As the political landscape shifts following Sir Keir Starmer’s resignation, Andy Burnham, the newly-elected MP for Makerfield, is poised to become the next Prime Minister of the UK. With this change in leadership comes the expectation of a new Chancellor, likely to replace Rachel Reeves, who currently occupies the pivotal role at Number 11 Downing Street. The incoming Chancellor will face a formidable set of challenges, including rising national debt, sluggish economic growth, welfare reform, and the ramifications of geopolitical tensions, particularly the US-Israel conflict with Iran.
The Front-Runners
Wes Streeting: The Bookmakers’ Favourite
Wes Streeting, a former contender for Labour leadership, is currently the leading candidate for the Chancellor position according to betting markets. Streeting’s support for Burnham during the leadership contest has positioned him as a loyal ally who may be rewarded with a prominent role in the new cabinet. Nonetheless, notable economist and cross-bench peer Lord Jim O’Neill has cautioned against selecting candidates based on loyalty alone. O’Neill emphasised the importance of choosing someone who possesses the necessary skills to navigate the economic landscape, hinting that loyalty should not overshadow merit.
Simon French, chief economist at Panmure Liberum, describes Streeting as a “relatively market-friendly option,” praising his pro-growth stance. However, he also cautions that Streeting’s ambition for higher office could pose a political risk. “Politics is what politics is. It’s a popularity contest,” French remarked, highlighting the complexities of leadership dynamics within the party.
Ed Miliband: A Familiar Face
Second in line according to bookmakers is Ed Miliband, the former Labour leader. Miliband’s political alignment with Burnham could foster a cohesive approach between Number 10 and Number 11, which is critical for effective governance. Paul Johnson, former director of the Institute for Fiscal Studies, underscores the potential benefits of this alignment, especially in times of economic uncertainty.
However, opinions diverge on Miliband’s ability to reassure financial markets. Nick Macpherson, former permanent secretary at the Treasury, asserts that Miliband possesses the intellect and experience needed to establish a credible economic strategy. Conversely, some analysts view Miliband’s past tenure as energy secretary as a liability, linking his policies to the UK’s high energy prices. Sharon Graham, general secretary of the Unite union, has also voiced concerns, suggesting that Miliband could hinder job creation due to his opposition to new oil and gas drilling projects.
Pat McFadden: The Experienced Contender
While not the frontrunner, Pat McFadden is viewed by some as a highly qualified candidate for Chancellorship. His background includes shadow Treasury roles and experience as a business minister, as well as his current position as Secretary of State for Work and Pensions. McFadden’s expertise in welfare reform could be invaluable, especially as this issue looms large on the agenda for any future Chancellors.
Industry observers, including Simon French, believe McFadden may be perceived as “the safest pair of hands” among the candidates. While it is argued that he could elicit a positive or neutral reaction from the markets, his status as a Starmer loyalist might deter Burnham from appointing him if he seeks a clear departure from the previous administration’s policies.
The Potential for a Surprising Pick
Yvette Cooper: A Middle Ground Option
Yvette Cooper, the current Foreign Secretary, could emerge as a consensus candidate. With extensive experience in government, including her tenure as Chief Secretary to the Treasury, Cooper occupies a politically moderate position, potentially appealing to various factions within the party. Danni Hewson, head of financial analysis at AJ Bell, describes her as a “middle of the road” choice, albeit one that remains somewhat unpredictable.
Rachel Reeves: An Unexpected Continuity
Despite the prevailing sentiment that a new Chancellor will be appointed, Rachel Reeves is not entirely out of the running. While her close ties to Starmer suggest a potential change, some analysts speculate that Burnham might retain her if he prioritises continuity in fiscal policy. Lord O’Neill advocates for Burnham to clarify his policy priorities before making any appointments, possibly leaving Reeves in place for the time being.
Additional Contenders and Wildcards
Several other names have surfaced in discussions about potential candidates, including current Home Secretary Shabana Mahmood and former Defence Secretary John Healey, both of whom could bring distinct perspectives to the role. Mahmood, while considered financially conservative, lacks significant economic experience, and Healey’s advocacy for increased defence spending could complicate matters for Burnham’s agenda.
Other names in the mix include Chief Secretary to the Prime Minister Darren Jones and former Resolution Foundation CEO Torsten Bell, both of whom are seen as long shots. However, as Lord O’Neill notes, those names in the media spotlight are actively positioning themselves for the role.
Why it Matters
The selection of the next Chancellor will have profound implications for the UK’s economic strategy at a critical juncture. With pressing issues such as high national debt and sluggish growth, the new appointment will need to balance fiscal prudence with the pressing demands for welfare reform and public spending. The choice may also signal a shift in Labour’s approach to governance, reflecting either continuity with previous policies or a bold departure aimed at revitalising the party’s image and electoral prospects. As Burnham prepares to take the reins, all eyes will be on how he navigates these pivotal decisions that could shape the nation’s economic future.