The next potential prime minister has already set out his plan for income tax, National Insurance and bills like energy, rail tickets and water
Sir Keir Starmer’s resignation paves the way for a new leader following Andy Burnham’s landslide Makefield by-election win on Friday. Sir Keir said there would be a new prime minister in place before parliament returns in September, and Mr Burnham is seen as the frontrunner to take over.
Some of the most important questions are around Mr Burnham’s approach to taxes, borrowing and spending, and who he may appoint as chancellor should he get the top job.
Mr Burnham has stated that he would stick to the fiscal rules set by Chancellor Rachel Reeves and has agreed that the UK needs a plan to reduce its debts. He has also committed to the Labour Party’s manifesto pledge not to raise income tax or national insurance contributions for working people.
However, the politician has said there is a need to bring down water and energy bills and rail fares, having previously advocated for key utilities to come under greater public control, and the “re-industrialisation” across the north of England.
One of the biggest concerns for the financial markets will be who will take up the role of chancellor under a new Cabinet. Dan Coatsworth, head of markets for AJ Bell, said: “Burnham’s choice of chancellor if he becomes prime minister could have a major impact.”
Ed Miliband, currently in charge of energy and net zero, could be a potential candidate for chancellor.
Rob Wood and Elliott Jordan-Doak, economists for Pantheon Macroeconomics, said Andy Burnham could “pitch to Labour MPs’ left-leaning instincts for more spending, funded by higher taxes and moderately looser fiscal rules, as well as additional regulation”.
They added: “We think Mr Burnham would be wary of a big bang fiscal change, because he needs to avoid a repeat of the gilt market meltdown that torched the previous Conservative government’s reputation for economic competence. But risks clearly lean to more spending.”
Kathleen Brooks, research director at XTB, said Mr Burnham would have to “work to persuade financial markets that he is the right man for the job to grow the UK economy and get debt back under control”.
