Andy Burnham is about to become Britain's seventh prime minister since 2016, but the identity of the person who will hold the purse strings next door in Number 11 Downing Street remains a closely guarded secret — with markets, party factions and the wider public all waiting to see who gets the job. The chancellor of the exchequer is arguably the second most powerful position in government, responsible for the nation's finances: taxes, spending, borrowing and the overall health of the economy. So the decision Burnham makes over the coming days will have immediate consequences for your mortgage, your job and the public services you rely on.
At the heart of the speculation is Shabana Mahmood, the current home secretary. According to the BBC, there have been “live discussions” about putting Mahmood into Number 11, and the Financial Times reports it as a certainty based on three sources close to Burnham. Mahmood does not have an economics background, but she is a senior minister on Labour’s right wing. Her appointment would be seen as a signal to financial markets that the new government intends to take a pragmatic approach to economic policy. Kathleen Brooks, research director at XTB, said markets were already rallying in relief when the reports emerged: the pound rose about 1% against the US dollar this week. Markets are nervous about the in-tray facing the next chancellor: high debt, low growth, welfare reform, defence spending and the economic fallout from the US-Israel war with Iran. Mahmood, some analysts believe, could reassure investors that fiscal discipline will be maintained.
“Who will be UK's next chancellor? Burnham faces choice between Mahmood and Miliband with major economic implications.”
However, the choice is not straightforward. The left of the Labour party is reportedly unhappy at the prospect of Mahmood as chancellor and would prefer Ed Miliband, the former party leader and current energy secretary. Miliband was the bookmakers’ strong favourite in late June and is politically closer to Burnham than other rivals. Yet there are doubts about whether he would command the confidence of the financial markets. Some analysts see Miliband as an inflation risk, linking his drive for net zero — while energy secretary — to the UK’s high energy prices compared to other countries. Whether that reputation is fair or not, it could affect the cost of government borrowing. Burnham’s team has officially said no decision has been taken and cabinet positions will not be announced until Monday. But the jostling and lobbying have already begun.
For UK readers, the identity of the chancellor matters more than a routine reshuffle. The Treasury sets the tax rates you pay, decides how much is spent on the NHS, schools and defence, and manages the national debt that ultimately affects interest rates on mortgages and loans. Whoever gets the job will have to tackle difficult trade-offs: raising taxes or cutting spending to stabilise the public finances; reforming welfare without punishing the vulnerable; boosting growth while keeping inflation in check; and navigating a volatile global environment. The chancellor’s first budget will be one of the most consequential in years.
Q: Who is the frontrunner to be chancellor? The frontrunner is Shabana Mahmood, the current home secretary. Reports from the BBC and Financial Times indicate she is the likely pick, though Burnham’s team says the decision is not final until Monday. Mahmood is seen as a safe pair of hands by markets, even though she lacks a formal economics background.
Q: Why does the chancellor matter to my finances? The chancellor controls tax, spending and borrowing. Decisions on income tax, national insurance, VAT and benefits all affect household budgets. The chancellor’s economic plan influences interest rates, inflation and the strength of the pound, which in turn affect mortgages, savings and the cost of imports.
Q: What are the biggest challenges facing the next chancellor? The incoming chancellor will inherit high national debt, low economic growth, a welfare system in need of reform, pressure to increase defence spending (partly due to the US-Israel war with Iran), and the need to rebuild market confidence after recent political instability. Balancing these competing demands will be extremely difficult.
What happens next? Burnham is due to become prime minister on Monday after Sir Keir Starmer formally resigns. He will then announce his cabinet, with the chancellor appointment being the most closely watched. All eyes are on whether the pragmatic Mahmood or the more left-wing Miliband gets the nod — and how financial markets react. The new team’s first 100 days will set the economic direction for the rest of the parliament.
