John Healey appointed Chancellor amid Andy Burnham Cabinet clear-out

Andrew Prosser, head of investments at InvestEngine, said: “There has been much speculation over recent weeks over who will become Andy Burnham’s Chancellor, with today’s appointment of John Healey finally putting those rumours to rest.

“The uncertainty this speculation creates speaks to a very fundamental challenge that any Chancellor must undertake – making sure the markets remain confident in the UK’s stability and the government of the day’s economic plan.

“With public-sector debt standing at around 95 per cent of GDP and borrowing already running above official forecasts, the government has little room for error. A rise in gilt yields would increase the cost of servicing the national debt and could also feed through into higher mortgage and business borrowing costs.

“In the immediate days of this new government, the Chancellor should be seeking to send a message of stability rather than upheaval and should avoid rushed or poorly signalled changes on spending or taxation. The PM and his team have previously made comments on borrowing and the bond markets which caused nervousness, though the recruitment of well-known and respected economic figures since has gone some way to reassure the markets. The role of a Chancellor must always be to project fiscal credibility.

“This will no doubt mean tough choices ahead, especially with already announced pledges on energy cost support, raising the personal tax allowance and increasing aid spending. These all carry hefty price tags, and with little fiscal headroom to fund them, the new Chancellor faces difficult decisions before he’s even set foot in the Treasury.”