Sir Keir Starmer came under renewed political pressure on Wednesday after the first tranche of government papers released on Peter Mandelson showed the former US ambassador received a £75,000 settlement after being dismissed from the post, while vetting documents confirmed the Prime Minister knew when he appointed him that Mandelson had remained in contact with Jeffrey Epstein after the financier’s conviction.

The documents, published after a Commons vote forced ministers to disclose material related to Mandelson’s appointment and conduct, show the former ambassador had reportedly sought more than £500,000 in compensation after losing the £161,000-a-year role. In internal correspondence, Foreign Office permanent secretary Olly Robbins said the eventual £75,000 package “represents good value for money”.

The release is the latest development in a fast-moving political scandal that has widened from questions about Mandelson’s judgment and relationship with Epstein into a wider row over ministerial appointments, transparency and the handling of sensitive government information. It has already triggered a Labour backbench revolt, an apology from the Prime Minister and a criminal investigation by the Metropolitan Police.

The government said about 200 pages were being published on Wednesday, with thousands more documents expected in a later tranche. The papers include a three-page due diligence summary prepared for Starmer before Mandelson was appointed ambassador to Washington in December 2024. According to the material released, the summary referred to Mandelson’s continued association with Epstein after his 2008 conviction and highlighted the resulting reputational risks.

Starmer had already acknowledged in the Commons that Mandelson’s official vetting mentioned the continued relationship. In an exchange with Conservative leader Kemi Badenoch on 4 February, he said: “Yes, it did. As a result, various questions were put to him.”

The latest disclosures are likely to intensify scrutiny of why the appointment went ahead. Starmer has previously apologised for making it, saying it was a mistake and that Mandelson misled him about the “depth and extent” of his contact with Epstein.

The timing of Wednesday’s release also drew immediate criticism from the Conservatives because Starmer was not due to make a statement himself in the Commons. Instead, Cabinet Office minister Darren Jones was scheduled to update MPs after Prime Minister’s Questions.

Opposition figures accused Downing Street of trying to limit direct questioning of the Prime Minister. Shadow Cabinet Office minister Alex Burghart said: “His fingers are all over this. He’s already admitted that he knew about Mandelson’s ongoing relationship with Epstein when he appointed him. Time and again his judgment has been found wanting.”

Conservative frontbencher Neil O’Brien attacked the settlement, writing: “£70,000 bung for betraying Britain. Unreal.”

Jones rejected claims that the government was trying to avoid scrutiny, saying the timing followed the Commons schedule and that ministers had already been planning to publish the first batch of papers in early March. Speaking on broadcast rounds, he said: “Because I run the Cabinet Office, at the centre of government, it was always my responsibility to give those updates to the House of Commons and statements always come after Prime Minister’s Questions.”

He said the publication would provide “full transparency” on Mandelson’s appointment process, except for one document withheld at the request of the Metropolitan Police because of the continuing criminal investigation. Jones also said a second tranche of documents would be released later.

The government said some material had been redacted on grounds including national security and foreign relations, with the process overseen by Parliament’s Intelligence and Security Committee. Ministers had initially sought to leave control of disclosure with the Cabinet Secretary, but altered the approach after unrest on the Labour benches.

Mandelson was arrested on 23 February on suspicion of misconduct in public office after allegations that he passed sensitive government information to Epstein during his time as business secretary. He was later bailed, then released under investigation, and his passport was returned. He has denied criminal wrongdoing and has denied acting for personal gain.

The police investigation has become a central part of the dispute over disclosure. The government has agreed a framework with the Metropolitan Police setting out which documents can be published without prejudicing the inquiry, according to the Intelligence and Security Committee.

Further pressure came on Wednesday from Nick Butler, a former Downing Street aide under Gordon Brown, who criticised Mandelson over the handling of official information. Butler, whose internal Credit Crunch memoranda were reportedly shared with Epstein, told BBC Radio 4’s Today programme: “I’m very sorry there’s been no note of contrition from Peter Mandelson to the people whose trust he broke.” He added that any consequences were “a matter for the Metropolitan Police and the law”.

The controversy around Mandelson intensified after the release in the United States of a large cache of Epstein’s personal emails, which led to renewed examination of the relationship between the two men. Material referred to in the political fallout in Westminster has included allegations that Mandelson remained in contact with Epstein long after his conviction, and that sensitive economic and policy information was shared with him while Mandelson was in office. Those matters form part of the wider public and political scrutiny, but no criminal charge has been brought.

The affair has already had severe political consequences for Downing Street. Last month, the Commons approved a motion requiring publication of a broad range of documents, including messages between Mandelson and ministers and senior officials. The episode prompted significant unrest inside Labour and was reported to have brought about a near-meltdown in No 10, culminating in the resignation of Starmer’s chief aide, Morgan McSweeney.

Jones said ministers only understood the “depth and extent” of Mandelson’s links with Epstein after documents were first reported by Bloomberg and later released by the US Department of Justice. “As soon as those documents became available, and it became obvious that Peter Mandelson had lied to the Prime Minister about the depth and extent of his relationship, he was sacked as ambassador to the United States very promptly,” he said.

Wednesday’s disclosures are likely to sharpen the central political question facing Starmer: whether he knowingly took a reputational risk in appointing Mandelson despite warnings in the vetting material, or whether he was materially misled about the significance of the continued relationship with Epstein.

For now, the published papers appear to establish two politically damaging points for the government: that Starmer was told before the appointment that Mandelson’s contact with Epstein continued after the conviction, and that the taxpayer later funded a £75,000 settlement after Mandelson was removed from the role.

With more documents still to come, and the Metropolitan Police investigation continuing, ministers face the prospect of further disclosures in the days ahead.