Every Labour meeting is about 'who can we tax in order to pay benefits to others', a senior Cabinet minister admitted in the Mandelson Files.

In a damning assessment of his own government, Sir Keir Starmer's former Cabinet enforcer Pat McFadden said it was asking the 'wrong questions'.

His quote echoes that of former Labour Treasury minister Liam Byrne, who left a note for his successor in 2010 in which he wrote: 'I'm afraid there is no money... Good luck!'

The Tories branded Labour 'the welfare party' as the McFadden revelation came to light in the 1,500 pages related to the appointment of Lord Mandelson as US ambassador, released yesterday.

Mr McFadden also revealed that ministers contemplated a 'huge bank levy' to cover the cost of the winter fuel allowance and scrapping the two-child benefit cap.

The then Chancellor of the Duchy of Lancaster told his long-time friend Mandelson that such a move would be tantamount to 'abandoning long-term growth for short-term [party] management'.

The lengthy discussions between the pair provide an embarrassing insight into the failings of Sir Keir's government.

Mr McFadden, now Work and Pensions Secretary, was previously a minister in Gordon Brown's government under then Business Secretary Mandelson.

In May 2025, Mandelson said: 'I have spoken to Morgan [McSweeney, Starmer's former chief of staff] a lot in this week, and last night I was direct with him – Keir is not leading from the front and Morgan is not organising the centre as it needs to be . . .

'Does he [the Prime Minister] even realise? The PLP [Parliamentary Labour Party] I gather is in mutinous state.' Mr McFadden responded: 'Yes, every meeting I have is "who can we tax in order to pay benefits to others". They're asking the wrong questions.'

Offering his views on where Labour is going wrong, Mandelson says: 'It stems from the top and Keir lacks verve as does the Cabinet as a whole.' He adds: 'There needs [to be] more dynamism and can-do optimism from the Government. More panache.'

And the disgraced architect of New Labour says that Sir Keir's visit to the US last year was planned around him avoiding 'any encounter with journos that might involve him answering a question.'

Referring to Gordon Brown, Mandelson said the former prime minister 'has it in for Keir (and Rachel [Reeves, the Chancellor]) big time. He doesn't seriously believe that Angela [Rayner] is an alternative but she is an instrument of destabilisation. I doubt he thinks Ed [Miliband] is fit for purpose.'

He was replying to Mr McFadden who said there was 'lots of manoeuvring here this week. Angela, Gordon. Doesn't feel good for Keir.'

Mr McFadden said: 'I don't know what Keir thinks of all this. He has not spoken to me about any of it.'

The pair discuss No 10's botched welfare Bill, which proposed cuts to benefits but sparked a backbench rebellion that forced Sir Keir into a U-turn. Mr McFadden said there was no good outcome: 'Defeat, pull Bill or gut it – all destroy his [the PM's] authority.'

Mandelson says that Mr McSweeney's plan to amend the Bill would not work, saying: 'If it presses to a vote and is lost I am not sure that Keir survives that.'

He revealed that Mr McSweeney, who was forced out having persuaded Sir Keir to post Mandelson to Washington, had sent him a document which 'seemed to be saying . . . that he has no faith in Keir's ability to change No 10.'

Mandelson also said of other key figures in No 10: 'None of them really know what Keir thinks or wants. In fact most of them don't think Keir knows what he wants.' Elsewhere, following last year's spring statement and Donald Trump's introduction of global tariffs, Mandelson said that he was 'very worried about the economy. Confidence is being lost.'

And, talking about Labour's disastrous local election results last year, Mandelson said: 'The problem is that when you say 'stay the course' people are not clear what the course is. The mantra is Plan for Change. But what is the plan? 

'The key to turn is an economic one but I felt when Rachel [Reeves] was here that she was on a growth mission but without an argument about where the growth will come from or how.'

Mandelson said of No 10: 'It is beleaguered and bereft. It requires complete revamp.'

Last night, a spokesperson for Mr McFadden said: 'Pat has said publicly many times that the question we should ask is not what are you entitled to, but how can we change your life?'

Last night, Baroness Davidson, the former Scottish Tory leader, said: 'Today's Mandelson release contains Pat McFadden stating, 'Every meeting I have is 'who can we tax in order to pay benefits to others?' ' It should serve as this Labour government's epitaph.'