When the prime minister resigns, it is not just Number 10 that gets a new occupant. The resignation of Sir Keir Starmer has fired the starting gun on the race for the UK's next chancellor—the person in charge of the country's finances. With Andy Burnham almost certain to become prime minister, the choice of who sits in Number 11 Downing Street will have huge consequences for your wallet, from taxes and public spending to the cost of borrowing.
The chancellor of the exchequer is the government's chief financial minister. They are responsible for setting tax rates, deciding public spending, managing the national debt, and presenting the annual budget. The role is so powerful that it is often called the second most important job in British politics. The next chancellor will inherit an in-tray stuffed with problems: high debt, low growth, welfare reform, defence spending, and the economic fallout from the US-Israel war with Iran. How they handle these will affect everything from the value of the pound to the price of your weekly shop.
“What the chancellor does and why the race to replace Rachel Reeves matters for your money.”
So who is in the running? The bookmakers' favourite is Wes Streeting, the former health secretary who threw his weight behind Burnham's leadership bid. Streeting is seen as a relatively market-friendly option because of his pro-growth comments, but some warn he could be a political risk if he later wants to be prime minister. The second favourite is Ed Miliband, the former Labour leader who was energy secretary under Starmer. Miliband is politically closer to Burnham than Streeting, which Paul Johnson, former director of the Institute for Fiscal Studies, says is a positive: "You really don't want people in Number 10 and Number 11 having very different views." However, analysts worry that Miliband's reputation for driving net zero as energy secretary could spook bond markets, because the UK's high energy prices are partly blamed on that policy.
Burnham's plans go beyond just picking a chancellor. He has drawn up a devolution blitz, aiming to shift power away from Westminster and draw on the example of Greater Manchester, where he was mayor. This would mean more cities and regions gaining control over tax and spending decisions, a major change to how the UK is run. The choice of chancellor will be central to whether those plans succeed or stall.
Q: How is the chancellor chosen? A: The chancellor is appointed by the prime minister. There is no fixed process, but typically the PM chooses a senior MP who has economic experience or credibility with financial markets. Loyalty and political alignment also play a big role—as the current race shows, with speculation that Streeting might be rewarded for backing Burnham.
Q: What is the most important thing a chancellor does? A: The chancellor sets the government's economic policy. This includes deciding how much to borrow, how to tax people and businesses, and where to spend money on public services like the NHS, schools, and defence. Their actions directly affect inflation, interest rates, and household incomes.
Q: Can a chancellor be fired? A: Yes. The chancellor serves at the pleasure of the prime minister. If the PM loses confidence in them, or if a chancellor's policies cause market turmoil (like Liz Truss's mini-budget in 2022), they can be removed and replaced. The next chancellor will need to reassure markets from day one.
What happens next depends on Burnham's timetable. He is expected to become prime minister within days, and his choice of chancellor may come soon after. Lord Jim O'Neill, an economist advising Burnham, has warned against appointing someone purely because they feel "owed it" for their support. The decision will signal whether Burnham's government will prioritise spending growth or fiscal caution—and will set the tone for the UK's economic direction for years to come.