Sunak v Kwarteng row lays bare tensions at top of UK government

Analysis: business secretary hinting at need to help firms has irked a chancellor keen to cut spending

Rishi Sunak’s frustration with Kwasi Kwarteng may only have burst into the open on Sunday because of an ill-tempered outburst from a Treasury insider, but the row over support for businesses hit by the energy crisis laid bare deeper tensions at the top of government.

Sunak spent much of the pandemic playing up to his role as the people’s chancellor, as the state stepped in to pay the wages of millions of people through the successful but extraordinarily costly furlough scheme.

With the economy bouncing back more quickly than expected from the Covid slump, however, Sunak is keen to return to the Treasury orthodoxy of fixing the public finances and letting the private sector shift for itself.

He would also dearly like to be able to cut taxes in the run-up to the next general election – both to tempt voters to stick with the Tories; but also to play to Conservative members mulling the best candidate to succeed Boris Johnson as prime minister.

Sunak was dragged by Johnson and Sajid Javid into announcing the national insurance increase to fund the NHS and social care at a time when allies said he would prefer not to be raising taxes at all, but appears to have drawn a line in the sand when it comes to other spending.

The Treasury steamrollered through the £20 a week universal credit cut in the face of widespread warnings that it would drive families into poverty, and insisted on cutting the aid budget despite opposition from many senior Tories who warned that it would cost lives.

Whitehall insiders suggest Sunak is equally keen to cleave to Treasury orthodoxy when it comes to intervention in the private sector. He signed off on the bailout for CF Fertilisers last month, justifying it as a short-term solution to an evident market failure. But the Treasury has long been sceptical about being drawn into pouring taxpayers’ money into potentially open-ended bailouts for struggling companies.

With sky-high energy prices expected to last for months, Sunak is likely to be highly reluctant to put public money on the table. It is hardly surprising, then, that he has become increasingly irked with Kwarteng, who appears to have been signalling to desperate business groups that he would love to help them but is hamstrung by the parsimonious Treasury.

There is also annoyance at Kwarteng claiming credit for the government’s latest narrative to explain away the shortages plaguing supermarkets and petrol station forecourts. The prime minister repeatedly insisted at his party’s conference in Manchester last month that these were caused by a long overdue adjustment to a post-Brexit, high-wage economy.

Kwarteng has told colleagues he believes he is responsible for this idea, which he dramatises by telling the story of encountering a builder in his constituency during the 2016 referendum campaign who felt his business had been undermined by cheap migrant labour.

Sunak’s emphasis in his conference speech was somewhat different, focusing on the importance of investment in technology to boost productivity rather than the suggestion employers must immediately ratchet up wages.

Generations of Treasury officials have regarded their colleagues in the business department as having a tendency to go native, in effect becoming industry lobbyists. Which side wins out in this particular battle – Sunak or Kwarteng – depends on which of them the prime minister decides to back.

Johnson has had his own run-ins with his assertive chancellor in recent months, with the pair clashing during the summer about Covid travel rules, which Sunak urged Johnson to relax in a conveniently leaked letter. The prime minister then reportedly mused to friends about whether it was time for Sunak to be removed from his post.

Johnson tends to be considerably more relaxed about splurging public money than his chancellor. He is also very focused on retaining the “red wall seats” he won in 2019, some of which play host to energy-intensive industries such as steelworks.

With his mind focused – even in sunny Marbella – by a string of negative front pages about the risks of the energy crisis, Whitehall officials believe it is increasingly likely he will wade in on Kwarteng’s side.

Contributor

Heather Stewart

The GuardianTramp

Related Content

Article image
Energy crisis: Treasury reprimands Kwarteng after help for firms claim
Source close to Rishi Sunak accuses business secretary of ‘making up’ talks with chancellor about support

Jessica Elgot and Sarah Butler

10, Oct, 2021 @6:11 PM

Article image
No 10 backs Kwasi Kwarteng as split with Treasury emerges in energy row
PM’s spokesperson says Treasury and BEIS officials looking at ways to help manufacturers

Rowena Mason, Heather Stewart and Rob Davies

11, Oct, 2021 @7:27 PM

Article image
Energy crisis: minister denies Kwasi Kwarteng lied over Treasury claims
Damian Hinds rejects accusations business secretary was ‘making things up’ in claiming he lobbied chancellor to help firms

Peter Walker Political correspondent

11, Oct, 2021 @8:04 AM

Article image
Tory lockdown sceptics praise Sunak for saying UK must live 'without fear'
Chancellor appears to defend decision to reopen swathes of economy amid coronavirus

Jessica Elgot Chief political correspondent

24, Sep, 2020 @3:50 PM

Article image
Rishi Sunak to announce £500m ‘plan for jobs’ extension
The chancellor will lay out a package of measures designed to stem rise in unemployment as furlough ends

Heather Stewart and Jessica Elgot

03, Oct, 2021 @9:30 PM

Article image
UK recession fears and rivalries take the shine off Rishi Sunak
The chancellor’s star rose quickly, but now ‘the richest man in the Commons’ is attracting new kinds of attention

Rupert Neate Wealth correspondent

06, Nov, 2020 @1:39 PM

Article image
Summer statement: Rishi Sunak plans temporary job creation scheme for under-25s
Six-month placements are intended to help those hardest hit by the Covid-19 lockdown

Larry Elliott, Phillip Inman and Heather Stewart

08, Jul, 2020 @6:16 AM

Article image
Kwasi Kwarteng vetoes subsidies for gas supply giants to take on rivals’ clients
Business secretary ‘categorically’ rules out loans for large suppliers to take on insolvent rivals’ customers

Jillian Ambrose

23, Sep, 2021 @6:59 PM

Article image
Extend furlough scheme or face spiralling job losses, Rishi Sunak told
Thinktank says support needed until September as industry groups warn PM exit plan lacks details

Richard Partington Economics correspondent

11, May, 2020 @11:01 PM

Article image
Kwasi Kwarteng: has all the right credentials – but can get into trouble
Business secretary is the first black British Tory to run a government department

Rajeev Syal

25, Jan, 2021 @3:29 PM