The Situation Room - July 22nd

Good morning everyone,

I’m Atlas, and welcome to The Situation Room! We cover the most high impact geopolitical developments every Wednesday!

Today’s topics:

• New U.K. PM Assembles Fresh Cabinet

• Zelensky Fires Military Chief In Major Shakeup

• Japan Raises Worry Over Chinese Live Fire Drills Within Japanese Economic Zone Territory

New U.K. PM Assembles Fresh Cabinet

_{By: Atlas}

Andy Burnham spent his first hours as Britain's prime minister on the phone, firing people. Over roughly two hours Monday afternoon, he removed 11 of Keir Starmer's cabinet ministers one by one, then filled the vacancies with a mix of his own northern allies and the very figures whose resignations had brought Starmer down. By Tuesday's first cabinet meeting, the shape of the new government was clear: a sharp turn from the administration it replaced, assembled by a man who campaigned on a folksy image and governs, in the words of one supporter, like "a cold-hearted lizard of a politician."

Burnham, the 56-year-old former mayor of Greater Manchester and a self-described socialist, became Britain's seventh prime minister in a decade after Starmer resigned under pressure from Labour MPs. He entered Downing Street promising to run a "cost-of-living government," and his personnel choices, rewarding those who rebelled and banishing those who stayed loyal, drew immediate scrutiny even from within his party.

The Purge

The sackings were blunt. Chancellor Rachel Reeves was ousted, along with Deputy Prime Minister David Lammy, Business Secretary Peter Kyle, Attorney General Lord Hermer, chief secretary Darren Jones, Northern Ireland Secretary Hilary Benn, communities secretary Steve Reed, and Europe minister Nick Thomas-Symonds, among others. All were seen as close to Starmer.

Some did not go quietly. Reed, on his way out, fired a parting shot about loyalty. "Keir Starmer showed loyalty to me by appointing me to his cabinet," he said. "I make no apology for returning that loyalty. It's what is expected of functioning teams, and I hope those who did not show loyalty to Keir will now show it to you."

Burnham tried to build what he called a "broad church," offering Reeves the defense brief as a demotion. She declined, forcing a hasty reshuffle. Standing outside Number 10, Burnham struck an optimistic note at odds with the afternoon's work. "Let's build a new national sense of unity, of common purpose and positivity," he said, closing with a pledge to "make this the moment when Britain starts to believe again."

The Surprise at Number 11

The biggest shock was the appointment of John Healey as chancellor of the exchequer, the second most powerful job in government. For more than a month, Westminster had treated the contest as a two-way fight between Home Secretary Shabana Mahmood and former energy secretary Ed Miliband, with allies of each briefing against the other. Burnham chose neither.

Healey, 66, a former trade unionist first elected in 1997 and a Treasury minister under Tony Blair, had helped topple Starmer by quitting as defense secretary five weeks earlier in a dispute over military spending. In his resignation letter he warned that defense was dangerously underfunded and called for spending to reach 3 percent of GDP by 2030. Now he holds the power, and the problem: he must fill a funding gap of nearly 5 billion pounds in the defense plan Starmer left behind, and find the money for the very increase he demanded.

The reaction among officials was mixed but broadly relieved. "It's brilliant for us," one Ministry of Defence insider said of having a spending ally at the Treasury, while adding they were glad Healey was not returning to the department, calling him "a difficult person." Even some Conservatives judged the pick shrewd. "He's not Ed Miliband, he's hard to attack, and he's Treasury-literate," one former Tory cabinet minister said. Burnham will hope Healey is steady enough not to spook bond markets that have been wary of the new prime minister.

Rebels Rewarded, Allies Returned

The rest of the top team followed the same logic. Miliband, the former Labour leader who lost the 2015 election and later refused to be moved from the energy brief before urging Starmer to quit, was named foreign secretary, a consolation prize his allies received bitterly. Wes Streeting, whose May resignation as health secretary helped topple Starmer, became defense secretary despite never having held a foreign-facing role. Miatta Fahnbulleh, the first minister to resign in the campaign against Starmer, replaced Miliband at energy.

Burnham's closest allies were elevated. Louise Haigh, who resigned from Starmer's cabinet over a decade-old fraud conviction and then ran Burnham's by-election campaign, became chancellor of the Duchy of Lancaster and first secretary of state, effectively deputy prime minister. Angela Rayner, who quit last year over an unpaid stamp duty bill she has since settled, returned as housing secretary. Lucy Powell, sacked by Starmer only to be elected deputy Labour leader, came back as education secretary. Jonathan Reynolds returned to an expanded business brief.

Two Starmer-era survivors kept major posts. Mahmood stayed at the Home Office, where she has pursued a hardline immigration crackdown that has won praise on the right and unease on the Labour left; her continuation makes it harder for MPs to soften those reforms. Pat McFadden remained work and pensions secretary, and Yvette Cooper was moved from foreign secretary to health, a brief set to grow as Burnham pledges to reform social care.

Fast Start, and the Risks Ahead

Burnham moved quickly to show intent. At Tuesday's first cabinet meeting he told ministers to "think every day, what can we do just to take that little bit of pressure off people's shoulders," and announced his first policy: scrapping the 5 percent VAT on domestic electricity bills from October 1, saving the average household about 45 pounds a year. The government said the roughly 850 million pound cost would be covered by canceling Starmer's planned digital ID scheme. Darren Jones, one of the ministers Burnham sacked, disputed that, arguing the ID program had been unfunded and demanding to know how the lost revenue would be replaced. The Conservatives backed the cut but also questioned its funding.

Burnham learned early that his words move markets. In a brief garden huddle with journalists, he said he would use flexibility in the fiscal rules to invest in infrastructure, sending government borrowing costs higher, and floated making social care free at the point of use, a commitment estimated to cost as much as 18 billion pounds, along with possible rent freezes.

The foreign brief carries its own friction. Miliband, who once called Trump "a racist, misogynistic, self-confessed groper," drew an angry response from the White House, where allies of the president warned he had "serious diplomatic repair to undertake." Burnham himself said in 2021 that any UK politician who gave Trump the time of day should be ashamed. Yet Burnham's own first call with Trump was described by both sides as warm, with the president posting that the two had "a very good conversation" and would meet soon. The prime minister also spoke with the leaders of Ukraine, France, Germany, the EU, and NATO, and faced an early reminder of the tensions ahead when a Russian frigate conducted a live-fire exercise in the English Channel the day he took office.

The unresolved question hanging over Westminster is whether Burnham will call a snap election to secure his own mandate. Nigel Farage has demanded one, arguing Burnham has no democratic authority, though some in Reform privately fear an early vote. Burnham has appeared to rule it out. As one former Conservative minister framed his choice: "He faces a choice between going for an election, and a slow decline as we saw with Gordon Brown."

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