Andy Burnham will walk into Downing Street on Monday as the new prime minister — but the identity of his neighbour in Number 11 remains unresolved, triggering a tug-of-war between Labour’s left and right and sending the pound up 1% against the dollar this week on reports that Shabana Mahmood may get the job.
Officially, Burnham’s team says no decision has been taken and cabinet positions will not be announced until Monday. But the BBC has been told there are “live discussions” about putting the home secretary into the Treasury, while the Financial Times reports it as a certainty based on three sources close to Burnham.
“Andy Burnham enters No 10 with chancellor choice unresolved; markets rally on Shabana Mahmood speculation.”
The prospect of Mahmood as chancellor has cheered financial markets. Kathleen Brooks, research director at XTB, said: “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.”
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. That has opened the door for other contenders.
The idea of Mahmood as chancellor is causing upset on the left of the party, according to The Times, which reported that those people would much prefer Ed Miliband. In late June, the former Labour leader and Treasury adviser was the bookmakers’ strong favourite. But opinions differ on whether Miliband would receive backing from financial markets. Some see him as an inflation risk, blaming his net-zero drive as energy secretary for the UK’s high energy prices.
Whoever takes the role will face a daunting in-tray: high debt, low growth, welfare reform, defence spending, and the economic fallout from the US-Israel war with Iran. The FTSE 100 opened lower on Monday as traders watched for Burnham’s first speech and the chancellor announcement that will set the tone for his government’s economic approach.
