With Sir Keir Starmer's resignation, Andy Burnham – the newly elected Makerfield MP and former Manchester mayor – is almost certain to become the UK's next prime minister. And with that, a new chancellor of the Exchequer will take charge of the nation's finances. The choice is one of the most consequential decisions Burnham will make, as the next chancellor faces an in-tray of high debt, low growth, welfare reform, defence spending, and the economic fallout from the US-Israel war with Iran.
Two main candidates have emerged. 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, according to Simon French, chief economist at consultancy Panmure Liberum. However, economist Lord Jim O'Neill, who has been advising Burnham, has warned against appointing someone who feels "owed it for their support". Streeting's politics also differ from Burnham's – Burnham is seen as more inclined to spend.
“Andy Burnham's likely appointment as PM and the race to become the next chancellor explained.”
The second favourite is Ed Miliband, the former Labour leader and current energy secretary. Political observers note Miliband is closer to Burnham ideologically, and Paul Johnson, former director of the Institute for Fiscal Studies, says it's important that Number 10 and Number 11 don't have "very different views". But Miliband's track record on net-zero has led some to view him as an inflation risk, which could affect how bond markets react. Nick Macpherson, former permanent secretary at the Treasury, countered that Miliband has the "intellect, experience, and authority" to deliver a coherent strategy.
Whoever gets the job will inherit a challenging economic landscape. Brexit continues to weigh on growth – modelling suggests rejoining the EU could boost GDP by £92 billion over 5-10 years. The next chancellor must also decide on welfare cuts. Burnham has said he is "not squeamish" about reducing the welfare bill but ruled out "crude" short-term cuts. Meanwhile, Germany's recent austerity – including major benefit cuts and defence spending increases – offers a potential model. There is also pressure from some Labour MPs to end the "unsustainable" triple lock on state pensions.
For UK readers, the chancellor's decisions will directly affect household finances: taxes, public services, pension increases, and the availability of welfare support. The choice between a market-friendly chancellor like Streeting or a more spending-inclined one like Miliband could signal the direction of economic policy for years.
Q: Who is likely to be the next chancellor? A: Wes Streeting is the bookmakers' favourite, but Ed Miliband is second. Burnham is still meeting MPs and has not made a final decision. The appointment will be confirmed after Burnham becomes PM on July 17.
Q: What are the biggest challenges facing the next chancellor? A: The next chancellor must tackle high national debt, low economic growth, welfare reform, increased defence spending due to the US-Israel war with Iran, and the lingering economic impact of Brexit. They will also need to manage the financial markets' confidence.
Q: How will the new chancellor affect my personal finances? A: The chancellor sets tax rates, benefits, and public spending. Key issues include possible changes to the state pension triple lock, welfare cuts, and decisions on defence spending that could affect budgets. The choice of chancellor will influence whether policies lean towards austerity or investment.
Burnham is expected to be confirmed as prime minister on July 17, after nominations for the Labour leadership open on July 9 and close on July 15. He is currently meeting MPs to "win their confidence" and has begun planning his team, including lining up former minister James Purnell as his chief of staff. The new chancellor is likely to be announced shortly after Burnham enters Number 10.