Andy Burnham will walk through the door of Number 10 on Monday, but who will follow him through the adjoining door to Number 11 remains the defining question of his first hours in office. The new prime minister has officially taken no decision on his chancellor – his team says cabinet posts will not be announced until Monday – but the betting, and the markets, are already pointing to one name: Shabana Mahmood.
The current home secretary has emerged as the clear frontrunner after weeks of speculation. The BBC has been told there are “live discussions” about putting Mahmood in the Treasury, while the Financial Times, citing three sources close to Burnham, has reported the appointment as a certainty. The pound has rallied on the prospect, rising about 1% against the US dollar this week. Kathleen Brooks, research director at XTB, said the move “tells us two things: 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.”
“Shabana Mahmood tipped as Andy Burnham's chancellor as markets rally; rivals Ed Miliband and council tax pressure loom.”
The strength of her candidacy has surprised some: Mahmood has no economics background, but she is a senior minister on Labour’s right and is seen as a safe pair of hands to reassure financial markets and smooth the transition. However, 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, creating a potential standoff with Burnham.
The alternative, Ed Miliband, was the bookmakers’ strong favourite in late June. The former Labour leader is politically closer to Burnham, but opinions differ sharply on whether he would receive the backing of the financial markets on which the government depends for borrowing. Some see Miliband as an inflation risk, blaming his drive for net zero as energy secretary for the UK’s high energy prices compared to other countries. Analysts say that reputation, whether accurate or not, could affect how bond markets react to his time as chancellor.
Whoever takes the Treasury will inherit a daunting in-tray: high debt, low growth, welfare reform, defence spending, and the economic fallout from the US-Israel war with Iran. And the pressure is already building. A cross-party group of MPs has urged Burnham to allow councils to increase council tax by as much as they want – an early test of the new chancellor’s fiscal discipline.
Executives and business groups have begun sizing up Mahmood and her past policy positions, searching for ways to engage with the woman tipped to become chancellor. She hails from the right of the party and cracked down on immigration as home secretary – record that may reassure markets but could alienate Labour’s left flank. For now, Burnham is playing his cards close. Only on Monday will the country learn who will be his neighbour – and the steward of its finances.
