Where did it all go wrong for Kwasi Kwarteng -and what can we learn from it?

o, Kwasi Kwarteng’s short and eventful time in office as Chancellor of the Exchequer is over.  How did it go so wrong?  Here was a man who was both a close friend of the Prime Minister and was united with her in a shared vision for how to take Britain forward economically.  That vision was to see low taxes encourage economic growth.  It was that vision that the Chancellor was seeking to implement. So why has he got the sack and the Prime Minister managed to keep her job?

Well, there might be a whole number of reasons why the Prime Minister should go but I don’t think it is quite as simple on this point.  I’m going to explain why below because there are a few good reasons for this.

It is all about understanding several key components that every organisation, businesses, charities, schools and churches need to consider. These are linked but we also need to distinguish them from each other. These are

  • Mission
  • Vision
  • Values
  • Strategy
  • Tactics

These are all joined up together.  Mission is about the specific reason that you exist. What is it that you are there to achieve.  I guess that for the Government we might argue that they exist to lead the country in a way that protects the well being of all citizens. This is something that most Governments of different political shades might agree on.  Churches often talk in terms of existing to make disciples of Jesus Christ in the area where they are “Matthew 28 with a postcode.”

Vision is about fleshing out what it will look like for you to deliver that mission.  This can change based on context and situation. It’s like adding a date stamp.  You will have a view of what your church and community should look like in a few years time.  This specific Government has a vision for a low tax economy believing that this is the best way to enable the majority of the population to enjoy the benefits of the nation’s prosperity. Not every political party or government will share that particular vision.

After that you have values. These describe the kind of feel, ethos and culture of an organisation or institution.  How do you go about things.  There may be some interesting views of what this particular Government’s values are.

Once you have these in place, you can start to think about strategy -the big plan and tactics, the day to day policies and processes you will use to achieve your strategy. Your strategy and tactics should align with your mission, vision and values.

Now it’s important to understand where the distinctions are and how they look to have become decoupled in the case of Kwasi and Liz.  The vision of a low tax economy is one that I would expect most Conservatives to share.  If you were to ask Rishi Sunak, Michael Gove, Grant Shapps,  Penny Mordaunt and Kemi Badenoch their vision, they would all answer the economic question in pretty much the same way.

Where there was a difference between Rishi Sunak and Liz Truss and where that started to come into play over the past few weeks was over strategy.  Truss believed that we could get to a low tax and growing economy by cutting taxes first. Her strategy worked on the assumption that if you cut taxes and it acted as a catalyst for growth then you would in fact increase tax revenue and balance the books. Others disagreed and this was Michael Gove’s point when interviewed during the Conservative Party Conference.  His and Sunak’s view was that you first of all balance the books so that there is market confidence and you can keep interest rates low.  Then you begin to cut taxes.  The difference here is between Reaganomics (Truss) and Thatcherism/Monetarism (Gove/Sunak). 

I believe that Truss and Kwarteng were united on the strategy too. However, there was clearly a difference on tactics.  You see, timing matters.  For the record, my personal view is closest to what Gove was arguing, you balance the books, then you cut taxes.  However, even if I’d agreed with Truss on strategy I would have argued that the timing of the tax cuts was terrible. As I’ve explained before, the Chancellor did not need to make the statement when he did. He failed to answer the questions that everyone was asking and instead answered other questions that nobody was asking. This in turn produced new questions that he did not have answers to.

I also believe that he made the wrong choices about which taxes to cut. As I’ve explained elsewhere, I would not abolished the 45p band and I would not have taken a penny off of the base rate. I’d have introduced a new lower band which would have delivered more for those on lower incomes.  If there were clear answers about how things were being paid for and if there had not been the politically insane decision to go for the 45p band then the Government would probably have had a bit of room to keep Corporation taxes lower.

Instead, the original statement caused panic on the money markets and the Bank of England had to intervene. Questions were then being asked about how all this would be paid for.  The Government did not have the political capital at this stage to impose further austerity type cuts.  So, the money had to be found from somewhere, hence the decision today to reverse the Corporation Tax cut.

Now, there have been a few clues already that Liz Truss and her Chancellor were at odds over tactics. The first big clue was when she made it clear at Conference that key parts of the mini-budget were his ideas and his alone without consultation with her or the cabinet.

So, why did she not sack him immediately?  It is possible that she was completely blindsided and wasn’t sure how to respond. If they shared the same vision, she may have been willing to trust him to handle the tactics and hope that he had called it right, even if she had some reservations.  However, it is also possible that she was happy to sign off the tactics at the time but then as things became clearer, she decided that the position was untenable and u-turns were necessary.

The Chancellor was sacked today as he flew back from Washington for emergency discussions about how to respond to a growing economic and political crisis. This suggests that as of this morning, Liz Truss was willing to stick with her Chancellor. My guess, and it is just a guess, is that as the morning transpired, it became clear that the Chancellor was unwilling to make the U-Turn which Liz Truss considered necessary.  If so, then it meant that for policy to change then the Chancellor had to go.  He was not willing to use different tactics.

It is therefore possible that the Chancellor and Prime Minister continue to share the same vision but that at some point in the past few weeks, they’ve parted company on tactics or strategy.  That would be how Kwasi Kwarteng’s position became impossible.

Now, as I said at the start, I think there are some lessons for us in this.  The big lesson I want to draw from this is that often it is at strategy or tactics that we start to get problems. It’s possible to be united in a shared vision, to know where you want to get the church to but differ sharply on the route needed to get there.  We should not assume that because people disagree with us on strategy or tactics that they do not support the vision.

Secondly, it is no use having a wonderful vision that everyone is agreed upon if you then get your strategy and tactics wrong. On a few occasions I’ve seen people in effect trash their vision by getting the specifics or the timing of their implementation wrong and then stubbornly sticking to their guns when if they listened to others they might salvage the vision and get there by a different route.

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