John Healey Appointed Chancellor in Surprise Andy Burnham Cabinet Move

For weeks, as ministers jostled, lobbied and positioned themselves for big jobs in an Andy Burnham government, the incoming prime minister remained sphinxlike. He told an interviewer on Monday that he had a black box containing his ministerial picks and major policy announcements, adding that even as he prepared to enter Downing Street: “The black box is still sealed.”

And so, when John Healey was appointed chancellor on Monday after intense briefing from allies of Ed Miliband, Shabana Mahmood and Rachel Reeves, it blindsided even those at the top of the Labour party. “We did not see this coming,” said one Labour MP. “But that is probably a sign that it is a good decision.”

Officials said the prime minister had chosen the former defence secretary because the two agreed on a series of policy ideas, including sticking to borrowing rules, re-industrialisation, devolution and intervention to help with the cost of living. Healey also has Treasury credentials, having been a junior minister in the department for five years under Gordon Brown, during which time he earned a reputation as a stalwart Brownite.

Healey’s appointment gives an indication of the prime minister’s thinking in certain key areas, not least defence spending. His resignation as defence secretary last month, in protest at the proposed defence investment plan, was a critical moment in the downfall of Burnham’s predecessor, Keir Starmer.

Some Starmer allies believe that resignation sapped the former prime minister of his will to fight Burnham for the premiership. Some even think Healey did a deal to become Burnham’s chancellor before announcing his resignation from Starmer’s government.

Healey will almost certainly use his new position to increase defence spending. One way to do so might be to issue “defence bonds” – new borrowing allocated only for the military – which Healey advocated in government and now has a chance to enact.

While the chancellor’s allies have been pushing his case in recent weeks, they have done so less vociferously than others. Healey himself told friends he was looking forward to having a break from government to spend time with his wife.

Friends of three other big hitters – Ed Miliband, Shabana Mahmood and Rachel Reeves had been more active in Labour circles and in the press. Weeks before Burnham was elected as Makerfield MP, some in the Labour party thought Reeves was positioning herself to stay in post as chancellor.

Her proposal to freeze private sector rents – something that had not previously been mentioned as a government policy and was quickly slapped down by Starmer and other senior ministers – was seen as deliberate signal to the more interventionist Burnham. Katie Martin, one of her most senior advisers, was calling business lobbyists and executives asking them to press her case, either publicly or privately.

Supportive MPs were also rallying round. One told the Guardian: “I am concerned that we may lose everything if a new leader sacrifices the chancellor for promises and new alliances they are currently forging with MPs who fancy the job for themselves. The biggest fear for the bond markets and the unions is Ed Miliband.”

In the end, none of this pressure was enough. Reeves resigned from the government on Monday having turned down the offer of another big appointment – reported to be that of defence secretary.

Miliband’s allies also spent time pressing his case. Friends responded angrily to suggestions that he would not be business-friendly, arguing that his efforts to increase funding on green infrastructure had been pro-growth and pro-industrialisation.

Several union leaders gave him their public endorsement – an unprecedented move for a potential cabinet pick. “We need a chancellor who will rewire the economy and properly invest to improve the lives of the majority,” said the Unison leader, Andrea Egan. “Of those reported to be in the running, only Ed Miliband could enact the kinds of policies trade unions and our members urgently need.”

Many of those closest to Burnham also indicated they thought he should be the pick. One said: “We need someone who knows the Treasury, can push back on what civil servants naturally want to do and has a proven track record of achieving things in government. That has to be Ed.”

Speaking soon after the Makerfield byelection, another said choosing Miliband as chancellor was a decision the incoming prime minister should “spend political capital on”.

Others, however, were always sceptical. One Burnham ally described Miliband’s previous leadership of his party as having “screwed up the Labour party for a decade”. Another accused his allies of “living in cloud cuckoo land”.

The heavy lobbying from senior figures in business and the markets against Miliband’s candidacy seemed to count against him however. With the Iran war threatening another bout of inflation and borrowing costs having moved up in recent weeks, even his former supporters expressed doubt in recent days. “It might just be time for a fiscal hawk,” said one MP who had previously advocated on his behalf.

It was against this rancorous backdrop that those close to Mahmood thought she might have a chance to take over at the Treasury. She had told friends she wanted to remain as home secretary to oversee the contentious changes to the asylum and immigration that she launched earlier this year.

But as the Labour party became more divided over who should be chancellor, her allies began mentioning her as a possible pick, despite having said little about economic policy in the past. Those who do know her economic views say she would have been fiscally dry – indicating she would be resistant to borrowing much more – but coupled with a commitment to re-industrialisation that echoed Burnham’s own.

The prime minister is known to be an admirer of Mahmood, indicating during the Makerfield campaign that he backed her migration reforms despite significant opposition in the parliamentary Labour party. Her case was being taken so seriously among Burnham’s supporters that one of them told the Financial Times just days ago: “Shabana is nailed down as chancellor. That’s definitely happening.”

In the end, she will be allowed to continue in post, as she always said she wanted, in a clear sign there will be no major watering down of her proposals. It was not just the Treasury, however, that became the subject of heavy lobbying from cabinet ministers uncertain of their fate.

Steve Reed, the outgoing housing and communities secretary, gave interviews and speeches in his final weeks in office stressing his commitment to devolution – one of Burnham’s main policy priorities.

Reed’s allies expressed frustration that he was not getting credit for what the government had already done to push power out of Whitehall – but it was not enough to save his job and he left the government on Monday.

Several other ministers were also privately candid about what jobs they would ideally like to do. More than one talked about their expertise in the technology sector – though in vain, given Burnham is expected to scrap the technology department altogether.

Some in international roles were keen to stress their domestic policy credentials, given that is likely to be where the prime minister puts much of his focus. However, those close to the prime minister say the lobbying campaigns waged by ministers’ proxies may have backfired.

“Andy hates people briefing themselves into jobs,” said one aide. “Anyone doing so is just as likely to find themselves out of government.”