Peter Mandelson wanted more than £500,000 after US ambassador contract was terminated
Lord Peter Mandelson was eventually handed a £75,000 taxpayer-funded payout to terminate his contract as the UK’s ambassador to the US
Newly released documents show that Lord Peter Mandelson was handed a £75,000 taxpayer-funded payout to terminate his contract as the UK’s ambassador to the US.
Emails contained within an initial batch of papers relating to Lord Mandelson’s appointment showed he first requested his contract was paid out in full, totalling more than £500,000.
A member of the HR directorate within the Foreign Office appeared to praise chief people officer Mark Power in October last year for managing to “get this settlement down this low with minimal fuss”.
An email dated October 16 last year, with the subject heading “PM settlement” from Alice McCullough from the Foreign Office’s HR directorate read: “If there’s any pushback, it might be worth mentioning that he opened negotiations asking us to pay out his contract (over £500k).
“Mark did v well to get this settlement down this low with minimal fuss.”
The documents released on Wednesday show the Treasury agreed to give Lord Mandelson a £40,329.50 payment “in lieu of notice” and a “special severance payment” of £34,670.50.
Full payout would have been “inappropriate and unacceptable”
Chief Secretary to the Prime Minister Darren Jones told MPs Lord Mandelson’s initial request for a full contract payout was “inappropriate and unacceptable”.
The Cabinet Office minister said: “As the documents show regarding his severance payment, Peter Mandelson initially requested a sum that was substantially larger than the final payment, not just two or even three times, but more than six times the final amount.
“Despite the fact that he was withdrawn from Washington because he had lost the confidence of the Prime Minister, the Government obviously found that to be inappropriate and unacceptable.
“The settlement that was agreed was to avoid even higher further costs involving a drawn-out legal claim at the employment tribunal.”
Starmer warned over Mandelson risk
The papers released today also showed that Sir Keir Starmer was warned there was a “general reputational risk” over Lord Peter Mandelson’s relationship with paedophile financier Jeffrey Epstein before he was givin the role of ambassador to the US.
A “due diligence” document drawn up in December 2024 before Lord Mandelson’s appointment to the Washington role noted a series of reports detailing his links with Epstein.
The document noted that after Epstein was first convicted of procuring an underage girl in 2008 “their relationship continued across 2009-2011, beginning when Lord Mandelson was business minister and continuing after the end of the Labour government”, noting that “Mandelson reportedly stayed in Epstein’s house while he was in jail in June 2009”.
Lord Mandelson was appointed in December 2024 but sacked in September 2025 after further details about the extent of his contact with Epstein emerged.
The advice did not expose the 'depth and extent' of Mandelson's relationship with Epstein
The Prime Minister has insisted Lord Mandelson “lied repeatedly” to No 10 about his relationship with Epstein, before and during his tenure as ambassador.
The first tranche of documents does not include correspondence between No 10 and Lord Mandelson, in which a number of follow-up questions were asked about his relationship with Epstein.
Chief Secretary to the Prime Minister Darren Jones updated MPs on the release of the Mandelson papers in a statement on Wednesday afternoon.
He said: “Whilst the documents point to public reports of an ongoing relationship between Peter Mandelson and Jeffrey Epstein, the advice did not expose the depth and extent of their relationship, which only became apparent after the release of further files by Bloomberg and then the United States Department of Justice.
“After the Prime Minister reviewed the Cabinet Office due diligence, that noted public reporting on Peter Mandelson’s relationship with Jeffrey Epstein, questions were put to Peter Mandelson by advisers in No 10 …. and Peter Mandelson responded.
“These are matters that are currently the subject of an ongoing police investigation and we will publish this document when the investigation allows.
“When we do, the House will be able to see Peter Mandelson’s answers for themselves, which the Prime Minister regrets believing.”