Kemi Badenoch: The Treasury is not the department for growth - mine is

Kemi Badenoch, Business and Trade Secretary, has been heavily tipped to succeed Rishi Sunak as party leader
Kemi Badenoch, the Business and Trade Secretary, has been heavily tipped to succeed Rishi Sunak as party leader - JENNY GOODALL/SHUTTERSTOCK

It’s been a tumultuous week for the Tories, with deep-rooted party divisions bursting back into the open as the party struggles to cope with Labour’s 20-point lead in the opinion polls.

No wonder Kemi Badenoch was happy to have been away from Westminster in the US, where she was signing a trade pact with Ron DeSantis, the governor of Florida and contender for the Republican presidential nomination.

It’s the seventh US state-level trade deal the UK has signed – and by far the biggest.

The Business and Trade Secretary, who has been heavily tipped to succeed Rishi Sunak as party leader, is keen to talk it up.

“If Florida was a country, it would be the fifteenth-biggest economy in the world, the same size as Spain,” says Ms Badenoch.

“The Biden administration has shut the door on new free trade agreements with all countries – we won’t see a US-UK free trade deal any time soon – so instead, we’re using our Brexit freedom to sign state deals, staying nimble and agile, removing barriers reducing trade.”

Welcoming Ms Badenoch to Florida, Mr DeSantis – second in the race for the 2024 Republican nomination behind Donald Trump – hailed the UK as Florida’s biggest foreign investor.

Kemi Badenoch with Governor Ron DeSantis in Florida
Kemi Badenoch with Governor Ron DeSantis in Florida

He added that the new memorandum of understanding on trade prioritises sectors including space research, aerospace manufacturing and artificial intelligence.

“These are all areas where the UK has significant competitive advantage,” says Ms Badenoch. “Our fast-growing space sector, for instance, is already worth £17.5 billion a year, employing nearly 50,000 people – and Florida has Cape Canaveral, home of the US space industry.”

There are “big opportunities to harness British insurance and financial services expertise”, she stresses, given the “huge demand for insurance and reinsurance in Florida”.

Ms Badenoch cites Lloyds of London opening a Miami branch after a recent British trade mission – “exactly the sort of expansion of UK industry we want and which this trade pact makes possible”.

The Business Secretary’s trip also took in California – and while at the Asia-Pacific Economic Cooperation (APEC) summit in San Francisco, she attended the UK’s first meeting as part of a major Asia-focused trade pact ­– the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Britain signed up in July to the 11-nation bloc, which includes Japan, Vietnam, Malaysia and Mexico.

“Attending an APEC summit doesn’t generate much UK media interest,” says Ms Badenoch. “But that’s because people still don’t understand the significance of CPTPP and our tilt to the Indo-Pacific region, accounting for the majority of global growth between now and 2050.”

Badenoch’s staff ‘relish challenges’

Now the UK has joined, CPTPP members account for 16 per cent of the global economy, the same as the 27-nation European Union. By 2050, though, on World Bank estimates, CPTPP’s existing members will generate around 25 per cent of global GDP, with the EU’s share shrinking to 10 per cent.

“Half of the world’s middle-class consumers will soon be living around the Pacific Rim – this is a free-trade area covering fast-expanding economies,” says Ms Badenoch. “The UK is the first European economy to join, so we can grab the advantages of free trade in this pivotal region, while deciding who gets to join the group next.”

While some Cabinet ministers berate civil servants for blocking bold moves, Ms Badenoch praises her officials. “I don’t have a ‘blob’ in my department, but staff who relish challenges,” she says. “There are people here very focused on free markets and free trade – this is probably the most centre-Right department in Whitehall.”

However, she remains “frustrated” at recently published Whitehall estimates that joining CPTPP will boost the UK economy by just 0.08 per cent.

“This was based on outdated and flawed methodology, not taking account how trade flows work, how firms trading with the world’s fastest-growing region will behave or the potential for CPTPP to bring in new countries,” she said.

Kemi Badenoch at her home in South London
Kemi Badenoch at her campaign office - JEFF GILBERT

With Jeremy Hunt’s autumn statement to come on Wednesday, Ms Badenoch suggests the Treasury could use some assistance when it comes to economic policymaking. “Of course, we all want lower taxes – but we need to think about the overall fiscal situation and that’s what the Chancellor is doing,” she says.

She proposes a separate department dedicated to boosting productivity and commerce. “I think business needs a department focused on economic growth,” she says. “The Treasury is very much a finance ministry and having an additional department looking at measures to improve growth is key.”

Ms Badenoch claims “this is what I have built” given how she has overseen the merger of business and trade within her current role.

“I’ve taught this department to move away from endlessly regulating and giving subsidies, focusing instead on solving business problems,” she says. “I’m keen we don’t seem like the department for big business but for small business as well.”

Warming to her theme, the minister stresses the need to “talk Brexit up, given that so many people are talking it down and putting out a false narrative”.

She describes the widely cited claim that leaving the EU will cost the UK 4 per cent of GDP as “nonsensical – that estimate was based on us leaving with no deal, yet we left with a comprehensive EU trade agreement”.

‘The UK has left the EU, there’s no going back’

Ms Badenoch insists it is “impossible to disentangle the effects of the pandemic on the UK’s immediate post-Brexit trade performance” – and cites figures showing growth comparing favourably with the EU average since 2016, with UK exports to the EU currently close to record highs.

If the Conservatives lose the election, Ms Badenoch fears “our political opponents will blame Brexit for problems caused by low productivity, too much regulation, too much immigration, claiming we can only fix things by going back into the EU and we’ll end up going round and round in circles”.

She remains sure-footed, though, when asked about the return to government of arch-Brexit critic David Cameron. “The UK has left the EU, there’s no going back,” she says. “We can’t keep rerunning the referendum, and I believe David has the same view”.

And she remains equally coy when assessing the ousting of her Tory leadership rival, Suella Braverman. “We all serve at the pleasure of the Prime Minister,” says Ms Badenoch. “It would be inappropriate for me to comment – I certainly wouldn’t like colleagues providing a running commentary if the same had happened to me”.

Remaining loyal for now, Ms Badenoch signals to her many admirers in her party, in Parliament and beyond, that she continues to back Mr Sunak, including on illegal immigration, currently his weakest flank. “It is clear from the Prime Minister’s latest remarks that stopping the boats is his top priority – and I support him in working on emergency legislation to see things through.”

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