This Spectator article gives good insight.
Conversely, the Act assigns the power to manage the diplomatic service to the Secretary of State (that is, the Foreign Secretary), and expressly says that this includes the power to make appointments to the diplomatic service. The Foreign Secretary, not the Prime Minister, is thus the relevant appointing authority for the diplomatic service. The Prime Minister clearly has political influence, and in practice may be consulted on or even politically try and direct major appointments, but he has no formal legal role in the selection of ambassadors.
The Act also says that the management powers over both the home civil service and the diplomatic service do not cover national security vetting. Vetting sits outside the ordinary management power. A diplomatic appointment and a vetting decision are legally distinct things. Official vetting guidance likewise treats national security vetting as a separate process from the appointment itself.
Final decisions on difficult vetting questions and any waiver process ordinarily rest at permanent secretary level. That strongly implies the probability that Sir Olly Robbins, the Permanent Secretary at the Foreign, Commonwealth and Development Office, authorised Mandelson’s clearance. A letter sent jointly by Robbins and Yvette Cooper to the Foreign Affairs select committee on 16 September last year seems to imply this by stating that ‘the [vetting] process is also independent of ministers who are not informed of any findings other than the final outcome’.
On the legal front, therefore, it seems correct to say that the Prime Minister should have been informed only of the outcome of the appointment and vetting process conducted within the Foreign Office, not treated as a formal decision-maker himself. The official vetting process also appears to mandate that ministers not be told anything about vetting other than the final decision.
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