Shabana Mahmood’s history on tax and welfare sparks tensions with Andy Burnham allies

The leader, who will be dubbed Andy Burnham’s chancellor, is already causing tension among his supporters on the left over his past support for tax and benefit cuts.

Home Secretary Shabana Mahmood is now expected to be named Mr Burnham’s chancellor on Monday, succeeding Ed Miliband, the soft left’s choice.

But MPs on the party’s left, who were the biggest backers of Mr Burnham’s replacement in parliament to replace Sir Keir Starmer, now fear he will choose someone from the party’s right to oversee economic policy.

Party insiders noted that Ms Mahmood was a prominent internal critic of the tax increases, with Rachel Reeves privately calling the tax increases “ridiculous”, “anti-aspirational” and “anti-competitive”.

Despite being committed to ministerial collective responsibility in the Starmer government, he has always publicly supported the policies, but behind the scenes he has criticized increasing employers’ national insurance contributions, revoking non-dom status and imposing 20 per cent VAT on independent school fees.

Ms Mahmood was one of several senior ministers on the right of the party, including outgoing housing minister Steve Reed and deputy prime minister David Lammy, who were concerned about the impact of Ms Reeves’s tax rises.

Mr Reed and Mr Lammy, who are rumored to be leaving the government, are both London MPs and have expressed concerns about the impact on capital investment of ideologically driven tax measures, particularly the end of non-Dom status and the introduction of VAT on school fees.

But Ms Mahmood was also a vocal critic and is understood to have complained that Ms Reeves and the Treasury had “lacked wider consultation with the cabinet” on economic policy.

A Labor MP on the party’s left said Ms Mahmood was “not the right choice” if Mr Burnham wanted to raise another £38bn in taxes.

He is known to be opposed to wealth taxes, which Mr Burnham has left the door open for, and is almost certain to clash with Louise Haigh, who as chancellor of the Duchy of Lancaster is expected to have a key policy role in the Cabinet Office, keeping the engine of government running.

Ms Haigh has already advocated for capital gains tax to be raised to bring it in line with income tax, warning businesses would destroy investment in the UK.

And there could be a conflict if Mr Burnham goes ahead with plans to run most economic policy from Downing Street and through the Cabinet Office rather than the Treasury, as proposed.

Another MP noted: “Şabana was far to the right of the party. He was one of the biggest supporters of cutting social benefits, he wanted to go even further.” [Rachel Reeves]. “This is completely unacceptable.”

But supporters hail him as a “brilliant minister” with “the courage and determination to get things done”. They highlight how both legal and irregular immigration figures were brought under control during his tenure at the Home Office.

Another support noted: “Andy needs a chancellor who will keep markets calm and inspire confidence. He needs to move on from Rachel Reeves but Shabana is perfect in that regard.”

There are still some hopes that the job could be given to Ed Miliband, but he is currently the top pick for the job of foreign secretary. Foreign Secretary Yvette Cooper and former health secretary Wes Streeting were also discussed as options.

“Ed would be much more in line with the wishes of the PLP (Parliamentary Labor Party),” another MP said.

But his past failed leadership tenure has made him an unpopular choice for chancellor among Mr Burnham’s inner circle.

In addition, Mr Burnham has made clear he would allow new oil and gas drilling at the Jackdaw and Rosebank fields in the North Sea, a move that Mr Miliband opposes.

It is partly hoped that the move will help generate extra tax revenue at a time when money is tight, especially in the wake of Donald Trump’s war with Iran and the closure of the Strait of Hormuz.

But a number of problems have already come to light for which Mr Burnham must find money.

Plans to introduce devolution on a large scale “will not be free”, an MP has warned.

In addition, a new chancellor will need to persuade the Treasury to devolve income tax powers to mayors to help them raise money, as parliaments in Scotland and Wales have done.

Mr Burnham is also under huge pressure to deliver a major cash injection into special needs education (SEND), which is still in crisis.

As the number of SEND children now reaches 1.7 million, 21 police and crime commissioners (13 from the Conservative Party, six from the Labor Party, one from the Reform and one from the Independent) have warned that failure to tackle SEND in schools means children and adults being failed by the education system are recruited into criminal gangs.

In a letter he saw IndependentThey warned: “As PCCs, we see first-hand the consequences of systems that fail vulnerable children. “We recognize the huge pressures facing the SEND system and support efforts to improve outcomes for children, families and local authorities.

“However, we are concerned that reforms that focus primarily on reducing costs or limiting access to specialist services could have profound impacts not only on education but also on crime prevention, community safety and the long-term demands on the criminal justice system.”