Peter Mandelson demanded a payout of more than £500,000 after being sacked in disgrace from his role as US ambassador. And while Sir Keir Starmer’s Government refused to pay such a large sum, it did hand the former Labour politician £75,000.

The sums are revealed in newly released files that the Government was forced to publish, showing details of Lord Mandelson’s appointment as ambassador to the US and his dismissal. The peer was told to leave Washington after it became clear he had remained close to sex offender Jeffrey Epstein even after the financier’s first conviction. A memo from civil servant Alice McCullough confirms an “agreement to pay the settlement of £75,000 within seven days of the agreed termination date”.

The payment included £40,329.50 in lieu of notice and a special severance payment of £34,670.50, with the first £30,000 exempt from income tax.

The note dated October 13, 2025, apparently sent to Lord Mandelson’s lawyers, stated: “It is in both parties’ interest to conclude this as quickly as possible and have therefore proposed a termination date of October 16, 2025, which would enable payment to be made no later than October 17, 2025.”

And a separate internal memo from the civil servant states: “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.”

Lord Mandelson’s request for more than £500,000 in severance pay was “inappropriate and unacceptable”, Cabinet Office minister Darren Jones has said.

The Chief Secretary to the Prime Minister told MPs: “I’m sure that right honourable and honourable members across the House will read in these documents with interest how Peter Mandelson conducted himself after his withdrawal as ambassador.

“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“Despite the fact that he was withdrawn from Washington because he had lost the confidence of the Prime Minister, the Government obviously found that to be inappropriate and unacceptable.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.”

Mr Jones earlier said: “Peter Mandelson should never have been afforded the privilege of representing this country, and I reiterate for the House that the Prime Minister deeply regrets taking him at his word, it was a mistake to do so.”

Lord Mandelson also suggested using Nigel Farage to better the UK’s connections with the Trump administration, the documents revealed.

The due diligence report that went to the Prime Minister ahead of Lord Mandelson’s appointment as ambassador in Washington quoted the peer as saying of Mr Farage: “You can’t ignore him, he’s an elected Member of Parliament.

“He’s a public figure. He’s a bridgehead, both to President Trump and to Elon Musk and others … National interest is served in all sorts of weird and wonderful ways.”

Sir Keir decided to sack Lord Mandelson after emails released by Bloomberg “revealed a depth and extent of a relationship with Epstein which he had not been aware of previously when he made the decision to appoint Mandelson”, according to a No 10 private office note released on Wednesday.

The memo said that at a meeting on September 11, the Prime Minister “referenced the his concern at the judgements and views expressed in the cache of emails released by Bloomberg, that the answers Mandelson provided to FCDO PUS (Foreign, Commonwealth and Development Office permanent under-secretary) Olly Robbins regarding the emails did not give him confidence that there were not further revelations to come and the serious discomfort in the PLP”.

It added: “The emails revealed a depth and extent of a relationship with Epstein which he had not been aware of previously when he made the decision to appoint Mandelson.

“On this basis, he proposed to ask Mandelson to resign from his post as HMA Washington.”

The note also said: “The Chief Whip emphasised the serious discomfort amongst the PLP.

“The Prime Minister was clear about his strong concern for Epstein’s victims and the importance of the work of the Government to tackle violence against women and girls.”

Mr Robbins then “spoke by telephone to Mandelson towards the end of the meeting to inform him of the Prime Minister’s decision and of the next steps”, the memo said, adding that “it was noted that the Palace had been informed of the decision during the meeting”.