The frontrunner to be named as Andy Burnham’s chancellor is already causing tensions with his supporters on the left because of her past support for tax and welfare cuts.
Home secretary Shabana Mahmood is now widely expected to be named as Mr Burnham’s chancellor on Monday over the soft left’s choice Ed Miliband.
But the MPs on the left of the party who were the biggest cheerleaders for Mr Burnham being parachuted into parliament to replace Sir Keir Starmer are now concerned he is picking someone from the right of the party to oversee economic policy.
Party insiders have noted that Ms Mahmood was a major internal critic over Rachel Reeves’ tax hikes which sources claim she privately branded “ridiculous”, “anti-aspiration” and “anti-competitive”.
While bound by ministerial collective responsibility in the Starmer government she always publicly supported the policies but behind the scenes was a critic of hiking employers national insurance contributions, scrapping non-dom status and putting 20 per cent VAT charges on independent school fees.
Ms Mahmood was one of several senior ministers on the right of the party including outgoing housing secretary Steve Reed and deputy prime minister David Lammy who were concerned about the impact of Ms Reeves’ tax rises.
Mr Reed and Mr Lammy, who are tipped to leave the government, are both London MPs and had raised concerns about the impact on investment in the capital for tax measures which were ideologically driven, particularly on ending non-dom status and putting VAT on school fees.
But Ms Mahmood was also a vocal critic and is understood to have complained about how Ms Reeves and the Treasury “failed to consult with the cabinet more widely” on economic policy.
One Labour MP on the left of the party noted that Ms Mahmood is “not the right choice” if, as has been reported, Mr Burnham wants to raise another £38bn in tax.
She is known to oppose wealth taxes which Mr Burnham has left the door open to and would almost certainly clash with Louise Haigh, who is expected to have a major policy role running the engine of government in the Cabinet Office as chancellor of the Duchy of Lancaster.
Ms Haigh has already advocated raising capital gains tax to equalise it with income tax in a move businesses have warned would destroy investment in the UK.
And there could be a clash if, as suggested, Mr Burnham goes through with plans to run much of the economic policy out of Downing Street and through the Cabinet Office rather than the Treasury.
Another MP noted: “Shabana is very much on the right of the party. She was one of the biggest supporters of cutting welfare, she wanted to go even further than [Rachel Reeves]. It’s just not acceptable.”
But supporters hail her as a “brilliant minister” with “the guts and determination to get things done”. They note how immigration figures both legal and irregular were brought under control during her tenure in the Home Office.
Another support noted: “Andy needs a chancellor who will keep the markets calm and inspire confidence. He has to move on from Rachel Reeves but Shabana is perfect in that respect.”
There are still some hoping that Ed Miliband may be handed the role but he is currently favourite to get the foreign secretary job. Foreign secretary Yvette Cooper and former health secretary Wes Streeting have also been discussed as options.
“Ed would be much more aligned with the wishes of the PLP (Parliamentary Labour Party),” another MP said.
However, his past failed tenure as leader has made him an unpopular choice for chancellor among Mr Burnham’s inner circle.
Added to that Mr Burnham has made it clear that he will allow drilling for new oil and gas in the Jackdaw and Rosebank fields in the North Sea, a move which was opposed by Mr Miliband.
It is partly hoped that the move will help raise extra tax revenue at a time when money is tight, especially after the impact of Donald Trump’s war with Iran and the closing of the Strait of Hormuz.
But a series of issues have already come to light which Mr Burnham will need to find money for.
His plans for a massive rollout of devolution will “not come cost free”, one MP has warned.
Added to that a new chancellor will have to persuade the Treasury to allow income tax powers to be devolved to mayors to help them raise money similar to the way the parliaments in Scotland and Wales can.
Also Mr Burnham is coming under huge pressure for a massive cash injection into special needs education (SEND) which remains in crisis.
With the number of SEND children now hitting 1.7 million, 21 police and crime commissioners - including 13 from the Tories, six from Labour, one from Reform and one Independent - have warned that a failure to tackle SEND in schools is seeing children and adults failed by the education system recruited into criminal gangs.
In a letter seen by The Independent, they warned: “As PCCs, we see at first hand the consequences of systems that fail vulnerable children. We recognise the immense pressures facing the SEND system and support efforts to improve outcomes for children, families and local authorities.
“However, we are concerned that reforms focused primarily on reducing costs or limiting access to specialist provision could have profound implications not only for education, but also for crime prevention, community safety and the long-term demands placed upon the criminal justice system.”
