Mr Mandelson has defied British demands for a freeze on EU spending by supporting plans by his new boss, Jose Manuel Barroso, the European Commission president, to expand its budget.
His stance puts him on collision course with Tony Blair, Gordon Brown, the Chancellor, and Jack Straw, the Foreign Secretary - all of whom want a ceiling on future EU spending to be set at 1 per cent of gross national income for 2007-13.
Mr Mandelson said: "It is very important for the Commission to know where it is going. Great demands are placed on us. Those who place the demands also have the responsibility to willing the means.
"If they want that combination of reform which means [economic] adjustment, they also have to will the support and assistance for that adjustment through reasonable social spending, structural fund spending, regional policy and rural development policy."
Mr Mandelson remains a friend of Mr Blair and is expected to offer advice on Labour's election campaign. Allies insist Mr Mandelson's stance is not an attack on his old foe Mr Brown. They argue that if the EU is to take the tough medicine needed to reform its economy it needs to help people in areas affected to adjust to job losses.
His intervention is unlikely to be welcomed at the Treasury which has taken the lead on seeking restrictions in Brussels on future spending.Reuse content