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UK Chancellor's right-hand man eyes hedge fund move

One of British Chancellor George Osborne's closest advisers is thought to be considering leaving Government, possibly for a high paying role at a hedge fund.

Rupert Harrison, the Chancellor's chief of staff, who has been tipped as a potential future Conservative party leader, is thought to have had a tentative conversation with Pete Davies, co-head of Lansdowne Partners, about a move into the private sector.

The government has come under scrutiny for its the close ties to Lansdowne, one of Europe's largest hedge funds, after highly sought shares in Royal Mail's initial public offering (IPO) were awarded to the hedge fund before pension funds got access. Lansdowne also took part in the Lloyds Bank privatization, becoming one of the tax-payer-backed bank's top shareholders.

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Although the Treasury has always denied any involvement with these share allocations, it has made for uncomfortable reading for the Chancellor, who is a close personal friend of Davies, the best man at his wedding. The hedge fund's co-founder, Paul Ruddock, is also a prominent Conservative donor, who was knighted in 2012.

The U.K. government's treasury building in London, U.K.
Matthew Lloyd | Bloomberg | Getty Images

Until fairly recently, Harrison, 35, who has two young children, was expected to stand as a Conservative candidate in next year's election.

His predecessor, Matthew Hancock, was one of the 2010 intake and has risen up the ministerial ranks rapidly. Mr Hancock was made energy minister in the most recent reshuffle.

As a special adviser, Harrison earns about £80,000 ($128,260) a year - a fraction of the sum he would make at a hedge fund.

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Osborne has also made it clear, with the appointment of Mark Carney as Bank of England Governor, that he has high regard for private sector experience.

People close to Harrison, who is widely respected and greatly liked, say these are very early-stage discussions and that no final decision has been made about leaving government, or indeed whether such a move would necessarily be to a hedge fund.

If the Conservative party wins next year's election, it is conceivable that Harrison would extend his tenure with the Chancellor. Even if Harrison does depart, he is expected to move back into politics later in his career. It is possible that a move to a think tank or a more macro-economic hedge fund would be better suited to Harrison than a stock-picking fund like Lansdowne.

John Kingman, second permanent secretary at the Treasury, spent two years as global co-head of the financial institutions group at Rothschild before rejoining the civil service in 2012.

Harrison, a former head boy at renowned public school Eton College, joined Osborne's staff in 2006 from the Institute for Fiscal Studies. He was a key player in bringing financial regulation back to the Bank of England and is often spoken of as "the real Chancellor" for his command of policy.

Lansdowne Partners and Harrison declined to comment.

This story has been corrected to show Ruddock was knighted, rather than ennobled.