Allies of Angela Rayner are said to be becoming increasingly confident that an HMRC probe into her tax affairs will be resolved before the May local elections, seen by many as the moment where Sir Keir Starmer is most likely to be ousted.
The ongoing inquiry continues to be seen as the main barrier to Ms Rayner returning to frontline politics, as questions remain over her finances.
But if the probe were to wrap up before the local elections, it would put the former deputy prime minister in a much better position to challenge the beleaguered prime minister.
The MP for Ashton-under-Lyne resigned as housing secretary and deputy prime minister last year after a row over her underpayment of stamp duty on a new property.
She has since been widely seen as a potential successor to Sir Keir amid rumblings of a leadership challenge in the face of devastating approval ratings and questions over the direction of the government.
There have also been reports that she could run on a joint ticket with health secretary Wes Streeting to challenge the prime minister after the local elections in May, which are expected to deliver a brutal result for Labour.
In what appeared to be the starting gun for a possible leadership campaign, Ms Rayner told an event hosted by left-wing campaign group Mainstream that the party had come to be seen as representing “the establishment, not working people” and called for a change of course.
Ms Rayner cited immigration reform as a key concern, suggesting that changes to indefinite leave to remain for people already living in Britain would be a “breach of trust”, dubbing the reforms “un-British”.
In an apparent attack on Shabana Mahmood’s plans to overhaul the system, Ms Rayner said: “Many people came here to Britain, on the understanding that if they worked in the sectors where we needed them, obeyed the law and paid their taxes, they could stay.
“If we suddenly change that, it pulls the rug from under those who have planned their lives and commitments and are contributing to our economy and to our society.
“That would be not just bad policy but a breach of trust. The people already in the system – who made a huge investment – now fear for their future, they do not have stability and do not know what will happen.
“We cannot talk about earning a settlement if we keep moving the goalposts, because moving the goalposts undermines our sense of fair play. It’s un-British.”
On Wednesday, in the wake of Ms Rayner’s attacks, Downing Street appeared to waver over the flagship policy, repeatedly refusing to commit to Ms Mahmood’s reforms.
The prime minister’s official spokesperson said the government is “considering responses” to a Home Office consultation into the proposals to reform indefinite leave to remain (ILR), which would extend the length of time migrants must wait for permanent residence.
The reforms are a central pillar of the government’s agenda and form a key part of Labour’s plan to win back votes from Reform UK amid devastating approval ratings and questions over the direction of Sir Keir’s administration.
Later, the government sought to clarify the situation, with a spokesperson insisting its “position has not changed”.
Ms Rayner’s office has been contacted for comment.
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