The next person to hold the keys to Number 11 Downing Street will inherit an in-tray stacked with high debt, low growth, welfare reform, defence spending, and the economic fallout from the US-Israel war with Iran. But before any of that can be tackled, Labour must first choose a new leader after Sir Keir Starmer's resignation, and that leader will then pick a chancellor. The race to be in charge of the UK's finances has already begun.
The chancellor of the exchequer is the UK government's chief financial minister, responsible for setting tax and spending plans, managing the economy, and presenting the annual Budget. The position is second only to the prime minister in political importance. Currently, Rachel Reeves is chancellor, but with Andy Burnham almost certain to become the next prime minister after his decisive victory in the Makerfield by-election, many believe he will want a new chancellor.
“Explains how the UK's next chancellor is chosen amid a leadership race after Starmer's resignation.”
Under Labour's rules, candidates for leader need to be nominated by 81 MPs, 32 local branches, or three affiliated organisations (including two trade unions) by a deadline between 9 and 16 July. If more than one candidate clears the threshold, party members and affiliated trade union supporters will vote, with a winner expected before Parliament returns on 1 September. Burnham has already confirmed he will stand, and he is widely regarded as having the support needed to avoid a contest.
The bookies' favourite to become chancellor is Wes Streeting, the former health secretary who resigned amid the pressure on Starmer and threw his weight behind Burnham. Some see Streeting as a 'relatively market-friendly option' because of his pro-growth comments, but also a political risk because he might someday want to be prime minister. However, economist and cross-bench peer Lord Jim O'Neill, who has advised Burnham, warned against appointing someone 'who feel they are owed it for their support'. Burnham and Streeting also differ politically, with Burnham seen as more inclined to spend.
Ed Miliband, the former Labour leader and energy secretary, is the second favourite. He is politically closer to Burnham, which former Institute for Fiscal Studies director Paul Johnson sees as positive: 'You really don't want people in Number 10 and Number 11 having very different views.' However, some analysts see Miliband as an inflation risk due to his net-zero drive, which could affect how bond markets react if he becomes chancellor.
For UK readers, the choice of chancellor directly affects personal finances — from income tax rates to mortgage costs and the value of pensions. The new chancellor will also decide on welfare reform and defence spending, issues that touch every household. The economic fallout from global conflicts and Brexit's lingering costs — one recent model suggests rejoining the EU could boost GDP by £92 billion over 5-10 years — will be major tests.
Q: How is the UK chancellor chosen? The chancellor is appointed by the prime minister, usually from among elected MPs. After a new PM takes office, they decide who will lead the Treasury, often rewarding loyalty or choosing someone with economic expertise.
Q: What does the chancellor actually do? The chancellor sets the government's tax and spending plans, delivers the annual Budget and autumn statement, manages the national debt and borrowing, and oversees financial regulation. They are the second most powerful person in government.
Q: Why might Andy Burnham want a new chancellor? Although Rachel Reeves currently holds the job, a new prime minister often brings in their own team. Burnham's politics differ from Reeves's, and he may want a chancellor whose economic views align more closely with his own spending priorities.
What happens next? Burnham is meeting Labour MPs to 'win their confidence' as next PM. The official leadership contest runs from 9 to 16 July for nominations, with a winner likely confirmed by September. Once Burnham becomes prime minister, he is expected to announce his chancellor quickly, with Streeting and Miliband as the leading contenders.