Will Rachel Reeves still be the chancellor following Starmer’s resignation?
A new prime minister usually means a new chancellor too, and Reeves is expected to leave. Who might replace her?
Chancellor Rachel Reeves looks set to follow her boss Keir Starmer out of Downing Street following the prime minister’s resignation on 22 June.
At present, Andy Burnham appears the most likely candidate to replace Starmer – though a leadership contest could still take place if any Labour MP decides to challenge him.
One contender could be Al Carns, who stepped down as armed forces minister earlier in June over criticism of Starmer’s defence investment plan. Carns told journalists at the Foreign Press Association on 23 June that he hadn’t ruled out running for prime minister.
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When the prime minister changes, the chancellor usually changes too. Jeremy Hunt was the last chancellor to survive a change of prime minister, from Liz Truss to Rishi Sunak – though Truss had only appointed Hunt after dismissing her original chancellor, Kwasi Kwarteng, following the infamous ‘mini budget’ in 2022.
Prior to that, Reginald Maudling was the last chancellor to stay in the post after the prime minister left, when Sir Alec Douglas-Home entered number 10 following the resignation of Harold Macmillan in 1963.
But with Reeves tied so closely to Starmer’s policies, it seems unlikely she’ll survive the transition at the top.
“Focus has already turned to Number 11, and the identity of the new chancellor of the exchequer,” said Matthew Ryan, head of market strategy at financial services firm Ebury.
Who could be the next UK chancellor?
If Rachel Reeves does lose her position as chancellor, there are several candidates that could replace her. So who are some of the high profile contenders?
Wes Streeting
Wes Streeting is one of the names at the top of this list. Prior to Starmer’s resignation he appeared to be a potential candidate for the top job, but immediately after Starmer resigned on 22 June, Streeting announced that he wouldn’t challenge Burnham for the position.
“Of the potential candidates, we view Streeting as the most bullish outcome for the pound, given his centre-left pragmatism and apparent aversion to aggressive tax-and-spend policies,” said Ryan.
Susannah Streeter, chief investment strategist, remarked that Streeting appears to be the front-runner for the position on the assumption that Reeves would be “ousted”.
“From any new chancellor, financial markets would initially be looking for stability and signs of action aimed at stimulating sustainable growth, and Streeting [would be] likely to initially try to project reassurance and a business as usual attitude aimed at reassuring investors and keeping a lid on high government borrowing costs,” said Streeter.
Streeting was previously secretary of state for health and social care, before resigning from the position in May.
Ed Miliband
Currently secretary of state for energy security and net zero, Ed Miliband is another possible contender for number 11 in a post-Starmer administration.
“Miliband’s position on the soft left might raise the possibility of more spending and borrowing,” said Sarah Coles, head of personal finance at investing platform AJ Bell. “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.”
Coles suggests that Miliband might turn to progressive taxes, or reviewing tax cuts that mostly benefit higher earners, in order to balance the government’s books.
“He has previously supported a mansion tax. He might also consider more environmental taxes,” said Coles.
Coles added that Miliband’s association with net zero could reduce his chances of landing the role given opposition from some business leaders and trade unions.
Shabana Mahmood
Another option, though one whose agenda as chancellor is harder to predict, is current home secretary 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,” said Coles.
“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.
This could clash with a desire on Burnham’s part to draw a line in the sand between the Starmer government.
“More recent reports suggest Mahmood is less of a front-runner for the role than originally thought,” said Coles.
Yvette Cooper
Foreign secretary Yvette Cooper could also be a contender for chancellor, and might be well-received by markets, according to AJ Bell’s head of financial analysis Danni Hewson.
“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,” said Hewson. “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."
Adding to the possible appeal of Cooper is the fact that, as a northern MP, she has a good working relationship with Burnham.
“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,” said Hewson.
Could Rachel Reeves play a role in the next government?
While it is unusual for senior ministers to accept demotions, the BBC has reported that sources close to Andy Burnham suggest she could do so, and take up a more junior ministerial role in a Burnham government.
Either way, Reeves is backing Burnham to be prime minister. She told the British Chambers of Commerce annual conference on 25 June that Burnham was committed to following the same fiscal rules that guided her term as chancellor.
“Andy has been really explicit - he backs those fiscal rules,” said Reeves.
“He is a great communicator, he's got a great track record of delivering in Greater Manchester, and I have no doubt he will bring that to the position of prime minister.”
