Political judgement matters to markets as much as it does to voters. As fresh revelations from the Epstein files trigger police interest and intensify scrutiny of Peter Mandelson’s role in public office, the controversy is fast becoming a wider test of Labour’s credibility in government.
In this exclusive commentary for Business Matters, former Downing Street strategist Alastair Campbell reflects on how a story once seen as historical embarrassment has evolved into a live political risk, and why the consequences for Keir Starmer’s leadership could be profound.
Fresh revelations linking Peter Mandelson to Jeffrey Epstein have escalated rapidly from a troubling disclosure into a full-blown political crisis for the Labour government, raising urgent questions about judgement, accountability and leadership at the top of British politics.
In the days since the latest tranche of Epstein files was published, two issues have come to dominate the debate in the UK: whether Mandelson could face criminal investigation for misconduct in public office, and whether Keir Starmer can weather the political fallout from appointing him as Britain’s ambassador to the United States, despite his known association with the convicted paedophile.
The intensity with which those questions are now being asked underlines how precarious the situation has become for Labour. What might once have been dismissed as historical embarrassment has morphed into a live test of political judgement and ethical standards at the heart of government.
For many observers, the shock lies not only in the scale of Epstein’s abuse, and the casual disregard shown towards his victims, but in the tone of some of the correspondence now in the public domain. The suggestion that Mandelson was providing Epstein with commentary on sensitive political developments during the fraught period surrounding the 2010 general election, alongside allegations of sharing potentially market-sensitive material and receiving money, has been particularly damaging.
These revelations sit uneasily with Labour’s attempts to project integrity and seriousness after years of Conservative scandal. They also reopen long-standing concerns about Mandelson’s judgement, concerns that were well known during his earlier Cabinet career, but which now carry far heavier consequences given the role he was asked to play on the world stage.
The political danger for Starmer is compounded by the perception that this controversy was avoidable. Mandelson’s friendship with Epstein was already on the record when the ambassadorial appointment was made. Critics argue that failing to anticipate how further disclosures might land reflects a broader pattern of miscalculation that has frustrated Labour MPs and unsettled supporters.
At the same time, there is a striking contrast between the scrutiny now facing the UK government and the relative lack of accountability for many prominent American figures named in the Epstein files. That imbalance has fuelled a sense of injustice and disbelief, particularly among Labour supporters who fear their party is paying a disproportionate political price.
The timing could hardly be worse. With elections looming and opinion polls offering little comfort, the government is grappling with a restless parliamentary party and a Downing Street operation that many MPs privately describe as error-prone and overly defensive. The Epstein-Mandelson affair has become a focal point for wider discontent about direction, competence and political instincts.
For Labour veterans, the disappointment is acute. After a landslide victory that promised stability and renewal, the government now finds itself firefighting a crisis that cuts to the core of trust in public life. External pressures – from a harsher media environment to geopolitical instability, undoubtedly make governing harder than in previous eras. But they do not explain why unforced errors continue to accumulate.
The deeper question is whether this moment marks a turning point or a slow-burning erosion of authority. Can the government regain control of the narrative, reassert clear ethical standards and restore confidence among its own ranks? Or does the Epstein affair expose structural weaknesses in Labour’s leadership and decision-making that will continue to surface?
As police inquiries progress and political pressure mounts, one thing is clear: this story will not fade quickly. It will shape how voters, investors and international partners assess the judgement and resilience of the current government. And for a party that returned to power promising higher standards, the stakes could hardly be higher.
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Why the Epstein files have become a serious political risk for Labour