Starmer engulfed in leadership speculation as he backtracks over Mandelson papers

Sir Keir Starmer was engulfed in Labour anger and renewed leadership speculation as he stumbled through the fallout of the Jeffrey Epstein scandal and his decision to appoint Lord Peter Mandelson as Britain’s US ambassador.

The prime minister admitted on Wednesday that he selected Mandelson in 2024 despite being told by officials that the peer had maintained an ongoing relationship with Epstein after the financier was jailed for child prostitution offences.

Starmer was also forced to back down under Labour pressure — led by former deputy prime minister Angela Rayner — over what some MPs saw as an attempt to “cover up” documents relating to Mandelson’s appointment as Washington ambassador.

The affair was described by one Labour MP as “the beginning of the end” for Starmer and the mood at Westminster was toxic.

In a sign of investors’ unease over the mounting political turmoil, UK borrowing costs hit their highest level since November on Thursday, with the yield on the 10-year gilt up 0.02 percentage points at 4.58 per cent. In currency markets, the pound fell 0.5 per cent against the US dollar.

Starmer and Rachel Reeves, the chancellor, are regarded by bond investors as more wedded to the government’s fiscal rules than other senior Labour figures.

Steve Reed, the housing secretary, insisted on Thursday morning that the positions of Starmer and his chief of staff Morgan McSweeney were secure, telling Sky: “The person at fault here is not the prime minister or his team.”

However, one former minister said there was “a mood for blood”, while others saw Monday’s events as a damning indictment of Starmer’s judgment and political operation.

One minister said McSweeney, who promoted Mandelson’s bid to become ambassador, could soon be ousted by the prime minister. “I think he has to offer Morgan up as a sacrificial lamb,” they added.

Rayner became the focus of the latest round of Labour leadership speculation. “Angela is clearly enjoying sticking the knife in,” said one senior Labour official. “She has set up shop in the tea room, which suggests she thinks this could be it.”

The House of Commons tea room is the traditional scene for political plotting. However, one Rayner ally said: “Angela had chicken and chips in the tea room for lunch — no side dish of trouble.”

Nevertheless, Rayner’s intervention in the Commons, calling for Starmer to be more open in how documents relating to Mandelson’s appointment as ambassador are released, came as the Parliamentary Labour Party teetered on the brink of mutiny.

Starmer had said documents involving Mandelson, demanded by the Conservatives, would be released unless they breached national security or damaged Britain’s international relations. The arbiter of these tests was intended to be cabinet secretary Sir Chris Wormald.

But as Starmer faced the prospect of defeat in a Commons vote on the issue, he made a last-ditch concession to Labour rebels and accepted Rayner’s proposal that oversight of the release of the documents should be carried out by parliament’s cross-party intelligence and security committee.

“Why the hell didn’t we go straight for the ISC?” one Labour frontbencher said.

Another added: “On days like this, you can see the parliamentary operation is broken.”

At Prime Minister’s Questions in the Commons, Starmer was accused by Tory leader Kemi Badenoch of choosing “to inject the poison of Peter Mandelson into his government” by sending the peer to Washington in February last year.

Badenoch demanded to know whether the “official security vetting he received mentioned Mandelson’s ongoing relationship with the paedophile Jeffrey Epstein”, to which Starmer replied: “Yes, it did.”

But Starmer insisted Mandelson had “lied repeatedly” about the depth and extent of the relationship. Starmer’s aides later clarified the information came up in Cabinet Office “due diligence” checks.

The FT revealed in 2023 that Mandelson had stayed in Epstein’s Manhattan townhouse in 2009 while the financier was in jail.

Badenoch said: “The political decision to appoint Epstein’s close associate Peter Mandelson as Britain’s ambassador to Washington goes to the very heart of this prime minister’s judgment.”

A Tory official added: “Starmer is no longer in control — Kemi is calling the shots.”

Starmer insisted he wanted to be “transparent” in releasing documents relating to Mandelson’s appointment as ambassador and his time in Washington, but he was heckled by opposition MPs in the Commons when he said there would be constraints.

He said documents deemed to be sensitive to national security or “prejudicial” to Britain’s trade and security relations with the US and other third countries would not be released.

Starmer also revealed that the Metropolitan Police, which is investigating Mandelson over allegations of misconduct in public office, had asked Number 10 to be careful about the release of documents that could “prejudice their investigation”.

That statement, confirmed by the Met on Wednesday evening, put on hold Starmer’s plan to release some information relating to Mandelson’s vetting when he was appointed ambassador.

That came as a blow to Number 10 because Starmer’s aides said the documents would have “put us in a good light” and confirmed the prime minister’s claim that Mandelson had misled him about the depth and extent of his relationship with Epstein.

The prime minister’s allies said Badenoch was being “totally irresponsible” in demanding the release of a mass of documents that could undermine national security and UK relations with other countries.

A Conservative parliamentary motion — based on an arcane device called “a humble address” — called for the release of emails and other exchanges between Mandelson and ministers, officials and special advisers both before and after his appointment to Washington.

But the motion was not voted on after Starmer made his concession over the intelligence and security committee.

MPs instead backed Starmer’s plan to give the committee oversight of the documents about Mandelson.

A government spokesperson said it would be “publishing documents relating to Peter Mandelson’s appointment, which will show the lies he told”.

Starmer tried to reassure his MPs that he grasped the gravity of the allegations, saying: “Mandelson betrayed our country, our parliament and my party.”

Additional reporting by Ian Smith in London