Burnham likely to replace Reeves if he becomes PM

Andy Burnham is expected to replace Rachel Reeves as chancellor and offer her a more junior cabinet position if he becomes prime minister, the BBC understands.

A spokesperson for Burnham said no decisions had been made about who he would appoint.

The MP for Makerfield is the only candidate to have emerged so far for the Labour leadership, and has met Prime Minister Sir Keir Starmer for talks as he prepares for a likely entry to No 10.

Senior Cabinet minister Darren Jones ruled himself out of the running for the leadership on Wednesday, and if there are no other candidates, Burnham could become prime minister by 17 July.

The biggest decision Burnham will make as he begins to sketch out a possible cabinet is who will be his chancellor, and most Labour MPs assume Reeves will not continue in that role.

As first reported by the Financial Times, external, she is expected to be offered a more junior cabinet position.

A close ally of Burnham told the BBC: "Andy really respects Rachel and I'm confident he'll want her in his top team."

The Treasury has been approached for comment.

It is unclear who might replace Reeves as chancellor, with Ed Miliband, Wes Streeting, John Healey and Yvette Cooper among the names mooted.

James Purnell, who served as a minister in Gordon Brown's government between 2007 and 2009, is expected to become Burnham's Downing Street chief of staff.

Paul Johnson, former director if the Institute for Fiscal Studies, said any chancellor had a number of difficult decisions to take.

He said the UK had borrowed more than virtually any other country in the last 25 years at very high rates, but had also failed to grow to pay off the debt.

"Simply borrowing more is certainly not an easy thing to do and it's absolutely not a costless thing to do," he told BBC Radio 4's Today programme, adding: "Growth clearly is the number one priority."

He said: "That requires a lot of really quite difficult decisions in terms of not just increasing taxes but reforming taxes, reforming welfare, focusing investment on the things that are actually likely to get you growth, radically changing regulatory and planning regimes.

"All of those sorts of things, and that's something where I think we need a really clear indication from a new chancellor that they're really focused on."

Another immediate challenges for a new prime minister is how much to spend on defence, following the row over the controversial defence spending proposals, which triggered the resignations of two defence ministers.

Burnham and his team have been discussing that with John Healey, the former defence secretary, warning the current planned increase in military funding fell "well short of what is required".

Sir Keir met Burnham for an hour on Tuesday, as the outgoing leader sought to ensure an "orderly" transition of power.

It was the pair's first meeting since Burnham won the by-election.

Jones and former armed forces minister Al Carns were being considered as potential candidates by some Labour MPs who want to avoid installing Burnham in No 10 without a contest.

However, Jones confirmed on Wednesday that he would not be running. He told Sky News: "Andy Burnham is going to be the next prime minister and if there was a contest of Labour Party members, he would win."

Jones, a close ally of Sir Keir, said he had wanted assurances on Burnham's approach to economic policy, which he received after speaking with the new MP for Makerfield.

Former Royal Marines officer Carns told BBC Newsnight he was still considering standing in a potential contest but was waiting to see what policies Burnham was planning to "push forward".

"We need to see that material before I can make a decision to back him," he added.

It is not clear whether either MP would gather enough support to get on the ballot paper.

The party's rulebook says candidates need to be nominated by 81 Labour MPs, as well as either 32 of Labour's 634 local branches, or three organisations affiliated to the party (including two trade unions).