Mandelson faces calls to repay his 'golden handshake'

Peter Mandelson was last night facing calls that he should repay an £11,000 "golden handshake" he received when he resigned from the Cabinet following the home loan scandal 18 months ago.

Peter Mandelson was last night facing calls that he should repay an £11,000 "golden handshake" he received when he resigned from the Cabinet following the home loan scandal 18 months ago.

The former Secretary of State for Trade and Industry took severance pay worth a quarter of his £45,201 ministerial salary when he was forced out of office over a £373,000 undeclared loan from the Paymaster General Geoffrey Robinson. He continued to draw his £45,066 MP's salary.

The Liberal Democrat MP Norman Baker called for the pay-off to be returned after Tony Blair revealed in a parliamentary answer that there was no requirement to do so.

Mr Mandelson was out of the Cabinet for just 10 months, and, Mr Baker argued, it was clear from the day he resigned that he would be reinstated.

Mr Mandelson returned to office in October 1999 as Secretary of State for Northern Ireland after Mo Mowlam was moved to the Cabinet Office.

In a letter to his colleague on the day he resigned, Tony Blair held out the prospect that Mr Mandelson could return to office, saying he would "achieve much, much more with us".

Mr Baker, MP for Lewes, claimed Mr Mandelson should have been treated as an exception to the rule on ministerial severance, which imposes a three-week delay on payments to guard against swift re-instatements. "The whole thing was questionable, but when we knew he was coming back to office it was quite wrong that he should receive this money," he said. "If he has any credibility or integrity he should repay it to the taxpayer."

Mr Mandelson took the money from Mr Robinson, a multi-millionaire, in 1996 to buy a £475,000 house in Notting Hill, London. Both resigned on the same day when the arrangement became public. The house was later sold for £750,000 and Mr Mandelson repaid Mr Robinson.

A spokesman for the Cabinet Office, which oversees ministerial salaries, confirmed the arrangement but said he could not comment on individual cases.