By Despina Alexiadou*
Having seen her government’s popularity plummet just weeks after taking office, British prime minister Liz Truss has sacked her chancellor of the exchequer, Kwasi Kwarteng in a bid to save herself. Kwarteng, widely seen as Truss’s right-hand man, was rushed back to London from New York for the occasion, where he had been meeting with IMF officials on Thursday evening.
But rather than drawing a line under recent chaos, many members of the Conservative party appear to feel that Truss has only accelerated her demise. Rather than showing strength of purpose, they fear, the decision exposes a lack of control and competence.
— Kwasi Kwarteng (@KwasiKwarteng) October 14, 2022
It is, indeed, very unusual to sack a chancellor. Other ministers come and go but finance ministers tend to be politically experienced heavyweights. It is usually very difficult for a PM to dispose of them.
Analysing my data on cabinet ministers, I find that, on average, British finance ministers have at least five years of experience in the cabinet prior to their appointment to the job. They also generally have around 18 years of parliamentary experience.
Kwarteng is a relatively young politician with only 12 years of parliamentary experience and one year as a cabinet minister (as secretary of state for business). He was, in this sense, more disposable than most.
Chancellor is the most visible job in the British government after the PM so it can send the wrong signals to the markets when they resign or are fired. In this instance, the markets reacted positively but only until Truss gave a surprisingly short press conference to confirm Kwarteng’s departure.
Truss acknowledged that the radical economy policies put forward in Kwarteng’s mini budget “went further and faster than markets were expecting” but did not show willingness to fully change course. The positive response duly evaporated.
Seeking a replacement to steady the ship
Once a government loses its credibility in the eyes of the markets and international investors, it runs into trouble. Finding the right replacement is therefore a matter of great importance once a chancellor has been shown the door.
Apparently understanding the peril, John Major sacked his chancellor Norman Lamont in 1993 amid the fallout of Black Wednesday, replacing him with Ken Clarke. Major survived the crisis and stayed in office until 1997.
Replacing the finance minister with someone who enjoys the trust of markets provides a government with a brief respite at moments like these. My research with colleagues found that appointing non-elected experts, also known as technocrats, as finance ministers during a major financial crisis, reduced various governments’ borrowing costs.
Appointments of this kind bring down sovereign yields by 1% over the course of a week and an average of 0.8% over the course of a year. These are significant effects.
It is not standard practice to appoint technocrats in the UK but the bottom line remains the same: Truss needs a trusted figure in place as a matter of urgency.
Her choice for the role is Jeremy Hunt – a member of parliament who, in many ways, trumps Kwarteng as a strong candidate. He has over 17 years of experience as an MP and was the longest serving health minister in British history. And while it’s a bitter pill for Truss to swallow, the fact that Hunt supported her rival Rishi Sunak might add to his value.
It was, after all, Sunak who first warned that Truss was on the road to fiscal ruin with her tax policies. He has become associated with the “voice of reason” at least in this respect. Appointing Hunt has the potential to increase her credibility as a leader who can work with ideological rivals.
The Rt Hon Jeremy Hunt MP @Jeremy_Hunt has been appointed Chancellor of the Exchequer @HMTreasury. pic.twitter.com/bldKWr3crG
— UK Prime Minister (@10DowningStreet) October 14, 2022
However, there is far more counting against his ability to save Truss.
Hunt is a vocal supporter of low corporate tax but also called for higher income and national insurance taxes in his own leadership campaign, putting him squarely at odds with a boss who isn’t known for her flexibility.
Nor has the rest of the Conservative party been reassured by these latest developments. Rumours continue to swirl that moves are being made against her. Whether she staves off economic problems for the time being may ultimately prove irrelevant if her political capital is entirely spent.
*Despina Alexiadou, Senior Lecturer at the School of Government and Public Policy, University of Strathclyde
This article is republished from The Conversation under a Creative Commons license. Read the original article.
17 Comments
Yuval Noah Harari recognised well that there's a disenchantment with liberalism and democracy...but the answer is not dictatorship.
The problem is that democracy has been eroded while some govern for themselves and their mates. To rejuvenate democracy the leaders need to begin governing for multiple generations once more, including the young and coming generations. (E.g. reverse economic policy that banks on foisting ever larger debts on following generations.)
It is hard to imagine anything crazier than the UK government at present. Earlier this year I was on holiday there for 2 months and none of the large group of my diverse family and friends (mainly middle class) had a kind word for the current UK conservative govt. On the other hand, if that had been China, they would have been too scared to speak and they would be impotent to change things at the next general election. A powerful popularist leader who it is impossible to criticise seems appealing until you consider Mao's great leap forward or Stalin's man-made famine the Holodomor.
I used to be British so I find it sad agreeing that their govt is laughable. But at least it is changeable. And I bet most POMs would prefer 3 year electoral cycles so they can sort it out faster.
Brexit and Trump both seemed to be the same phenomenon...a bunch of content generated with intent of rarking people up with outrage, not really expecting to win but rather to profit off said outrage and publicity. And then in neither case seeming to know quite what to do when they accidentally won.
Perhaps they should ban anyone from Oxford and/or Eton ever holding public office. Liz Truss gives comprehensive schools a bad name, it is hard to believe that she came from a Labour supporting family. She is either a bit thick or is some kind of genius Trojan Horse deployed to destroy the Tories from the inside by turning their own policies against them.
Please don't give Xing a hard time. the local "contact point" is keeping an eye out for him.
https://www.abc.net.au/news/2022-10-13/beijing-sets-up-overseas-police-…
This is the UK's fourth chancellor since (and including) 2020. The lack of continuity in such a job is a worry. The selection process after the GE (once Johnson stood down) is a worry. The Conservative Party voted for everything that has happened in the last 4 weeks - Liz Truss did everything she wrote on the box. So the problem, and the causes, are far wider the the most recent Chancellor or the most recent PM. It is a wonderful, real time, education on economic consequences of political decisions in a very short space of time however (from a novice point of view). It's complete rubbish for mortgage payers, people with pensions and everyone else however. I think their winter is going to be crap this year - I really feel for all the average people there.
We are watching the downside of Brexit for sure. The idea was to take back their sovereignty, however, their ability to create their own destiny has been poorly managed & dear I say it, poorly lead. There are too many dream(er)s & not enough workers. The same is true of here. Our nation's dreamer leaders have done more to destroy our nation's future in the last 2 (5?) years, than everyone else combined has done in the last 250 years. Longer!
Kwazi was a private sector chap, can't have that, now can we? The Establishment has won a battle and got their man Hunt in. Presumably Britain will now enter a long period of decline as the Establishment suffocates the small and medium business sector.
As Hayek warned us, fascism has been re-branded as rule by "experts" chosen for their belief in the current groupthink and is now the fashionable way to go:
“Fascism should more appropriately be called Corporatism because it is a merger of state and corporate power”
Benito Mussolini
Lessons to learn:
1) Accountability. When s*** hits the fan, someone needs to answer for the mistakes and go. Where's Grant Robertson on this?
2) Experience. Get experienced people - people with real-world experience in leading and actually doing the stuff that they are supposed to be doing. Where's Jacinda Arden on this?
3) Do it once and do it right. Self-explanatory.
4) Look at your own backyard, NZ. It's not that much better.
What a bunch of baloney. You call for government by the elderly and the entitled - aka the Boomers - who clearly govern in their own interest and got the West into the current mess.
A vote for anyone under 40 is a vote against the ‘head in the sand’ mentality of the political leaders that has characterised the last 30 years. They ignored all the issues - ranging from housing to aging infrastructure to climate change.
And what is this meaningful ‘experience’ you speak of - managing a provincial accounting business? Being a marketing executive? A forex trader? I’d choose the likes of James Shaw any day.
There was I thinking that experience outside government meant that you tended to receive direct feedback when you did things that didn't work out. That believing in a compelling theory often leads to mistakes based on the false assumptions you have picked up from who knows where. That competing ideas often help the thought process evolve.
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