The Mandelson Affair: The Road To Resignation - The move upmarket that led to a cabinet minister's fall from grace

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The Independent Online
"PETER HAS got new friends - he has joined the salon tendency," one of his close allies complained shortly after last year's general election. "For some reason, he is impressed with the Saatchis and the Charles and Carla Powell set. He should remember his roots."

An integral part of Mr Mandelson's new life was his new pounds 475,000 house in Notting Hill, one of the smartest neighbourhoods in west London. His move puzzled the many friends who had lived near him in Islington; they wondered why the New Labour stronghold in N1 was no longer good enough.

But few of them would have guessed that his move upmarket would sow the seeds of his rapid and astonishing fall from grace yesterday, only five months after entering the Cabinet as Secretary of State for Trade and Industry.

Friends did wonder where the money for the new house had come from. They had no idea that he had turned to Geoffrey Robinson, a millionaire Labour MP languishing on the back benches in 1996 when the fateful pounds 373,000 loan was sealed, who later became Paymaster-General. At the time, details of Mr Robinson's offshore trusts and business links with the media tycoon Robert Maxwell had not emerged. To Mr Mandelson, he seemed safe.

The two men agreed to keep their astonishing arrangement a secret. At the time, it suited them both. With hindsight, Mr Mandelson admits he should have told Tony Blair - and, crucially, his top civil servant at the Department of Trade and Industry (DTI) when he won promotion to the Cabinet in July.

The dark secret returned to haunt Mr Mandelson this month as he heard rumours about the contents of a hostile biography of him by Paul Routledge, the Mirror columnist, to be published in the new year. The word was that the book's "unique selling point" was the Robinson loan.

Reports also reached Mr Mandelson that Charlie Whelan - his sworn enemy, press secretary to the Chancellor, Gordon Brown, and a close friend of both Mr Routledge and Mr Robinson - had boasted over drinks with journalists that he had "got the story out". Mr Mandelson assumed this meant that Mr Whelan had tipped off Mr Routledge about the loan.

In the event, the story surfaced before the book in both Mr Routledge's newspaper and The Guardian on Tuesday. Mr Whelan strongly denies that he was the source, and the Brown camp suspects that Mr Mandelson's allies may have launched a pre-emptive strike against the Routledge biography aimed at "getting the story out of the way" during Parliament's Christmas recess. The Mandelson camp dismisses the idea that it leaked the damaging revelation as "too ludicrous for words".

On Wednesday last week, Mr Mandelson got wind that the story was about to break. On Thursday, his office at the DTI tipped off Alastair Campbell, the Downing Street press secretary and a friend of Mr Mandelson's as they are the Prime Minister's two most influential allies.

Mr Campbell told Mr Blair, who responded by looking anxiously at his watch: he was about to make a Commons statement on the previous night's bombing of Iraq. None the less, he ordered that Sir Richard Wilson, the Cabinet Secretary, should investigate whether Mr Mandelson had breached the code of conduct for ministers.

Sir Richard concluded that Mr Mandelson had "insulated" himself against any conflict of interest by standing down from handling the DTI inquiry into Mr Robinson's business activities in September.

Mr Blair hoped that would be the end of the matter and, in any case, had his hands full with Iraq. But Mr Mandelson spent an anxious weekend, at first in his Hartlepool constituency and then at his Notting Hill home. He feared that the only reason his ticking timebomb had not gone off was the air strikes on Iraq.

Discussing his fightback strategy with close friends, including Mr Campbell, he hoped he would be able to survive the storm about to break around him. "It was perfectly legitimate for Geoffrey to help me. He is just a generous soul. He gave me a loan I will repay in due course, with interest," Mr Mandelson said.

At 5pm on Monday, he knew the story would break the following morning, and prepared for a gruelling 24 hours of media interviews, starting on BBC TV's Newsnight programme on Monday. As details from the first editions emerged, he knew he had a fight on his hands to keep his job. "I was reeling," he told one friend. To another ally, the doyen of political strategists conceded: "This was a very big operation against me."

As Mr Mandelson continued his frantic round of media interviews on Tuesday morning, Mr Campbell told Westminster journalists that Mr Blair was standing by Mr Mandelson. Another Downing Street official told them: "You won't be getting any red meat."

Privately, though, an exhausted Mr Mandelson believed he was fighting a losing battle. He feared that yesterday morning's newspapers would be bad, and his media instincts, as usual, were right.

He telephoned Mr Blair at Chequers at 10pm on Tuesday, confessing to a "misjudgement" in not telling his civil servants about the Robinson loan when he moved to the DTI. He said the affair was damaging the reputation of the Government and the Labour Party and, because of their close relationship, feared it would also damage Mr Blair.

Mindful of Mr Blair's promises to "clean up" politics after the years of "Tory sleaze", Mr Mandelson told him: "We can't be like the last lot."

He was also mindful of the way that Tory ministers facing allegations of personal or financial sleaze tried desperately to hang on to office, only to resign after prolonging the government's agony. At least if he resigned quickly, he might be able to safeguard his integrity.

Mr Mandelson feared that at the DTI he was in the wrong department to do an effective job after the disclosures. He knew the media were bound to judge his performance against the background of the Robinson affair - and to seek more damaging revelations.

He probably calculated that, as a backbencher, it would be easier to withstand the barrage of allegations about his private life, which he expects in the Routledge biography.

Mr Blair, who by now had time to digest a full report by Downing Street officials on the affair, was pessimistic about his friend's prospects but reluctant to abandon him. He told Mr Mandelson to "sleep on it" and not make a final decision until the morning. But both men knew he would have to resign. "We knew the game was up," one close ally admitted.

Rumours that Mr Mandelson might resign began to circulate at Westminster after Jack Cunningham, the Cabinet's enforcer, appeared to distance the Government from him in a BBC Radio 4 interview yesterday morning, admitting that mistakes had been made.

Press speculation that Mr Mandelson may have misled the Britannia Building Society by not revealing the Robinson loan when he obtained a mortgage showed that the storm was far from dying down. However, this was not mentioned when Mr Mandelson rang Mr Blair at 10am yesterday and told him: "In the cold light of day, it is clear I have to resign."

"Peter's mind was made up. He was very upset, but he felt it was the right thing to do," Mr Blair's spokesman said. This time, a sad and subdued Prime Minister did not stand in his way.

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