Lord Mandelson could be in line for a generous six-figure payout after being dramatically sacked as Britain’s ambassador to the US over his friendship with paedophile Jeffrey Epstein.
Sir Keir Starmer, who picked the Labour grandee to be the UK’s representative in Washington, swiftly made the decision to fire Mandelson after emails showed he had sent messages of support even as Epstein faced jail for sex offences.
The Foreign Office said the emails showed ‘the depth and extent of Peter Mandelson’s relationship with Jeffrey Epstein is materially different from that known at the time of his appointment’.
But according to allies of the beleaguered peer, Lord Mandelson had made it clear during the vetting process that his connection with Epstein continued over many years.
They added that he was unable to share any of the emails that have since emerged, because they came from an old account he no longer has access to.
As the peer refused to resign, the Government would have needed to find legal grounds to sack him – or else pay him compensation over loss of position.
HR experts are understood to have now been drafted in to ensure due process was followed before Lord Mandelson was sacked, The Times reported.
But there are fears the dismissed politician could be in line for a substantial taxpayer-funded payout, because the prime minister did not speak to Lord Mandelson before taking his decision.
Lord Mandelson could be in line for a six-figure payout after being sacked by Keir Starmer as Britain’s ambassador to the US over his friendship with paedophile Jeffrey Epstein
The holiday snap that triggered his downfall: Lord Mandelson in a fluffy white dressing gown enjoying a chat with ‘best pal’ Epstein
Lord Mandelson, who was appointed by Sir Keir Starmer as Britain’s Ambassador to the US, is pictured here with Donald Trump in the Oval Office in May 2025
One government source said: ‘They’re concerned it could end up in some disastrous HR process.’
Another explained that Starmer had ‘no choice’ but to act swiftly, given the negative optics of leaving Lord Mandelson in place after his friendship with Epstein had been revealed.
They said: ‘Politics is very different from employment law and there is a real fear that this will end up costing them a lot of money.’
Daily Mail understands Lord Mandelson is still on the Government payroll and will be paid until a settlement is reached.
If the peer does secure a hefty compensation package, he will follow a long line of others before him who were paid out after being forced to step down.
Sir Tom Scholar, the top official at the Treasury, was sacked just days after Liz Truss became prime minister and received an exit payout of £335,000.
Former permanent secretary Jonathan Slater received a £277,780 payout after he left in 2021 following backlash over the use of a controversial algorithm to award A-Level and other exam grades.
Mandelson’s message in the ‘birthday book’ compiled by Ghislaine Maxwell, said Epstein was ‘my best pal!’
Mandelson with his now husband enjoying a boat ride together as guests of Epstein at his private island in 2002
According to allies of the beleaguered peer, Lord Mandelson had made it clear during the vetting process that his connection with Epstein continued over many years
Physical tests did not take place because of the pandemic.
Sir Philip Rutnam, who quit as the Home Office’s permanent secretary after accusing Home Secretary Priti Patel of a ‘vicious and orchestrated briefing campaign’ against him, settled his constructive dismissal case for £340,000.
Meanwhile Sir Philip Barton, the former permanent secretary at the Foreign Office, received a voluntary exit payment of more than £260,000 after leaving eight months before his five-year fixed contract was due to end.
Sir Philip was heavily criticised for staying on holiday in the Dordogne as the Taliban took control of Afghanistan in 2021.
There are also concerns that, even after his sacking, the peer could re-emerge for duty in the House of Lords.
The peer is currently on a leave of absence from the House of Lords, which began at the end of January and is due to last for the rest of the Parliamentary session.
Lord Mandelson’s intentions now he has been removed as ambassador are not known.
However, under Lords rules he can return to duties in the chamber simply by giving the Clerk of the Parliaments three months’ notice.
The PM’s spokesman said today that whether Lord Mandelson keeps his peerage – which was awarded in 2008 – was ‘not a matter for me’
His fellow peers however expressed concern that Lord Mandelson cannot be allowed to be a ‘lawmaker’ following these latest revelations.
The PM’s spokesman said n Friday that whether Lord Mandelson keeps his peerage – which was awarded in 2008 – was ‘not a matter for me’
But Labour MP Kim Johnson told Sky News the peer should be ‘removed from the Lords’.
SNP MP Brendan O’Hara meanwhile has tabled an early day motion in the Commons accusing Lord Mandelson of bringing Parliament ‘into disrepute’ and calling on the Government ‘to take legislative steps to remove his peerage’.
And Tory frontbencher Neil O’Brien told the Mail that Lord Mandelson should not be allowed to return.
He said: ‘Surely now he has been forced to resign in disgrace for a third time, for attempting to secure an early release for a convicted paedophile, he cannot return to being a lawmaker and a serving member of the House of Lords.’
