Gordon Brown used to joke that there were two sorts of chancellors: the ones who failed and the ones who got out in time. Nadhim Zahawi looks like being in the second category.
Appointed by Boris Johnson on 5 July as he struggled in vain to remain prime minister, Zahawi is likely to be the shortest-serving chancellor since Iain Macleod died in office in 1970. Macleod was in charge of the Treasury for a month; Zahawi’s tenure will probably last only twice as long.
Funny things happen in politics. Despite all the polling evidence to the contrary, Liz Truss might not end up becoming prime minister. And even if, as expected, she sees off the challenge from Rishi Sunak, she could surprise everybody by keeping Zahawi in place.
The chancellor’s aides say he is enjoying the challenge of the job and was pleased with the way a speech on financial services at the Mansion House was received.
But there is no getting away from the fact that he feels like an interim appointment, the equivalent of the caretaker football manager given the job for a few weeks while a permanent replacement is found. Even the Mansion House speech was a recommitment to a policy stance agreed under Sunak.
Truss is already thinking about who she wants in her cabinet, and there have been strong rumours that she will move Kwasi Kwarteng from the business department into 11 Downing Street once she replaces Johnson. In February, the last time the energy price cap was lifted, Sunak was ready with measures to ease the burden on consumers that he could announce within hours.
When the new price cap is announced on Friday, Zahawi’s role will be to reassure the public that help is on the way, if not necessarily from him. The Treasury has drawn up a list of options but it will be up to the next government to decide which approach to adopt.
Zahawi’s official response to the latest inflation rate – which in July rose above 10% for the first time in four decades – was telling. “I understand that times are tough, and people are worried about increases in prices that countries around the world are facing,” the chancellor said before going on to outline details of help to consumers announced by Sunak in May. Zahawi’s lame-duck status meant he could offer no reassurance about what extra assistance might be provided in coming months.
On average, the 26 chancellors since the second world war have lasted three years in the job but if the predictions are correct, Kwarteng will be the fourth since the 2019 general election, a high attrition rate by Treasury standards.
The only comparable period was 1989-93, also a time when there were four chancellors in quick succession: Nigel Lawson, John Major, Norman Lamont and Ken Clarke. Lawson resigned after a disagreement with Margaret Thatcher over economic policy; Major became prime minister after Thatcher’s fall in December 1990; Lamont was made the fall guy for the pound’s ejection from the European exchange rate mechanism on Black Wednesday.
Lamont’s replacement, Clarke, ushered in a period of stability at the Treasury in which there were only four chancellors in 23 years. Clarke lost his job when Tony Blair’s Labour government came to power in 1997; Brown served 10 years before taking over as prime minister just before the financial crisis began in 2007. Alistair Darling lasted just short of three years, and lost office at the 2010 general election. His successor, George Osborne, was at the Treasury until the summer of 2016, when he was fired by Theresa May.
Major was at No 11 for just over a year but the shortest-serving chancellor since Macleod is currently Sajid Javid, who resigned in February 2020 after little more than six months and without announcing a budget.
Great things were expected of Macleod by the Conservatives when he became chancellor, and his death was a blow from which Ted Heath’s government never really recovered. “Quite apart from the human tragedy, it was an enormous loss to the government,” says the historian Dominic Sandbrook in State of Emergency, his book on Britain between 1970 and 1974. “None of Heath’s ministers had comparable wit, charisma or rhetorical skill, and certainly none had Macleod’s tactical instinct.”
Macleod’s successor was Tony Barber who, in a competitive field, is a contender to be the worst chancellor since 1945. Under Heath’s direction, Barber stoked the fires of inflation with tax cuts, spending increases and reforms of the credit system that unleashed an explosion in lending.
The tax cuts in the giveaway budget of 1972 would not, Barber insisted, lead to higher inflation but would put downward pressure on the cost of living by boosting productivity and profits.
Similar arguments are made by Truss to justify the package of tax cuts expected in an emergency mini-budget next month, as Sunak’s team has pointed out. Sunak has tried to win support for his more cautious proposals by pointing out the historical parallels between now and 50 years ago: an underlying inflationary problem, a war-induced energy crisis, and a dash for growth.
The Barber boom quickly turned to bust and, if history repeats itself, the next chancellor will face a monumental challenge. With the US bank Citi predicting inflation will peak next year at 18.6%, any regrets Zahawi has when he leaves No 11 may be short-lived. His is not the reputation that stands to be shredded.
