Rayner was forced to resign from her Cabinet roles in September after the Telegraph revealed that she did not pay £40,000 ($92,000) of stamp duty owed on the purchase of a flat in Hove, East Sussex.
Her allies believe she is ready to make a political comeback, with those to the left of the party favouring her as a leadership candidate over other contenders such as Wes Streeting, the Health Secretary.
An early leadership contest would favour candidates such as Rayner and disadvantage those such as Andy Burnham, the left-leaning Mayor of Greater Manchester, who is not an MP.
A source close to Rayner dismissed the claims as “total rubbish”, insisting that she was “focused on representing her local community”.
Over the past week, Downing Street’s attempt to see off a perceived leadership threat backfired, while Chancellor of the Exchequer Rachel Reeves’ about-turn on raising income tax caused chaos in bond markets and exasperation among MPs.
Clive Lewis yesterday became the first Labour MP to break ranks and call for Starmer to step down, saying the current situation is “not tenable, frankly”.
Lewis, the MP for Norwich South, told Channel 4 News: “I just don’t see how this can stagger on without any resolution on the horizon”.
He added that Labour grandees and the “men in grey suits” needed to step in and install Burnham as the next Prime Minister.
Despite openly calling for the Prime Minister to go, Lewis retained the party whip, more than 24 hours after he made the remarks.
One Labour MP said the past week had been a “complete shambles”, adding that: “After this last week, everyone is just completely fed up with it all”.
Another backbencher said: “The leadership of the party is in complete disarray. If they had three feet they’d have shot all three.
“They are frightened of their own shadow, they have spooked the markets and they have confused both the Labour Party and the electorate.
“There are a lot of Labour MPs worried about their seats and worried about the direction of the Government. So there is constant talk and constant chatter of dissatisfaction.
“I don’t know any part of the party that it is not coming from, including ministers, both junior and senior.”
A third Labour MP said: “The Government has found itself in a position where it has lost the confidence of a significant part of the parliamentary Labour Party. It is not surprising that senior politicians are thinking, ‘What do we do if there is a leadership election?’”
A Cabinet source said: “There is a lot of volatility at the moment – it could go one of many different directions. That is probably the worst place to be.
“Nobody appreciates a divided party that faffs around with its leadership. We need to get a grip. Next May is going to be a bit of a bloodbath – we need a bit of stoicism and a bit of unity.”
The Prime Minister’s credibility was damaged last week by a briefing war against alleged coup plotters.
Allies of Starmer accused the Health Secretary of plotting against the Prime Minister, as they tried to shore up his position by briefing that he would fight any attempt to oust him.
Starmer was left on the back foot after Streeting called Downing Street “toxic” and “juvenile”. The Prime Minister was then forced to launch an investigation into the leak and apologise to the Health Secretary.
Reeves’ flip-flopping on raising income tax led to fury among many of her own MPs, who felt the chaotic handling of the run-up to the Budget damaged the party’s credibility.
She is now preparing to scrap the two-child benefit cap, extending an olive branch to MPs on the left of the party.
Rayner is popular among Labour’s membership, as well as with MPs on the left and soft left of Labour.
On Monday, Shabana Mahmood, the Home Secretary, will announce new policies on asylum seekers, in an attempt to see off the threat of Reform UK.
Fresh polling has shown that satisfaction ratings for Starmer continue to be the worst recorded for any prime minister going back to 1977.
Satisfaction with Reeves as Chancellor has also reached the lowest level of any chancellor going back to 1976.
The figures, from Ipsos Mori and shared with the Telegraph, show that Reform maintains a clear lead as the nation’s most popular party – on track to take 33% of the popular vote.
Labour’s vote share languishes at 18% – the lowest since the expenses scandal and economic crisis of 2008-2009.
Some eight in 10 people think the country is getting worse as a place to live, showing no improvement from the 76% who felt the same in 2023.
Labour has also lost its lead on a range of key policies from before the election, including on tax and the economy, the cost of living, healthcare and immigration. Reform is most preferred on asylum and immigration, the polling firm found.
A source close to Rayner said: “This is total rubbish and obviously false. Amidst all the stirring and silly games, Angela is focused on representing her local community and ensuring that the priorities she championed in Government are delivered in full.”
Downing Street declined to comment.
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