Sarah Coles, head of personal finance at AJ Bell, and Rachel Vahey, Danni Hewson and Dan Coatsworth examine what Andy Burnham’s expected arrival in Downing Street could mean for the Treasury and for key areas of tax, pensions, markets and public spending.
Sarah Coles, head of personal finance at AJ Bell, comments:
“Prime ministers and chancellors are a pivotal double-act of the UK government. So with Andy Burnham now widely expected to become prime minister in the coming months, attention turns to who will be running the Treasury.
“There are several names in the frame, all bringing something different to the table. The question is whether the next dynamic duo will adopt a similar approach to Starmer and Reeves, or head down another route entirely.
“We’ve picked out nine potential candidates and looked at what policies they might pursue if they get the top economic job in the country.”
Ed Miliband
“Miliband’s position on the soft left might raise the possibility of more spending and borrowing. However, his experience in senior roles, including as a special adviser to Gordon Brown, may lie behind reports it was Miliband who helped persuade Burnham of the importance of sticking with the fiscal rules in order to calm the markets.
“To balance the books, he might consider more progressive taxes or revisiting tax reliefs that predominantly benefit higher earners. He has previously supported a mansion tax. He might also consider more environmental taxes.
“If he was appointed, it could raise questions among business leaders. He has shown support for more government involvement in business and his commitment to net zero has led to criticism from some business leaders and unions. This may impact his chances of being offered the role.”
Shabana Mahmood
“Mahmood has not spoken out on economic issues since her time in the shadow Treasury, so assessing a potential approach relies on extrapolating from her position as home secretary.
“She is considered to be measured, pragmatic and disciplined over budgets. If this is carried through into economic policy, it could mean steering clear of radical changes and opting for incremental improvements. The fiscal responsibility may go down well with markets, which had been worried about borrowing and spending under Burnham.
“However, the incremental targeted policymaking might not be a natural fit with a prime minister keen to draw a line in the sand. More recent reports suggest Mahmood is less of a front-runner for the role than originally thought.”
Pat McFadden
“Serving as an adviser to Blair and in Starmer’s cabinet, he might be seen as a safe pair of hands to keep the ship steady. It’s one of the reasons he was made work and pensions secretary after the universal credit U-turn. This could be why he’s considered a potential front-runner for chancellor.
“He’s seen as a moderate, so would be likely to promote fiscal responsibility alongside investment in public services and working to improve growth. His private communications, recently made public, show he wanted to move beyond simply thinking of tax as a way to pay for public services, and use the system to promote growth and provide opportunities.
“The delicate balance required in this approach is demonstrated by the fact that he stood by the state pension triple lock, while acknowledging the potential problems that raising the state pension age could bring for those in poorer health as they get older. At the same time he also emphasised that the system needs to be affordable and fair.”
Rachel Vahey, head of public policy at AJ Bell, comments:
Wes Streeting
“Despite previously saying he would run in a leadership contest, Streeting instead backed Andy Burnham on the morning of Starmer’s resignation, suggesting a deal may already have been struck for his support, potentially in return for one of the top four government roles.
“The former health secretary may have his eye on becoming chancellor, after briefly serving as shadow exchequer secretary to the Treasury in 2020. His tenure as health secretary shows he’s unafraid of taking tough decisions, after repeatedly clashing with resident doctors over strike action.
“What sort of chancellor he would make is less clear. He has previously said he wanted to tax capital gains on the same basis as income and has suggested replacing inheritance tax with a lifetime gifts tax. He has also supported an increase in corporation tax, a move which would not endear him to employers already struggling with national insurance hikes under the current administration.
“Wes Streeting’s centrist credentials would make him a popular choice to win over markets, which have so far been muted in their response to the political upheaval. While he hasn’t held any positions to develop his fiscal chops, his work as health secretary gained plaudits from the public and he’s been vocal in his belief that politicians should be more honest about what the government can afford. He’s a big believer in fiscal rules and the need to bolster market confidence: something which has endeared him to bond markets.
“On the day he resigned from the cabinet, 10-year gilt yields fell significantly, only to pop back up the following day as Andy Burnham was given backing from Labour’s National Executive Committee (NEC) to stand in the Makerfield by-election. If a deal has been done between the two men to avoid a lengthy leadership fight, it signals they are prepared to work together, which will be crucial if they’re going to deliver a Budget in a timely fashion.”
Torsten Bell
“Although a relative newcomer to Westminster after being elected in 2024, Bell comes armed with a pedigree of economic prowess after previously leading the Resolution Foundation for nine years.
“He has already garnered useful practical experience after being drafted by Rachel Reeves into a senior economic role to explicitly help lead and write the preparations for the Autumn Budget. The legacy from his tenure as pensions minister includes attempting to steer pension capital towards productive UK investments.
“Bell is considered as left leaning, but he may struggle to advance the radical tax and wealth reforms he proposed while leading a think tank, which included raising capital gains tax on assets, applying National Insurance to rental income and overhauling council tax. He has already defended Reeves’ decision not to introduce a wealth tax, arguing it would have a limited impact.”
Danni Hewson, head of financial analysis at AJ Bell, comments:
John Healey
“Former defence secretary John Healey does have some Treasury experience, but it is both limited and dated, so markets might struggle to work out what kind of chancellor he could be. He has proved to be a man of conviction with his recent resignation from the cabinet over defence spending, winning over many in the sector he represented.
“He’s also fully aware of the potential economic boon as a result of increased defence spending if it’s done in the right way, creating jobs in parts of the country that Andy Burnham wants to champion. Healey also has first-hand knowledge of how the Treasury interacts with under pressure departments and the struggle to fund vital services whilst trying to keep the books balanced.”
Yvette Cooper
“Yvette Cooper is likely to be considered a safe pair of hands, having deftly jumped from domestic to global affairs of state as part of Starmer’s cabinet. She also spent time in the Treasury under Gordon Brown and is considered to be something of a centrist, which could reassure markets nervous about an Andy Burnham premiership that starts with pledges to turn on the spending taps.
“As an MP of a northern constituency, she’s got a good working relationship with Andy Burnham and is one of the most senior politicians in the current cabinet who knows how to be a team player – but also how to raise sensitive issues at the highest level. Her breadth of experience means that she will understand the pressures on the public purse better than many and her seniority could help bring together different factions of the party under a new leader.”
Dan Coatsworth, head of markets at AJ Bell, comments:
Jonathan Reynolds
“Chief whip Jonathan Reynolds is a former business secretary and has been immersed in industrial and trade policy, which could work in his favour. He comes across as someone who knows the importance of following a process and sticking to rules.
“However, he isn’t the most obvious candidate as his values might not be fully aligned with Andy Burnham’s. A year ago, Reynolds said a wealth tax was ‘daft’, whereas Burnham has previously hinted at supporting the case for reintroducing a 50p on the pound income tax rate.”
Lucy Rigby
“Currently chief secretary to the Treasury, Lucy Rigby is certainly in the right department to move into the chancellor’s role, and she also brings previous experience as economic secretary to the Treasury.
“What she lacks is a long career in senior political roles. Markets can be sceptical towards unproven names in politics and Rigby may be viewed as someone that has yet to prove her worth.”
