By Elizabeth Piper and Kylie MacLellan
LONDON (Reuters) - Liz Truss will become Britain's next prime minister after winning a leadership race for the governing Conservative Party on Monday, vowing to press ahead with promised tax cuts and action to tackle a deepening energy and cost of living crisis.
After weeks of an often bad-tempered and divisive leadership contest, Truss, currently the foreign minister and the favourite to win, beat former finance minister Rishi Sunak in a vote of Conservative Party members, winning by 81,326 votes to 60,399.
"I will deliver a bold plan to cut taxes and grow our economy," Truss said after the result was announced. "I will deliver on the energy crisis, dealing with people's energy bills, but also dealing with the long-term issues we have on energy supply."
Truss takes over as the country faces a crunch on household finances, industrial unrest, a recession and war in Europe, where Britain has been a leading backer of Ukraine. She appeared to rule out another national election before 2024, when she promised to deliver a great victory for her party.
But in a sign of deep divisions in her party, her winning margin was much narrower than had been expected and the narrowest in any Conservative leadership election held this century. Truss also won with the support of less than 50% of members, as almost one in five did not vote.
"It's right we now unite behind the new PM, Liz Truss, as she steers the country through difficult times," Sunak said on Twitter.
Truss will succeed Boris Johnson, who was forced to announce his resignation in July after months of scandals saw support for his administration drain away and ministers quit to force him out.
Johnson will travel to Scotland to meet Queen Elizabeth on Tuesday to officially tender his resignation. Truss will follow him and be asked to form a government by the monarch.
"I know she has the right plan to tackle the cost of living crisis, unite our party and continue the great work of uniting and levelling up our country," Johnson said on Twitter. "Now is the time for all Conservatives to get behind her 100 percent."
Long the front-runner to replace him, Truss will become the Conservatives' fourth prime minister since a 2015 election. Since then Britain has stumbled from crisis to crisis, and now is seen facing a long recession and inflation that hit double digits in July.
Within minutes of her victory, business leaders from the hospitality sector to manufacturing and chemical industries demanded help with the soaring cost of energy and tight labour markets to stop firms going bust.
Truss, 47, has promised to act quickly, saying within a week she will come up with a plan to tackle rising energy bills and secure future fuel supplies.
She signalled during her leadership campaign she would challenge convention by scrapping tax increases and cutting other levies in a move some economists say would further fuel inflation.
That, and a pledge to review the remit of the Bank of England while protecting its independence, has prompted some investors to dump the pound and government bonds.
Kwasi Kwarteng, widely tipped to be her finance minister, sought to calm markets on Monday, saying in a Financial Times article that while there would be "some fiscal loosening" under Truss, her administration would act in "a fiscally responsible way".
Asked if he would become finance minister, Kwarteng told Reuters he didn't know.
Truss faces a long, costly and challenging to-do list, which opposition parties say reflects 12 years of poor Conservative government. Several have called for an early election - something Truss has rejected.
Veteran Conservative lawmaker David Davis described challenges she faced as "probably the second most difficult brief of post-war prime ministers" after Conservative Margaret Thatcher in 1979.
Truss has said she will appoint a strong cabinet, dispensing with what one source close to her called a "presidential-style" of governing, and will need to win over some Conservative lawmakers who had backed Sunak.
"It was closer than expected," said Conservative member of parliament Andrew Bridgen. "By the end of the week, we'll get a new government and you'd be amazed at how this party can come together and unite."
WEAK STARTING POINT
However, the Institute for Government think-tank said Truss would have a weaker starting point than any of her predecessors, because she was not the first choice among her party's lawmakers.
First on her list will be surging energy prices, expected to boost average annual household utility bills by 80% in October to 3,549 pounds and to 6,000 pounds in 2023.
Britain has lagged other major European countries in supporting its consumers, which opposition blames on a "zombie" government unable to act during the Conservatives' leadership contest.
"We've heard far more from the latest prime minister about cuts to corporation taxes over the summer, than we have about the cost-of-living crisis," opposition Labour Party leader Keir Starmer said.
Freezing bills at current levels is one option now being examined.
While Truss eulogised about how Johnson had stood up to Russian President Vladimir Putin and was admired in Ukraine, the Kremlin warned that the countries' dire relations could get even worse.
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(Reporting by Kate Holton, William James, Alistair Smout, Sachin Ravikumar, Andrew MacAskill, Michael Holden, Farouq Suleiman and Muvija M; Editing by Frances Kerry, Emelia Sithole-Matarise, Angus MacSwan, Frank Jack Daniel and Tomasz Janowski)