Mandelson 'set for £1m package'

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The new Business Secretary is entitled to the package despite giving up his post as Trade Commissioner voluntarily after four years.

The scale of the compensation - on top of Mr Mandelson's £104,386 ministerial salary - is likely to provoke anger amid widespread criticism of the City bonus culture and its role in the credit crunch.

Under generous EU rules, Mr Mandelson will be eligible for around £78,000 in "transitionary payments" annually for the next three years.

The money - £234,000 in total - will also be subject to preferential tax rates devised for EU officials. The top-up ensures that his income in his new job is the same as his £182,500 salary as a commissioner.

When he reaches the age of 65, Mr Mandelson will receive a gold-plated pension, starting at £31,000 and then rising in line with the cost of living.

Buying a pension of that size in the private sector would require a fund of around £750,000, according to experts.

As he relocates from Brussels to London, Mr Mandelson is also due a one-off resettlement grant of some £15,000.

The former Northern Ireland Secretary - who has twice resigned from Cabinet posts in controversial circumstances - will take his seat in the Upper House as Lord Mandelson of Foy and Hartlepool.

Hartlepool used to be his Commons constituency, while Foy is a village in Herefordshire where he took holidays.