Have Liz Truss’s 44 days in office destroyed 40 years of free market philosophy?

Families who renegotiated their mortgage in the weeks after former chancellor Kwasi Kwarteng’s mini-Budget will be paying an average of over £500 more on monthly bills due to higher interest rates, Labour has said.

Interest rates spiked in the wake of the 23 September announcement of £45bn of unfunded tax giveaways going predominantly to the rich, the bulk of which were reversed within the following weeks by prime minister Liz Truss and new chancellor Jeremy Hunt.

Kwasi Kwarteng has been sacked as chancellor and replaced by Jeremy Hunt after his mini-budget resulted in financial turbulence and a revolt from Tory MPs.

He has become Britain’s second shortest-serving chancellor, lasting just 38 days in the role.

The long-time ally of Prime Minister Liz Truss, seen as her political soulmate, was appointed to the role on 6 September.

Speaking before Mr Kwarteng became chancellor, one friend told the Times that he and Ms Truss were a bit like “Batman and Robin”, adding: “They are both slight social misfits, amiable geeks, and have strong views which are in tune with each other.”

He took over at Number 11 Downing Street at a critical time for the UK economy, with millions looking to him for help with soaring winter energy bills.

An Old Etonian who became the first black Conservative cabinet minister in 2021, he read classics and history at Trinity College, Cambridge, and has a PhD in economic history. He is also a past winner of notoriously tough BBC quiz show University Challenge.

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Kwasi Kwarteng: The basics

Age: 47

Place of birth: East London

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Education: Trinity College, Cambridge and Harvard University

Family: Married to solicitor Harriet Edwards with one daughter

Parliamentary constituency: Spelthorne (Surrey)

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Mr Kwarteng’s parents came to the UK from Ghana as students in the 1960s. He was born in East London in 1975, the same year as Ms Truss.

His economist father and barrister mother gave him a traditional Ashanti first name, meaning “born on Sunday”, when he was actually born on a Monday. He told the BBC’s Political Thinking with Nick Robinson podcast his parents stayed silent on the matter when he jokingly pulled them up on it.

The Church was a strong part of his mother’s life and she was a lifelong Conservative voter.

He was just three years old when Margaret Thatcher came to power, and she would remain prime minister until his GCSE year. He has said in the past that his mother deeply admired Mrs Thatcher as someone “who wanted to rely on their own efforts” and has described himself as a “pragmatic Thatcherite”.

He attended the exclusive private school Eton College after winning a scholarship there, and went on to graduate with a double first from Cambridge University in classics and history.

One well-known anecdote about the young Kwasi Kwarteng harks back to his admissions interview for Trinity College. The self-confident 17-year-old told the tutor, who had arrived late and hadn’t conducted many of these interviews before: “Don’t worry, sir – I’m sure you’ll do very well.”

He was part of the Cambridge team which won University Challenge in 1995, although he generated headlines for uttering a swearword after he buzzed in and forgot the answer to a question.

He has since questioned how much being good at quizzes “relates to anything in what people call ‘real life'”.

Kwarteng’s resignation letter:

Dear Prime Minister,

You have asked me to stand aside as your chancellor. I have accepted.

When you asked me to serve as your chancellor, I did so in full knowledge that the situation we faced was incredibly difficult, with rising global interest rates and energy prices. However, your vision of optimism, growth and change was right.

As I have said many times in the past weeks, following the status quo was simply not an option. For too long this country has been dogged by low growth rates and high taxation – that must still change if this country is to succeed.

The economic environment has changed rapidly since we set out the Growth Plan on 23 September. In response, together with the Bank of England and excellent officials at the Treasury we have responded to those events, and I commend my officials for their dedication.

It is important now as we move forward to emphasise your government’s commitment to fiscal discipline. The Medium-Term Fiscal Plan is crucial to this end, and I look forward to supporting you and my successor to achieve that from the backbenches.

We have been colleagues and friends for many years. In that time, I have seen your dedication and determination. I believe your vision is the right one. It has been an honour to serve as your first chancellor.

Your success is this country’s success and I wish you well.

The prime minister responded as follows:

Dear Kwasi,

Thank you for your letter. As a long-standing friend and colleague, I am deeply sorry to lose you from the Government.

We share the same vision for our country and the same firm conviction to go for growth.

You have been Chancellor in extraordinarily challenging times in the face of severe global headwinds.

The Energy Price Guarantee and the Energy Bill Relief Scheme, which made up the largest part of the mini budget, will stand as one of the most significant fiscal interventions in modern times.

Thanks to your intervention, families will be able to heat their homes this winter and thousands of jobs and livelihoods will be saved.

You have cut taxes for working people by legislating this week to scrap the increase in National Insurance Contributions.

You have set in train an ambitious set of supply side reforms that this Government will proudly take forward. These include new investment zones to unleash the potential of parts of our country that have been held back for too long and the removal of EU regulations to help British businesses succeed in the global economy.

I deeply respect the decision you have taken today. You have put the national interest first.

I know that you will continue to support the mission that we share to deliver a low tax, high wage, high growth economy that can transform the prosperity of our country for generations to come.

Thank you for your service to this country and your huge friendship and support. I have no doubt you will continue to make a major contribution to public life in the years ahead.

The downfall of Kwasi Kwarteng is one of the fastest in British political history. Just three weeks ago, in the poorly named mini-budget, he ripped up years of Conservative economic strategy.

The chancellor and prime minister were determined to take radical action in pursuit of economic growth. It didn’t matter if parts were unpopular, they would do it anyway.

But key elements of the strategy proved too unpopular for the markets and for Tory MPs. The “Growth Plan” has now been scaled back, the chancellor has been removed from his job and the prime minister’s own future remains in the balance.

The opening song from Blood on the Tracks aptly sums up the state of modern Britain after 12 years of Conservative rule. This is a country that is increasingly dysfunctional and, from the outside, appears to be having a nervous breakdown.

In the latest twist to this blue psychodrama, Rishi Sunak is strong favourite to replace Truss but is being challenged by Boris Johnson, the prime minister he was instrumental in removing from office less than two months ago.

Make no mistake, a Sunak premiership would be a victory for the financial markets and for the status quo more generally. And not just in Britain, either. After Truss’s humiliation during her 44 days in office, any country contemplating challenging the orthodoxy will now be having second thoughts.

This is a disaster, but one that Truss and Kwasi Kwarteng brought on themselves. As the Guardian revealed, the prime minister and her first chancellor were warned last month by economists sympathetic to their project of the need to square off the markets before revealing the contents of the mini-budget.

Summary

Here’s a roundup of today’s news, as Liz Truss sacked Kwasi Kwarteng after he returned from an IMF summit in the US, and appointed Jeremy Hunt in his place. Truss then gave a press conference which has not gone down well with Conservative MPs.

  • Liz Truss sacked Kwasi Kwarteng, a key ideological ally in the Conservative party, making him the second-shortest serving chancellor in modern history.
  • Kwarteng is said to think that his sacking will only buy Truss “a few weeks” in the job, according to reports in the Times.
  • Truss announced Jeremy Hunt, former health secretary who has twice stood for the party’s leadership as Kwarteng’s replacement.
  • Corporation tax will now be raised to 25%, a cut to 19% had been pencilled in. Truss then refused to apologise during a press conference.
  • Labour leader Sir Keir Starmer has called for a general election as the government “is at the end of the road”.
  • There are discussions between senior members of the 1922 Committee of Conservative party backbenchers set to take place this weekend, about Truss’ leadership. There are rumours that there has been a “substantial number” of letters sent in to the committee calling for a vote of no confidence, Sky News has reported, despite Truss being immune for a year after her election.
  • Former chancellor Philip Hammond has said that the Conservative party under Liz Truss have “thrown away” reputation for “fiscal discipline and competence”.
  • A poll by Savanta/ComRes has found seven in 10 voters say Truss cannot win back their trust. A majority backed Kwarteng’s sacking. Another poll found support for a general election, including among Conservative voters.

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