Shabana Mahmood, the UK home secretary, is set to become Britain’s next chancellor, three people briefed on the thinking of Andy Burnham have told British outlets. The move has been welcomed in the City even before it is made official. One person familiar with the incoming UK prime minister’s plans reportedly stated, “Shabana is nailed down as chancellor. That’s definitely happening.”
An ally of Burnham was more circumspect but no less telling to British reporters, saying only, “I wouldn’t steer you away from that.”
Burnham’s own spokesperson has declined to confirm the appointment, saying cabinet roles will be assigned only after he formally becomes prime minister on Monday, when Starmer travels to Buckingham Palace to resign and Burnham is received by King Charles III.
Why Mahmood, And Why Not Miliband
The expected pick amounts to a significant snub of Ed Miliband, the current energy secretary, who had been considered an early frontrunner and close Burnham ally for the Treasury post.
People close to the incoming UK prime minister’s thinking have now been reported saying that Miliband is likely to be moved instead to foreign secretary, while Mahmood, who sits on the right of the Labour Party, takes the UK’s second most powerful office despite having no economics brief anywhere on her ministerial record.
What she brings instead, allies argue, is discipline as justice secretary and then home secretary. Mahmood is known to have pushed through contentious immigration reforms and has built a reputation as a steady, unsentimental operator trusted by Labour’s centrist and right-leaning factions, a profile that looks, to bondholders, like a far safer bet than a chancellor drawn from the party’s economic left.
Nigel Green, chief executive of the global financial advisory firm deVere Group, said the choice would reassure investors nervous about a change of Labour leadership.
“Shabana Mahmood or Yvette Cooper would send a fundamentally different signal,” Green said. “Both are viewed as pragmatic and disciplined, and neither is expected to tear up the fiscal rules that have kept gilts comparatively stable through the uncertainty of a leadership change.”
Susannah Streeter, chief investment strategist at Wealth Club, noted separately that the identity of the chancellor may matter more to markets than who occupies Number 10 itself, since sustained elevated gilt yields “push up swap rates and, in turn, fixed-rate mortgage pricing,” a direct line from Treasury appointments to household borrowing costs.
How UK Markets Have Already Responded?
The UK market reaction arrived before the appointment was even confirmed. UK government bonds outperformed European peers on Wednesday as investors bet that Mahmood would keep Labour’s economic policy anchored to the centre ground, with the 10-year gilt yield falling 0.05 percentage points to 4.93 per cent even as the equivalent Italian yield rose.
Sterling climbed 1.1 per cent to 1.353 dollars in late London trading the same day. The muted, positive response reflects a broader City verdict that a Mahmood chancellorship represents continuity with the fiscal caution of her predecessor, Rachel Reeves, rather than a lurch toward the more expansive, redistributive economics associated with figures further to Labour’s left.
What Has Burnham Signalled On UK Tax And Spending?
Even as his Treasury pick points toward caution, Burnham’s own rhetoric has left the door open to significant tax rises. Speaking this week, he warned that the coming fiscal decisions would be “difficult” and declined to rule out a wealth tax when asked directly.
“I’m not going to rule things out right now,” Burnham said. “I do believe we need a greater sense of fairness.” He went further in a separate comment, saying, “We are going to have to work quite hard to make sure we can pay our way. And at some point that might be having to ask for a little more.”
UK’s Conservative leader Kemi Badenoch seized on the remarks, saying, “Andy Burnham isn’t even prime minister yet, but he’s already talking about raising your taxes again.”
The first major test of Mahmood’s stewardship, should the appointment be confirmed, will be an autumn Budget that must reconcile Burnham’s populist instincts with the fiscal restraint his appointment is meant to signal.
Burnham has previously called for scrapping the two-child benefit cap altogether, describing it as “the worst of Westminster” and something he said “can’t be defended, because it’s arbitrary.”
As Greater Manchester mayor, he widely criticised the government’s welfare reforms under Reeves, saying disability benefit cuts represented “the wrong choice” and warning they risked “causing some people significant harm.”
Ending the two-child cap alone has been estimated by the Resolution Foundation to cost between 2.5 billion and 3.6 billion pounds in a single financial year, a commitment that would need to be funded from somewhere if Mahmood is to maintain the fiscal discipline markets are currently pricing in.
The Balancing Act Ahead for Andy Burnham
The tension between Burnham’s redistributive instincts and Mahmood’s reputation for caution is likely to define the opening months of the new British government. Reeves herself had resisted calls to scrap the benefit cap outright, telling the BBC’s Laura Kuenssberg earlier this year that doing so would cost “more than 3 billion pounds a year” and insisting Labour would not make “unfunded commitments,” and adding, “I am going to run our economy with iron discipline.”
Whether Mahmood adopts the same posture, or is pushed by Burnham and Labour’s backbenchers toward the kind of wealth taxes, on high-value property, gambling profits or bank earnings, that have circulated in Westminster in recent budget cycles, will shape not only household finances but the credibility of the new UK government’s economic message in its critical first months.
The appointment, at this time, remains unofficial, with Burnham’s team insisting no decisions will be confirmed until he is standing in Downing Street.
