Prime Minister Andy Burnham has sought to repair a hit to UK defence credibility with the appointment of John Healey as Chancellor, weeks after he quit government in a row over funding the military.
As the first name in Mr Burnham's roll-out of his new cabinet, the former defence secretary's emergence with the finance portfolio took Westminster watchers by surprise.
Mr Burnham took office earlier on Monday as Britain's fifth prime minister of the 2020s. In brief comments to the press before his cabinet announcements, Mr Burnham said he would “stick to the fiscal rules, and by that I mean the existing fiscal rules, and use. obviously, any flexibility within them”.
Press reports say Mr Healey had recently lobbied Mr Burnham on using “defence bonds” in a special issuance to fund the Defence Investment Plan.
It had been expected that either Home Secretary Shabana Mahmood or left-wing champion Ed Miliband would be given the keys to the Treasury. Mr Miliband was handed the Foreign Office while Ms Mahmood remains in post at the Home Office.
Both appointments would have put a highly influential Labour figure – and a possible Burnham rival – at the heart of government.
Instead, he has opted for Mr Healey, whose experience in government stretches back to Treasury posts in the last Labour government in the 2010s.
His key role will be to maintain stability and to control spending, with Mr Burnham potentially pushing for more money to invest in industries and government-related businesses.
The fiscal rules mean he has to get debt falling with no borrowing for the day-to-day running of government. But it is understood that the new Prime Minister could remain within the fiscal rules and still borrow up to £16 billion to invest in infrastructure, including defence spending.
Ms Mahmood remaining as Home Secretary came after a raft of sackings and resignations of leading figures in Keir Starmer’s cabinet, including previous chancellor Rachel Reeves, deputy prime minister and former foreign secretary David Lammy, attorney general Richard Hermer, housing secretary Steve Reed and business secretary Peter Kyle.
“Stability restored, investment delivered and reform to our economy under way,” Ms Reeves wrote on social media announcing her resignation. It is understood that she was offered a more junior role, possibly defence, but declined it.
The appointments came hours after Mr Starmer went to Buckingham Palace to hand his resignation to King Charles III. Mr Burnham was appointed a short while later.
Mr Burnham won the Labour leadership contest unopposed on Friday. His win followed Mr Starmer's resignation in June after more than a year of sinking popularity and falling support among the glut of MPs who entered parliament in the 2024 landslide election.
The new Prime Minister is expected to make a major announcement on the cost of living on Tuesday that could result in low earners paying less tax and the rapid introduction of rent controls.
The remainder of Mr Burnham's cabinet is expected to reflect a balance of experience and fresh talent, with appointments to the foreign office, health, education and the home office.
