Sir Keir Starmer will hand a peerage to Sue Gray following her ousting as his chief of staff, according to reports.

The Prime Minister is said to be teeing up a spot in the House of Lords for the former civil servant, who broke from his top team in October after a power struggle at the heart of No 10.

The Financial Times reported that Ms Gray, who has been on a break since leaving Downing Street, is set to receive the peerage in the New Year’s Honours list.

It will be seen as an olive branch after plans for her to take up a replacement role as Sir Keir’s envoy for the regions and nations fell through.

Friends of Ms Gray’s said at the time that she had declined the job but No 10 insisted the offer was rescinded over concerns about the media attention it would generate.

Any honour would probably trigger backlash from the Tories, who were critical of Ms Gray’s decision to swap the Civil Service for Sir Keir’s team in opposition.

She ended up spending just three months as his chief of staff in Downing Street, with the revelation that she was on a higher salary than the Prime Minister proving especially controversial.

Sir Keir also plans to hand peerages to Thangam Debbonaire, the former shadow culture secretary who lost her seat to the Green Party at the general election, and ex-MPs Lyn Brown, Kevin Brennan and Julie Elliott, according to the FT.

Rishi Sunak, the former prime minister, is set to make nominations for the honours list, which are rumoured to include ex-ministers Michael Gove, Simon Hart and Alister Jack.

Ms Gray was taken on as Sir Keir’s chief of staff while he was in opposition following a long career in the Civil Service.

The move proved contentious because months earlier she had written an official report into the partygate allegations surrounding Boris Johnson’s premiership during the Covid-19 pandemic, which contributed to his resignation as prime minister.

She continued to serve in the top role after Labour’s election victory before a turf war opened up between her and Morgan McSweeney, then the Prime Minister’s political secretary.

Ms Gray was accused of not planning sufficiently for the party’s return to government and of miscalculating the level of Downing Street access given to Lord Alli, a key Labour donor.

She announced she was quitting the role three months after the election, with Mr McSweeney taking her place.

As part of the deal, Ms Gray was offered a position as the Prime Minister’s envoy for the regions and nations, which involves liaising with the devolved governments and metro mayors. It was originally said that she was taking a short break before adopting the role.

No 10 was approached for comment.