Rachel Reeves has given her support to Andy Burnham to be the next prime minister, despite reports she is likely to be moved out of the role of chancellor if he becomes Labour leader.
The chancellor told the BBC she and Burnham were friends and did not appear to rule out accepting a more junior cabinet position. “I’m supporting Andy to be prime minister,” she said.
Asked about reports that Burnham could offer her a less prominent role in his cabinet, Reeves said: “I’m not going to pre-empt the decisions that the new prime minister will make. I’m backing Andy. I think he’d be a great prime minister, but those are his decisions, not mine to make.”
During a speech at the global annual conference of the British Chambers of Commerce (BCC) on Thursday, Reeves said it was clear that Burnham would keep her fiscal rules, which she described as “a good thing”.
Asked by Sophy Ridge, the Sky News presenter, if she had “unfinished business”, she staunchly defended her record but said fiscal devolution and business rates were areas where she wanted to go further.
“I know that whoever is prime minister and chancellor in the future will inherit a stronger economy than the one I inherited two years ago,” she said.
She said her fiscal rules already allowed more borrowing for defence, after the Guardian revealed that senior government officials were planning to lobby the next prime minister to revive the idea of “war bonds” to pay for higher defence spending – an idea consistently resisted by the Treasury.
Reeves said the defence investment plan, which will be published before the next prime minister is appointed, would involve “more money, spent more effectively”.
When it was put to her that classifying defence spending as investment could allow more borrowing, Reeves said: “That’s exactly what my fiscal rules allow. We do treat now, for the first time ever, day-to-day spending and capital spending differently because of the fiscal rules.”
Defence was capital investment, she said, adding: “Also, what is really crucial is that we get better value for money for our defence spending, which is why cooperation with our Nato allies, especially our European Nato allies, is really important.”
Reeves, who became the first female chancellor after Labour’s landslide election victory in 2024, has been shoring up her position since it became likely Burnham would be the next prime minister.
She was not present when the outgoing prime minister, Keir Starmer, gave his resignation speech but attended Burnham’s Westminster Hall rally on Monday. One Labour source said that while her chief of staff could be seen at the centre of Starmer supporters, her absence was notable. “Rachel talking herself into a job is quite mad,” they said.
Reeves told the BBC that “no one could doubt” her commitment to Starmer, with whom she has worked side by side since he entered No 10.
She said: “I’ve been by his side for six years now as shadow chancellor and then as chancellor of the exchequer. I know that whoever is prime minister and chancellor in the future will inherit a stronger economy than the one I inherited two years ago.”
Her support for Burnham comes after reports that one of Reeves’s top aides has urged some of the UK’s biggest companies and trade associations to lobby Burnham to keep her in the top job at the Treasury.
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According to Sky News, officials including Katie Martin, who was appointed as Reeves’s business adviser in January, are said to have called a number of big companies in the insurance, banking, defence and other sectors this week to make the case for “stability” and “continuity”.
Speculation around Burnham’s choice for chancellor has grown as the new Makerfield MP’s route to 10 Downing Street has become clearer. The next resident of No 11 could define his time in office, with MPs saying it will give the clearest sign yet of how radical he intends to be.
Burnham’s supporters are said to be divided over the choice, with a briefing war breaking out between advocates of the former health secretary Wes Streeting and those close to the energy secretary, Ed Miliband.
Some allies see Streeting as the more reassuring choice for the business community and fossil fuel industry, but others have lobbied for Miliband, whom they see as more likely to back radical policy ideas and push through reforms.
Some in Labour have cautioned against appointing Miliband, with the chief secretary to the prime minister, Darren Jones, appearing to suggest the former party leader would not meet his “tests” for a new chancellor. Jones said any new chancellor should not seek to “control” the prime minister and would have to reassure markets, trade unions, MPs and the public.
Burnham moved a step closer to taking the helm of the Labour party on Wednesday after Jones said he would not stand in a Labour leadership contest.
The former armed forces minister Al Carns, who resigned earlier this month over defence spending, is yet to rule himself out of any potential race. On social media on Wednesday evening, Carns said the country needed “a proper debate about where we go next. Not a reshuffle. Not a few degrees of course correction. The big, difficult, honest choices we’ve spent 30 years avoiding.”
Reeves has faced criticism from business groups about the impact of higher taxes and tighter employment regulations.
Shevaun Haviland, the head of the BCC, responded to Reeves’s comments with a message to Labour: “Back business and we will deliver growth.” But she added that extra taxes would be the “road to ruin”.
