Sir Keir Starmer's resignation has fired the starting gun on the race to be in charge of the UK's finances. With the prime minister gone, Andy Burnham, the newly elected Makerfield MP, is almost certain to be the next UK prime minister. And many believe he will want a new chancellor to replace the current occupant of Number 11 Downing Street, Rachel Reeves.
Whoever gets the job will face quite the in-tray – high debt, low growth, welfare reform, defence spending, and the economic fallout from the US-Israel war with Iran, to name a few issues. The bookies' favourite to be chancellor is a former contender for the leadership, Wes Streeting. Having thrown his weight behind Burnham, the thinking is the former health secretary could be awarded the number two job for his loyalty.
“Andy Burnham is set to become PM, with Wes Streeting and Ed Miliband leading the race for chancellor.”
But economist and cross-bench peer Lord Jim O'Neill, who has been providing advice to Burnham, has warned against this approach. While not naming any specific person, he told the BBC: “There are clearly some people pushing to be chancellor who feel they are owed it for their support.” Though Burnham may appreciate Streeting's backing, the pair's politics differ – with Burnham seen to be inclined to spend more than Streeting.
Simon French, chief economist at consultancy Panmure Liberum, says Streeting is 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. As for the idea that Streeting could get the job because of his support rather than his abilities, French said: “Politics is what politics is. It's a popularity contest.”
The bookmakers' second favourite pick is Ed Miliband, the former Labour party leader, who is politically closer to Burnham than Streeting. Paul Johnson, former director of think-tank the Institute for Fiscal Studies, sees this as a positive. “You really don't want people in Number 10 and Number 11 having very different views,” he says.
However, opinions differ on whether former Treasury adviser Miliband could rally the markets. Nick Macpherson, the former permanent secretary at the Treasury, told the Financial Times: “The key to gaining the confidence of the markets is to articulate, implement and deliver a coherent strategy. Miliband is one of the few cabinet members with the intellect, experience, and authority to do that.” Yet others see Miliband as an inflation risk, believing his drive for net zero as energy secretary partly responsible 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.