Starmer’s Rival Burnham Opens Path to a Challenge, Hitting Gilts

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The UK currency fell as much as 1% on Thursday to $1.3395, the lowest since April 13. While Burnham’s announcement came after the gilt market closed, interest-rate swaps pointed to a rise in government bond yields when trading resumes at 8 a.m. in London on Friday.

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It capped a day in which other potential challengers to Starmer made significant moves of their own. In the early hours, former Deputy Prime Minister Angela Rayner announced that she’d been cleared of deliberate wrongdoing in a probe by the UK tax authority, HMRC, into a house purchase. In an interview with ITV, she talked about the government’s “mistakes” and said Labour needed to put “rocket boosters” on efforts to deliver its election promises. And while she said she didn’t plan to trigger a leadership contest, she refused to rule out joining one. 

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Then in the early afternoon, Wes Streeting quit as health secretary, giving an excoriating assessment of Starmer’s administration. “Where we need vision, we have a vacuum,” he wrote in his resignation letter. “Where we need direction, we have drift.”

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Instead of immediately launching a leadership bid, Streeting publicly urged Starmer to “facilitate” a contest, adding that he wanted to see “the best possible field of candidates.” 

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Streeting was the first cabinet minister to quit in the wake of a disastrous set of local election results for Labour last week. The governing party lost three in five English council seats it was defending, and placed third in the elections for the Parliament in Wales, known as the Senedd — having previously topped the voting in the region for more than a century.

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Starmer has vowed to defend his position, even after almost a quarter of Labour’s 403 MPs called for him to quit. Nevertheless, No. 10 on Thursday evening indicated to Labour MPs that Starmer wouldn’t block Burnham.

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Last time Burnham sought a return to Parliament, when a Manchester seat was contested earlier this year, the premier’s allies on the NEC had blocked him, citing the need to avoid a costly election for the mayoral post he would have to vacate. 

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Since then, Starmer has been weakened both by the loss of that seat to the left-wing Green Party in the ensuing by-election, and then by last week’s catastrophic election losses, making it harder for him to stymie Burnham this time. 

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Burnham may still have to beat other internal Labour candidates to secure the nomination, and then go on to win the seat — something that’s not guaranteed given the rising appeal of populist parties on the right and left. Nigel Farage’s Reform UK party — which has now led national polls for more than a year — came second in Makerfield in 2024, taking their sixth-highest share of the vote — 31.8% — in any constituency: higher even than in one of the five seats they won.

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An ally of Burnham said he is intentionally going for a Reform-facing seat to show he can win and then go on to beat the right-wing populists in a general election.

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If he makes it to Parliament, Burnham would then need to secure the backing of 81 Labour MPs to run in a contest. Burnham’s complex choreography also hinges on the party opting for a drawn-out leadership race to give him the time required to win the by-election and enter the contest. 

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Burnham becoming prime minister is seen is a bearish risk by UK bond traders, who fear any replacement for Starmer will increase spending and, with it, gilt issuance. Though Burnham said comments last year that the country is “in hock” to bond markets were taken out of context, it nonetheless spooked investors.

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Greater Manchester, which has long been a stronghold for Labour, suffered some of the worst losses to both Reform and the Greens at last week’s local elections, turning the city into a patchwork where it was once a sea of Labour red. That included losing control of Tameside for the first time in 47 years, the local authority in Rayner’s constituency, after Reform gained 18 of 19 seats.