Incoming UK Prime Minister Andy Burnham has been warned by Nigel Green, CEO of deVere Group, to keep Ed Miliband out of the Treasury to prevent a negative impact on markets. According to reports, Burnham’s opponents have stopped Miliband’s bid for the Treasury, instead suggesting home secretary Shabana Mahmood or foreign secretary Yvette Cooper as contenders for the role.
Miliband, who was a key supporter of Burnham’s leadership campaign and the first Cabinet minister to call for Sir Keir Starmer’s resignation, is expected to be offered the Foreign Office instead.
Burnham will take office on Monday, July 20, making him the UK’s seventh prime minister in a decade. His choice for Chancellor, the eighth in 10 years, is a crucial test of his economic credibility. Investors have already shown their nerves as gilt yields spiked to an 18-year high on the 10-year and a 28-year high on the 30-year when Miliband’s name was mentioned as a potential contender for the role.
According to Green, this is a clear indication that investors do not want to see a Miliband-led Treasury. He is known to be fiscally expansive and cautious of businesses, which has raised concerns among institutional investors. His past record of blocking new oil and gas licenses and his stance on net zero have also raised doubts about his ability to manage the country’s finances.
Green warns that appointing Miliband as Chancellor could have a negative impact on not just gilt yields, but also on the value of the pound. This, combined with the recent rise in energy costs due to the Hormuz crisis, could lead to a selloff in both currency and bonds, resulting in increased borrowing costs for mortgages, businesses, and the government.
On the other hand, Green believes that appointing Mahmood or Cooper as Chancellor would send a positive signal to markets. Both are viewed as pragmatic and disciplined, and are not expected to make any drastic changes to the current fiscal rules, which have helped keep gilt yields stable during the leadership change.
Green acknowledges that Burnham has shown caution so far and has expressed respect for the existing fiscal framework. However, he cautions that appointing Miliband as Chancellor would use up all the goodwill he has gained from investors in a single day.
According to Green, this is the first real test of Burnham’s premiership, and it is being closely watched by markets. He believes that making the right decision will buy Burnham time and credibility with investors, while making the wrong decision could result in a mini-budget moment for Burnham even before he delivers his first speech from Downing Street.
