There are few ministers who clashed more with Rishi Sunak during his time in office than Kwasi Kwarteng, from windfall taxes to net zero. Now the business secretary is among those touted to have a turn in Number 11. Kwarteng has been a longtime loyal supporter of Liz Truss, making discreet inquiries with MPs about support for her potential leadership bid for many months. That dedication and his relative seniority has placed him as a frontrunner alongside Thérèse Coffey, the work and pensions secretary, and Sajid Javid – who briefly held the job before. But it is quickly becoming a poisoned chalice. The next chancellor has an in-tray which contains the worst outlook for the economy since the 2008 banking crash, a lengthy recession, eye-watering inflation and rising interest rates, potential mass defaults on energy bills and an NHS going into a winter crisis.
Sunak began his political career with an entrenched small-state ideology, which was steamrollered in his first weeks in the job by the pandemic and the need to introduce the unprecedented furlough scheme. If appointed, Kwarteng would enter the Treasury as a free marketeer and is likely to find his beliefs will face extraordinary challenges from the economic headwinds. Elected in 2010, Kwarteng used his maiden speech in parliament to rail against the former Labour government and the 2008 crash, saying: “I find it staggering that Labour members have not had the good grace to come to the House to apologise and to show some recognition of the very real problems that we face and the solutions that we need to get out of this situation.” He was born in east London, to middle class, Ghanian-born parents, and won a scholarship to Eton. His interview at Trinity College, Cambridge, became a story often told at his old school – that he was interviewed by a young don who told him that it was his first time interviewing candidates. Kwarteng, then 18, reassured him: “Don’t worry, sir, you did fine.” After university, he worked as an analyst for JP Morgan and Odey Asset Management, run by the Brexit-backing tycoon Crispin Odey. Kwarteng’s closeness to Truss dates back to 2012, his co-author on the now famous Britannia Unchained paper on growth and prosperity with the oft-quoted line “The British are among the worst idlers in the world.” Despite being an early backer of Brexit, he was ambitious enough not to resign as part of the Brexit exodus from Theresa May’s government, and was a minister in DExEU and then in Beis once Johnson was in power. From there it was a heady rise, straight to the cabinet after Alok Sharma was given the full-time Cop26 brief. As business secretary, Kwarteng has repeatedly clashed with the Treasury, which he regards as penny-pinching and prone to over-complicate issues. When he claimed in October last year that there were talks going on about a bailout for firms struggling with rocketing energy bills, an unnamed Treasury source denied it, shooting back: “This is not the first time the Beis secretary has made things up in interviews.” He has become a full-throated convert to the necessity of diversifying the UK’s energy supply and renewables, despite previously accepting donations from fossil fuel investors during the last election campaign. For Kwarteng, it is a pure business case rather than any passion for combatting the climate crisis. He was scathing as he was lobbied intensely by MPs to relax the fracking ban, believing it to be economically and politically impossible. Truss has already promised an immediate emergency budget and a spending review should she become prime minister and tax cuts from “day one”, including cancelling the national insurance rise. That would leave her chancellor with a potential hole in the NHS budget and grave doubts over the future of the predicted “headroom” in the public finances, given the bleak economic outlook.
Nevertheless, Kwarteng is likely to be relaxed about cancelling the increase in corporation tax due to kick in next April, in accordance with Truss’s plans. Asked about the prospect last spring, as Sunak prepared to announce it, he said: “I am a Conservative, and I’ve always been a low-tax Conservative.” He has also in the past been sceptical about the power of the Treasury, and its tendency to draw up measures to help ease the cost of living that are vastly overcomplicated for ordinary people. Whoever is in the Treasury is likely to face strong pressure for intervention that goes way beyond cutting taxes, and gets cash directly to the most vulnerable people to stop them freezing in their homes because of fears about energy bills. It may mean yet another small-state chancellor will find themselves forced by circumstances to be a very different one.