Speculation has ramped up about who will be the next UK prime minister after Sir Keir Starmer kicked off a Labour leadership election by resigning on Monday (23 June).
Nominations will open on 9 July and end by the summer recess on 16 July.
The next prime minister may have different priorities to the current government, which has been working on several tax shake-ups including the mansion tax, cash ISA reforms and changes to pensions and inheritance tax rules.
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New Labour MP and former Greater Manchester mayor Andy Burnham is the only candidate to have put his name forward so far, as many expected following his by-election win last week.
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Maike Currie, vice president of personal finance at PensionBee, said: “The Labour leadership contest will dominate the summer, with a new prime minister expected to take office when Parliament returns in September. Investors will be looking for a clear handover, a credible economic team and an early commitment to fiscal discipline.”
Who will replace Keir Starmer?
Burnham is the only name officially in the ring so far to become the next prime minister.
He has also been backed by former health secretary Wes Streeting, who was seen as a potential candidate.
No other Labour MPs have confirmed that they will run for the leadership role yet.
Burnham hasn’t confirmed what his policies will be, although he may have to stick to manifesto commitments to not raise income tax, VAT or national insurance.
He has previously backed reforming council tax and stamp duty.
Inheritance tax changes could also be a possibility. As health secretary in 2009, Burnham suggested a flat 10% charge applied to all estates, with the money being used to fund social care for all.
More recently, on BBC Question Time in June, he said he would look at raising the personal tax allowance and also said there was “definitely a case” for the return of a 50% top rate of tax for the wealthiest.
Matthew Ryan, head of market strategy at global financial services firm and FX specialists Ebury, said: "Burnham sits firmly to the left of the Labour Party, and his record as mayor points to a significant step-up in public spending, a higher tax burden and greater gilt issuance.
“This is an experiment that the UK can ill-afford. Debt is at its highest relative to GDP since the 1960s, growth is weak, debt-servicing costs are already vast and the limited fiscal headroom leaves almost no room to manoeuvre, risking a self-reinforcing borrowing and growth trap.”
Susannah Streeter, chief investment strategist for Wealth Club, added that Burnham has tried to reassure markets by signalling that he will largely stick to fiscal rules and take a more cautious approach to spending.
She said: “He appears willing to tackle the UK's large benefits bill, arguing that welfare reform should focus on helping more people into work. Investors will also be scrutinising how Burnham's interventionist instincts translate into national economic policy. He has argued that the government should play a more active role in shaping economic outcomes, particularly through greater investment in regions outside London and the South East.
“He is also expected to push for further devolution of economic powers and has indicated support for a stronger public role in key sectors and infrastructure. However, concerns are bubbling that greater state involvement could deter private investment if it creates additional costs or regulatory burdens.”
Local supporters suggest the regeneration he has brought to Greater Manchester could be replicated nationally.
Property developer Mike Ingall, chief executive of Allied London, who has worked with Burnham on developments in Manchester including the technology and media campus Campfield, said: “He understands investment and that is the only way to get growth rather than just tax and spend.”
There have been rumours in the past that former deputy prime minister Angela Rayner could stand.
Rayner also sits on the left of the party.
Who could be in the new cabinet?
The prime minister is just one role that is likely to be up for grabs in July.
Whoever becomes the next Labour leader and prime minister is likely to want to appoint their own ministers and there are rumours that chancellor Rachel Reeves could be replaced.
Rob Morgan, chief investment analyst at Charles Stanley Direct, said: “Until we know more about the composition of the cabinet and likely policy direction it is hard to draw any firm conclusions from the soundbites heard so far. However, bolder moves on taxation certainly appear to be a possibility, so it’s a time for anyone planning their finances to be on high alert for changes.
“Already the Budget in the autumn looms large as a potentially highly consequential event. Yet given we don't even know the identity of the chancellor at this stage we can make no conclusions.”
Currie said a chancellor with a reputation for fiscal discipline could reassure markets but warned: “A more interventionist appointment, or a candidate perceived to be less disciplined with spending could have the opposite effect.”
Morgan added that there is some comfort in the fact that marked changes to taxation or other policies affecting personal finances rarely happen overnight and usually come with a long lead in time.
He said: “So while vigilance is essential there is likely plenty of time to assess any consequences, good or bad, that fall out of a change of political leadership.”
