LONDON – With inflation rising, borrowing costs rising and Britain on the brink of recession, many politicians would accept any expert advice offered to them if they were handed over to lead the country’s economy.
But when Kwasi Kwarteng became British Chancellor of the Exchequer last month, his first act was firing the officer Ranking of the Treasury, Tom Scholar.
A few weeks later, Kwarteng’s job is at stake, with critics calling for his resignation after his disastrous tax cut announcement sent markets into a tailspin.
After announcing unfunded tax cuts, bypassing an independent control system of the government’s economic plans, and ignoring warnings, Kwarteng is accused of precipitate The biggest British financial crisis in recent years.
Yet even after the pound plunged and his announcement was dubbed the “budget kamikwasi”, he doubled down on his plan to cut taxes, even for the highest incomes, telling the BBC that “there’s more to come “.
After a week of being punched by economists, banks and the opposition Labor Partyhe will return to public advocacy when he speaks at the Conservative Party conference in Birmingham on Monday.
Prime Minister Sunday Liz Truss told the BBC that the government should have “better prepared the ground” for the announcement, admitted that the cabinet had not been consulted in advance about the tax cut for higher incomes, and described the cut as a decision to Kwarteng.
Struggling to explain the growing crisis, one of its lawmakers accused the government of “Inept madness“.
But analysts say the miscalculation reflects a legacy of bitterness over Britain’s exit from the European Union, which has left libertarian policy advocates, such as Kwarteng, deeply skeptical of the advice of the political establishment. and cheap.
During the 2016 Brexit referendum, most business federations, many bankers and a large part of the public administration wanted stay on the block.
The prime minister and the chancellor did the same at that time.
Instead, the left came out victorious.
In the years since then, libertarian advocates of the Brexit say the establishment has prevented Britain from adopting the policies they believe it needs to thrive outside the European Union:
deregulate, reduce taxes and attract jobs and investment from continental neighbors.
During his successful campaign to become prime minister, Truss criticized the Treasury, accusing it of stifling growth in pursuit of economic “orthodoxy”.
“It’s a combination of the ideological path he and others had taken as free market libertarians, telling them they were right, and the fact that they were frustrated that previous conservative administrations didn’t behave like ‘true conservatives’. In terms of economics and Brexit, “said Alistair Burt, a former Conservative MP and colleague of Kwarteng, explaining the chancellor’s actions.
Though Boris JohnsonTruss’s predecessor strongly supported Brexit, his economic instinct was more interventionist.
“Now they are in charge, so they have a belief that everything they talked about can be put into practice and will have the impact they always believed it would have,” added Burt.
Others were more energetic.
“I don’t know if these people have convinced themselves that the experts were wrong about Brexit and therefore will be wrong again,” said Anand Menon, professor of European policy and foreign affairs at the College of the King From London.
“It seems inconceivably stupid to me, but that doesn’t rule it out.”
Kwarteng, a refined artist, extremely confident and established academic, has an impeccable resume, but at times he seems distant (during the funeral of Queen Elizabeth II he was seen smiling to himself, not realizing that the cameras were aimed at him ).
It certainly shares the skepticism of conventional economic thinking.
In 2019, Menon interviewed Kwarteng, then a rising star and mid-ranking minister, in a one-hour Brexit conversation in which Kwarteng referred to a dizzying array of historical figures.
He also defended Michael Gove, a former government minister, who argued during the 2016 Brexit referendum that the British people had “had enough of experts“.
Gove was right “about the claims of the economy,” Kwarteng said, adding:
“Some of the claims economists make on the subject, and some of the authority they try to claim for themselves, are quite spurious. You have to take it with a pinch of salt “.
Kwarteng, a tall, imposing figure with a booming voice, was born in 1975 in East London and raised by parents who had emigrated from Ghana to Britain as students in the 1960s and became economists and lawyers.
At the age of 8, he entered a private school, then won financial aid to attend it Eton CollegeBritain’s most famous secondary school, before moving on to Cambridge University.
Graduated with a higher degree, Kwarteng spent a period in Harvard before returning to Cambridge for a PhD in economic history, during which he specialized, fittingly enough, in an earlier period of financial turmoil, the so-called “recovery crisis“1695. -1697.
After working as a journalist and financial analyst, Kwarteng was elected to Parliament for the Conservatives in 2010, but pursued other interests and published several books, including one on British Empire.
In 2012, he contributed to a more overtly political treaty called “Britannia Unchained”, a hymn of praise to the free market that described the British as “some of the worst slackers in the world”.
One of his co-authors was Truss.
In 2015, Kwarteng was starting his rise in the ranks as an unpaid ministerial assistant and also making friends in high places.
In her journals chronicling life as the wife of a conservative lawmaker, Sasha Swire recounts a meeting in early 2016 in Dorneywood, the country residence of Chancellor, then George Osborne.
“Kwasi is essentially an academic,” he wrote.
“He’s enthusiastic, booming and barely breathing.”
Although he was once a supporter of the European Union, Kwarteng was fervently supportive leave the countryside at the time of the referendum in the same year.
Another winning political call followed in 2019 when Theresa May she stepped down as prime minister and Kwarteng, then undersecretary, approved Johnson to succeed her.
His reward was a rise in government ranks which saw him enter the cabinet in 2021 as business secretary.
But it was his strong ties with Truss that led to his recent promotion to chancellor, the second most powerful political post in the country.
Kwarteng and Truss lived close to Greenwich in South East London, and the ideological bond they had forged blossomed as they wrote. “Britannia Unchained “.
So while the oddsmakers don’t weigh Kwarteng’s chances of survival, losing him would be a major blow to Truss because his announcement was the fulfillment of their joint project to drive growth through. tax relief and deregulation.
His idea was to move politics away from the interventionist instincts of Johnson, who won a landslide election victory in 2019 with the promise of bringing prosperity to the poorest and most neglected areas in the north and center of the country.
Johnson’s free spending policies were anathema to critics who favored small-state conservatism and low taxes.
And with only about two years before the election took place, Truss and Kwarteng apparently felt they had no time to waste.
Analysts believe that the financial markets would have bought a version of his plans had they received it more warnings and if the financial guarantor, the Budgetary Responsibility Office, could provide a independent evaluation.
Even without Scholar, the former Treasury official at the helm, it seems unlikely that others at the Treasury will not invite caution.
One of the chancellor’s allies, Gerard Lyons, said he had given warnings in private.
“I warned them quite explicitly about the need to be aware of the feverish state of the markets, how they needed to make sure the markets fully understand what they were doing,” Lyons told the Daily Telegraph.
Moving on regardless was a surprisingly fundamental mistake for a finance minister.
But Menon recalled part of their conversation in 2019, when Kwarteng talked about Britain’s economic growth since the 1800s and said that, on this time scale, even seismic events such as world wars have not stopped the long-term trend.
“Perhaps,” said Menon, “he is more a historian than a politician.”
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Source: Clarin
