Keir Starmer is considering giving Sue Gray a place in the House of Lords, it has been reported, after she turned down the offer of becoming the PM’s ‘envoy to the regions and nations’.

Last month it emerged that Sue Gray would not be taking up the post, which the PM had offered her as a consolation prize after she quit as Downing Street chief of staff amid infighting, briefings and turmoil.

However this evening it appears she could be in line for a major golden handshake, as Sir Keir is considering handing her a place in the House of Lords.

The Financial Times reports that Sir Keir is set to put a number of Labour figures into the upper chamber, which is currently disproportionately full of Tories.

The PM is looking at handing peerages to former MPs who stepped down from safe Labour seats at the election in order to ‘make way for new party talent’.

They include Lyn Brown, Julie Elliott and Kevin Brennan.

Thangam Debbonaire, the former shadow culture secretary who lost her Bristol seat to the Greens, is also in line for a political return via the Lords.

While the FT initially said that Sue Gray had been on an early draft list of those set to appear on the New Years honours, government insiders had become unsure about whether she will make the final cut.

However in an update shortly after, they clarified that the former Chief of Staff is still in line for a peerage.

The LibDems will also get to appoint peers, after returning to the third largest party in the Commons.

While Rishi Sunak has not submitted his list yet, but it could include Michael Gove, former chief whip Simon Hart, and former Scottish Secretary Alister Jack.

It’s also believed Rishi Sunak may break with tradition by not appointing any party donors to the Lords, something causing concern in Tory high command as it may disincentivise future donations.

In November, a civil service ally of Ms Gray said she had turned down the job offer of envoy to the regions and nations after having “taken time to think about it properly”.

They added: “Ultimately she’s decided she doesn’t want to do it.”

Appointing Sue Gray to the Lords could pour further fuel on the fire, coming shortly after Sir Keir faced backlash for allowing sacked Transport Secretary Louise Haigh to depart from government with a £17,000 golden handshake of her own.

Despite resigning after it was revealed she had a fraud offence prior to entering politics, Ms Haigh will be entitled to three month’s salary.

This comes in spite of Labour previously demanding a change to the rules so ministers who leave office due to a scandal are no longer entitled to the taxpayer pay-out.

A Downing Street source said they do not comment on speculation around honours or peerages.