Andy Burnham has appointed John Healey as chancellor in a surprise move that marks the first major decision of his premiership, bypassing the widely tipped favourite, Shabana Mahmood. The choice suggests Burnham wants to avoid the factional splits that dogged the previous government, opting for a respected figure seen as a compromise between the party's left and centre rather than a candidate closely tied to either faction.

Mahmood, who had appeared a near-certain pick, stays on as home secretary, retaining a tough stance on immigration, while Ed Miliband takes charge of reforming the Foreign Office, including plans to restore international aid. Healey, who resigned as defence secretary under Keir Starmer over a £13bn defence funding shortfall, previously criticised the Treasury for treating defence as a drain on spending rather than a driver of growth, and his appointment is seen as a signal that defence funding will be prioritised. He previously served as economic and financial secretary to the Treasury under Gordon Brown, and a Downing Street source said Burnham and Healey share a focus on economic stability, reindustrialisation, devolution and easing the cost-of-living crisis.