As Sir Keir Starmer’s premiership appears to enter its final days, some Labour MPs are quietly beginning to look beyond the Prime Minister’s now inevitable demise and ask another question: who will become the next Chancellor?
It is a question that needs consideration, because the consequences are enormous. In so many ways, prime ministers live and die by the track record of their chancellors. Is the economy growing? Do people feel better off? Have taxes gone up or down? Are public services working?
Starmer’s crisis-ridden 22 months in office have proved no different. While the buck always stops with the Prime Minister, so much of the damage to his popularity and authority has been done by the decisions taken by his Chancellor. Labour’s woefully inept return to power has been defined by the failures of Rachel Reeves, who must surely go down as one of the worst chancellors in recent history.
Reeves said her number one priority was economic growth, but she has delivered none of it. She is said to harbour hopes of continuing as Chancellor even if Starmer is forced to go. That is delusional, pipe dream stuff – a sign of just how out of touch with reality she appears to be. Whoever succeeds Starmer will need to make a clear break from the failures of the past two years, including jettisoning a wildly unpopular Chancellor who has her fingerprints on so many of the Starmer Government’s biggest mistakes.
The next prime minister will therefore need to make an early decision that is likely to define their premiership: who should become chancellor. This, of course, depends on who succeeds Starmer. If Greater Manchester Mayor Andy Burnham or another candidate from Labour’s so-called soft left wins the race, Ed Miliband is very likely to get the job. The former leader has emerged as the unofficial leader of the Parliamentary Labour Party’s biggest ideological grouping and, along with former transport secretary Louise Haigh, is leading the push to try to install Burnham as prime minister. Miliband is rumoured to have long had his eye on the Treasury job. If Burnham or any other soft-left candidate becomes leader, he would surely get his way.
If Health Secretary Wes Streeting or another more centre-ground candidate enters No 10, though, the contest to become chancellor will be much more interesting. Streeting’s allies say his instinct would be to appoint somebody who shares his political values – someone like Business Secretary Peter Kyle. Kyle and Streeting entered Parliament at the same time and shared a Westminster office for almost a decade. They are politically aligned but are also close friends away from politics. A different option from Labour’s right-leaning flank would be current Home Secretary Shabana Mahmood. Yet Streeting may decide she is best left in place to continue with her controversial immigration reforms.
Plus, Streeting will come under enormous pressure to look beyond his natural allies. His views are to the right of most Labour MPs and the vast majority of the party base. If he were to find a way to become prime minister nonetheless, there would be enormous pressure to unite the party and appoint a chancellor from the rival camp: from Labour’s soft left.
Miliband would again be the obvious choice, though Streeting’s strained personal relationship with the Energy Secretary might rule that out. Experienced Defence Secretary John Healey could also be an option. But there is a more tantalising prospect: Streeting could bring his biggest rival into the tent and unite the party by finding a way to help Burnham return to Westminster and appointing the Greater Manchester mayor as chancellor.
While Burnham’s past comments about Britain being “in hock” to the bond markets would likely send jitters through the City of London, such a move would be hugely popular with Labour MPs and members. And there is another advantage. Whoever succeeds Reeves will need to deliver change on a scale and at a pace that far outweighs what Labour has done so far. As mayor, Burnham has shown exactly the sort of reforming zeal that the next chancellor will need.
None of this will be easy, not least because Labour’s manifesto committed the party to following a set of strict fiscal rules that make it very difficult for the chancellor to borrow more money. The next prime minister and chancellor will have to make a huge decision: with taxes already at cripplingly high levels and the economy stagnant, should they rip up that promise or bind themselves with the same constraints that stymied Reeves and Starmer?
Labour MPs will be lobbying Reeves’ successor to ditch the rules and to start splashing the cash in an attempt to deliver meaningful change in time for the next election. A change in leadership would provide an opportunity to do so: a new leader would not be quite as bound to the 2024 manifesto as Starmer and Reeves.
Yet any attempt to ditch the borrowing rules would likely send the cost of government borrowing rocketing. Investors will not look favourably on any lurch leftwards by Labour, let alone a new chancellor deciding to throw off the fiscal shackles and kickstart a borrowing splurge. The next chancellor will have to decide whether that is a price worth paying, if, in the short term at least, it frees up more money to spend on defence, the NHS and cutting taxes.
As the possible successors to Starmer weigh up all of this, they should learn a crucial lesson from his mistakes. Starmer appointed Reeves because they were close personally and politically. That was an error. While Reeves’s political mundanity helped convince investors that Labour would not rock the economic boat, it quickly became obvious in government that she shared too many of Starmer’s flaws: a crippling caution, a dearth vision and ambition, a lack of political foresight and judgement.
Prime ministers and chancellors work best when they bring different skills to the table: Tony Blair and Gordon Brown had very different personalities, as did David Cameron and George Osborne and Boris Johnson and Rishi Sunak. Starmer appointed a Chancellor in his image, ensuring that the two most important people in his Government had the same, limited skillset.
In no small part because of this, Starmer will soon be out of office. So too will Reeves. Westminster will descend into a frenzy over who our next prime minister will be. But amid the fevered speculation, keep an eye on who is making the case to become the next chancellor. That contest, too, will be crucial – not just for the future of the Labour Party, but for us all.
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