Kwasi Kwarteng may have cut a large figure, but he proved to be the proverbial bull in a china shop as Britain’s Chancellor of the Exchequer. He was repeatedly wrong, but never in doubt. His central conceit was that trust — whether from his party, the public or markets — could be assumed rather than earned. Sacking him may be Liz Truss’s first smart move as prime minister.
But although Kwarteng has now been replaced by Jeremy Hunt, Truss isn’t out of trouble herself. No prime minister and chancellor duo in recent memory was more aligned on policy and ideology — or perhaps closer personally. In losing Kwarteng, Truss has effectively had to abandon her whole governing project.
Not that the prime minister is admitting as much. Truss clearly comes from the “never apologize, never explain” school of leadership. But that works only if the mistakes are small and the power held is substantial, or if the leader is both liked and broadly trusted. Truss has lost the support of the vast majority of her parliamentary colleagues, has the lowest public approval ratings on record and has trashed her government’s credibility with the markets. Her only hope now is to show that she understands her errors and has plans to fix them.
Yet she hasn’t met that bar. On Friday, she seemed to blame the markets for her problems, saying that parts of her program “went further and faster than the markets were expecting.” She reinstated Rishi Sunak’s plan to increase corporate taxes to 25%, which her government had scrapped. But there was no indication in her statement or answers that she understood why the market reacted as it did, driving up mortgage rates and the costs of servicing government debt.
Trussonomics, as it came to be called, rested on the assumption that a policy of aggressive tax cuts funded by low-cost borrowing and combined with supply-side reforms would deliver a higher rate of economic growth. Had she taken a more gradual approach to rolling out measures and taken greater stock of moving market conditions, that policy agenda might still be alive. Instead, the Truss-Kwarteng duo hit at multiple targets at once, aiming sloppily. The result has been further damage to households (especially those with mortgages), to the government’s fiscal position and to Britain’s international reputation. No wonder she wouldn’t answer the question of why she should stay when he had to go.
What kind of chancellor will Jeremy Hunt make? In short, a powerful one in a terminally weak government. Prime ministers and chancellors are often competing power centers. But in this case, there’s no real competition. Truss cannot afford to lose another finance minister or fall any further in the polls. That makes Hunt the de facto head of government, whatever his title says. Whether Britain will get coherent leadership depends on whether Hunt, Truss and the broader cabinet can agree on a revised strategy.
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ABOUT THE WRITER
Therese Raphael is a columnist for Bloomberg Opinion covering health care and British politics. Previously, she was editorial page editor of the Wall Street Journal Europe.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
