As speculation over the Labour leadership grips Westminster, one question has emerged above all others for Andy Burnham: who would he appoint as Chancellor?
Burnham’s journey toward Downing Street has featured scores of polls outlining his popularity among Labour members, and Labour MPs travelling to Greater Manchester to “kiss the ring.”
His comments that Labour leaders cannot be “in hock” to the bond market sparked fear and derision in the City when he uttered them last year.
Combined with pledges to cut taxes and nationalise major companies, the former Manchester mayor has remained a figure of suspicion to economists, opposition groups and the Labour government alike.
Whoever enters Number 11 will face a bulging in-tray, including calls for greater defence spending, debt interest costs forecast to jump to over £120bn by 2030, and potential nationalisation of major utility firms such as Thames Water.
Chancellor Rachel Reeves would represent the smallest fiscal risk from City traders’ perspective, with her team briefing newspapers on her ability to keep bond markets on-side and stave off a debt crisis.
The International Monetary Fund said her fiscal rules represented a “good balance between deficit reduction and growth-friendly spending,” and Burnham’s team has already pledged allegiance to those rules during his campaign in Makerfield.
However, reports suggest Reeves would lose her job if Burnham became Prime Minister, and a recent quarrel with John Healey over defence investment has placed her at the centre of another major fiscal row.
Ed Miliband has appeared to build close ties with Burnham, with one of his special advisers working with the former Manchester mayor during the by-election campaign, and he looked destined to be handed the top economic role.
But Quilter’s Lindsay James warned that Miliband would be viewed as a dangerous Chancellor selection for investors as he “would come with a reputation of having priorities other than maximising growth within existing fiscal constraint.”
Sharon Graham, the general secretary of Unite, fears Miliband’s net-zero push would decimate industrial jobs, a concern that jars directly with Burnham’s pledge to re-industrialise the UK.
Wes Streeting has made no secret of his ambitions to become Prime Minister, making Burnham’s political ascendancy a direct hindrance to those personal goals.
Streeting has endorsed a growth report written by Mark McVitie for the Labour Growth Group, calling for capital gains taxes to be equalised with income taxes while offering an “investment allowance” to boost start-ups.
Whether Burnham could put aside Streeting’s stinging critique of him for “appeal[ing] to the party faithful at the expense of the British people” remains a significant political question.
John Healey resigned from the Cabinet after blaming the Treasury for only giving the defence budget a rise of 0.08 per cent in funding by 2030, declaring that “our adversaries do not follow timetables set by the Treasury.”
Bond markets and businesses may raise an eyebrow at Healey as a prospective Chancellor given his limited credentials in political economy, though he might benefit from a honeymoon period as economists assess his approach.
Among the dark horses, Miatta Fahnbulleh, the MP for Peckham and former chief of the New Economics Foundation, was one of the first MPs to directly call for Burnham’s return to parliament and the first government minister to call for Starmer to resign in May.
Mizuho Group analyst Jordan Rochester suggested Yvette Cooper would be a safe pair of hands in markets’ view, given her experience as chief secretary to the Treasury under Gordon Brown.
Sacked Transport Secretary Louise Haigh, a key Burnham ally on the campaign trail, has urged Reeves to “rewrite the rules” and “confront the economic straitjacket” at the heart of the establishment.
Haigh’s divisiveness amongst the electorate and controversial background may ultimately prove the setbacks that prevent her from securing the keys to Number 11.