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Labour leadership contender Owen Smith is warning the party it faces a ‘disastrous split’ if Jeremy Corbyn stays in charge as despairing MPs plan a new left-wing party.

Rising star Mr Smith announced he will battle Angela Eagle to become the ‘unity candidate’ who takes on Mr Corbyn in this summer’s Labour leadership contest.

The Pontypridd MP already has the backing of dozens of Labour colleagues and believes he can oust Ms Eagle as the frontunner and then defeat Mr Corbyn in the looming ballot of party members.

In a stark warning the Daily Mirror, Mr Smith - the ex-shadow work and pensions secretary - writes: “If the crisis and arguments we have seen in recent weeks continue, we are heading towards a disastrous split.

“That would put all the gains we have made at risk, as this Tory party is dead set on ruining our country.”

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Yesterday several worried Labour MPs confirmed to the Mirror they are ready to break away from the party and create a ‘new Centre Left’ if Mr Corbyn wins the leadership contest.

Plans have already been sketched out for a new grouping based on Europe’s most successful social democrat parties.

The new party would hope to keep the ‘Labour’ name in some form but would sever all links with the trade unions.

One MP told the Mirror: “If we lose, there is an opportunity to build a new centre left.

“In many ways the model upon which the Labour Party is built is actually out of date.”

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“You would have a constitution more suited to modern times – a proper social democratic party on a ‘one member, one vote basis’ like any other political party in Europe.”

Names including ‘True Labour’ and ‘Real Labour’ have been discussed in Commons tea rooms, and MPs are confident of taking much of Labour’s party machinery with them too.

One said bluntly: “We want the name, and we certainly will take the staff. They can keep the debt.”

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However a senior shadow cabinet source said last night they felt “hopeful for the first time in months’ about Labour’s future following Mr Smith’s decision to stand as leader.

The 46-year-old Welshman only became an MP in 2010 and so carries none of the baggage of the Blair/Brown years.

By contrast Ms Eagle, the ex shadow business secretary, has been an MP for more than 20 years and has already been attacked by Corbynistas for backing the Iraq War in 2003.

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Left-winger Mr Smith - a former BBC journalist - was quick to point this out yesterday as he announced his leadership bid, saying: “I wasn’t in Parliament at the time. I would have voted against.”

However critics pointed to an interview he gave in 2006 as a Labour Parliamentary candidate, in which he said removing dictators like Saddam Hussain was “a noble, valuable tradition”.

A spokesman insisted last night the interview had been given “while British troops were still on the ground”, and that Mr Smith had not wanted “to undermine our servicemen and women.”

The spokesman added: “He believed then, as he believes now, that the war in Iraq was a mistake and lessons must be learned from it.”

Mr Smith and Ms Eagle are now locked in a battle of wills over who should ultimately be the single candidate who takes on Mr Corbyn in the leadership contest.

Labour MPs are split on who is the better candidate, but agree there can ultimately be only one to give them any chance of defeating Mr Corbyn.

A private hustings could be held for Labour MPs on Monday afternoon, with whoever emerges with less support set to come under massive pressure to pull out.

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To further complicate the picture the Mirror understands former leadership hopeful Yvette Cooper has also been taking soundings about a possible bid.

She has been meeting MPs for quiet drinks on the House of Commons terrace as she weighs up if she has enough support to make a second run for leader – less than a year after losing to Mr Corbyn.

But her spokesman has just flatly denied she was considering another leadership run.

He said: “No - she is not.”

The two-month leadership contest will formally begin with the winner to be unveiled on Saturday, September 24.

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Mr Corbyn remains the hot favourite due to his huge grassroots support, but rebel MPs are increasingly hopeful the decision to clamp down on who can actually vote in the contest may give them a fighting chance.

At Tuesday’s highly charged meeting of Labour’s ruling National Executive Committee (NEC) it was decided that more than 130,000 new members who have joined in the past six months will not automatically get a vote.

Instead they will have to become a registered supporter for a hefty one-off fee of £25 - and there is only a 48-hour window next week to sign up.

Rebel MPs believe this will massively reduce the hard left and Tory ‘entrysim’ that plagued last summer’s leadership contest, when anyone could sign up and vote for just £3.

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The crucial NEC meeting on Tuesday night also ruled that Mr Corbyn will automatically be on the ballot paper.

But in a dramatic live interview yesterday one official who took part in the vote claimed colleagues were “bullied and intimidated” by Corbyn supporters ahead of the crunch ruling.

Johanna Baxter, one of six constituency party reps on the panel, claimed “groups within the party” published her personal contact details online as part of a campaign of intimidation.

She said at least one colleague broke down in tears during the meeting where there were “a number of threats made”.

She sobbed as told BBC Radio 4 that NEC members were threatened with legal action if they kept Mr Corbyn off the ballot before the decision was even made.

And she condemned Jeremy Corbyn for voting against a secret ballot even after NEC members voiced fears for their safety.

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“That is the most upsetting thing for me as a member of the NEC,” she said.

“I acknowledge Jeremy has consistently spoken against bullying behaviour and I applaud him for that and I respect that.

“But when it came to the vote to prevent colleagues taking an extremely difficult decision that would determine the future of our party, he voted against the single thing that he could have done to protect those colleagues.”

By contrast it was reported Mr Corbyn’s team celebrated tightening their grip on power with mocking football chants and bottles of lager.

Elated members of the leader’s office chanted ‘Watson Watson what’s the score?’ as the result of the knife-edge NEC vote came in - a jibe at deputy leader Tom Watson who had tried to broker a peace deal.

Shadow Chancellor John McDonnell then attended a rally of supporters where he branded plotting Labour MPs as “f****** useless”.

The speech was caught on audio but he later dismissed it as “a joke, stand-up comedy”.

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A spokesman for Mr Corbyn yesterday said Mr Corbyn had pushed for an open vote at the meeting because members of the NEC should be “accountable” for their decisions.

Angela Rayner, promoted to shadow education secretary after a slew of resignations, said it “isn’t right that people are that upset”.

But she said it was right to push for a publicly known ballot at the NEC, saying: “I encourage democracy. Are we going to close Parliament and stop people knowing how we vote in Parliament?

“I think it’s right that we have an open democracy.”

The bitter Labour split has descended into ugly threats and violence over recent weeks, with Ms Eagle’s office window bricked after she announced she was challenging Mr Corbyn.

Labour announced its constituency parties have been told to suspend all meetings for the duration of the leadership contest over members’ safety fears.