Former defence secretary John Healey becomes chancellor – Mortgage Strategy

The prime minister has appointed former defence secretary John Healey as chancellor in his new cabinet.

In the run-up to Andy Burnham taking government, former Labour leader Ed Miliband had been widely tipped for the Treasury role.

However, in recent days home secretary Shabana Mahmood emerged as a front-runner.

But in the end, Healey was the surprise appointment to lead the Treasury, as Miliband was named foreign secretary and Mahmood remained at the Home Office.

Angela Rayner has returned to her former role as housing secretary after resigning last year over tax controversy.

Healey immediately sought to calm markets with his first words as chancellor.

Speaking to broadcasters this morning, he said: “Fiscal control is the first duty of any chancellor – it is mine.

“And fiscal credibility is the bedrock of economic stability and national security.”

Early indications suggest his words were well-received by investors as gilt yields eased back and sterling edged upwards.

Yesterday, Burnham’s first comments as Prime Minister drove 10-year yields up 8 basis points to 5.049% and pushed 30-year borrowing costs to their highest since late May, according to financial advice group deVere.

AJ Bell head of markets Dan Coatsworth says: “John Healey’s surprise appointment as chancellor hasn’t troubled the markets as he is seen as a safe pair of hands.

“His extensive parliamentary career including roles in the Treasury are seen as putting him in good stead.

“Bond markets reacted favourably, with gilt yields easing back after a jump yesterday afternoon when prime minister Andy Burnham made remarks about fiscal flexibility.

“While he has pledged to stick to existing rules, he implied there is some wriggle room within them.

“The comments initially caught the market off guard, but Burnham was quick to say he wouldn’t take any risks with the economy.”

But deVere’s chief executive Nigel Green remains sceptical about Healey’s reassurances and warns against reading too much into the early market movements.

He says: “This is a chancellor whose defining trait in government was asking the Treasury for more money as defence secretary, right up until he resigned from Keir Starmer’s administration.

“Now the man who spent years pushing to loosen the purse strings is the one holding them.

“Healey might manage how the flexibility gets used.

“He was never appointed to prevent it, because preventing it was never the plan.”

He adds: “Healey’s appointment is not evidence the pressure to spend has gone away.

“It is evidence Burnham knows the market needed reassurance while he works out how far he can push.

“Gilt yields sitting at five-week lows and a marginal rally in sterling reflect relief that Monday’s worst case did not repeat itself, nothing more.”