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3 October 2022

How long will Kwasi Kwarteng last?

The intellectually confident Chancellor will rely on his own instincts rather than economic advisers. But that may be his downfall.

By Harry Lambert

Editor’s note: This article was originally published on 26 September 2022. It has been republished in light of the Conservative Party conference.

Kwasi Kwarteng entered parliament early enough to be in no rush. Elected in 2010, three weeks before his 35th birthday, he spent his first seven years as an MP moonlighting as an author. The Chancellor, as he is now, wrote three books of his own (in 2011, 2014, and 2015) and co-authored three more, including Britannia Unchained, the foundational text for the Truss government, which called for a radical shrinking of the welfare state and a return to Victorian productivity.

That text had five authors, Truss herself among them. Kwarteng’s views must be parsed, but his historical comments – in articles, interviews and House of Commons speeches – show that the book captured his own world view, which he is unashamed about proposing. 

“I’ve been round a Chinese factory, and I can tell you,” he told the Guardian admiringly in 2012, “they time absolutely every single thing that you could ever do. They have to do a certain job in an hour, and if they do it in 58 minutes, they get two free minutes.”

“We have created a culture in which people can, as a lifestyle, opt not to work,” he said then, claiming the public agreed with his view. “It’s quite acceptable nowadays, and possible, to decide never to work. And at the same time people who are in work are very highly taxed.” The people “working long hours in the fields for not very much pay” tended to be immigrant workers, not British people, he added.

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For Kwarteng, “you’ve got to ask questions about the welfare state”, which he sees as far too expansive and unlike the basic safety net envisaged by William Beveridge in the 1940s. Kwarteng belives – as he put it to my colleague Anoosh Chakelian in 2013 – that welfare is “an issue which the Conservatives could own and win by making bold arguments and challenging the consensus… If we talk about an honest day’s work for an honest day’s pay, if we bring back those ideas, that’s something we can win on”. 

Cutting the size of the welfare state is a familiar aim of Tory politicians, and of Tory chancellors (George Osborne embraced Iain Duncan Smith’s Universal Credit project in the early 2010s once he saw it as a means of cutting benefits). Two factors typically constrain chancellors once in post, however. First, benefits in the UK are low, not high. As the New Statesman has noted, the UK has the lowest unemployment benefit as a share of previous income in the 38 countries of the Organisation for Economic Cooperation and Development. Second, Treasury officials are likely to advise Kwarteng that further cuts are untenable. Nick Macpherson – who ran the Treasury from 2005 to 2016, and put many of its current senior officials in place – stressed to me in December that there is little more than can be cut from state support payments, given voter expectations. The British do not want Victorian insecurity.

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[See also: Fear and loathing at the Tory conference]

“I would love to ask someone on the left,” Kwarteng told the Guardian, “do you believe that everyone on benefits is really trying to get into work? I think obviously most are, but some are not.” But there is little to suggest that the British public agree with Kwarteng. The latest British Social Attitudes survey, with data from 2021, showed that 52 per cent of Britons wanted spending on “health, education and social benefits” to be increased, with 40 per cent wanting it to remain at current levels and only 6 per cent wishing for it to fall.

Part of Kwarteng’s skill as a politician comes from his ability to say unreasonable things reasonably. His baritone voice, calm eyes, easy laugh and thick glasses convey the impression of an amiable intellectual, an analyst of the state who just happens to be in politics. He has none of the urgent, fastidious energy of Rishi Sunak, or the troubled intensity of Gordon Brown. He is invariably laid-back, which makes him a disarming presence in interviews: he is not as easily flustered by questions as Boris Johnson, Keir Starmer or indeed Liz Truss.

That is in part because Kwarteng has a hinterland. He has written considerable works of history – from Ghosts of Empire, his caustic study of the savage inconsistencies of British administration across six colonies, to War and Gold, his examination of 500 years of financial crises, and Thatchers Trial, a study of the six months in 1981 that nearly led to her being toppled. He has the confidence of someone who knows their own views.

Kwarteng trained as an economic historian, but he is much more of a historian (and a classicist) than an economist. He is unmoved by the mathematical precision of economic models; he is more likely to resist than embrace any forecasts offered by the Treasury’s in-house economists. As he put it in 2019, his father was an economist in the Commonwealth Secretariat, but for him economics had “very little predictive power”. “It can never be physics, it can never be a hard science, because you’re dealing with human motivation and human behaviour,” Kwarteng said. “I think some of the claims that economists make are pretty spurious, and we have to take them with a pinch of salt.”

Rather than leaning on econometricians, Kwarteng is likely to rely on his own analysis of history to guide him at the Treasury. He has not yet appointed a lead economic adviser, in the mould of Ed Balls (for Brown) or Rupert Harrison (for Osborne). Instead he will steer the civil service himself, having replaced the Treasury’s top official on his first day in post.

He has, ironically, been described in the past by some as an idler in office. But the Treasury is the most intellectually demanding environment in government, and that should suit Kwarteng, who won the Harrow History Prize at prep school, the Newcastle Scholarship at Eton, and the Browne Medal (twice) for classicists at Cambridge. He was part of a team that won University Challenge. He won a Kennedy Scholarship to Harvard. Now Kwarteng has found a role that he cannot dismiss as insufficient for his intellect.

On Friday 23 September, in his first act as Chancellor, Kwarteng cut taxes more dramatically than in almost any other fiscal statement in modern history. The move will lead to a surge in government borrowing. A younger Kwarteng would not have approved. “Borrowing, as every economist knows,” he wrote for the New Statesman in 2007, “will eventually be paid for by more taxation.”

But the borrowing Kwarteng was criticising then was being done by Labour. That, it seems, was bad borrowing, while his borrowing is good – because it will, he believes, lead to a surge in “wealth creation”. The problem for the new Chancellor is that there is very little evidence, as almost every economist knows, that a tax cut for the rich – which is what Kwarteng’s plan to reverse the National Insurance increase amounts to – will lead to economic growth.

[See also: Liz Truss’s tax U-turn is even worse for her than it looks]

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