July 21 2026 - 10:00am
If Andy Burnham needed any reminder of how important his choice of chancellor will be in defining his premiership, he need only look at the newspaper headlines. “Burnham pins hope on Chancellor Healey,” says the Telegraph. His surprise decision to eschew the leading candidates, Ed Miliband and Shabana Mahmood, in favor of party loyalist John Healey has prevented a factional civil war from day one. In the end, it was this desire to keep the party together that drove his decision on who to appoint for the job, rather than any particular economic policy.
We know that Healey’s appointment to the Exchequer will mean an increase in defense spending. In his resignation statement as defense secretary last month, Healey called for an increase in defense spending to 3% of GDP in the short term and 3.5% of GDP by 2035. The Office for Budget Responsibility says that achieving 3% by the end of the decade will cost an additional £17.3 billion a year — equivalent to 2p on income tax. Healey’s appointment likely means that the rumored Spending Review and Budget in the autumn will have to be a big exercise in finding savings and raising taxes.
However, increasing defense spending is not in itself an economic strategy. Ironically, to find Healey’s likely strategy one should look to a document written not by the new chancellor but by the previous one, Rachel Reeves. In A New Business Model for Britain, Reeves said that the country needed a new approach to deal with the “age of insecurity”. This meant higher investment to give Britain “energy independence”, reduce “our dependence on fragile international supply chains” and secure critical materials. In a speech in Washington to launch the report three years ago, she called this new approach “securonomics”.
Frustratingly for many of her colleagues, securonomics did not become the defining feature of her time as chancellor. Energy independence was put on the backburner as British manufacturers warned of the collapse of thousands of companies due to high energy costs. Higher public investment was more rhetoric than reality, with the OBR predicting the Government’s gross fixed capital formation — a standard measure of investment — will be only 0.1% of GDP higher at the end of this parliament than it was at the beginning. Although Reeves belatedly wrote to departments to call for them to “Buy British”, without any investment in growing domestic supply chains it was more of a plea than a policy.
If there was one department that sought to carry out securonomics, it was Healey’s Ministry of Defense. His munitions plan committed to building six new munitions factories in the regions through £1.5 billion in additional investment and the creation of 1,000 new jobs. Healey’s efforts to onshore more of Britain’s defense manufacturing have seen US giant Boeing commit to building more in the UK to secure future contracts. Reeves may have been the chancellor to talk about economic security, but Healey genuinely practiced it.
His appointment may also address another weakness of Reeves’s term as chancellor: her inability to take her party with her when it came to policy. From winter fuel payments to welfare cuts, Reeves struggled to convince her party that she had the right ideas. Healey will be more sensitive to the views of his colleagues, and he will know that building economic security requires tough choices, prioritizing capital investment and reindustrialization over higher welfare spending. However, as a party loyalist, he stands a better chance than anyone of pulling off this shift in approach. Burnham may have thought Healey was the safe choice, but his new chancellor may take his government in a much bolder direction than he anticipated.
Andrew O’Brien is the former Director of Policy at the think tank Demos and currently Head of Secretariat of the Independent Commission on Neighbourhoods. He writes in a personal capacity.
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