Andy Burnham is considering keeping Rachel Reeves as Chancellor if he becomes prime minister after lobbying from MPs who back her as the only candidate to safeguard the country’s finances, The i Paper has learned.
The Mayor of Greater Manchester has been told by Labour MPs that he will have to retain her in order not to spook the markets. They compare the situation to when Liz Truss appointed Jeremy Hunt, who was known as a “safe pair of hands” to stabilise the economy after her disastrous mini-Budget.
Some allies believe he has already made up his mind to do so – even though it could mean Reeves has to rip up much of her economic programme.
However, other MPs claim it would be “utterly ridiculous” to allow her to continue given her unpopularity after raising taxes, the winter fuel allowance debacle and weak economic growth.
Back in 2015, when Burnham last stood for the Labour leadership, Reeves was among the first Labour MPs to endorse him. His supporters say the pair’s relationship was so close that had he been victorious he would have made her his shadow chancellor.
One minister, who said they would back Burnham if it comes to a leadership election, was adamant that he must stick with Reeves as Chancellor, adding that there would be a move from MPs to keep her in post.
“The reason why interest rates have been held and not gone up off the back of Iran is because of her handling of the economy. It wasn’t guaranteed that interest rates would be held, but it’s because of her stewardship that they have. And I, along with others, will be making it clear if Andy does become leader that he has to keep her in post if he is to avoid unnecessary instability.”
Burnham ‘won’t want to spook the markets’
Another like-minded Labour MP put it more emphatically, insisting that Burnham had already decided to keep Reeves in post. “It’s a done deal,” he said.
“The last thing Andy will want to do is spook the markets.”
But keeping Reeves could prove difficult for Burnham if he wants to turn Labour’s fortunes around in the polls, given she is so closely associated with Sir Keir Starmer’s leadership and economic policies in the eyes of the public.
She has also faced criticism for introducing taxes that hold back economic growth.
A senior Labour MP questioned the extent to which any new leader would be able to break with current Government policy.
“You’ve still got the same manifesto, the same amount of money,” they said. “What, you’re going to grow the economy magically in the next six months or a year?
“You’ve still got broadly the same people… let’s not overblow the radical differences.”
Some Cabinet ministers have already begun to subtly make their case to Burnham to stay in post.One aide who is lobbying for their Cabinet minister to remain in their role said: “There is going to have to be quite a strong sense of continuity because so much is already under way.
“I think a lot of what Andy does as least in the early days will be based on vibes. It will be hard enough to turn things around without dismantling key planks of the Starmer project.”
A Cabinet source said: “It would be absolutely extraordinary if Rachel Reeves was the only Cabinet minster to survive if Andy Burnham became PM.”
But not everyone in Labour agrees
However, there are others in the Labour Party who believe Reeves is “toast.”
A Labour backbencher said: “Reeves is toast. Obviously, she can’t hang on, that would be utterly ridiculous. Every single big decision has been her fault. Maybe it was the right thing to do, to cut winter fuel allowance. But you can’t do it in the way that she did. So, she has to go.”
Among the policies Burnham’s allies, largely from the North of England, are clamouring for are a so called “land value tax” (LVT) to replace council tax.
However, he has other backers from the opposite wing of the party calling for even more controversial measures, such as reversing the VAT hike on private school fees.
Burnham has already hinted that he is looking at increasing the income tax personal allowance. When asked about this during Thursday’s Question Time, he told the audience: “I’ve heard on so many doorsteps and I’ve said to my team, let’s have a proper look at this and let’s develop a policy.”
And on Friday, Burnham pledged to cut business rates for pubs by 20 per cent if he wins the Makerfield by-election and beats Starmer in a leadership race. He also vowed to abolish business rates for cafes, shops and hairdressers altogether if he entered No10.
Reeves has previously come under fire for extending a freeze on income tax and National Insurance thresholds, which have dragged many more people into higher bands.
First big choice for Burnham
Burnham’s choice of Chancellor will be seen as one if his first big tests and there are plenty of Cabinet ministers in the running. They include Ed Miliband, the Energy Secretary, who is understood to have been advising Burnham for months, and Shabana Mahmood, the Home Secretary, who was among a group of ministers who last month called on Starmer to set out a timetable for his resignation.
One Labour backbencher even suggested that Wes Streeting, the former Health Secretary who resigned from the Cabinet last month as part of the stalled coup, could do a deal with Burnham in which he supported his leadership in exchange for a big Cabinet job.
Streeting as Chancellor would be a “really good idea for trying to reassure the markets”, they said.
However, some Labour MPs are furious with Streeting over his recent comments calling for tax cuts for businesses. Last weekend, Streeting suggested reducing employers’ National Insurance (NI) contributions could be a way to incentivise businesses to hire more young people.
A minister fumed: “Wes did himself a disservice with his criticism of raising NICs on employers, when it was that which handed him the record investment for the NHS.”
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