Mahmood frontrunner for UK chancellor as markets reject Miliband

Shabana Mahmood has emerged as the likely next chancellor of the exchequer after Andy Burnham takes office as UK prime minister on Monday. The current home secretary overtook Ed Miliband for the role following a backlash from business leaders, unions and investors who feared the energy secretary would upend economic policy.

The prospect of a Mahmood-led Treasury was met with immediate approval in financial markets. The pound rallied and the yield on 10-year UK government bonds fell by 0.06 percentage points on Wednesday. Investors had been bracing for Miliband, viewed by the City as an ideological figure who might fund a radical policy shift through heavy borrowing.

While Mahmood lacks a strong public record on economic issues, the City regards her as a more centrist option, particularly given her hardline immigration stance. However, some Labour insiders warn this market optimism may be misplaced. "I am also not sure the markets will ultimately like her; she is a protectionist," one minister said. Her allies note she sits to the left on economics, aligning with Burnham on fiscal devolution and public ownership of utilities.

If confirmed, her first priority will be drafting an emergency cost-of-living package. Measures under consideration include targeted energy bill support, a rent freeze and a cap on bus fares. She will then pivot to an autumn budget, where Burnham has signalled a desire for higher taxes on the wealthy. "At some point that might be having to ask for a little more," he said.

Miliband is now expected to move to the Foreign Office, possibly with the added title of first secretary of state. Wes Streeting is tipped to replace Mahmood at the Home Office. The broader personnel picks, including Graeme Cooke as No 10 policy chief, point to a leader intent on tightening his grip on domestic strategy. "Appointing Graeme is a sign of a prime minister who is going to take much greater charge of his policy output," a former colleague said. "This is Andy saying: ‘I’m the guy that makes the decisions and you are the people who find ways to implement them for me.’"