Revealed: The final flash point that left 'impossible to work with' Sue Gray in a scramble to negotiate a 'dignified' way out

By ANDREW PIERCE FOR THE DAILY MAIL

PUBLISHED: 22:33, 6 October 2024 | UPDATED: 10:53, 7 October 2024

Flying to New York for his first keynote speech to the United Nations nearly two weeks ago, Sir Keir Starmer could have been forgiven for seeming tense with his chief of staff Sue Gray.

Only hours before boarding, a number of senior officials had visited the prime minister in No 10. His controversial adviser was becoming impossible to work with, they said, and her position was now untenable.

They had snapped after weeks of rows over freebies for Starmer worth well over £100,000, as well as the Downing Street pass for controversial Labour donor Lord Alli, who had furnished most of the ­largesse. Gray had been named as the official who granted the all-access pass to Alli – dubbed Lord Moneybags by her ­detractors in Labour.

Then there was the row over Gray's salary, at £170,000 bigger than that of the prime minister, precipitated by her enemies leaking the information to the BBC. They were astonished she had rejected advice to take a slightly smaller salary. 

'Greedy as well as tin-eared,' one Labour source told me yesterday.

Yet despite endless reports of her involvement in internal feuds, the dithering prime ­minister had soldiered on with Gray – because she was his ­personal appointment.

He had ignored criticism about his choice to hire the supposedly impartial Gray from her senior position in the civil service. Not just any role, but the head of ethics who wrote the May 2022 'Partygate' report that ended Boris Johnson's premiership.

While conceding there were teething problems in No 10, Starmer assured the officials who had come to see him that there would be new appointments to steady the ship. That proved the final flash point with Gray, who was unhappy over Starmer's plan to move Nin Pandit, the little-known director of the Downing Street ­policy unit, to the new role of ­parliamentary private secretary to the PM.

Was her objection based on an assessment of Ms Pandit's ­suitability for the job? Or was it because her appointment had been championed by Morgan McSweeney, the all-powerful ­director of strategy at No 10?

While Downing Street has ­consistently denied it, Gray and McSweeney have been embroiled in what has now proved to be a lethal power struggle. Gray even moved McSweeney's desk – twice – because she thought it was too close to Starmer's office.

The pair had been fighting for Starmer's ear since Gray's appointment in September 2023. But McSweeney goes back much ­further with Starmer, having run his party leadership and his ­general election campaigns during his 20-year career in the party.

I'm told on Thursday, Gray knew she was on her way out and has been negotiating a dignified exit, which has resulted in her new role of 'envoy for the regions'. It was not clear last night if her £170,000 chief of staff salary goes with it. The announcement that McSweeney would be taking her old job will have rubbed salt in the wound.

Gray's departure and the announcement of a clutch of new appointments is proof that No 10 is in turmoil. Her defenestration is a public admission that Starmer's first three months in power have been a public relations disaster.

Again and again, the steady hand of experience Gray was meant to provide has been found wanting. The withdrawal of winter fuel payments from 10 million ­pensioners was presented alongside ­inflation-busting pay rises for the unions. 

There followed an entirely predictable rebellion by Labour MPs, with eight either suspended or resigning the whip. Labour is plummeting in the opinion polls. Starmer's ratings have fallen by 45 points to minus 26 since July.

Meanwhile, Gray has been accused of restricting access to the PM including, as the Mail on Sunday revealed, officials attempting to give him an intelligence briefing. Downing Street denied the reports.

Gray was also accused of blocking ministerial and adviser appointments. There was astonishment when her son, Liam Conlon, was offered an unpaid role on the first rung of the ministerial ladder in the Department for Transport within days of being elected an MP. Labour denied she had any ­influence over the post.

On her watch, even Labour's most loyal supporters have been shocked by the scale of freebies. Last week Starmer agreed to pay back more than £6,000 including tickets for a Taylor Swift concert. But why hadn't Gray prevented the freebies in the first place?

'Starmer has become impaled on the very moral issues that Sue Gray used to judge the Tories on,' said one scathing Labour critic. 'Did she also think it was a good idea for the PM to give back £6,000 of gifts? Now everyone is asking about the other gifts.'

Yet Starmer repeatedly dismissed criticism of Gray. He also dismissed claims by MP Rosie Duffield who, in an excoriating resignation letter from the Labour Party early last month referred to 'sleaze, ­nepotism and apparent avarice', adding that the PM is surrounded by 'lads' and has 'a problem with women'.

Only last month, the Daily Mail published photographs of Gray in heated talks in a Downing Street garden with Michael Bourke, principal private secretary to Cabinet Secretary Simon Case, the most senior civil servant in the land.

Just as with McSweeney, she was in a turf war with Case, who has since announced he will leave his post at the end of the year. Gray has accused Case's team of briefing against her. They deny it.

While Gray is rarely out of the headlines, the workaholic McSweeney, always in No 10 by 7am and invariably the last to leave, is first person Starmer would speak to in the morning and ­usually the last. No Cabinet minister can match him for influence. He was determined to see Gray removed from Downing Street altogether.

In opposition, McSweeney was Starmer's chief of staff from April 2020 to June 2021, and Labour MPs will hope second time around he proves a better fit. As for Gray, she was known in Whitehall as the consummate fixer, but she had to go because nothing was being fixed.

There were many people in the Labour Party who questioned her appointment in the first place. If Starmer had listened, he might have avoided a lot of trouble. 

But as one senior Labour source told me: 'That's the problem. Keir has been an MP since only 2015. He doesn't know the Labour Party or understand it. He has no political instincts. He needs to listen to ­people who do.'