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Wes Streeting has quit the cabinet as health secretary and called on Keir Starmer to resign as prime minister, saying it would be “dishonourable” to remain in post and that there should now be a contest for the Labour leadership.

But Streeting, who is on the party’s right, will not immediately launch a challenge and said he wanted to see a leadership contest with a broad range of candidates, a suggestion that the Greater Manchester mayor Andy Burnham could fight the contest.

Streeting had long been gathering support for a challenge and has spent the week asking MPs to nominate him. Allies of the former health secretary have consistently said he did not want to challenge the prime minister directly but hoped to be a candidate in a leadership contest if Starmer resigned. The fact that he is not challenging Starmer immediately suggests he does not have the requisite 81 MPs to mount the challenge directly.

A challenge would like have prompted bids from other potential candidates, including former deputy prime minister Angela Rayner, and Ed Miliband, the energy secretary.

Burnham would need to win a byelection seat to stand as a leadership candidate and was said by allies to have several lined up, though at least two have failed to materialise.

In his letter, Streeting criticised Starmer’s determination to stay, saying: “Your heavy-handed approach to dissenting voices diminishes our politics.

“It is now clear that you will not lead the Labour party into the next general election and that Labour MPs and Labour unions want the debate about what comes next to be a battle of ideas, not of personalities or petty factionalism.

“It needs to be broad, and it needs the best possible field of candidates. I support that approach and I hope that you will facilitate this.”

Streeting told the prime minister in their meeting on Tuesday that he had lost confidence in him – a meeting that lasted just 15 minutes and where Starmer told Streeting he would fight any challenge.

Close ministerial allies of Streeting, Jess Phillips, Zubir Ahmed and Alex Davies-Jones, stood down on Tuesday, calling for Starmer to resign.

Several of Streeting’s close allies, including Melanie Ward and Streeting’s former ministerial aide Joe Morris as well as the backbenchers Chris Curtis, Alan Gemmel and Jas Athwal, have called for Starmer to go.

If he did not resign, Starmer would automatically be on the ballot paper in any contest, and his allies have made it clear that he would fight any attempt to dislodge him. Any race would mark the first time a challenger has attempted to dislodge a sitting Labour prime minister.

Streeting’s departure comes as Starmer faces record-low popularity ratings, just two years after he came into office with a historic majority.

In his letter to Starmer, Streeting said that the local elections had convinced him thatStarmer’s leadership was at the heart of why people were turning away from Labour.

He said: “There are many reasons we could point to: from individual mistakes on policy like the decision to cut the winter fuel allowance to the ‘island of strangers’ speech, all of which have left the country not knowing who we are or what we really stand for.

“Where we need vision, we have a vacuum. Where we need direction, we have drift. This was underscored by your speech on Monday. Leaders take responsibility, but too often that has meant other people falling on their swords. You also need to listen to your colleagues, including backbenchers, and the heavy-handed approach to dissenting voices diminishes our politics.”

Number 10 sources were bullish on Tuesday night that Streeting did not have the required support to mount a formal challenge.

“Wes’s team were desperately trying to drum up support in the bars last night,” one MP said. “If they’ve led the party up the garden path they won’t be forgiven for this instability.”

Another said: “Based on calls still being made to certain colleagues last night, I’d guess Wes is not at 81.”

But ministers and MPs who met Starmer on Tuesday afternoon are said to have told the prime minister they are deeply unhappy with government. At least one minister, Josh MacAlister, is said by colleagues to have told the prime minister he should set out a timetable to resign.

Darren Jones, the chief secretary to the prime minister, is said to have spent six hours talking to MPs considering backing Streeting, persuading several to withdraw their names from his list of backers.

One MP said: “Darren promised people he would tell the PM their concerns. I think some took from that he was agreeing the PM should not lead the party to the next election. Ultimately we need stability, and that comes from him setting out an orderly timetable.”

MPs said there was “paralysis” in the party with many MPs wanting an orderly leadership contest but not prepared to call for Starmer to resign or to back Streeting.

One said: “A pool of MPs are just watching: what is Wes going to do and what cabinet delegation will do? It’s not good for the party to have endless public calls denouncing the prime minister but that doesn’t mean we are happy with the status quo. The cabinet needs to talk sense.”