Kwarteng’s Affinity With Truss May Win Him Keys to UK Coffers

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(Bloomberg) — If political events go Kwasi Kwarteng’s way, he’ll soon be supplementing the little burgundy notepad he carries with an altogether more substantial and brightly-colored item — the famous red box wielded on budget day by the UK Chancellor of the Exchequer.

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Kwarteng, 47, is tipped by Conservative Party insiders to become Liz Truss’s finance minister if she wins the race to succeed Prime Minister Boris Johnson next month. With inflation at a four-decade high and the Bank of England predicting a recession, it’s a daunting prospect for the business secretary, who prides himself on “Making Shit Happen” — the meaning of the letters “MSH” that adorn a whiteboard in his office above a list of factories the government has financially supported.

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According to allies, his priority as chancellor would be to address soaring energy prices and a cost-of-living crisis that’s dominating the political discourse. He and Truss have emphasized the need for tax cuts rather than handouts, but have been less forthcoming about help for pensioners and low earners to heat their homes, amid winter energy bills set to be triple last year’s level. 

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Kwarteng’s economic nirvana lies in low taxes and high competition, growth and wages, a person familiar said. He sees value in government intervention, but in a targeted rather than big-state way, and favors supply-side reforms to get the economy firing. He’s also expressed opposition to a windfall tax on the profits of energy firms — even after the government he still serves in introduced one.

Those economic goals align him ideologically with Truss, and the two have a history of collaboration, co-authoring a 2012 book, “Britannia Unchained,” advocating deregulation and free markets. 

“They understand there is an opportunity to do something radical,” said Helen Thomas, a former adviser to ex-Chancellor of the Exchequer George Osborne, and CEO of BlondeMoney, an economics consultancy. She said the “ideological sympathy” between the two presages a “more harmonious relationship” than Johnson’s with his former chancellor, Rishi Sunak.

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Missing The Target

Adding weight to that notion, a person close to Kwarteng said he believes the Treasury should facilitate, not emasculate the prime minister. He was frustrated with Sunak’s Treasury, describing officials as bean-counters who said “no” to projects based on cost rather than potential future value.

Nevertheless, Kwarteng and Truss may have to compromise on some of their economic principles to help pensioners and low earners cope with the surge in energy bills. The Resolution Foundation said on Thursday that Truss’s plan to reverse a rise in National Insurance “completely misses the target,” benefitting richer households far more than poorer ones. And the Institute for Fiscal Studies has said her plan to cut green levies from energy bills will have only a “modest” effect. Critics also say that the goal of low taxation would inevitably lead to cuts in spending or increased borrowing.

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Like Truss, Kwarteng was born in 1975, and grew up under Margaret Thatcher’s government. Both joined parliament in 2010, and Kwarteng, the son of Ghanaian immigrants, lives a few streets from Truss in southeast London. He would be the UK’s first Black chancellor.

An author of several books on politics and the British Empire, Kwarteng attended Eton College, the same elite school as Johnson. He studied at Cambridge University and Harvard, where he was a Kennedy scholar. He married in his 40s, and had his first child last year. 

Like Johnson, he campaigned for Brexit, and the two also share a reputation for not being ‘details’ guys. One person who knows Kwarteng said that he’s got away with that as business secretary — but it would be a worrying trait in a chancellor. An energy executive who’s attended several meetings with Kwarteng said he acts as if he knows it all, but leaves a perception that he is not fully across his brief.

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It’s a characterization others suggest is unfair. One official said it’s a reflection that Kwarteng prefers to prioritize what’s important. A former colleague at his constituency office in Spelthorne — the parliamentary seat southwest of London that he represents — said his memory is phenomenal, with an ability to recall the name and address of people he’d met five years ago.

The notebook he carries is to jot down interesting tidbits as he goes about his ministerial duties, and he pores over market fluctuations, constantly checking commodity prices on a Bloomberg terminal in his office.

Kwarteng’s current role puts him directly in contact with businesses, and he regularly plans visits to companies in regions he hasn’t previously been. It also means he’s responsible for the government response to the energy crisis and ensuring security of supply. While power and gas networks have so far proven resilient, the UK is planning for several days of organized blackouts over the winter in a “reasonable worst-case scenario.”

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Those who work with Kwarteng say he’s smart and serious about the job — but also good-humored: His belly-laugh can be heard from other floors. He also likes people to get to the point quickly, and can be brusque — a trait that even allies say can appear rude. 

University Challenge

Kwarteng’s self-assuredness allows him to make decisions quickly, and compared to previous ministers, he doesn’t require as much briefing time, people familiar said. That confidence was in evidence during the admissions procedure for Cambridge, when his interviewer apologized for running late and said to bear with him. By his own account in a BBC podcast, Kwarteng told him: “Don’t worry, I’m sure you’ll do very well.” 

One rare occasion when nerves took hold was during University Challenge, a television quiz show which his team eventually won. To calm down beforehand, he had a cigarette.

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“I don’t think he had ever smoked before, so it was an illogical decision, physiologically,” said Erik Gray, a teammate who now teaches English at Columbia University. “It seems to have worked psychologically: he did very well in the next match.”

As chancellor, he may need to calm his nerves more often: The BOE predicts the UK will enter almost two years of negative or zero growth the month after Truss — if she wins — takes power. It also foresees inflation above 13%. Meanwhile markets are betting that early next year, the bank will be forced to hike rates above 4%, a level not seen for more than a decade and one that’s likely to cause pain to millions of homeowners on floating-rate mortgages.

Truss says she wants a “fiscal event” in her first few weeks in office to address the cost-of-living crisis, but with the utility Electricite de France SA warning more than half of UK households are likely to be in fuel poverty by January, details are scant. She’s said it’ll be for her new chancellor to announce how they’ll cushion vulnerable Britons from a long winter of economic pain. 

If that turns out to be Kwarteng — who said last weekend that “help is coming” — it’s those details that may be the making or breaking of him.