Labour's leadership anarchy took a dramatic twist today as Angela Rayner declared she had been cleared by the taxman - and suggested Keir Starmer could consider quitting.

The former deputy PM effectively threw her hat into the ring by announcing that she has paid £40,000 to settle her wrangling with HMRC over unpaid stamp duty.

Crucially, she insisted that she had not been made to pay any penalty for deliberately or 'carelessly' dodging tax.

The shock move came hours before Health Secretary Wes Streeting is widely expected to unveil a formal challenge to Sir Keir. 

Manchester Mayor Andy Burnham is also poised to reveal whether he has a pathway to return to the Commons, as days of fevered political manoeuvring comes to a head.

Mr Burnham pulled out of his regular BBC Radio Manchester slot this morning, but a series of MPs have denied they have done deals to stand down so he can fight a by-election. 

Loyalists have been signalling that Sir Keir will not go quietly, teeing up a Battle Royale for control that has been panicking markets and driving up UK borrowing costs.

There are fears the Government now faces months of paralysis as the warring factions thrash out who should be in charge - and potentially lurch to the Left in a frantic effort to woo activists.

The timetable - which will be decided by Labour's ruling NEC if a contest is triggered - has emerged as a critical flashpoint. Mr Burnham will need nominations to stay open until at least the end of June if he has any hope of participating.     

As Westminster braces for impact today:

• Rachel Reeves has warned that Labour MPs face an 'important decision' and leadership 'chaos' could derail the economy; 
• Ms Rayner was only informed of her settlement yesterday afternoon, with one jubilant ally telling the Daily Mail: 'Cometh the hour, cometh the taxman!'
• Mr Streeting is due to respond to NHS waiting list figures this morning, with Starmer supporters trolling that he does not have the 81 nominations from MPs to stage a formal challenge; 
• Other challengers are gearing up, with speculation around Ed Miliband, deputy leader Lucy Powell and 'Action Man' ex-marine Al Carns. 

With her party plunging deeper into civil war, Ms Rayner conducted a series of interviews this morning to stake her own claim.

She also poured cold water on suggestions she had a pact with her friend Andy Burnham, declaring: 'I am not doing deals'.  

Ms Rayner revealed she has finally handed £40,000 to HMRC for underpaying stamp duty on a seaside flat - but insisted she had not been 'tax dodging'.

She insisted the authorities cleared her of 'deliberate wrongdoing or carelessness over her tax affairs'. HMRC refused to comment on individual tax cases.

Ms Rayner made clear said is ready to stand in any leadership contest, saying she would 'play my part' - but would not strike first herself.

'I've made it clear that I wasn't going to trigger the Prime Minister – and that I want to see change. I want to see actions, not just words', she said.

'We're not delivering the change that people voted for and I feel like we've made some mistakes that need to be corrected.  

'I've said to Keir this is a really significant moment for our party and the country. The pace of change hasn't been enough for voters to see, and also mistakes have really blown us off course and made voters doubt us.' 

Asked if the PM should now resign she said: 'Keir will have to reflect on that.' 

Ms Rayner was forced to quit as Deputy PM and Housing Secretary last September after a sleaze watchdog found she broke the Ministerial Code when she underpaid about £40,000 of stamp duty on an £800,000 seaside apartment in Hove, East Sussex. 

In an interview with ITV the former deputy Labour leader said 'people felt that I was tax dodging' but 'HMRC have concluded that there wasn't any wrongdoing on my behalf'. 

She also told The Guardian: 'I'll play my part in doing everything we possibly can to deliver the change, because it's not a personal ambition, I know the difference it makes.

'Whatever role I can play, I will keep pushing and pushing hard because I want the people out there at the moment who are really struggling… to know that I'm putting all my energy into fighting for them.'

However the MP, a darling of the Labour Left, suggested she would not fire the starting pistol on a leadership race herself.

When asked whether she had struck a deal with the Manchester mayor, Ms Rayner said: 'No, I've said I would not trigger [a coup against] the Prime Minister.' 

Meanwhile, Mr Burnham has pulled out of his regular BBC Radio Manchester slot this morning. 

His spokesman said he had to 'prioritise discussions arising from last week's elections'. 

Mr Streeting is poised to fire the starting gun on a contest this morning following a brutal face-to-face showdown with the PM yesterday.

As his coup ramped up, the Health Secretary was in Downing Street for just 16 minutes before emerging grim-faced.

However, even natural supporters of Mr Streeting have concerns that he might only succeed in opening the door for a hard-Left leader.

Backbencher Luke Akehurst said: 'I would urge Wes not to resign or start a leadership contest. 

'I think he needs to be part of the cabinet team still, and my big concern is that he might start a contest that a candidate from the left of the party would win'. 

Sir Keir has been reduced to pleading with his MPs to step back from the brink, warning of cause 'chaos' and 'paralysis'. 

During a series of private meetings in the Commons, he told them: 'We can't let a leadership contest plunge us into chaos and a challenge would 100 per cent do that.'

Allies of the PM insist he will stand and fight for his job in what is likely to become a three or even four-way contest for the keys to No10.

Amid deepening panic in the party, MPs are even considering Ed Miliband as they scramble to unite behind a candidate of their own. 

Ms Reeves hailed official figures indicating the UK economy was resilient in March as the Middle East crisis brewed.

But the Chancellor said: 'Labour MPs have got an important decision to make today, but the numbers show that the economy is growing and that when we entered this conflict, our economy was growing strongly because of the decisions that I have made as chancellor, we shouldn't put that at risk'.

Mr Burnham is expected to signal his own ambition to succeed Sir Keir today. 

But it remains unclear whether he can find a route back to Parliament in time given there is no Westminster seat for him.

One union leader accused Mr Streeting of attempting a 'coup' by launching a leadership bid before Mr Burnham is able to stand.

MPs on the Left of the party were last night debating whether to back Angela Rayner or Mr Miliband if Mr Burnham is locked out of the race.

Mr Miliband was emerging as favourite despite being rejected by the public at the 2015 election, although his wife Justine Thornton is thought to be against the idea of him running for the leadership again.

Other potential candidates include deputy leader Lucy Powell and Culture Secretary Lisa Nandy. 

Cabinet Office minister Darren Jones is being encouraged to run as a 'continuity Starmer' candidate if the PM falls by the wayside. Former Special Forces officer Al Carns is also considering entering the race.

During the King's Speech debate yesterday, Kemi Badenoch said Sir Keir was 'in office, but not in power'.

In a blistering performance in the Commons, the Conservative leader warned Britain will be 'subjected to months of peacocking by leadership candidates while the country is not being governed'.

She added: 'In the past 48 hours, nearly 100 Labour MPs have called for the Prime Minister to resign. Four ministers have quit. 

'It is clear that his authority has gone and that he will not be able to deliver what little there is in this King's Speech. This is a Government less than two years in office who have already run out of ideas and run out of road.'

Pressure has been mounting on Sir Keir since last week's disastrous local elections, which saw Labour lose 1,500 council seats in England and trail in third place in Scotland and Wales.

Downing Street had thought it had seen off the threat from Mr Streeting after he failed to mount an immediate challenge, but the situation reignited after their abortive summit in No10. 

The PM faced another body blow when Labour-supporting trade unions told him to set out a timetable for his departure, saying it was 'clear that the Prime Minister will not lead Labour into the next election'. 

In a joint statement, the 11 unions said 'Labour cannot continue on its current path' and needs 'a fundamental change of direction' to 're-orient Labour back to working people'.