Reeves backs Burnham to be PM despite reports she may be offered lesser role | Rachel Reeves

Rachel Reeves has backed Andy Burnham to become the next prime minister, despite reports that she would be sacked as chancellor if he becomes Labor leader.

The chancellor told the BBC that he and Burnham were friends and that he had not ruled out accepting a lower-level cabinet position. “I support Andy becoming prime minister,” he said.

Asked about reports that Burnham might offer him a less prominent role in the cabinet, Reeves said: “I’m not going to pre-empt the decisions the new prime minister will make. I support Andy. I think he’ll be a great prime minister but those are his decisions, not mine to make.”

Speaking at the British Chambers of Commerce (BCC) global annual conference on Thursday, Reeves said it was clear Burnham would maintain his financial rules, which he described as “a good thing”.

Asked if Sky News presenter Sophy Ridge had “unfinished business”, she staunchly defended her record but said financial devolution and business rates were areas where she wanted to go further.

“I know whoever becomes prime minister and chancellor in the future will inherit a stronger economy than the one I inherited two years ago,” he said.

He said fiscal rules already allow more borrowing for defense – an idea consistently opposed by the Treasury – after the Guardian reported that senior government officials planned to lobby the next prime minister to revive the idea of ​​”war bonds” for higher defense spending.

Reeves said the defense investment plan, which will be published before the next prime minister is appointed, will include “more money spent more effectively”.

When asked whether classifying defense spending as investment could allow for more borrowing, Reeves said: “My fiscal rules allow for exactly that. For the first time, we’re treating day-to-day spending and capital spending differently because of the fiscal rules.”

Defense is a capital investment, he said, adding: “What’s also really important is that we get better value for money for our defense spending, so cooperation with our NATO allies, particularly our European NATO allies, is really important.”

Reeves, who became the first female chancellor after Labour’s landslide election victory in 2024, has been strengthening her position since it emerged that Burnham could become the next prime minister.

He was not present when outgoing prime minister Keir Starmer made his resignation speech but attended Burnham’s Westminster Hall rally on Monday. A Labor source said that although the chief of staff was seen as the centerpiece of Starmer supporters, his absence was notable. “It’s pretty crazy that Rachel accepted a job,” they said.

Reeves told the BBC that “nobody can doubt” his loyalty to Starmer, with whom he has worked alongside since entering the 10th place.

He said: “I have been with him for six years as shadow chancellor and then as chancellor of the exchequer. I know whoever becomes prime minister and chancellor in the future will inherit a stronger economy than the one I inherited two years ago.”

His support for Burnham follows reports that one of Reeves’ top aides had encouraged some of Britain’s biggest companies and trade unions to lobby Burnham to keep the top job at the Treasury.

Officials, including Katie Martin, who was appointed as Reeves’ business adviser in January, are said to have called some major companies in the insurance, banking, defense and other sectors this week to plead “stability” and “continuity”, according to Sky News.

Speculation about Burnham’s choice for chancellor has increased as the new Makerfield MP’s route to 10 Downing Street becomes clearer. The next occupant of Number 11 could define his time in office, with MPs saying it would give the clearest sign of how radical he plans to be.

Burnham’s supporters are said to be divided over the choice, with a briefing war breaking out between defenders of former health secretary Wes Streeting and those close to energy secretary Ed Miliband.

Some allies see Streeting as a more reassuring option for business and the fossil fuel industry, but others are lobbying Miliband, who they say is more likely to support radical policy ideas and push through reforms.

Some in Labor have warned against Miliband’s appointment, with the prime minister’s principal secretary, Darren Jones, suggesting the former party leader would not pass his “tests” for a new chancellor. Jones said any new chancellor should not try to “control” the prime minister and should reassure markets, unions, MPs and the public.

Burnham moved a step closer to becoming leader of the Labor Party on Wednesday after Jones said he would not enter the Labor leadership contest.

Former Armed Forces Secretary Al Carns, who resigned earlier this month over defense spending, has not yet ruled himself out of any potential race. On social media Wednesday evening, Carns said the country “needs a proper discussion about where we go next. Not change. Not a few degrees of course correction. Big, hard, honest choices we’ve been avoiding for 30 years.”

Reeves has faced criticism from business groups over the impact of higher taxes and strict employment regulations.

BCC chief executive Shevaun Haviland responded to Reeves’ comments with a message to Labor: “If we get jobs back we will deliver growth.” But he added that extra taxes would be “the road to ruin”.