When he reaches 65, he can take his EU pension which will net him £31,000 a year which will rise with inflation. Sources close to Mr Mandelson suggested he would take what he was entitled to but stressed he did not know what sums were involved.

The Business Secretary role is his third Cabinet post.

He first quit after it emerged he had not declared a loan from a fellow minister when he applied for a mortgage. He resigned again over allegations of a role in passport negotiations for tycoons the Hinduja brothers but was cleared of wrongdoing.

Conservative shadow Europe minister Mark Francois said: “Not only did Gordon Brown recall Peter Mandelson to shore up his own position but it adds insult to injury to know taxpayers will have to pay extra for the privilege.

“While millions are struggling to pay their mortgages, he seems to be getting the taxpayer to help finance his.”

Hugo Robinson, of thinktank Open Europe, said: “Hard-pressed taxpayers will be angered to hear their money is being spent keeping Peter Mandelson in the luxury he grew accustomed to.

“This also raises concerns over conflicts of interest.”