When a new prime minister walks through the door of Number 10, one of the first things they do is decide who lives next door in Number 11 Downing Street — the Chancellor of the Exchequer, the UK's top finance minister. Next week, as Andy Burnham becomes prime minister following Sir Keir Starmer's resignation, that decision will shape economic policy for years. But how is the chancellor actually chosen, and what factors influence the pick?
The Chancellor of the Exchequer is the government's chief financial officer, responsible for setting taxes, spending, and borrowing. The post is appointed by the prime minister — no election, no public vote. The prime minister weighs political loyalty, economic experience, and market credibility. In Burnham's case, speculation has centred on two candidates: Home Secretary Shabana Mahmood and former Labour leader Ed Miliband.
“How the UK chancellor is chosen, and why Andy Burnham's pick matters for the economy.”
Whoever gets the job inherits a daunting in-tray: high debt, low growth, welfare reform, defence spending, and the economic fallout from the US-Israel war with Iran. The choice matters because the chancellor's decisions affect everything from interest rates to public services.
Historically, chancellors have often had economics backgrounds — think Gordon Brown or Philip Hammond. But that's not a requirement. Burnham's options show the tension parties face between rewarding internal factions and reassuring financial markets. According to the BBC, Mahmood does not have an economics background but is a senior minister on Labour's right; the Financial Times reports it as a certainty based on three Burnham sources. Markets have already rallied, with sterling up 1% against the dollar, and research director Kathleen Brooks of XTB says this signals trust in Mahmood's "sensible approach" and Burnham's willingness to include right-wing figures in key economic roles. However, the Press Association reports Mahmood is keen to stay as home secretary after cutting immigration by nearly half.
Ed Miliband, by contrast, is backed by the Labour left. He served in the Treasury under Gordon Brown and is understood to have worked on policy for Burnham already. But opponents have waged a briefing war against him, claiming he could "spook the markets" and raise borrowing costs — partly due to his net zero push as energy secretary, which some analysts blame for high UK energy prices. As Brooks notes, reputation matters: whether accurate or not, it affects market sentiment.
For UK readers, the chancellor pick determines the economic direction: Mahmood might prioritise fiscal credibility and welfare cuts; Miliband might focus on green investment and industrial strategy. Labour MPs are already demanding a target of one million new production jobs over a decade, according to Sky. The choice could define whether Burnham defeats Reform at the next election, as the Mirror reports.
Q: Who has the final say on who becomes chancellor? The prime minister alone decides. There is no public vote or parliamentary approval. The appointment is a royal prerogative exercised by the monarch on the prime minister's advice.
Q: Does the chancellor need an economics degree? No. Shabana Mahmood, a frontrunner, does not have an economics background. However, past roles in Treasury or as a business minister often help. Ed Miliband worked in the Treasury under Gordon Brown.
Q: Why do markets care about who is chancellor? Financial markets want a chancellor seen as fiscally responsible. If markets distrust a pick, they may demand higher interest rates on government debt, raising borrowing costs for the UK. Sterling rose 1% on reports Mahmood would get the job, indicating market confidence.
What happens next is clear: on Monday 20 July 2026, Keir Starmer formally resigns, Burnham becomes PM, gives a speech outside Number 10, and then announces his cabinet. The chancellor pick will be revealed then, along with the rest of the team. Until then, speculation — and lobbying — continue.