Keir Starmer should step aside in favour of a caretaker prime minister who would run the country until a leadership contest is held in the summer, Labour MPs have argued.

Despairing Government backbenchers argue that unless the Prime Minister quits over the Peter Mandelson crisis, the party is heading for disaster at the Gorton and Denton by-election later this month – followed by annihilation in May’s local elections.

They hope the Cabinet will this week persuade Sir Keir to quit and allow a ‘non-contentious’ candidate such as Defence Secretary John Healey or Northern Ireland Secretary Hilary Benn to be a temporary replacement.

It came as insiders said Sir Keir’s chief of staff Morgan McSweeney – blamed by Labour MPs for ‘forcing’ the Prime Minister to appoint Mandelson, a friend of Jeffrey Epstein, as US ambassador in 2024 – is on the brink of quitting.

Cabinet Secretary Sir Chris Wormald could also resign.

A source said: ‘Morgan going would offer the MPs a sacrifice to try to atone for this disaster. But could Keir survive without him? They should really depart as a package.’

Under the extraordinary caretaker plan, the interim leader would steer Labour beyond the May local elections and then oversee a full-scale party leadership contest in the summer before handing over to the new leader at the party’s annual conference in the autumn.

MPs backing the move say it would ‘bring stability’ to the Government and avoid the ‘bloodbath’ of a leadership contest before May’s elections. It may also appeal to all three of the main leadership contenders – each of whom has reason to want to delay a challenge for the top job.

Could Rayner be cleared... and end up costing the taxman millions? 

Angela Rayner is said to be on the brink of being exonerated over the stamp duty affair.

However, it is claimed it has not been announced yet because the taxman doesn’t want to have to repay millions to others who have been hit with the tax in similar circumstances.

Ms Rayner’s leadership prospects are widely thought to hinge on HMRC’s investigation into the stamp duty levied on the £800,000 flat she bought in Hove last year: she left the Cabinet after admitting having not paid the extra £40,000 required for a second home. But some of her allies claim she could be cleared on the grounds that Hove was indeed her main home, because her constituency house was owned under a family trust arrangement.

A source said: ‘She is off the hook…the delay in announcing her exoneration is because HMRC doesn’t want to have to repay all the thousands of people who have been hit with the second-home surcharge in similar circumstances. The bill would run into millions.’

For Angela Rayner, it would allow HMRC time to finish its lengthy investigation into her tax affairs and, say backers, ‘lift a shadow’ over her leadership ambitions.

For Manchester Mayor Andy Burnham, it could give him a second chance to claim a Commons seat, without which he cannot succeed Sir Keir.

Mr Burnham, who was blocked from standing in Gorton and Denton by Labour’s ruling National Executive Committee (NEC), is still hoping to secure a constituency in the North West – using the logic that the mood in the party has deteriorated so quickly since he was blocked last month that the NEC would let him stand as Labour’s potential ‘saviour’.

Meanwhile, Health Secretary Wes Streeting would be granted the time needed to shake off his perceived closeness to Mandelson, who has long been regarded as his political mentor.

Last night, one senior Labour MP aware of the plotting conceded that it would require Sir Keir to fall on his sword. But the MP told The Mail on Sunday: ‘Extraordinary times call for extraordinary solutions.

'We can’t let Starmer limp on until after the May elections – we need a replacement now to stem what could be disastrous losses for Labour. But equally, we can’t have a full-scale election for leader between now and May.’

He said that a respected Cabinet minister without realistic long-term leadership ambitions of their own – ‘such as Hilary Benn or John Healey’ – would be the ideal interim leader.

The MP added: ‘Given the briefing war that’s already broken out between Rayner and Streeting, there wouldn’t be just blood on the walls in a full-on contest – it’d be all over the floor and ceiling, too.

‘And that would only make us lose more seats in May. So yes, the idea is now being discussed actively by Labour MPs.’

It came as:

• Labour MPs warned that Sir Keir would not survive a disastrous result in the Gorton and Denton by-election on February 26.
• Party sources cast doubt on Ms Rayner’s claims to have warned Sir Keir against appointing Mandelson as US ambassador.
• Ed Miliband was tipped to stand for leader on a pledge to do an election deal with the Greens.

One Labour MP claimed that despite protestations that Mr Miliband, the Energy Secretary, did not want a second go at the top job, he was waiting ‘like a patient spider in the web’ for the other contenders to fail.

He claimed that Mr Miliband can offer what none of the other main runners could – ‘a deal with the Greens’ to unite the Left vote and prevent Nigel Farage and Reform from gaining power.

There were also claims that, as the two main candidates suspected of having campaigns ready to go, Ms Rayner and Mr Streeting were already plunging the party into ‘civil war’.

Mr Streeting’s backers accused Rayner allies of ‘fantasy stuff’ exaggerations of just how close the Health Secretary was to former Labour grandee Mandelson.

One Streeting ally accused Ms Rayner of ‘virtually salivating’ before she made her crucial intervention in the Commons last week, which forced Sir Keir to back down over the release of documents relating to how Mandelson was appointed US ambassador.

By way of return, Ms Rayner’s camp has celebrated what they see as the collapse of Mr Streeting’s hopes because of his past links to the disgraced New Labour architect. Last night, even one Left-wing MP not aligned to either hopeful joked that Mr Streeting was ‘just a pair of smoking boots’.

However, he also suggested that Ms Rayner ‘isn’t suited to being prime minister’, adding: ‘She doesn’t have what it takes.’

Separately, former deputy PM Ms Rayner came under fire yesterday after reports she had warned Sir Keir not to appoint Mandelson.

One Labour source said: ‘The idea that she was like Cassandra, warning everyone about Mandelson, rings a bit hollow.

‘I know she has the right colour of hair, but she was the one having dinners with him.’

A source close to Ms Rayner said: ‘Not true. [That] didn’t happen’.

Proof more demure Angela is on the mauve for No10? 

From loud flares and high-voltage colour clashes to demure mauve and sharp tailoring, Angela Rayner has quietly rewritten her wardrobe rulebook, writes Eliza Scarborough.

Not long ago, her look was bold, unapologetic bursts of colour, a flash of rainbow here, a statement suit there, and, inevitably bovver boots grounding the ensemble.

But since losing her Cabinet role, something has shifted. And the stand-out shade? It’s a strategic shade of mauve.

The proof is in the outfits. Rayner’s bold green ME+EM trousers (£225) from September last year have been replaced by a mauve dress from the same brand (£275), worn on January 24.

This new look, all tailored confidence and controlled colour, feels suspiciously like the early scaffolding of a leadership pitch – it may be a wardrobe built for a future Prime Minister.

Could it have something to do with PR supremo Matthew Freud who she recently dined with? Perhaps he told her: keep the colour, lose the chaos, retain the personality and elevate the polish.