The disclosure of the vetting failure has intensified pressure on Sir Keir over his appointment of Mandelson, Britain's former US ambassador, who is under police investigation for allegedly leaking government documents to the sex offender Jeffrey Epstein, and has led to renewed calls for the prime minister to resign.
Mandelson failed his security vetting before taking up the role, but the government said Starmer was unaware officials had overruled the recommendation.
"Neither the prime minister, nor any government minister, was aware that Peter Mandelson was granted developed vetting against the advice of UK Security Vetting until earlier this week," a government spokesperson said in a statement on Thursday.
The decision was taken by officials in the foreign ministry, the spokesperson said.
Sir Keir has apologised for the appointment but defended his own actions, accusing Mandelson of creating a "litany of deceit" about his Epstein ties and promising to release documents on how he was appointed.
A source familiar with the matter on Thursday said Olly Robbins, the most senior official at the foreign ministry, would leave his post after Sir Keir and his boss, Foreign Minister Yvette Cooper, lost confidence in him.
A foreign ministry spokesperson said in a separate statement that Sir Keir had "initiated a process to establish the facts" of the vetting process, adding that it "was working urgently to comply with that process".
The Guardian newspaper had reported earlier on Thursday that the failed security check came after Mandelson's appointment had been announced. The government has previously pledged to overhaul the vetting process and "address weaknesses" in the system.
The report also said that officials were considering whether to withhold publication of the documents that would reveal Mandelson had not been given security clearance.
However, the government spokesperson said that once Sir Keir had been informed, he had instructed officials to establish why the clearance had been granted and to update parliament.
Mandelson has not commented publicly on allegations he leaked documents, and a lawyer for Mandelson did not provide a comment about the report.
Mandelson, 72, was fired from the most prestigious posting in Britain's diplomatic service in September, when the depth of his friendship with Epstein started to become clear. His relationship with the convicted sex offender, who died in prison while awaiting trial in 2019 on sex trafficking charges, is at the centre of a British political scandal that has forced the resignation of two senior government officials.
Opposition Leader Kemi Badenoch accused Sir Keir of misleading parliament when he said three times in September that "full due process" had been followed.
If Sir Keir was found to have knowingly misled parliament, he would have broken the code that governs ministers' behaviour and would be expected to resign.
"Keir Starmer said in February that the security services had given Mandelson 'clearance for the role,'" said Nigel Farage, leader of the populist Reform UK Party which is leading polls.
"Now we discover that he has blatantly lied, the prime minister should resign."
Mandelson was arrested in February on suspicion of misconduct in public office after Sir Keir's government passed on communications between the former ambassador and Epstein. He was later released on bail, pending further investigation.
Sir Keir faces further scrutiny as parliament is expected to release more documents related to his vetting.
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