An academic posing as an iron man
Kwasi Kwarteng appears to be going through an identity crisis
“We get it, we are listening”, Kwasi Kwarteng announced after he decided not to cut the taxes of Britain’s highest earners this morning. Recognising, perhaps, that his future as chancellor was looking less than certain, he issued this masterclass non-apology.
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Following interventions from Michael Gove, Julian Smith, and Grant Schapps, the retreat simply raised the question: can Kwarteng make policies stick without the approval of Michael Gove? Or do we, instead, believe Jacob Rees-Mogg, who minutes before Kwarteng delivered his speech, claimed that the U-turn “has been a sound and fury that signifies nothing”?
There was not too much to the speech itself. Kwarteng had no announcements to make, only a bellowed summary of the Truss government’s economic strategy to date.
Here was the new era, described in exactly the same terms Kwarteng used during his “mini-budget” on September 23rd. The Government’s approach was about “economic growth”; the Government would “focus relentlessly on economic growth”; we need a government “committed to economic growth”. The 70-year high tax burden was mentioned three times. Kwarteng gloatingly praised the government’s “monumental” energy package. This government was: unhesitating! Unashamed! Unyielding!
The reception to the speech in the auditorium was lukewarm. The fascination of this Chancellor is that he is a complicated, somewhat anxious man, terribly insulated from reality, who aspires to a streamlined, relaxed confidence that is beyond him. Kwarteng, wrote Sasha Swire in her Diary of an MPs Wife, is “essentially an academic”.
And an above-average academic at that. He speaks five languages. He writes Latin poetry. He authors respected histories. Before he became a minister under Theresa May, Kwarteng gave cursory attention to day-to-day political grind, instead dwelling at higher altitudes. Indifferent to his colleagues and the public, he mused about factory conditions in China, the role of economic crises in history, and the sterility of debating whether the British “empire was a good or bad thing”. This Kwarteng has been variously described as “bright”, “very bright” and “just exceptionally clever”.
Kwarteng the academic, cautious and cerebral is no more. Instead, he follows in the path of Margaret Thatcher. All the chaos Kwarteng caused in recent weeks has been a tribute act. In Thatcher’s Trial: Six Months That Defined A Leader, his short book about 1981, Thatcher’s worst year in office, chaos — dire poll ratings, furious economists, and unpopular budgets — is considered a necessary trial. By 1983, Thatcher had a historic majority. Kwarteng thought he had a blueprint.
It was not only that this speech was preceded by this morning’s U-turn. It was not merely that he felt the need to yell the whole thing, as if he were stopping a cab. It was, above all, the Freudian slip. “I know the plan”, Kwarteng said of his mini-budget, “was only put forward 10 years ago — err, 10 days ago.” The nonchalant, bearish exterior was concealing a man who had experienced the last ten days as a kind of agony. As ten painful years.
A source who watched the Chancellor drink cocktails with bankers on the day of the ‘fiscal event’ told The Times that Kwarteng looked surprised by the reaction of the markets. “I think maybe he didn’t see it coming.” Did City financiers ever label Thatcher, as they reportedly have of Kwarteng, a “useful idiot”?
None of that was part of the plan. The Chancellor is an academic posing as an iron man. He has shed his greatest asset — thoughtfulness. Shouting his economic policies will not make them anymore credible, not to the City, and not to the public. There is no Falklands War coming to save him and Truss, as it did for Thatcher after 1981. “We really NEED to do things differently”, he roared. He already has. The likelihood is that Kwarteng will be back to writing books before he, or the country, can see if his different approach is as successful as Thatcher’s was.
The remedy for the disasters of
neo-liberalism is not more neo-liberalism. The country needs far reaching reform of education, healthcare and the housing market and an end to mass immigration.
The only politician who seems to grasp the reality of the situation is Kemi Badenoch.
So what damage has Mr Kwarteng actually done? One tax might be dropped. Is that really it? Is that all the media are upset about?
The tax cut for the richest wasn’t a smart move politically when so many lower and middle class people are struggling financially. The optics just looked horrible.
It may have made sense economically if you believe trickle down I guess.
But the biggest issue is that the British public has been infatuated with the concept of this mythical “rich” class with endless money which is supposedly ripping off the rest. If only we could soak them for billions, it would solve all our problems, pay for NHS, etc etc. And in such an environment, lowering the tax rate for high earners is like praising private enterprise in USSR or praising Taiwanese economic policies in China. Fairly quickly you will see the lynch mob after you if you dare do that.
But the lynch mob wasn’t the public was it? Who was he reacting to?
The damage isn’t in the change in top rate tax, but the u-turn under pressure from the media, overseas organisations and those deluded and disloyal Tories who are now emboldened after their defenestration of Johnson to attack and undermine Truss.
I’m afraid it’s curtains for the Tories as the electorate dislike disunity more than anything else.
That’s the real fault, the bedwetters panicking and forcing a u-turn.
The market, the media, much of the Conservative party, and the world and the universe.
I reckon both will be out before Christmas.
To be replaced by a Kemi, Sunak, Gove ticket and a virtual coronation. I suspect the 1922 rules will be changed to prevent a 3 month contest.
Care to expand on how that interesting projection might come about? (Genuinely interested in your thinking)
I’m not sure I believe it either. But it could go like this:
Truss knows what everyone else knows – this government is in for two soul-destroying years followed by a landslide loss. It is possible she could be persuaded to fall on her sword? Especially if her cabinet threatens to rebel over immigration and the party doesn’t back her “mini budget” in the house.
Sunak would have to be squared away – he has a decent claim to be next in line. But having been “proved right” about the concerns of the bond markets, he might jump at the chance of a return to No 11.
Gove has adopted Kemi as his protege. He has the chutzpah to propose a plan like this and to convince all the players to come to the party.
Would Kemi go for it? Is it not better to go into opposition and assume the leadership? Maybe not. Rising stars don’t rise forever. Sir Keir will have what his Tory opponents have lacked – the enthusiastic support of the Establishment and media. He will probably also reap the rewards of Truss’s tax changes like Blair benefitted from Thatcher’s changes. The Tory’s could be out for quite a spell. Maybe it is worth rolling the dice now.
I can’t see it, why would those three want to take over a party that’s likely to receive a pasting at the next election?
A much more likely scenario in my opinion will be they keep their heads down until after the election, doing just enough to stay relevant and keep their names out there, but far enough away from Truss so they aren’t dragged down with her.
Then after the election they can come in and if the defeat is as heavy as looks likely currently they’ll have an almost blank canvas in which to mould the party in their own image
Yes it could play out like that too.
You’re doing what everyone does in these discussions and assuming that the pendulum, having swung, always swings back. We just assume that the Tories can lose, serve their sentence in opposition, then win again.
As I’ve said before, all the opposition parties favour lowering the voting age to 16. As well as enfranchising schoolkids who pay no taxes, Labour could enlist an unknown number of immigrants. Then Labour need never lose again.
I think that if the Tories lose it in 2024 they’ve lost it forever.
You may, of course, think that they deserve to.
Are you sure this isn’t a dystopian nightmare you’re reporting from your sleep?
I was on the bourbon last night so you never know.
No problem with Kemi, but Gove? No thank you.
Bill and Ben the flowerpot men, Noddy and Andy Pandy might make a sound alternative? The Bank of Toytown run by Postman Pat?
Academic? Tin eared? Politically inept? Probably.
To be fair, however, the massive sell off in the gilts market was NOT a panicked reaction to his 45% tax cut or the unfunded NI reduction or even the increasingly widespread scepticism about the Tories’ commitment to fiscal responsibility. It was mostly a mechanical effect in the derivatives market where selling became self fuelling (as in the 1987 crash and 2008). I will skip a complicated explanation about delta neutral hedging and LBI but the key point is that the self off would probably have occurred within a few weeks even if he had been as silent as a Trappist monk.
Unfortunately for the government, the public will assume their higher mortgage payments are 100% his fault so I fear the Tories’ reputation for economic consequence is as badly damaged as it was over the ERM exit. Absent a miracle they have lost the next election.
Forensically, the questions that interest me are 1/ Did the Treasury know about and understand the risk of a gilts sell off? The BoE appears to have done so. 2/ Did the Treasury civil servants advise Kwarteng accordingly? 3/ Did he ignore them? I do not know the answers but my guesses would be 1/ No. 2/ No. and therefore 3/ No.
Personally, I think there may be worse things for the next two years than a highly intelligent but chastened Chancellor who has been forcibly reminded of the importance of building and keeping market confidence – and that the post 2008 age of the “magic money tree” was only ever a temporary phenomenon and it is now definitely over. Instead we risk getting another round of Tory ideological infighting and yet another new Chancellor full of delusions while the Treasury remains unreformed.
The failure is arrogance. Not discussing the proposals wlth cabinet . Not taking professional advice. Not running a risk analysis ( which would have picked up the mortgage risk and the pensions risks) – it’s arrogance that has been his downfall. Being tall and shouting doesn’t make you a leader .
Kwarteng is a financially savvy, very bright and exceptionally able man: Gove is everything that makes my stomach churn about the ToylitTory party.
He is none of those things . His recent record is amateur
look at his previous career? fact…
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