John Healey returns as UK chancellor weeks after quitting over defence funding row
John Healey, who quit as defence secretary last month over inadequate military funding, returns to government as Andy Burnham's chancellor, tasked with finding the extra billions he once demanded.
John Healey has been appointed Chancellor of the Exchequer by new Prime Minister Andy Burnham, barely a month after his shock resignation as defence secretary helped trigger the downfall of Keir Starmer. The 66-year-old MP for Rawmarsh and Conisbrough, a veteran of Labour frontbenches since 2001, now inherits the Treasury brief he once accused of being "unwilling" to fund the armed forces.
The resignation that shook Starmer
Healey quit in early June 2026 after months of wrangling over the Defence Investment Plan. He had pressed for a clear path to spending 3% of GDP on defence by 2030, the year many Nato allies say the alliance must be ready for conflict. The Treasury under then-chancellor Rachel Reeves offered an extra £13.5bn, which Healey's team dismissed as only £10bn of new money once "Treasury Trickery" was stripped out. In his resignation letter, he wrote that the government had no timetable for the 3% pledge and that the Treasury was "unwilling" to "commit the resources that the nation needs to defend the country at this time of rising threats."
The Treasury has been unwilling to commit the resources that the nation needs to defend the country at this time of rising threats.
His departure came days before Burnham's pivotal by-election victory in Makerfield and, according to some Starmer allies, sapped the prime minister's will to fight on. Starmer resigned less than two weeks later.
Burnham's cabinet takes shape
Burnham, who had kept his ministerial picks in a "black box" until the last moment, stunned Westminster by handing the Treasury to Healey. The two men share an outlook on economic stability, devolution, reindustrialisation and cost-of-living support, officials said. Healey's five years as a junior Treasury minister under Gordon Brown (2002–2007) gave him credentials that allies of Ed Miliband, Shabana Mahmood and Rachel Reeves had been lobbying hard to match.
The black box is still sealed.
Other appointments include Miliband as foreign secretary, Mahmood remaining as home secretary, and Louise Haigh becoming Chancellor of the Duchy of Lancaster and first secretary of state.
The chancellor's defence dilemma
Healey now faces the task he once set for others: finding the money to modernise the armed forces. The Office for Budget Responsibility calculates that reaching 3% of GDP by 2029-30 requires an additional £17.3bn per year, lifting the overall defence budget from more than £63bn to around £90bn. The revised Defence Investment Plan published after his resignation still contains a £5bn black hole, and key programmes for drones, uncrewed warships and long-range weapons remain underfunded. Healey has previously argued for "creative funding options," and the Liberal Democrats have pushed for defence bonds, though Starmer dismissed that as another form of borrowing.
- John Healey quits as defence secretary, citing Treasury unwillingness to fund defence properly.
- Andy Burnham wins the Makerfield by-election, entering Parliament.
- Keir Starmer steps down as prime minister less than two weeks after Healey's exit.
- Burnham names Healey as Chancellor of the Exchequer.
Market and political reaction
Initial market reaction was muted. Richard Carter, head of fixed interest research at Quilter Cheviot, said the appointment signalled fiscal discipline. "Healey brings Treasury experience and is a sign that Burnham will respect the bond markets as a check on his radicalism, rather than plough ahead with significant changes that could unsettle the fiscal position," Carter said. Inside Labour, the choice blindsided even senior figures. "We did not see this coming," one MP told The Guardian, "but that is probably a sign that it is a good decision."
