Andy Burnham, Britain’s new prime minister, on Monday named John Healey as his chancellor of the Exchequer, a critical cabinet post overseeing the country’s finances and helping execute his vision to spread economic growth across the country.
Mr. Healey was recently defense secretary under the former government, though he resigned last month because he said the Treasury had not funded the military adequately. While little is known about Mr. Healey’s latest economic views, the role of chancellor is one of the most consequential in the British government, controlling how much money other government departments are given to spend and invest. The office and official residence is at No. 11 Downing Street, next door to the prime minister’s.
Still, Mr. Burnham has indicated that he intends to set the direction of policy and have other cabinet ministers follow his lead. The choice will be a surprise to many as Mr. Healey wasn’t a considered a recent front-runner.
Mr. Burnham, who was named leader of the Labour Party on Friday, has yet to offer details on his economic plans, but he vowed to break from the policies of the past four decades. He has said he wants to give more power to local authorities to spur growth throughout the country. Mr. Burnham also wants to bring water, housing, energy and transportation under more public control. He is expected to take quick steps to ease the high cost of living, with the first announcements coming on Tuesday.
Since the 1980s, when Margaret Thatcher as prime minister privatized most public utilities and services, Mr. Burnham said, the economy hasn’t worked for most people.
“In the 1980s, Britain took some wrong turns,” he said on Monday. “Political power was centralized, economic power privatized. Large parts of the country deindustrialized, and they still haven’t recovered.”
The ambitions of Mr. Burnham’s government will have to contend with formidable and long-running economic challenges. Britain has had sluggish growth since the 2008 financial crisis, big regional divides in prosperity, stubbornly high inflation and a heavy debt burden that directs a lot of money toward interest payments.
Mr. Burnham and Mr. Healey will also have to deal with fallout from the war in the Middle East, which has obscured the economic outlook. Over the past few months, higher energy prices have pushed household energy bills higher and eradicated expectations that interest rates set by the central bank will go down this year.
While the British economy has been buffeted by a series of shocks in the past decade, including Brexit and Russia’s war with Ukraine, political turmoil has added to the challenges. Mr. Healey is the ninth chancellor since Britain’s vote in 2016 to leave the European Union.
One thing that Britain sorely needs is more consistency, economists say. And this is the lesson of Manchester, where Mr. Burnham was mayor for nearly a decade, said Diane Coyle, a professor of public policy at the University of Cambridge. The northern city has shown impressive growth during Mr. Burnham’s tenure, though the foundations for that success started before Mr. Burnham arrived.
“It takes a long time turning around a place, and you need that consistency of policy and leadership, and that’s one of the big lessons I take from Manchester,” Ms. Coyle said.
Among the open questions about Mr. Burnham’s economic policies is: What does he mean in practice by “business-friendly socialism,” a term he has used to describe his policies in Manchester? How will an increase in housing construction by local authorities be funded? Will Mr. Burnham introduce a wealth tax? And how will he fund more social care, something that he has been concerned about since his early days in government two decades ago.
For Mr. Healey, the role of chancellor is rarely a path to popularity. Rachel Reeves, the previous chancellor, focused on returning stability to Britain’s public finances and rebuilding the country’s credibility on bond markets. But she imposed strict fiscal rules aimed at reducing debt, including requiring tax revenues to cover day-to-day spending, leading to difficult choices that were at times unpopular. Early decisions to try to cut winter fuel payments for retirees and rein in welfare spending caused revolts in the party and ended in U-turns.
The new chancellor will have to contend with many of these problems, too. Welfare spending is still uncomfortably high, and Britain has committed to increase military spending. Mr. Burnham has already promised to stick to Ms. Reeves’s fiscal rules, which also binds his new chancellor to them. He has said, however, that he would use any “flexibility” within these rules, which sent the 10-year yield on British government bonds above 5 percent for the first time in about two months.
