Peter Mandelson asked Foreign Office for £500k severance payment, files show

Ex-peer sacked as US ambassador over Epstein links was offered £75,000, documents released by Cabinet Office show

Peter Mandelson was offered a severance payment of £75,000 after initially asking the Foreign Office to pay him more than £500,000 upon his sacking as US ambassador, newly released documents reveal.

Exchanges in the documents released by the Cabinet Office suggested that officials did “well to get this settlement down this low with minimal fuss”, after Mandelson was forced to resign as ambassador to the US because of newly disclosed details about his long friendship with the child sex offender Jeffrey Epstein.

The initial release of the documents covers the vetting of Mandelson as a potential US ambassador as well as discussions around his dismissal in autumn last year.

The documents note that Keir Starmer’s national security adviser, Jonathan Powell, raised concerns during the appointment process about Mandelson’s reputation directly with the prime minister’s then chief of staff, Morgan McSweeney, who said “the issues had been addressed”.

The release of the documents was forced by a humble address motion from the Conservative party in parliament, which the government did not oppose. The motion covered exchanges with all senior figures in Starmer’s government, designed to be as wide-ranging as possible.

But a police investigation into Mandelson has delayed the release of the documents. One specific exchange that is understood to have been blocked from release includes the three questions Starmer put directly to Mandelson about how he maintained his friendship with Epstein.

MPs voted to hand powers to the intelligence and security committee of MPs and peers to decide which documents could be released without prejudicing national security.

Within the initial tranche of documents is one prepared for the prime minister detailing the “due diligence” carried out on Mandelson, including a long section on his relations with Epstein, including after the financier was jailed – information that was in the public domain at the time.

The document read: “After Epstein was first convicted of procuring an underage girl in 2008, their relationship continued across 2009-2011 … Mandelson reportedly stayed in Epstein’s house while he was in jail in June 2009.”

Mandelson’s past suggestion of using Nigel Farage, the Reform UK leader, as a way of smoothing relations with Trump were listed among reputational risks Starmer was briefed on in December 2024 before the ambassadorial appointment.

There was, the report said, “general reputational risk” from this and other aspects of Mandelson’s life, including his business links and the fact he had been twice forced to resign as a government minister.

In a call with Mike Ostheimer, the general counsel to the prime minister, who was investigating after Mandelson’s dismissal, Powell said he had found the appointment to be “unusual” and “weirdly rushed”.

Powell noted that Philip Barton, who was the permanent undersecretary at the Foreign Office at the time, also had reservations.

The documents suggest Mandelson raised the prospect of suing the Foreign Office for unfair dismissal until the settlement was reached. The department’s HR boss, Mark Power, said Mandelson had consulted an employment KC who said there were doubts about the “reasonableness of the PM’s decision” to sack him as ambassador.

In an email, he wrote: “There is some carefully placed language around the public implications of not reaching a settlement, and the nature of an employment tribunal case … There is a potential, that absent a positive indication, Peter goes public on some of his claims so there is some urgency.”

The chief secretary to the Treasury, James Murray, signed off on the £75,000 severance payment to Mandelson – a combination of payment in lieu of notice as well as a special severance deal of £34,670.50. Officials discussing the payment said Mandelson “opened negotiations asking us to pay out his contract (over £500k)”. The full amount requested would have been £547,000.

Mandelson emailed Power to say he expected his return to the UK to be treated with “maximum dignity and minimum media intrusion” five days after he was sacked in September last year.

The documents are the first batch to be released of tens of thousands of files that are expected to contain information that was publicly available at the time of the appointment and sacking, such as newspaper reports that showed the extent of his relationship with Epstein, as well as correspondence between Cabinet Office, Downing Street and Foreign Office officials about Mandelson.

Mandelson, 72, resigned from the Labour party and the House of Lords in February after the release of the Epstein files in the US. He has since been arrested on suspicion of misconduct in a public office, which is understood to be related to sensitive information he appeared to share with Epstein while he was business secretary under Gordon Brown.

He has been released from his bail conditions, although he remains under investigation.

Mandelson has denied any wrongdoing, including misconduct in public office. He has apologised to Epstein’s victims for remaining friends with him.