Starmer out, Burnham in: what’s next?

The resignation on Monday 22 June of Sir Keir Starmer, timed for shortly before the (delayed) arrival at Euston of former mayor of Manchester, now MP for Makerfield Andy Burnham, could mark a major change in UK fiscal and economic policy.

At the time of writing, it looks likely that on 16 July, when nominations for the Labour Party leadership race close (and parliament begins its summer recess), Andy Burnham will step unopposed into 10 Downing Street. So, what can we expect?

The fate of the fiscal rules

Burnham, who was briefly Chief Secretary to the Treasury under Alistair Darling in 2007, has said that he will stick to the set of fiscal rules set by Chancellor Rachel Reeves. The current main target of these rules is to have day-to-day government spending at least matched by tax revenue by 2029/30. The Autumn 2025 Budget assessment from the Office for Budget Responsibility (OBR) projected that this goal would be met with a margin of £22 billion. However, since last November the Iran war has cast its shadow over the economic outlook. In the first two months of the current financial year, government borrowing was £7.7 billion above the OBR’s forecast.

Burnham’s economic advisers include Andy Haldane, former Bank of England chief economist and Jim O’Neill, former Goldman Sachs chief economist. Both have said the current fiscal rules should be relaxed to permit more borrowing for investment. Burnham could stick with the fiscal rules, but as Reeves did, modify them. Rule changes are unfortunately commonplace – there have been nine different sets since 2010, according to the Institute for Government. If he leaves the rules unchanged, he will benefit from extra wiggle room built into them by Reeves, with a deferred start of 2026/27.

Tax policy

Burnham has said that he sees “a big case for land and business and property tax to be changed” and reform of council tax (which is a devolved tax). A land tax is often floated by left-leaning think tanks, such as the Institute for Public Policy Research (IPPR), but he would need a second term to implement such a change. Rachel Reeves’ much smaller High Value Council Tax Surcharge (HVCTS – aka mansion tax) is not due to start until April 2028.

During the Makerfield campaign, Burnham spoke of replacing inheritance tax (IHT) with a social care levy, echoing a 2009/10 proposal he made when Health Minister. Back then he was talking about a 10% levy in addition to IHT. As IHT is set to raise £9.5 billion in 2026/27, replacement was probably an unfortunate choice of words. In any event, Baroness Casey is in the middle of a review on social care, with a preliminary report due this year (and the final version out in 2028).

The markets

Last September, when Burnham was making a leadership bid at the Labour Party conference, he gave an interview to the New Statesman in which he called for UK government to “get beyond this thing of being in hock to the bond markets”. The comment was widely criticised and was seen by some at the time as sinking his attempt to replace Starmer. Burnham has said his comment was misinterpreted, but he has since avoided poking the bond market further. During the Makerfield campaign he pulled out of a call with hedge fund managers on bond market issues.

In a similar vein, Burnham also backtracked on a previous proposal to exclude borrowing for defence from the fiscal rules (an approach adopted by Germany). The Liz Truss episode looms over every would-be prime minister…

The next Chancellor?

Burnham has said nothing about his choice of Chancellor. While Rachel Reeves was a notable absentee from Starmer’s Monday Downing Street podium announcement, but did turn up in Westminster for Burnham’s arrival, it is unlikely she will remain in post. Her initial failure on the Winter Fuel Payment and later unsuccessful attempt at disability benefit reform both point to a change of cabinet role.

The list of potential new 11 Downing Street occupants is ever expanding, with John Healey, the former Secretary for Defence, added to Wes Streeting (no longer a challenger), Shabana Mahmood, Yvette Copper and Ed Miliband. Miliband has been advising Burnham on his fiscal approach and has five years of Treasury experience (as an adviser to Gordon Brown from 1997 to 2002). However, he would be an unpopular choice in some quarters:

His 2011 Labour conference speech in which he spoke of businesses dividing between “producers and predators” has not been forgotten in corporate circles.
Markets would regard him as the most left-wing choice of potential candidates and worry accordingly.
His green credentials also jar with some parts of the union movement. At the weekend Sharon Graham, leader of the largest trade union, Unite, said Miliband would be a “noose around the neck” of job creation.

The Autumn 2026 Budget

Whichever name Burnham chooses from the list, the next Chancellor faces a difficult Autumn Budget. The Iran war has given renewed impetus to inflation and shows signs of slowing the UK economy – after 0.6% growth in the first quarter of the year, the month of April saw a 0.1% decline. As mentioned above, government borrowing is running at nearly £8 billion over target only two months into the fiscal year. Defence spending is an all too obvious pressure. And that is all before any spending plans that the new prime minister might have.

A November Budget again looks possible. That would give the new Burnham team time to develop its plans and, possibly, a chance for economic conditions to improve if the situation in the Strait of Hormuz continues to ease. However, a late Budget with a new Chancellor threatens another summer/autumn spell of tax increase speculation.

The heat on the new incumbent in Downing Street and his team, assuming all goes according to plan, won’t just be coming from the record temperatures.

Tax treatment varies according to individual circumstances and is subject to change.
The Financial Conduct Authority does not regulate tax advice.

Sources

Andy Burnham

https://members.parliament.uk/member/1427/career

https://obr.uk/docs/3a1ad916af5766cb615e3adfb451457a/PSF-commentary-May-2026.pdf

https://www.instituteforgovernment.org.uk/explainer/fiscal-rules-history

https://www.kingsfund.org.uk/insight-and-analysis/blogs/death-tax-social-care

Ed Miliband 

https://members.parliament.uk/member/1510/career

Ed Miliband speech to Labour conference, 27 September 2011 – https://www.bbc.co.uk/news/uk-politics-15081234

https://www.ons.gov.uk/economy/grossdomesticproductgdp/bulletins/gdpfirstquarterlyestimateuk/latest

https://www.ons.gov.uk/economy/grossdomesticproductgdp/bulletins/gdpmonthlyestimateuk/april2026