Sir Tony Blair’s think tank is drawing up a sweeping policy blueprint to “renew Britain” and rescue Labour as rumours swirl that Sir Keir Starmer could face a leadership challenge next year.

The former Prime Minister is “frustrated” with the Government’s direction, according to friends of Sir Tony.

One source told The Times that last week’s Budget “killed any idea this is a Blairite or New Labour-style government”.

They added that while some former New Labour figures remain in the mix, there is “no overarching plan to radically reform the state”.

Sir Tony is believed to have “given up” on trying to influence Sir Keir in recent months, according to Labour figures who have spoken to the former Prime Minister.

One friend of Sir Tony said that is now “looking closely at each of the leadership campaigns”.

The former Labour leader is also due to appear at an in-conversation event with Home Secretary Shabana Mahmood on Wednesday

Ms Mahmood has previously spoken at several events hosted by the Tony Blair Institute for Global Change (TBI) think tank.

The TBI is teaming up with other centre-left figures to propose bold policies on healthcare, welfare, and technology.

The plan is being drawn up with the future in mind and could give any potential Labour leadership candidates a ready-made policy blueprint.

Sir Tony is said to have told the authors of Prosperity Through Growth: Boosting Living Standards in an Age of Autocracy and AI earlier this year that Britain’s taxes were too high, singling out the 40 per cent income tax band in particular.

One minister said the former Prime Minister “and 50 million other people” are dissatisfied with the current direction of the Labour government.

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The minister added: “It would be weird if he was chuffed.”

In April, Sir Tony warned in a report from his think tank that the Government’s “irrational” net-zero policies needed a drastic overhaul, saying they were “doomed to fail”.

The TBI later emphasised that the former Prime Minister’s remarks were not aimed at Sir Keir or Energy Secretary Ed Miliband.

The party’s moderate wing is said to be unhappy with Sir Keir’s perceived lurch to the left in recent months, pointing to Rachel Reeves’s £26 billion tax rise and higher welfare spending as examples.

Labour MPs have speculated that a leadership challenge could emerge after the local elections if results are as poor as expected.

Downing Street is said to have been bracing for a contest, with the Prime Minister’s allies last month insisting he would fight to remain leader.

One minister said the two “most advanced” potential candidates are Health Secretary Wes Streeting and Ms Mahmood.

They added: ““Angela Rayner still clearly has ambitions, but if a leadership contest were to happen any time soon she is more likely to be an influence on the race instead of an actual contender.”

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