Angela Rayner signalled an alliance with Andy Burnham to force a hard-Left Labour revolution tonight as she put Keir Starmer on a final warning.
In a dramatic intervention in the wake of the local elections meltdown, Ms Rayner delivered a devastating verdict on her former boss's performance.
She said the Peter Mandelson scandal showed a 'toxic culture of cronyism' and accused the PM of failing to help 'working people' enough.
The 1,000-word statement - released on the eve of Sir Keir giving a make-or-break speech - laid out proposals for an extraordinary Labour lurch to the Left.
The former deputy PM also hinted that she has formed an alliance with Manchester Mayor Mr Burnham, amid alarm that Wes Streeting - seen as a Blairite - has put himself in pole position to force an early contest and seize the leadership.
Many at Westminster expect Sir Keir's fate to be sealed as early as tomorrow, with a 'stalking horse' challenger surfacing and anger mounting among MPs.
But Ms Rayner - who is still wrangling with HM Revenue & Customs over unpaid stamp duty - and Mr Burnham - not currently an MP - both have an interesting in delaying the denouement.
Ms Rayner said the Government had allowed 'wealth and power to concentrate at the top', demanding a wave of nationalisations.
She said her controversial workers' rights overhaul should be 'just the start', and indicated a push for more taxes on the wealthy.
The country could not carry on with 'deregulation, privatisation, and trickle-down economics', she said.
'We are in danger of becoming a party of the well-off, not working people,' she added.
In a dramatic intervention in the wake of the local elections meltdown, Angela Rayner delivered a devastating verdict on her former boss's performance
Laying down the gauntlet to Sir Keir, she warned he must 'change - now'
Labour Left-wingers hit the panic button over Wes Streeting plotting to succeed Sir Keir
Ms Rayner pointed to Sir Keir blocking Mr Burnham from standing in the Gorton & Denton by-election in Februaryy, a traditional Labour bastion that was stormed by the Greens.
'This is bigger than personalities, but it is time to acknowledge that blocking Andy Burnham was a mistake,' she said.
'We must show we understand the scale of change the moment calls for - that means bringing our best players into Parliament - and embracing the type of agenda that has been successful at a local level, rather than reaching back to an agenda and politics that has failed people.'
Ms Rayner said 'policy tweaks will not fix the fundamental challenges facing our country'.
Laying down the gauntlet to Sir Keir, she warned he must 'change - now'. 'The Prime Minister must now meet the moment and set out the change our country needs,' she said.
Ms Rayner singled out the scrapping of winter fuel allowance as a key mistake for the Government.
'For too long, successive governments have allowed wealth and power to concentrate at the top without a plan to ensure the benefits of economic growth are shared fairly,' she said.
'The result is an economy that does not work for the majority, with wealth concentrated in too few hands. This level of inequality, alongside squeezed living standards, is the outcome of a model built on deregulation, privatisation, and trickle-down economics.'
The PM's grip on power is looking increasingly tenuous, despite his tone-deaf protestations today that he can stay on as PM for another eight years.
However, the timing of any leadership contest is regarded as critical.
Backbencher Catherine West is pledging to launch a 'stalking horse' challenge to Sir Keir as early as tomorrow.
Left-wingers believe the Health Secretary's allies want to force a leadership crisis before their favoured candidate, Mr Burnham, can find a way of returning to the Commons.
Having neutralised Mr Burnham, Mr Streeting would then try to see off Ms Rayner - whose tax issues are still seen as a problem.
The tactic has echoes of the Schlieffen Plan, which Germany developed to try and win on two fronts in the First World War.
Mr Streeting is thought to have made clear to No10 previously that he will not directly challenge Sir Keir, but is preparing in case the top job comes vacant.
Former shadow chancellor John McDonnell said Ms West was 'reflecting the upset in her constituency' but did not have the 'right approach'.
'We need to discuss how we go forward and I worry some in shadows want to exploit her concerns and bounce us before we have a proper democratic process,' he said.
One veteran Labour strategist told the Daily Mail: 'It would suit Wes to force a contest while Angela is still under investigation.'
Another insider pointed out that the Schlieffen Plan failed. 'Who will lead the plucky British Expeditionary Force and stop him at the Marne?'
Josh Simons - regarded as an ally of the PM until he was forced to resign in February - joined the growing list of rebels demanding he steps aside this morning. He said the PM had 'lost the country' and should allow an 'orderly transition'.
Labour grandee Lord Blunkett said Sir Keir will need to make a 'seemly' exit unless he can achieve an 'earthquake' in opinions.
Unite general secretary Sharon Graham also said she believed the premier is doomed.
Sir Keir's bid to stabilise the situation yesterday by bringing veterans Gordon Brown and Harriet Harman back into Government was roundly ridiculed by MPs and ministers.
The PM is now facing a make-or-break moment tomorrow, when he has promised a big speech that will explain how he can save Labour from oblivion. He is expected to talk up his plans to unwind Brexit, a key demand of many London MPs.
Sir Keir's bid to stabilise the situation yesterday by bringing veterans Gordon Brown and Harriet Harman (pictured) back into Government was roundly ridiculed by MPs and ministers
Backbencher Catherine West is threatening to launch a 'stalking horse' leadership bid in the morning unless the Cabinet acts
Former shadow chancellor John McDonnell joined other Left-wingers in voicing alarm that Ms West's leadership mutiny could 'bounce' the party into choosing its new leader quickly
Ms West shocked Westminster by declaring her intentions to challenge Sir Keir last night. She appeared to backtrack slightly this morning by saying she will wait until after the PM's speech before sending her message email to colleagues.
Ms West, MP for Hornsey and Friern Barnet, denied that she wants to thwart Mr Burnham's chances.
'Not at all,' she said. 'I think Andy should be part of the leadership team, and I would expect that any leader will want to appoint Andy, perhaps, to the House of Lords, because you could be a minister in the House of Lords, and he would make a fantastic contribution.
'Whether he can necessarily be the prime minister from the House of Lords, that would be very unusual.'
Ms West said: 'What I'd really like to see is not a leadership election, but for (the Cabinet) to come together and appoint somebody amongst them who can lead us and give us a vision of how we're going to defeat Nigel Farage and the right wing in the coming general election, which could be as soon as possible.'
The backing of 20 per cent of Labour's 403 MPs – a total of 81 - is needed to spark a full vote. Ms West acknowledged she only has 10 supporters so far, but argued that could increase quickly.
Left-wing MP Richard Burgon said Ms West wanted a 'Cabinet stitch-up'.
'That would mean the very people who sat back and allowed terrible decisions like the winter fuel and disability cuts to happen end up deciding the future of the party,' he posted on X.
'I fear there's a real danger that, whatever her good intentions, her move will be exploited by people on the right of the party who want a coronation and not a proper democratic contest in the party. It may even be that those people help secure the 81 nominations needed to kickstart any leadership race.'
Mr Burgon said the next leader could not be decided 'through a snap election run under rule changes designed by Morgan McSweeney/Labour Together in order to hand someone like Wes Streeting a coronation'.
Even loyal MPs are downbeat about the chances Sir Keir can turn his fortunes around, after repeated failed 'reset' attempts.
'Lots of people have done an anti-establishment vote and the answer is Gordon, Harriet and one degree closer to the EU,' one despairing backbencher told the Daily Mail.
'That will really p*** people off in Brexit areas... they are screaming at us and already think we don't listen.'
A former minister said of the pro-EU message: 'This is going to go down like a cup of cold sick in the Red Wall. He does these speeches and never has anything to say.'
Education Secretary Bridget Phillipson was sent out to defend the PM in TV studios this morning.
She said Ms West was 'completely wrong' to try to trigger a leadership contest. 'What I do recognise, however, is that Catherine, like lots of other colleagues, and like lots of candidates who stood in the elections that we've just had, are really hurting, really hurting this morning, and I feel that too,' she said.
Ms Phillipson insisted that Labour's 'red lines' on not rejoining the EU customs union or single market remain in place.
'We hold to what we said in our manifesto, but we do need a closer relationship with Europe,' she told Sky News.
She also said there would be no U-turn on Shabana Mahmood's tough immigration crackdown, which has faced anger from many on the party's Left.
Ms Phillipson argued that the Government has 'another three years to deliver', while ruefully acknowledging that there had been 'a few' mistakes.
She singled out axing the winter fuel allowance, and ministers being 'too gloomy and negative early on'.
Asked whether the PM could really serve another eight years, Ms Phillipson said: 'What Keir was talking about is a decade of national renewal.'
However, she said she supported Sir Keir to lead the party into the next election.
Lord Blunkett told Times Radio Sir Keir's speech would need to be an 'earthquake' moment to save him.
Angela Rayner's statement in full
Our party has suffered a historic defeat. Many good Labour colleagues have lost their seats despite working hard for those they represented. We have lost good Labour administrations and lost the chance for more.
What we are doing isn't working, and it needs to change. This may be our last chance.
The Labour Party must now live up to our name: we must be the party of working people.
We've heard the same on the doorstep as we've seen in the polls - the cost of living is the top issue for voters of all parties. People have turned to populists and nationalists because we have not done enough to fix it.
Living standards are barely higher than they were a decade and a half ago. People feel hopeless - that the cost of living crisis will never end, and now they see oil and gas companies use global instability to post record profits.
Once again, ordinary people are paying the price for decisions they didn't make. It's no wonder that across the UK, working people feel the system is rigged against them.
Things can be so much better than this. Countries including Spain and Canada have shown that economies can grow and people can thrive when governments stay true to labour and social democratic values and put people first. We need to learn from that.
In London, we lost young people who fear they will never afford a home. In my patch and across the north, we lost working people whose wages are too low and costs too high. In Scotland and Wales, people do not currently see Labour as the answer.
We are in danger of becoming a party of the well-off, not working people.
The Peter Mandelson scandal showed a toxic culture of cronyism.
Decisions like cutting winter fuel allowance just weren't what people expected from a Labour government.
For too long, successive governments have allowed wealth and power to concentrate at the top without a plan to ensure the benefits of economic growth are shared fairly. The result is an economy that does not work for the majority, with wealth concentrated in too few hands. This level of inequality, alongside squeezed living standards, is the outcome of a model built on deregulation, privatisation, and trickle-down economics.
But we have the chance to fix this.
We need immediate action to cut costs for households and put money back into the everyday economy. This can be done within the current fiscal rules, by ensuring those who benefit from the crisis contribute more so that everyone can thrive.
Our Employment Rights Act was just the first step in our plan to Make Work Pay. Now is the time to take the next steps, starting with a Fair Pay Agreement in social care - but not ending there. A rising minimum wage must go alongside our programme to get young people into work.
The investment we secured in social and affordable housing should now unleash a building boom that benefits British business and workers. We must double down on renters' reform and show leaseholders our action on tackling ground rents and charges was just a first step to ending freehold for good.
Our devolution revolution has begun, but is nowhere near done.
Giving mayors powers to transform planning and licensing can boost local business and good growth, in the interests of local people. They must go alongside economic powers and public services.
Boosting community ownership and stopping the sell-off of local assets from pubs to playgrounds will put power back in local hands, helping restore the pride they feel in the places they live.
We must go further on planning reforms, to build the schools, hospitals, roads and infrastructure the country needs to grow.
We should be unafraid to promote new forms of public, community and cooperative ownership across the board. Buses and trains being brought back into public hands can now operate for the public good, at prices passengers can afford.
Thames Water is an iconic failure of privatisation, which resonates for the same reasons. People are rightly sick of bonuses for bosses who deliver nothing but higher bills. We must face down demands that the public pay the price of private failure.
We must create good jobs that pay decent wages by ensuring defence investment includes a secure manufacturing base. Use our house building programme to boost construction, invest in the green economy, backing SMEs by reforming business rates and increasing support to revive our high streets and local economies, raise the minimum wage and get young people into work.
And then there is politics itself, putting power back into people's hands so that they are shaping the decisions that impact them. We must tackle the inflow of dodgy money in our politics - something that Nigel Farage, who took 5 million pounds in a secret personal gift from an offshore crypto baron, will never do. We must make politics work for ordinary people.
We can only prove we mean it by putting the common interest ahead of factionalism.
This is bigger than personalities, but it is time to acknowledge that blocking Andy Burnham was a mistake. We must show we understand the scale of change the moment calls for - that means bringing our best players into Parliament - and embracing the type of agenda that has been successful at a local level, rather than reaching back to an agenda and politics that has failed people.
These are the fights we need to have, and the change in direction we need to see. Policy tweaks will not fix the fundamental challenges facing our country. This government needs, at pace, to put measures in place that make people's lives tangibly better, while fixing the foundations of a system rigged against them.
The Prime Minister must now meet the moment and set out the change our country needs.
Change our economic agenda to prioritise making people better off, change how we run our party so that all voices are listened to, and change how we do politics.
Labour exists to make working people better off. That is not happening fast enough, and it needs to change — now.
Otherwise there 'won't be a decade of his leadership, there won't be anything else for us except opposition for a very long time'.
'Either Keir pulls out the stops and there's a massive transformation in how we relate to the public,' the ex-home secretary said.
'Or he and Victoria will have to talk about the best way of doing it in a seemly fashion and someone else will take over… The jury's well and truly out.'
Mr Streeting has repeatedly denied plotting against Sir Keir. As the results rolled in on Friday, the Health Secretary gave limited backing for the PM while stressing 'the Government nationally bears a huge amount of responsibility'.
'On Monday, Keir Starmer will be setting out as our leader and Prime Minister how he intends to make sure our Government still can deliver the change that people voted for at the last general election and still show that politics can be a force for good,' he said.
Deep divisions are emerging within Labour over whether to focus on combating the Reform surge in northern and Midlands heartlands, or position to quell the Green threat in former urban strongholds.
One Government adviser predicted Sir Keir - whose own constituency is in central London - will side with the metropolitan faction.
'Going back to a Red Wall strategy would be the fastest way to guarantee a coup. The Parliamentary Party just would not wear it,' the aide said.
Morgan McSweeney, the PM's former chief of staff, was seen as the main champion of policies targeted at Brexit-backing areas before he resigned amid the Mandelson debacle.
In an interview with the Mirror, Sir Keir was asked if he would lead Labour into the next election and serve a full term in office.
'Yes I will, and I've always said it's a decade of national renewal, where the legacy we inherited was an appalling legacy on all fronts, not just the economy, which was broken,' he said.
'Public services were broken and actually the situation was worse when we got into office than we thought beforehand.
'There has to be a 10-year project of renewal. If it's to be done properly, that's how it needs to be done.'
Pressed if he would fight any challenge, he said: 'I'm not going to walk away from the job I was elected to do in July 2024.'
So far the Cabinet has held off joining calls for Sir Keir to go - although some including Ed Miliband and Yvette Cooper have offered notably lukewarm support.
Ms Rayner has also stayed silent, although there are rumours of a statement later.
She posted pictures on social media last night of her swimming and caked in mud at a charity fundraiser.
Some senior Labour figures believe her prospects have been badly damaged by Reform sweeping the local council in her constituency. She had been pictured canvassing in London during the campaign, which many saw as preparation for a leadership bid.
Education Secretary Bridget Phillipson was sent out to defend the PM in TV studios this morning
Angela Rayner posted pictures on social media last night of her swimming and caked in mud at a charity fundraiser
One senior Government aide told the Daily Mail that MPs were 'going wild'.
'It always felt like the most unpredictable element of this weekend - groups of angry backbenchers going wild,' they said.
Sir Keir failing to deliver a speech that moves the dial tomorrow could swing opinion against him.
'There is no sign that the Mandelson stuff has made Keir take an interest in how politics works,' one senior Labour source said. 'He just doesn't really care and that is why he f***s things up.
'He's not going to change now but that's OK - we just need him to be a slightly better version of himself.'