Andrew Gwynne signs Commons deal that could pave way back for Andy Burnham | Labour

Andy Burnham may have a new path to parliament after MP Andrew Gwynne reached a deal with the House of Commons that will allow him to retire and hold a by-election.

The mayor of Greater Manchester is said to want to return to parliament to represent the Labor leadership in the event of a challenge to Keir Starmer, but is thought to have limited options for a by-election in the north-west.

Gwynne, MP for Gorton and Denton in Greater Manchester, has publicly ruled out planning early retirement. He reportedly sought a compromise with House of Commons pensions officials but withdrew the request in the autumn. He said he plans to serve the full parliament soon.

But a senior source confirmed the suspended Labor MP had been offered a pension deal that would allow him to retire on medical grounds.

Friends of the MP told the Guardian he was almost certain he would accept the deal, which sees him receive annual payments until he reaches retirement age when he will be entitled to a full pension.

Gwynne is currently the subject of a parliamentary standards investigation launched last year after he was found to be in a WhatsApp group called Trigger Me Timbers, where he shared vulgar and provocative comments about voters and other MPs. He was suspended from the party after the messages were revealed.

The Manchester backbencher was said by some MPs to have reached an agreement with Burnham to allow the Greater Manchester mayor to take his seat after taking early retirement, but both men denied any agreement.

Burnham made no secret of her ambitions. He sparked outrage within No 10 and among cabinet ministers when he said several MPs were urging him to run for the Labor leadership ahead of the Labor Party conference last year.

But allies have warned against exaggerating the extent of planning that may be taking place, arguing that he is passionate about his current job and will only make the decision to return to Westminster if space becomes available.

“People want to portray him as scheming and scheming, but that’s definitely not his place. That would only be an option if he feels he has something to offer,” one of them said.

Burnham will not be guaranteed a candidacy if she decides to return to Westminster in a by-election where the candidate is selected by a panel of the party’s ruling national executive committee (NEC).

Five members of the NEC told the Guardian they believed it would be impossible for Burnham to get through the selection panel, given the number of Starmer allies on the body and how they could be hand-picked to sit on the selection panel.

They said this was due not only to personal hostility towards Burnham, but also to the great cost and uncertainty of the mayoral election. This could mean around £500,000 of party funding has been diverted from other races in Britain.

“What if Reformation wins the mayoralty of Greater Manchester? That would be a totemic win for them: their biggest ever win. We’d go mad if we let that happen,” one of them said.

“It’s extremely selfish for Andy to want to run for this – it costs us tens of thousands of dollars we don’t have and diverts our activist resources while we fight other important elections. It’s beyond description and cannot be allowed,” another added.

But other senior figures in the party have suggested there would be significant unrest among MPs, unions and party members if he tried to block Burnham, even though the establishment is dominated by Starmer loyalists.

“I don’t think anyone wants a big fight within the NEC. That’s not where anyone wants to go. No one is benefiting from it. But it wouldn’t be wise to second-guess the NEC,” one said.

Unions also wield significant power over the party’s ruling body, holding 14 of the 25 seats. Steve Wright, general secretary of the Fire Brigades Association, said: “It would be a democratic outrage if Andy Burnham was prevented from standing as the Labor by-election candidate in this seat.

“Should a by-election take place, the FBU, as an affiliated union, will not stand by and allow senior Labor politicians such as Andy to be left out of the process. Our union will fiercely resist any attempt to consolidate the election.

“It is vital that there is a full and open democratic procedure to select the Labor candidate to run in this by-election. Anything less is unacceptable.”

There are historical examples of the NEC rejecting entire shortlists prepared by the selection panel because they did not initially include certain candidates, such as Jonathan Reynolds in Stalybridge and Tristram Hunt in Stoke-on-Trent Central.

It is also possible that the institution will impose an all-female shortlist to stop her candidacy.

A party insider suggested Downing Street was closely monitoring the rise in support for Kemi Badenoch, who acted decisively last week by sacking Robert Jenrick, who defected to Reform England.

Another warned that MPs and members were already concerned that leadership speculation risked destabilizing the party ahead of local and devolved elections in May. “I don’t think anyone will thank Andy for triggering more of this,” one of them said.

Gwynne has a majority of 18,000 in the seat south-east of Manchester. Reform UK is likely to face a significant challenge in any by-election, drawing on support in the Tameside part of the constituency.

Labor believes it is on stronger footing in the Greater Manchester part of the seat but could face pressure from pro-Gaza independents.

If Burnham returns to parliament, she will need the support of 80 Labor MPs to challenge Starmer.

Gwynne’s office has been approached for comment. Burnham declined to comment.