Chancellor chaos engulfing Burnham: Shabana Mahmood is now the front runner as he dithers… and U-turns on Miliband

Andy Burnham’s incumbent government has descended into chaos as it remains undecided on whether to appoint Ed Miliband or Shabana Mahmood as Chancellor.

A bitter briefing war has broken out in Westminster following news that Mr Miliband’s dream of a Treasury job will be shattered.

While an ally of Mr Burnham claimed he had been ‘chosen as Chancellor’, Ms Mahmood has emerged as the favorite for the role.

But others close to the new Prime Minister insisted he had not yet made up his mind on an appointment that would determine the course of his government, just days before he enters Downing Street on Monday.

Foreign Affairs Minister Yvette Cooper is also still pushing for the role; friends highlight his experience as Treasury secretary in the last Labor government.

Mr Miliband has long been the favorite for the job and has been working with Mr Burnham on his economic plans for the government for months.

But the prospect of him taking up a Treasury post has triggered a fierce backlash uniting business, unions and Blairite Labor MPs.

Sharon Graham, general secretary of the powerful Unite union, warned Mr Burnham last month that Mr Miliband’s obsession with Net Zero would be ‘a noose around his neck’ on job creation.

While some Burnham allies believe Shabana Mahmood has won the race to become Chancellor, Ed Miliband’s Net Zero obsession worries investors and unions

A Bloomberg survey of investors on Wednesday found only five per cent backed the idea of ​​appointing the former Labor leader as Chancellor. Ms Mahmood fared slightly better with 11 per cent support. Former health minister Wes Streeting came first with the support of more than 30 per cent of investors but has fallen out of favor.

But sacking Mr Miliband now could trigger a major row among Left-wing MPs, forcing Mr Burnham to make a major change of direction.

There was speculation last night that Mr Miliband could be made foreign secretary as a consolation prize. But his rejection of the Treasury would risk angering a key ally who played a key role in the sacking of his former friend Keir Starmer.

Last night his supporters were still lobbying for him to get the job.

A Labor MP sympathetic to Mr Miliband said he was the only minister with the experience needed to implement radical changes to the Treasury.

‘Ed has shown he can get things done in government and has the experience to take on the biggest hurdle to real change: the Treasury,’ the source said. ‘If Andy botches this now he will end up running a continuing Starmer government with the Treasury still in charge. ‘This is a sure recipe for failure.’

Ben Obese-Jecty, a leading figure in the Conservative Party, said Mr Burnham’s indecisiveness was already damaging the country.

Burnham and Mahmood were filmed in October last year

Prime Minister-in-waiting hugs Miliband in July 2024

He told the Mail: ‘Just days before he takes office as prime minister, Andy Burnham’s paralysis over who will be chancellor amid infighting within his inner circle shows just how unprepared he is to govern.

‘Burnham’s rush to seize power by avoiding scrutiny and without any plan or economic vision after the disaster of the Starmer administration suggests he is on the verge of filling his Cabinet with last-minute panic appointments.

‘The next phase of this ill-conceived coup appears to be in trouble.’

A spokesman for Mr Burnham said ‘no decisions have been made’ about the makeup of his new cabinet.

But an ally of the new Prime Minister told the Financial Times: ‘Shabana has been installed as chancellor. This is definitely happening.’

Ms Mahmood was keen to remain at the Home Office and moving her would create a vacancy that would be difficult to fill. He has limited economic experience having served in opposition as a junior member of Labour’s Treasury team. The appointment of a member of the Labor Party to this post may also bring about a reaction from Left MPs.

By contrast, Ms Cooper has significant experience having served as chief secretary to the Treasury in the last Labor government.

Mr Miliband was an adviser to Gordon Brown at the Treasury for many years.

Treasury officials are preparing to brief Mr Burnham and his new chancellor on the poor state of the public finances when he takes office next week. The Resolution Foundation think tank warned last night that the new Prime Minister and chancellor were ‘not starting from a financially strong position’, with the Iran war reducing the government’s financial share by almost £15bn.

Mr Burnham last night hinted he was preparing to introduce tax rises, saying people could be asked to pay ‘a little bit more’.

Kemi Badenoch said: ‘We are heading for another summer of chaos, with Labor obsessing over who it can tax to deliver more benefits. ‘It doesn’t matter who is responsible, Labor is the problem.’