As the political landscape shifts in the UK following Sir Keir Starmer’s resignation, the spotlight turns to Andy Burnham, the newly-elected MP for Makerfield, who is poised to become the country’s next prime minister. With this transition, the question arises: who will succeed Rachel Reeves as Chancellor of the Exchequer? The incoming Chancellor will inherit a considerable array of challenges, including high national debt, sluggish economic growth, welfare reform, defence spending, and the repercussions of geopolitical tensions, notably the US-Israel conflict with Iran.
Leading Contenders for Chancellor
Wes Streeting: The Bookies’ Favourite
Wes Streeting, a former leadership contender and ex-health secretary, is currently the frontrunner to take on the role of Chancellor. Having publicly supported Burnham during his campaign, Streeting’s potential appointment could be viewed as a reward for his loyalty. However, there are concerns regarding the compatibility of his fiscal policies with those of Burnham, who is perceived to advocate for a more expansive spending approach.
Economist Lord Jim O’Neill has advised caution, suggesting that the desire for the Chancellor’s position among some candidates stems from a sense of entitlement rather than merit. Simon French, chief economist at Panmure Liberum, describes Streeting as a “relatively market-friendly option” due to his pro-growth comments, but he also highlights the political risk associated with Streeting’s ambitions, which may extend beyond the Treasury.
Ed Miliband: The Experienced Contender
Ed Miliband, the former Labour leader, is another strong candidate, positioned as the second favourite among bookmakers. His political alignment with Burnham could foster a more cohesive approach between Number 10 and Number 11, a factor deemed crucial by economic experts such as Paul Johnson, former director of the Institute for Fiscal Studies.
Despite Miliband’s experience, his track record as energy secretary has raised concerns among some analysts who fear his commitment to net-zero policies could exacerbate inflation, particularly given the UK’s current energy pricing challenges. Nonetheless, his intellectual capacity and experience could lend him the credibility needed to reassure financial markets.
Pat McFadden: The Dark Horse
Though not as prominent as Streeting or Miliband, Pat McFadden is regarded as a highly qualified candidate. His previous roles, including shadow Treasury positions and his current position as work and pensions secretary, equip him with the expertise necessary to tackle pressing welfare reforms. French posits that McFadden might be perceived as “the safest pair of hands” among the contenders, likely eliciting a neutral or positive reaction from the markets.
However, if Burnham is seeking a clean break from Starmer’s administration, McFadden’s loyalty to the former leader may hinder his chances.
The Case for Yvette Cooper
Foreign Secretary Yvette Cooper could emerge as a compromise candidate, possessing extensive governmental experience, including her tenure as chief secretary to the Treasury under Gordon Brown. Analysts like Danni Hewson from AJ Bell have labelled her a “middle of the road” option, albeit one that carries a degree of uncertainty regarding how she would navigate the economic landscape.
The Current Chancellor’s Future
While the possibility remains that Rachel Reeves could retain her position as Chancellor, this seems increasingly unlikely given her close ties to Starmer. However, some suggest the potential for continuity if Burnham decides to uphold Reeves’ fiscal policies. Lord O’Neill advises that Burnham should first clarify his own priorities before making a decision on the Chancellor.
Potential Wildcard Candidates
The list of potential candidates does not end with the frontrunners. Home Secretary Shabana Mahmood is seen as a financially conservative option, albeit lacking significant economic experience. Other names, such as former defence secretary John Healey, have also surfaced, but choosing Healey could entail a commitment to increased defence spending that Burnham might prefer to avoid.
Additionally, names like Darren Jones, the chief secretary to the prime minister, and Torsten Bell, former chief executive of the Resolution Foundation, have emerged as less likely contenders but still remain in the conversation.
Why it Matters
The selection of the next Chancellor will have profound implications for the UK’s economic direction, especially in a time marked by uncertainty and significant fiscal challenges. The new Chancellor will not only shape financial policy but also influence public trust and market stability. As Burnham prepares to assume the role of prime minister, the decision regarding his second-in-command will be pivotal, setting the tone for governance and economic strategy in the years to come.
