A key ally of Keir Starmer was last night accused of being ‘rewarded’ with more than £1 million from the taxpayer for his ‘secretive firm’ after surrendering British sovereignty in the Chagos Islands, sparking a bitter conflict of interests row.

An organisation founded by Jonathan Powell, the Prime Minister’s national security adviser (NSA), received the money in a series of payments following his appointment as the Government’s Chagos envoy after Labour’s 2024 election win.

The handover of the Indian Ocean territory to Mauritius – a close ally of China – led to tensions with Washington after Donald Trump complained that the move had strengthened Beijing’s influence in the region.

The archipelago includes the joint UK/US military base on Diego Garcia, which Mr Trump had hoped to use to launch bombing raids on Iran this month – only to be blocked by Sir Keir. 

The UK, which has controlled Chagos since the early 19th century, has agreed to pay Mauritius an average cost of £101 million a year to lease the base.

Last night an official working in the Trump administration told The Mail on Sunday that America was considering withholding classified information from the British Government because of its concerns about potential ‘conflicts of interests’ relating to Mr Powell’s powerful role, his company and his links to China.

Mr Powell – who is known in Whitehall as ‘the real Foreign Secretary’ because of his contacts and influence – last met China’s foreign minister Wang Yi in Beijing on Monday. 

Details of the secret trip only surfaced after a press release was issued by the Chinese government.

An organisation founded by Jonathan Powell, the Prime Minister’s national security adviser (NSA), received the money in a series of payments following his appointment as the Government’s Chagos envoy after Labour ’s 2024 election win

Wang Yi, a member of the Political Bureau of the Communist Party of China Central Committee and director of the Office of the Central Commission for Foreign Affairs, holds talks with Mr Powell

The UK, which has controlled Chagos since the early 19th century, has agreed to pay Mauritius an average cost of £101 million a year to lease the base. Pictured: Diego Garcia, a British Indian Ocean Territory and the largest of the islands in the Chagos Archipelago

Mr Powell, 69, founded Inter Mediate – an organisation which uses intelligence networks to run back channels to ‘non-state actors’ – four years after he left Tony Blair’s Downing Street, where he was chief of staff for ten years until 2007. 

He stood down as its £200,000-a-year chief executive in December 2024 when he took up his post as NSA, but according to recent reports he is planning to return to the organisation later this year.

Now new evidence has come to light which reveals that his firm has been awarded a total of £1 million of taxpayer funding since Keir Starmer became Prime Minister. 

The reason for the payments has only been disclosed in very vague terms.

On October 23, 2025, just two days after legislation to surrender Chagos cleared the Commons, Inter Mediate was awarded a grant for £700,000, in addition to £349,000 which had already been paid to the company since Mr Powell’s appointment as envoy.

Mr Trump has urged Sir Keir not to ‘give away Diego Garcia’, saying that such a move would be ‘a blight on our great ally’.

The revelations came as President Mohamed Muizzu of the Maldives told the UK yesterday that it did not recognise the deal, expressing its opposition to the ‘deeply concerning’ agreement in two written objections and a phone call with Deputy Prime Minister David Lammy.

Alex Burghart MP, Shadow Chancellor of the Duchy of Lancaster, said: ‘It is shocking that Jonathan Powell’s secretive firm is pocketing a million pounds under the Labour Government, which raises serious concerns about conflicts of interest and breaches of procurement rules. 

‘Labour ministers should come clean on these dark money contracts, and how UK taxpayers’ money is being used to bankroll back channel communications with hostile foreign states.

‘We need to know what role Inter Mediate has played in secret discussions with the likes of Iran, China and Mauritius.

‘This payout would appear to be a reward for selling out the Chagos Islands, allowing Powell’s firm to cash in when he leaves government. 

‘The Government Internal Audit Agency needs to do a forensic investigation of these murky payments.’ 

Mr Powell, 69, (pictured) founded Inter Mediate – an organisation which uses intelligence networks to run back channels to ‘non-state actors’ – four years after he left Tony Blair’s Downing Street, where he was chief of staff for ten years until 2007

An official in the Trump administration said: ‘A foundation of our intelligence sharing is our confidence that these governments, including the British government, will protect classified information from adversaries like China.

‘Undisclosed connections and conflicts like the ones alleged here could raise grave concerns.’

On Friday, a group of MPs and peers criticised the way that Mr Powell was being shielded from public scrutiny. 

The parliamentary joint committee on national security (JCNSS) said there was a ‘lack of clarity’ over who is responsible for national security, which ‘hampers the possibility for external scrutiny and challenge’.

It added: ‘We have not been able to publicly question the national security adviser about delivery of national security policy, in contrast to all previous parliaments under all previous administrations’.

The JCNSS report also warned that Labour was prioritising short-term financial gain from China over national security. Mr Powell was still working as chief executive of the shadowy outfit – which was first incorporated as a company before subsequently obtaining charitable status – when he was appointed as Sir Keir’s Chagos envoy in September 2024.

He has strong links to Beijing. In 2023 he attended a seminar run by the Grandview Institution, a Chinese state ‘think-tank’, whose key people have all worked at the highest levels of the Chinese foreign and defence ministries.

Then in 2024 he gave a lecture at Peking University and met with the Chinese People’s Association for Friendship with Foreign Countries – which the US warns aims ‘to directly and malignly influence state and local leaders to promote’ Chinese interests.

According to the Charity Commission, Inter Mediate’s purpose is ‘human rights/religious or racial harmony/equality or diversity and other charitable purposes’ with its activities taking place ‘throughout England and Wales’.

But the organisation also exists as a limited company, IM01 Ltd. That company’s Articles of Association suggest the firm’s activities may include paid political lobbying work for undisclosed clients, including seeking to influence national governments’ policies.

A Government spokesman said Inter Mediate was one of several organisations ‘awarded Official Development Assistance (ODA)’ for a specific project which supported conflict resolution.

They added: ‘The programme started in 2023 and was funded by the previous government.

‘This had nothing to do with the Chagos Islands, and claiming otherwise is completely false. All ODA funding goes through rigorous checks and must be linked to specific development outcomes.’