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Sir Keir Starmer was issued a damning official warning about Peter Mandelson’s friendship with sex offender Jeffrey Epstein before making the ex-Labour politician Britain’s top diplomat, government documents have revealed. The Prime Minister was warned about a “reputational risk” if he handed the peer the role of ambassador to the US – and was told the ex-minister continued his friendship with paedophile Jeffrey Epstein long after the financier was convicted of a child sex offence.

It appears to contradict the Prime Minister’s claim that the disgraced peer “lied throughout the process” and the extent of his friendship with Epstein “was not disclosed”. The first tranche of the so-called Mandelson files also revealed that the former ambassador demanded a payout of more than £500,000 after being sacked, and eventually received £75,000, which MPs are now demanding he hand back. Alex Burghart, Shadow Chancellor of the Duchy of Lancaster, said: “Keir Starmer was plainly aware of the relationship between Mandelson and the world’s most notorious paedophile when he appointed him as US ambassador.

“What’s worse, the Government gave him a payoff of £75,000 despite his resignation in disgrace. No one will be able to trust the Prime Minister’s judgement again.”

And the Government’s national security adviser, Jonathan Powell, warned that the appointment process had been “unusual” and “weirdly rushed”.

Documents were published on Wednesday after Conservatives used a parliamentary procedure to force the Government to release files related to Lord Mandelson’s appointment as ambassador in 2024, and his eventual sacking last year.

In a “due diligence” memo sent to the Prime Minister on December 11, 2024, Sir Keir was told: “After Epstein was first convicted of procuring an under-age girl in 2008, their relationship continued across 2009-11.”

The memo continued: “Mandelson reportedly stayed in Epstein’s House while he was in jail in June 2009.”

But the Prime Minister went ahead and announced Lord Mandelson’s appointment as British ambassador to the White House nine days later.

Lord Mandelson, a former Labour MP and cabinet minister, was sacked on September 11 last year following the publication of leaked emails that illustrated his ongoing friendship with Epstein.

In one June 2008 email, the peer told Epstein: “Your friends stay with you and love you.”

Sir Keir insisted last year: “If I knew then what I know now, he would never have been anywhere near Government.” But Conservatives said the documents confirmed that the Prime Minister knew about the relationship all along.

Mr Burghart warned there would be more revelations to come because only a small part of the documents have so far been released.

Some papers cannot currently be published because of an ongoing police investigation. Lord Mandelson was arrested on suspicion of misconduct in public office, having been accused of passing sensitive information to Epstein during his time as business secretary.

Darren Jones, the Chief Secretary to the Prime Minister, defended Sir Keir land told MPs that the due diligence report “did not expose the depth and extent” of Lord Mandelson’s relationship with Epstein.

He insisted Sir Keir had asked for more information. Mr Jones said: “Whilst this is a document that we can’t publish at this time, the Prime Minister is very clear that he regrets having believed the lies that Peter Mandelson put before him.”

The papers also show Lord Mandelson’s chequered past as a politician, including two resignations from previous Labour governments, was cited as another risk in the report sent to the Prime Minister.

In addition, Sir Keir was told that appointing a politician rather than a career diplomat meant that “if anything goes wrong, you could be more exposed as the individual is more connected to you personally”.

The documents reveal that Sir Keir said “serious discomfort” among Labour MPs contributed to his decision to sack Lord Mandelson.

National security adviser Jonathan Powell said after the peer’s removal that he found the appointment process “unusual” and “weirdly rushed”, according to the record of a telephone call.

Philip Barton, the then-Foreign Office permanent under-secretary, “also had reservations around the appointment”, the memo said.

A Foreign Office memo confirming Lord Mandelson’s £75,000 payout said: “If there’s any pushback, it might be worth mentioning that he opened negotiations asking us to pay out his contract (over £500k).”

And Lord Mandelson told Foreign Office colleagues in his farewell email on September 11, 2025, that he continued to “feel utterly awful about my association with Epstein 20 years ago”, despite the fact he was later proved to have been in touch with paedophile financier as recently as 2016.

The Prime Minister should have come to the Commons to address his “catastrophic failure of judgement” in appointing Lord Peter Mandelson as the ambassador to Washington, the leader of the Liberal Democrats told MPs.

Sir Ed Davey said: “For a close friend of Epstein to have been made Britain’s ambassador to the United States is a shameful part of this affair that is the Prime Minister’s responsibility.”

The Lib Dem leader also called on the Government to release documents relating to the former prince, Andrew Mountbatten-Windsor, who was also friends with Jeffrey Epstein, “as quickly as possible”.