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 government when Andy Burnham becomes prime minister on Monday 20 June.
Though Reeves has been lobbying to keep her job, it seems highly unlikely that Burnham will keep her on – not least because of how unpopular she is.
As a figure so closely associated with the Starmer project, keeping Reeves in No 11 would send the wrong signals to a country that Burnham is promising to change. His platform is much closer to the Labour soft left, and that would not make a good fit for the centrist Reeves.
Try 6 free issues of MoneyWeek today
Get unparalleled financial insight, analysis and expert opinion you can profit from.
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Choosing a replacement for Reeves will be one of the most important decisions Burnham makes as prime minister, as who he chooses to replace her will reflect the style of economic policy he intends to pursue.
Currently, no official statements have been made by the Burnham camp about who the next chancellor will be, but there are rumours.
Who could be the next UK chancellor?
With Reeves almost certainly leaving, there are several high-profile candidates that could replace her. Who are they?
Shabana Mahmood
The current front-runner is Shabana Mahmood, the home secretary, who is now heavily rumoured to replace Reeves as chancellor after Ed Miliband has fallen out of favour with the Burnham camp.
Mahmood was previously the justice secretary but has not held any economic positions within government.
The closest economic experience she has is when she served as the shadow financial secretary to the Treasury from 2013 to 2015 and shadow chief secretary to the Treasury in 2015 under then Labour leader Ed Miliband. When Corbyn became leader in 2015, she did not join his shadow cabinet.
Mahmood belongs to the right of the Labour party and has been instrumental in pushing through controversial, harsh immigration rules. However, we have little basis to predict what her economic policies may be.
Sarah Coles, head of personal finance at AJ Bell, said that 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.”
Before going into politics, Mahmood was a barrister and specialised in indemnity law. She read law at Lincoln College, Oxford (she was in the year below former PM and chancellor Rishi Sunak), graduating with a 2:1.
Ed Miliband
Energy secretary Ed Miliband has also been tipped as the next chancellor. He was widely anticipated to replace Reeves in Burnham’s cabinet, but his stock has fallen in the past few days.
The reason Miliband was expected to replace Reeves is because he belongs to the soft left of the Labour party, just like Burnham, and has held a number of economic positions both in government and in opposition.
Miliband has by far the most economic expertise of any of Reeves’ potential successors. He worked as a special adviser to Gordon Brown in the Treasury between 1997 and 2002, taught economics at Harvard, then rejoined the Treasury team in 2004.
He also read philosophy, politics, and economics (PPE) at Corpus Christi College, Oxford and went on to get a postgraduate degree in economics from the London School of Economics.
“Miliband’s position on the soft left might raise the possibility of more spending and borrowing,” said Coles.
“However, his experience in senior roles, including as a special adviser to Gordon Brown, may lie behind reports that 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.
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.
Wes Streeting
Wes Streeting is another contender for the role. Prior to Starmer’s resignation, he launched a bid to replace Starmer as prime minister, but immediately stood down to make way for Burnham on 22 June after Starmer resigned.
“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 Matthew Ryan, head of market strategy at financial services firm Ebury.
Susannah Streeter, chief investment strategist at wealth manager Wealth Club, 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.
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.”
