Andy Burnham will move into Downing Street on 20 July, becoming the next prime minister after the resignation of Sir Keir Starmer. But who will live next door in Number 11 as chancellor remains officially undecided – Burnham's team says no decision has been taken and cabinet positions won't be announced until Monday.
That hasn't stopped intense speculation. The BBC has been told there are “live discussions” about putting the home secretary, Shabana Mahmood, in Number 11. The Financial Times, citing three sources close to Burnham, reports it as a certainty. Though she does not have an economics background, Mahmood is a senior minister on Labour's right, and it may be felt she could reassure financial markets and smooth the transition to a Burnham government.
“Andy Burnham faces pressure to name a chancellor as speculation swirls over Shabana Mahmood and Ed Miliband.”
Kathleen Brooks, research director at XTB, said markets were already rallying at the prospect, with the pound up about 1% against the US dollar this week. “It tells us two things about Andy Burnham's government: firstly, the market trusts Mahmood to take a sensible approach to economic policy, and to tackle the hard questions of welfare spending; secondly, Burnham is willing to have those to the right of the Labour party in his cabinet in key economic roles,” Brooks said.
Yet according to separate reports from the Press Association, Mahmood is keen to remain as home secretary and see through changes she has brought in to the asylum system.
Ed Miliband, the former Labour leader and current energy secretary, was the bookmakers' strong favourite in late June, politically closer to Burnham than other rivals. But opinions differ on whether he would command the confidence of financial markets. Some see Miliband as an inflation risk, blaming his drive for net zero for the UK's high energy prices. Analysts say that reputation, whether accurate or not, could affect how bond markets react to his time as chancellor.
Whoever gets the job will inherit a formidable in-tray: high debt, low growth, welfare reform, defence spending, and the economic fallout from the US-Israel war with Iran. Adding to that pressure, Labour MPs are demanding that Burnham sets a target of creating one million jobs in production over the next decade as part of a reindustrialisation strategy.
As Burnham prepares to enter Downing Street, the choice of chancellor – and the response to those demands – will define the economic direction of his government from day one.