In a medium bowl, stir together the flour, baking powder, salt, and sugar. Cut in butter, until pieces of butter are no larger than peas. Use a fork to stir in mashed potatoes, breaking them up into chunks. Make a well in the mixture, and pour in egg, water and milk. Stir into a loose dough using the fork.
Turn dough out onto a floured surface and knead for 6 or 8 times so the dough holds together. Pat the dough out to about 3/4 inch thickness and cut into circles with a biscuit cutter or drinking glass. Place biscuits onto an ungreased baking sheet. Brush the tops with 2 tablespoons milk.
Bake for 15 to 20 minutes in the preheated oven, or until bottoms are golden.
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