Lord Peter Mandelson was given a pay-off of up to £55,000 when he was sacked as US ambassador over his friendship with convicted paedophile Jeffrey Epstein.
The Labour peer is now facing calls to hand the money back or donate it to charity.
Lord Mandelson was sacked by the Prime Minister over his relationship with the disgraced financier and later was removed as a Labour peer after the latest release of documents indicated he leaked information to Epstein while he was a government minister.
The Metropolitan Police has launched an investigation into Lord Mandelson and searched two of his London homes on Saturday.
The taxpayer-funded pay-off he received after being dismissed in September last year could be as high as £55,000 before tax and deductions, the Sunday Times reported.
Full details of the pay-off will be disclosed to Parliament after MPs backed a call for the disclosure of papers relating to his time in Government.
The figure is thought to be between £38,750 and £55,000, based on Lord Mandelson being paid at the highest rate in the diplomatic service, an annual salary of between £155,000 and £220,000, and qualifying for a three-month pay-off.
A No 10 source told the Press Association: ‘Given what we know now, Mandelson should either pay the money back or give it to a charity to support victims.’
Sir Keir Starmer has become engulfed by a growing scandal over his appointment of Lord Mandelson as US ambassador. Pictured: The pair together in 2025
An image released in the Epstein files shows Peter Mandelson standing in white underwear while talking to a woman in a bathrobe
Earlier this week, Health Secretary Wes Streeting, who was a friend of Lord Mandelson before his sacking, said the peer should ‘certainly’ hand the money back.
Cabinet Minister Pat McFadden also told Sky News that the Labour peer should either hand the money back or give it to charity.
Dame Priti Patel MP, Shadow Foreign Secretary, said: ‘A five-figure taxpayer funded payout for Lord Mandelson is a disgusting betrayal of Epstein’s victims.
‘Once again it raises very serious questions about the Prime Minister’s judgment and his disgraced Chief of Staff Morgan McSweeney.
‘The Government must ensure Mandelson’s golden goodbye is recovered in full.’
A Foreign Office spokesman said: ‘Peter Mandelson’s civil service employment was terminated in September 2025 in accordance with legal advice and the terms and conditions of his employment.
‘As we have consistently said to Parliament, normal civil service HR processes were followed.
‘Further information will be provided to Parliament as part of the Government response to the motion passed last week which is being co-ordinated by Cabinet Office.
‘A review has been instigated in light of further information that has now been revealed and the ongoing police investigation.’
The Metropolitan Police said its investigation into Lord Mandelson, 72, over alleged misconduct in public office would ‘take some time’ after officers finished searching his homes in London and Wiltshire.
‘This will be a complex investigation requiring a significant amount of further evidence gathering and analysis,’ Metropolitan Police Deputy Assistant Commissioner Hayley Sewart said.
Former Prime Minister Gordon Brown said his former colleague’s secret email contacts with Jeffrey Epstein while he was in government were ‘a betrayal of everything we stand for as a country’.
In 2022 a picture emerged of Lord Mandelson celebrating with Epstein at a birthday gathering
Peter Mandelson is pictured and mentioned many times throughout the released Epstein files
A furious Mr Brown, who brought Mandelson back into government as Business Secretary in 2008, said: ‘There’s no doubt this would be seen as a financial crime if police were investigating it, I see it as a financial crime.’
Mr Brown said he felt ‘shocked, sad, angry, betrayed, let down’, when he saw the messages released by the US Department of Justice which suggested the then Cabinet minister was passing sensitive information about the response to the global financial crash to Epstein.
The scandal has engulfed Sir Keir Starmer, with Labour MPs in open revolt after Sir Keir finally admitted to the Commons on Wednesday that he had agreed the appointment despite knowing about Mandelson’s post-prison ties to Epstein.
MPs told the Daily Mail it is now a matter of ‘when, not if’ the Prime Minister is forced to step down.
Speculation of a possible leadership contest grew further as potential leadership candidates Wes Streeting and Angela Rayner became embroiled in briefing wars against one another.
A friend of Ms Rayner said MPs who were ‘frothing at the mouth’ at the chance to install Mr Streeting as leader were ‘mad because he has been damaged by association with Mandy’.
But allies of Mr Streeting criticised Ms Rayner’s ‘little helpers’, with a source quoted in the Sunday Telegraph saying: ‘They are doing this to try to distract from her own tax scandal. The Labour Party is pretty sick of the toxic briefing culture in No 10 and will not want to bring in something even more nasty.’
A poll by Opinium indicated that more than half, 55 per cent, of British voters thought Sir Keir should quit as Labour leader, with just 23 per cent saying he should remain.
Mr Brown said that emails which appeared to confirm an imminent bailout package for the Euro the day before it was announced in 2010 could have caused ‘huge commercial damage’. Pictured: The pair in 2008, after Mandelson became Business Secretary
Last week Ms Rayner was behind a backbench revolt, calling on the Prime Minister to cede control of documents relating to Lord Mandelson’s appointment to Parliament’s Intelligence and Security Committee (ISC).
The Daily Mail understands that in the wake of Wednesday’s drama, Ms Rayner told an MP ‘I will be ready’ to launch a leadership challenge, despite an ongoing probe into her tax affairs.
Lord Mandelson has previously suggested his status as a gay man meant he was ‘kept separate from what (Epstein) was doing in the sexual side of his life’.
Among the three million pages of so-called Epstein Files released by the US Department of Justice are bank statements that suggest Lord Mandelson and his husband, Reinaldo Avila da Silva, received payments from Epstein totalling tens of thousands of pounds.
Labour’s ‘Dark Lord’ is named as the recipient of three $25,000 (£21,500) payments, which he denies getting, while Mr da Silva was the subject of a standing order that paid out $4,000 (£2,900) a month for three months.
The Epstein files have shown Lord Mandelson sharing lewd and off-the-cuff messages with the late child abuser, including joking about ‘well-hung young men’ when he was a Cabinet minister.
He was pictured standing in his underpants in one of the homes belonging to Epstein, while talking to a woman wearing a white bathrobe.
Mandelson’s friendship with Epstein started around 2002 and continued until 2011.
During that time he served as Cabinet minister in both Tony Blair and Gordon Brown’s governments.
The former ambassador was sacked last September after a 2003 ‘birthday book’ for Epstein contained a message from Mandelson calling the pervert ‘my best pal’.
Mandelson told Epstein ‘I think the world of you’ and advised him to ‘fight for early release’ from his jail term.
Flight records show Mandelson flew on Epstein’s private jet, dubbed the ‘Lolita Express’, and stayed at his homes in New York, Palm Beach and on his private Caribbean island.
Previously published pictures showed Mandelson in a bathrobe and another wearing swimming trunks.