penny should back down because a greater number of members of Parliaments, at least, are pushing for Rishi Sunak to be the next prime
minister. If she does this, Max says get those 100 votes, it then prolongs this to a bigger decision that then gets made and the result will be
announced on Friday. Once again, disunity among the Conservative Party is on display, because those parliamentary members are being forced to choose?
BIANCA NOBILO, CNN CORRESPONDENT: It's in sharp relief. And we actually see that in several ways in which the leadership contest was designed. Because
if Penny Mordaunt does reach or exceed that 100 MP threshold, there'll be an indicative vote following which is essentially a way for
parliamentarians to conservative lawmakers to display exactly where their preferences lie. And that's meant to signal to the conservative membership,
the prime minister that will be able to command the government most effectively. Because Rishi Sunak, if current tallies are to be believed,
and we always have to be slightly skeptical about what people say publicly, and then what they do, decide to do afterwards has the support of over 180
of his fellow Conservative MPs, which is more than half the party.
And if we consider that it takes about 170 MPs to run a government, the argument being, it might be sensible and prudent for Penny Mordaunt to step
aside for the Conservative Party to try and knit itself back together to emphasize that it can be disciplined, that it can put the national interest
first. But if she doesn't decide to step aside according to the polls that were done over the summer, and CNN is rightly very rigorous about polling,
but this informs this contest, Penny Mordaunt would beat out Rishi Sunak in a membership vote.
So, you have potentially a scenario where Rishi Sunak is by far and away the favorite of conservative lawmakers and somebody who can clearly, more
easily command the confidence of the House of Commons. And then Penny Mordaunt he might command the support of the conservative grassroots base.
What do you do in that kind of situation.
CHATTERLEY: Where you have a Liz Truss kind of situation, perhaps, and we've seen what happens there. Admittedly, the economics of that situation
might be slightly different, too. And speaking of that, Anna, come in here too, because whether or not the country's ready for Rishi, it felt like
financial markets decided, as soon as Boris Johnson came out and said, look, I'm not going to be part of this, destabilize the pound rallied,
interesting to see what's happening with the bond markets too, and the belief that actually, the central bank, the Bank of England might not have
to raise interest rates as high as they would, should Rishi Sunak potentially become the next prime minister?
ANNA STEWART, CNN REPORTER: I think that's the biggest reaction we've actually seen today, certainly. The U.K. government bonds have bounced in
terms of the 10-year. We're looking at a yield now below 4%. So quite a different story as what we've had for the last few weeks due to
Trussonomics. The pound is now fairly flat. I think most of the fiscal shocks are now in the rearview mirror.
However, Julia, you know, British politics is always rather exciting. And I would say that I think what investors will want to see at this stage is a
government that can govern. And so, who votes for Rishi Sunak and Penny Mordaunt, how much support they have within the party and within the party
members, if it gets to that stage of the vote. Will also be very telling as to how much faith investors can have in the U.K. government. How credible
it is and whether it can continue down a path right up to an election.
I think there's certain expectation that Jeremy Hunt will likely remain as chancellor and the undoing and the reversal of the Trussonomics plan and
will continue as expected. But, you know, we've had some pretty weak economic data out just today suggests that the U.K. is heading for a deep
recession, probably no surprise there. But, you know, private sector output declined for a third month in a row. Business optimism has slumped, double
digit inflation and yes, U.K. likely to be heading into a technical recession in the fourth quarter.
CHATTERLEY: There's a lot of work to do for the next prime minister, whoever he or she is. Max, let's get back to what you were saying earlier
as well. And the support behind each of these two candidates and perhaps one of the challenge for Rishi Sunak last time we had this effective
leadership contests was that he was perceived as someone who backstabbed Boris Johnson that he created the waterfall effect of other cabinet members
pulling away. Fast forward to today and what we see, who is Rishi Sunak this time around? And it's been interesting to hear voices that supported
Boris have now turned around and said OK, with Boris out, Rishi is the guy. And I think this is important, too.
FOSTER: Yeah. Well, that one of the big moments for me today was definitely seeing Priti Patel, who was Home Secretary under Boris Johnson, absolutely
loyal to Boris Johnson coming out in support of Sunak rather than Mordaunt. And I think that was very telling moment. So yes, Sunak is regarded as the
person that ultimately brought down Boris Johnson hated by that side of the party. But then key members of that side of the party coming over to sport
Sunak today. I think that might be a bit of a turning point.
He does have various issues that have come up in the past. One of them being that he's completely out of touch with reality, because, you know,
he's this -- he's a very -- him -- he and his wife together are very wealthy. She's the daughter of an Indian billionaire. But he also worked at
Goldman Sachs and hedge funds. They've got a huge amount of money, not really in keeping with the times, which are very much focused on the cost
of living. But he's trying to turn that around by talking about his tenure as finance minister during COVID, when he masterfully managed and steer the
British economy through that without breaking it.
And he's holding himself up as someone who can, you know, master the economy at a very sensitive time. And he does have that credibility and
that stability. He is seen as a bit of a boring figure as well, which is also something I think that people want right now. So, he's -- I think that
that, you know, the tension with Boris Johnson also with that controversy about him and his wife's wealth and whether or not they're paying the right
taxes. They're sort of behind us a bit more now. We're looking ahead and trying to focus on this very tough economic time coming up, but also
someone who can bring the party together, and increasingly, the feeling here in London, at least isn't that person is Rishi Sunak rather than Penny
CHATTERLEY: Yes, the words boring, safe and stable have never sounded so good. Bianca, Max, Anna, thank you so much for that. We'll be back with you
Now, coming up after the break, the latest on the race to become Britain's new prime minister. We expect an announcement as you've been hearing very
soon. Stay with us.
FOSTER: In the next few minutes, we could find out who Britain's next prime minister will be. Rishi Sunak is the favorite to take over from Liz Truss
as leader of the Conservative Party. He's reported to have won the backing of more than half of the Conservative Party, MPs, but that doesn't
guarantee him the leadership. We expect an announcement at the start of the next hour. Conservative MP Tobias Ellwood says he's ready for Rishi. He
joins us now. Thank you so much for joining us, Mr. Ellwood. What's your understanding about the level of support for Rishi Sunak today?
TOBIAS ELLWOOD, BRISTISH CONSERVATIVE MP: We're so pleased that it's starting to come together. What's been missing from our party and in the
government is it really leaning in to support the Prime Minister. And Rishi Sunak's campaign has been quite incredible over the last few days with
members from the left and the right of the party, recognizing that we need to show economic competence and also political direction. I have to say,
you know, it's been turbulent few months, in fact, or indeed years, the optics don't look good. Here we are, another leadership contest. We've got
big issues such as what's happening in Ukraine. Chinese president just been elected for life. So, we should be focusing on those, as well as domestic
matters. What's going to happen to mortgages, to pensions and so forth. So, I'm pleased and I hope that it is concluded today with evermore MPs
supporting Rishi Sunak.
FOSTER: Penny Mordaunt may get the 100 MPs to back her, we'll find out probably, won't we, in about half an hour, whether or not she's got that.
And she seems determined then to continue in the race because she feels she can win the wider party vote, if it comes to that. Do you accept that she
may be ahead of Rishi Sunak in the wider party. So, ultimately, she could win?
ELLWOOD: I don't know whether that is -- whether she is or not. She's formidable talent. I supported her, and the original votes are contested
during the summer itself. She performed brilliantly at the -- on the Privy Council when sadly the Queen died. But ultimately, I think it would be
dangerous to take it to the membership now. If you've got well over two- thirds of the party, parliamentary party supporting Rishi Sunak and just 1/3 then supporting her to take it to the membership and then perhaps get
another result, I think would be very damaging indeed. That's exactly where Liz Truss got into trouble.
And I think what the nation wants to see is stability, predictability. They want to see us going back to that fiscal due diligence that we normally
provide in running the country country's finances. So, for Penny, I do hope that her supporters and she will recognize that she has an absolute role to
play, I think in Rishi Sunak's government. But now is the time to draw a line. Now is the time for us to regroup. Now is the time to put our nation
FOSTER: That sort of unity and the quick decision is probably what everyone wants, isn't it, particularly considering what we've gone through recently
with British governments and the Conservative Party in particular. But presumably, she would have accepted an offer by now, if she was going to
accept one. If she continues down the race, it will go to Friday, won't it? And do you think that will be very damaging for the party?
ELLWOOD: Well, as I said, I hope it is concluded today, there's a certain sort of buzz to Westminster, as everybody's trying to work out what's going
on. Probably a lot of back-channel discussions taking place to try and appeal to many more than to recognize, let's put the nation first, let's
draw a line under this.
You know, our party does incredibly well, when we have a clear mission, when we rally around one leader, when all wings of the party come together.
And that has been what's exceptional about Rishi Sunak that you've had the party, the divisions of the party, the one nation group and the ERG all
supporting Rishi, it absolutely makes sense for us to get back to our old ways, a pragmatic center right Conservative Party, able to answer those
domestic but also international issues as well. There is limited leadership on the international stage right now. In the United States, Germany,
France, Britain, there's a role for Britain to play. And I want us to pick up that mantle and lead.
FOSTER: OK, Tobias Ellwood, thank you very much, indeed. If Penny Mordaunt isn't quite there, we could find out in 15 minutes whether or not Rishi
Sunak is the new prime minister.
Coming up after the break, Julia, will be back with a look at how global investors are reacting to today's U.K. political drama.
CHATTERLEY: Welcome back. I tell you what, the new U.K. Prime Minister faces a mounting set of economic challenges. New numbers today show U.K.
private sector output contracting for a third straight month. Business optimism, meanwhile, sinking to its lowest level since the start of COVID
lock downs and rating agency Moody's has lowered its credit rating outlook for the U.K. economy to "negative," citing the U.K. political uncertainty
and rising inflation. And Morgan Stanley now calling the U.K. economy, "a structural underperformer."
The pound beginning the week, a little softer, which is helping lift U.K. stocks a touch. What's crucial here is that the U.K. benchmark 10-year,
bond yield remains near one-month lows, firmly below 4% amid hopes for a more predictable and market friendly economic path and perhaps a less
aggressive Bank of England.
Joining us now Jonathan Portes. He's Professor of Economics and Public Policy at King's College London. I think that statement there is all
relative compared to what we've seen over the last few months. Jonathan, great to have you with us. The markets investor reaction to what we saw
yesterday with Boris Johnson and overnight was firmly ready for Rishi, can you compare and contrast the two candidates that we're now left with at
least for the next 10 minutes or so? Will both follow a more austere path?
JONATHAN PORTES, ECONOMICS PROFESSOR, KING'S COLLEGE LONDON: Well, I think even before Liz Truss resigned, she had appointed Jeremy Hunt as chancellor
and completely behind her so-called mini budget. So, under any Conservative Prime Minister, we were going to get tax rises and probably some spending
cuts. And I think, you know, that's clearly the case with either Sunak or Mordaunt.
So, either way, we are going to get more austere fiscal policy. What's I think more of an open question is what the -- what Mr. Sunak's long-term
economic strategy is, and we haven't -- he's made to get away without answering a single question during his leadership campaign. So, at the
moment, we really have no idea.
CHATTERLEY: I mean, that is a vitally important question. Once we get through the next 24 hours, or at least the next five days, because choice
is limited at this stage. Is it important that Jeremy Hunt remains as Chancellor, irrespective of who now becomes prime minister? Is continuity
important? Or whoever leads, then perhaps Sunak becomes chancellor, if not prime minister? Does he need to be the mix?
PORTES: I mean, I think, you know that -- in some ways, it doesn't actually matter that much, right? The Truss' extreme, you know, tax cutting wing of
the party has been completely discredited and marginalized on the one hand. And meanwhile, the sort of Boris Johnson, you know, irresponsible
opportunistic, slightly, you know, a wing has also been discredited by Mr. Johnson's self-immolation over the last 24 hours.
So, I think, you know, whatever happens, we are going to get people who are committed to a more restrictive fiscal policy. And that means, as I said,
some tax rises and spending cuts, and that is what the markets are expecting. I don't think actually that, you know, I almost certainly will
be Prime Minister Sunak Chancellor Hunt. But actually, I don't think the markets are particularly worried or worried about that at the moment. I
think we, you know, whatever happens in the next 24 hours, we're pretty much set for that, essentially, reversal of the Truss budget, which was
already in trade, even before she resigned.
CHATTERLEY: And how much further does the next prime minister have to go, Jonathan, in your mind, because however unpopular they are at this moment,
really tough choices still have to come?
PORTES: Well, I mean, my view is that, look, the -- we have had 10 years of austerity, that has delivered as predicted a deterioration in the quality
of U.K. public services, that has hit people very hard. And I do not think that some of the sort of spending cuts that have been proposed are remotely
realistic or sensible. What that means, therefore, is at least over the medium term, taxes need to go up. And -- but at the same time, Liz Truss
correctly said that we need a more growth friendly tax system. So that requires some fairly fundamental reform of the U.K. tax system.
I don't actually think that this government is going to be able to deliver that. It's just not in a position to do so. It's essentially a lame duck
government for the moment. So, I think the best we can hope for is a period of stability. And then over time, perhaps we'll get a government was
actually prepared to deal with the UK's economic and social problems.
CHATTERLEY: But you think this government can limp on until an official general election, even if the economy deteriorates into that?
PORTES: Well, constitutionally they can. They have, you know, they have a majority if they can hold it together. And the next election doesn't have
to be until the very end of 2024. So, they may -- they may well in bond. I think as I said, that it's very difficult to see how they can do anything
substantive. Again, some of the more sensible longer-term supply side measures that the Truss -- that Liz Truss proposed, are unlikely to be
delivered by this government. Because the Conservative Party doesn't see -- have the majority or the political mandate to see them through.
CHATTERLEY: Yeah. That's why unity government just as at a starting place is so important, a unity candidate, I mean. Jonathan, great to have you
with us. Jonathan Portes, Professor of Economics and Public Policy at King's College of London. We'll chat again soon, sir.
Live pictures here of the room where it's all going to happen in just minutes. Britain could find out who its next prime minister will be.
Conservative Party MPs are heading into the final minutes of choosing between Rishi Sunak and Penny Mordaunt. As we've been discussing Sunak and
Mordaunt need at least 100 nominations to make it onto the ballot. If only one of them meets that threshold, they will automatically become leader and
therefore the next U.K. Prime Minister. All this coming up.
We'll be back with more after this break. Stay with us. You're watching CNN.
FOSTER: I'm Max Foster in London. We're waiting to hear who has getting enough nominations from MPs to go forward to ballot, to be the party's next
leader and consequently Prime Minister. We've actually just had a statement from Penny Mordaunt, who is running against Rishi Sunak. I want to have a
quick look at it, because I think it's going to be the news that we -- as a result, we have now chosen our next prime minister. Let me say, she's
conceded. Penny Mordaunt has conceded. So, I think we can confirm. We'll have confirmation from this meeting.
This is where Graham Brady, the Chairman 1922 committee will come out and announce the votes.