Political judgment matters as much to markets as it does to voters. As new revelations from the Epstein files spark police interest and intensify scrutiny of Peter Mandelson’s role in government, the controversy is fast becoming a wider test of Labour’s loyalty to government.
In this special commentary for Business Matters, former Downing Street strategist Alastair Campbell shows how what was once seen as a historic scandal turned into a living political danger, and why the consequences of Keir Starmer’s leadership could be huge.
The new revelations linking Peter Mandelson and Jeffrey Epstein quickly grew from a troubling revelation into a full-blown political crisis for the Labor government, raising urgent questions about judgement, accountability and leadership at the top of British politics.
In the days since the publication of the latest episode of the Epstein files, there are two issues that have dominated the debate in the UK: whether Mandelson may face a criminal investigation for misconduct in public office, and whether Keir Starmer can withstand the political fallout from his appointment as British ambassador to the United States, despite his well-known relationship with a convicted child.
The intensity of those questions that are being asked now emphasizes how bad the situation has become for the workforce. What was once thought of as a historical embarrassment has become a live test of political judgment and moral values at the heart of government.
For many observers, the shock is not only at the scale of Epstein’s abuse, and the general indifference shown to his victims, but at 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, as well as allegations of sharing potentially sensitive market information and accepting money, was particularly damaging.
The revelations sit uneasily with Labour’s efforts to project integrity and seriousness after years of Conservative scandals. They also reopen long-standing concerns about Mandelson’s judgment, concerns that were known when he served in the Cabinet, but now have far-reaching consequences given the role he has been asked to play in the world.
The political risk for Starmer is compounded by the idea that the controversy could have been avoided. Mandelson’s friendship with Epstein was already on the books when the ambassador was appointed. Critics argue that the failure to anticipate how more global disclosures could reflect a wider pattern of miscalculation has frustrated Labor MPs and unstable supporters.
At the same time, there is a striking contrast between the scrutiny now facing the UK government and the lack of accountability for many prominent Americans named in the Epstein files. That inequality has fueled injustice and mistrust, especially among Labor supporters who fear their party will pay a heavy political price.
The timing couldn’t be worse. With the election looming and opinion polls offering little solace, the government faces a restless parliamentary party and a Downing Street job that many MPs privately describe as flawed and overprotective. The Epstein-Mandelson affair has become the focus of widespread discontent about direction, power and political sensibility.
For labor veterans, the disappointment is overwhelming. After a resounding victory that promised stability and renewal, the government now finds itself fighting a serious fire that cuts to the core of trust in public life. External pressures – from a strong media environment to the instability of the country, undoubtedly make governance more difficult than in previous eras. But they don’t explain why unforced errors keep piling up.
The deeper question is whether this period marks a revolution or a slow-burning erosion of authority. Can the government regain control of the narrative, reassert clear moral standards and restore confidence among its ranks? Or does the Epstein affair expose structural weaknesses in Labor leadership and decision-making that will continue to emerge?
As police inquiries continue to mount under political pressure, one thing is clear: this story is not going away anytime soon. It will shape how voters, investors and international partners evaluate the judgment and integrity of the current government. And for a team that has returned to power that promises high standards, the stakes could not be higher.
