Who is Kwasi Kwarteng? Chancellor who unleashed market chaos with first step

Britain's new finance minister faces calls to be removed after first policy announcement sparks turmoil

Chancellor of the Exchequer Kwasi Kwarteng, during a BBC interview this week, faces a battle to shore up the UK economy. PA
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Kwasi Kwarteng has not yet racked up a month in the role of the UK's finance minister.

He was the first appointment by new Prime Minister Liz Truss when she took office on September 6, with the pair intent on shaking up "Treasury orthodoxy".

Mr Kwarteng hoped to take down the economic groupthink that he and Ms Truss saw as holding Britain back.

After a 10-day hiatus due to the official mourning of the death of Queen Elizabeth II, he set about introducing his ideas in a mini-budget intended to spark growth in the UK's economy to raise it out of the doldrums caused by the Russia-fuelled energy crisis.

Instead he has seen his first fiscal statement take down the value of the pound, the bond market, his party's reputation for financial credibility and quite possibly his own political career.

What is Kwasi Kwarteng's background?

Britain's first black chancellor, Mr Kwarteng is the son of Ghanaian immigrants. He attended Eton, one of Britain's most prestigious private schools, which has been the alma mater of numerous politicians. Mr Kwarteng scored a "double-first" at the University of Cambridge in Classics and History, as well as attending Harvard University in the United States. He also managed to swear twice during an appearance on the long-running TV quiz programme University Challenge.

He has to last another week in the job if he is to avoid being the shortest-tenured chancellor in British political history. In 1970, Iain Macleod died after one month in office. Mr Kwarteng's predecessor Nadhim Zahawi survived 63 days in the job before being replaced.

Plan to shake up economy

Charged with delivering Ms Truss's vision to run the country on a low-tax agenda, which persuaded Conservative members to choose her as leader over former chancellor Rishi Sunak, Mr Kwarteng fired the Treasury's most senior official and unveiled a series of unfunded tax cuts with a view of turning "the vicious cycle of stagnation into a virtuous cycle of growth".

What the 47 year old unleashed was a vicious cycle of falling market confidence, flight from British assets and such damage to the British bond markets that the Bank of England was forced to start buying bonds. It also led to a ticking off from the International Monetary Fund, which usually reserves such admonishments to emerging economies, not G7 members.

Mr Kwarteng is showing no plans to resign or reverse any policies. On the contrary, he has been given public support by Ms Truss, who on Thursday broke her silence on the economic turmoil by taking to the airwaves in a quick-fire round of interviews in which she insisted she had the "right plan" for the country.

She defended Mr Kwarteng’s measures, insisting “urgent action” was needed, although she admitted the government’s decisions had been “controversial”.

Investors, traders, government officials and even some politicians from the ruling Conservative Party are increasingly of the view that to fix the situation, policy reversals or even Mr Kwarteng's resignation are necessary. The Tories are in turmoil once more.

One government source, who worked closely with Mr Kwarteng in the past, told Reuters it was hard to see how he could survive. "He and Truss are close, and you have to wonder whether she is ruthless enough to axe one of her longest-standing allies this soon in her tenure," they said.

The source noted that Ms Truss had backed the plan throughout.

A long-serving Conservative MP told The National that there were now calls for Mr Kwarteng to be sacked as chancellor after his destabilising budget announced last Friday.

“It’s fair to say there’s just sheer disbelief in the party over what has happened in the last few days," the MP said. "We may well see one of the shortest chancellor careers in history with Kwasi [Kwarteng] getting the sack. What might happen after that is totally unclear. Bring back Rishi?”

Tories in trouble

Support for the governing Conservative Party has sunk, a YouGov poll showed this week, with central planks of the economic plan unpopular with voters.

Keiran Pedley, a research director at pollster Ipsos, said early data showed the opposition Labour Party was increasingly more trusted to manage the economy, spelling danger for the government heading into the next election, expected in 2024.

"If that continues, that's a real problem for the Conservatives because that has typically been one of their key brand assets," he said.

Ally of Liz Truss

In Mr Kwarteng, Ms Truss picked a key ideological ally with whom she co-wrote a book that spells out a low-tax, small-state, deregulated vision of Britain.

A politician since 2010 and economic historian known for his intellect, some said Mr Kwarteng didn't have the experience to run the huge finance ministry. A veteran Conservative source said before his appointment that the Treasury would "approve of his brain [but] disapprove of his independence".

That desire to do things differently was exemplified when he immediately fired Tom Scholar as Permanent Secretary to the Treasury, with Mr Scholar saying "the chancellor decided it was time for new leadership."

Paul Johnson, director of the Institute for Fiscal Studies, said the fallout from Friday's mini-budget showed why economic "orthodoxy" should be welcomed as evidence-based knowledge.

"It needs testing and challenging but experience tells us that simply dismissing it is dangerous indeed," he said on Twitter.

Ms Truss's and Ms Kwarteng's determination to sideline doubting voices was also reflected in the makeup of the first Cabinet of ministers, where no backers of leadership rival Rishi Sunak were given roles.

Mr Sunak had warned during the leadership campaign that Ms Truss's plans would put Britain's economic credibility in jeopardy but she dismissed his caution as "negative, declinist language".

What's next?

Mr Kwarteng has been equally dismissive of criticism of his fiscal statement, stressing that it would drive growth.

"What was unacceptable and unsustainable was the idea that we were going to have tax being at a 70-year high and that we could continue simply raising taxes," he told the BBC on Sunday. "That was unsustainable, something had to change and I'm very pleased we changed that."

He has declined to comment directly on the market rout but has been locked in meetings with bankers and stayed in close contact with the Bank of England.

One other aspect that raised investor ire was Mr Kwarteng's decision to release a fiscal plan without the accompanying scrutiny of the independent Office for Budget Responsibility.

As investors processed the details, markets started to tank: the pound hit a record low against the dollar in early trade on Monday, long-dated bond yields hit a 20-year high on Wednesday and the IMF called for a rethink.

"He's not going to feel culpable for any of the chaos in markets right now," the government source told Reuters. "He will be saying: 'the medicine tastes bad but the country needs to swallow this'."

Mr Kwarteng will set out a medium-term fiscal plan alongside OBR forecasts on the scale of government borrowing on November 23.

First he must address the party's annual conference next week, with discontent already spilling into the open.

"These are not circumstances beyond the control of government [or the] Treasury, they were authored there," MP Simon Hoare said. "This inept madness cannot go on."

For some, Mr Kwarteng, a committed supporter of Brexit, has form for playing down market movements, with the Evening Standard newspaper reporting overheard comments he made on the night Britain stunned markets by voting to leave the European Union.

"Who cares if sterling crashes?" he reportedly said. "It will come back up again."

Updated: September 29, 2022, 11:22 AM