Tough love from the man at the DTI

In his first interview as a Cabinet minister, Peter Mandelson talks to Andrew Grice

TWENTY-ONE years ago, an eager young Trades Union Congress researcher took the notes of the meetings between cabinet ministers in James (now Lord) Callaghan's government and the "big six" trade union leaders.

Such was the strict hierarchy at the TUC that Peter Mandelson was not allowed to write up the official minutes; that was someone else's job.

As the social contract between the government and unions disintegrated over pay awards - and led to the 1978-1979 "winter of discontent" - Mr Mandelson learnt some useful lessons for his present post.

As Secretary of State for Trade and Industry, Mr Mandelson is responsible for industrial relations, and will return to address the organisation which gave him his first job when he speaks at the TUC conference in Blackpool on Thursday.

In his first interview since his promotion to the Cabinet last July, Mr Mandelson revealed a simple lesson drawn from his 18 months observing the daily haggling between ministers and union bosses in the late Seventies: "Never again".

He explained: "Although the economy was rebalanced, the trade unions had become far too enmeshed in politics and government. By the same token, the government had sacrificed too much of its perceived independence to a sectional interest. ... The motivation on everyone's part was very good, but the relationship became too close and claustrophobic."

Today's union bosses know there is little prospect of being smothered with love by Mr Mandelson, and they have little love for him. Although personal relations are cordial so far, he is viewed with suspicion in the labour movement. He is a leading architect of Tony Blair's modernisation project, a central tenet of which is to distance New Labour from its union founders.

However, Mr Mandelson will travel to Blackpool in a more conciliatory mood than his audience might expect. After cutting short a trade visit to South Africa, he will tell the unions they have "as important a place as anyone else in the Government's modernising project".

He said: "We are partners in creating both a modernised and fair society and if the unions continue to embrace change, then the future will look after them in return."

Mr Mandelson views the unions not as one side of industry but as one integral part of the business world. "Employees are just as much a part of business as employers are. Whether it's the TUC or CBI [Confederation of british Industry], everyone will get the same message from me. I don't tailor my arguments or language for different audiences. My forthcoming speeches to the TUC and CBI will be interchangeable."

The unions, he insisted, had modernised themselves like Labour, and most had no desire to turn the clock back. "Their leadership takes a very sober and practical approach to their relations with the Government. There is a reasonableness which has surprised many people who believed we would either be in bed with each other or at each other's throats. We are neither. We have our respective roles, we can talk as adults; we share the same goals to modernise our country and economy."

However, he believes the unions have not managed to live down their "old image" in the media, unlike Labour. He said the unions had started to catch up, and pointed to their "effective campaign and lobbying" before a White Paper extending workers' rights in May (on which he will bring in legislation over the coming year).

So how would Labour's most infamous spin doctor advise the unions to improve their image?

"Above all, they should talk realistically and with credibility about the economy, the impact of globalism and the limits on national economic policies in this new environment. There is no point in simply reverting to the old slogans and old demands. To the unions' credit, we don't see that by and large."

The Secretary of State rejected the TUC's plea for the Government to change the remit of the Bank of England's monetary policy committee, to make it take account of jobs and growth as well as inflation when fixing interest rates.

"To introduce confusing and contradictory objectives would result in confused and weaker decisions," he said. "That is the last thing the economy needs, and the conduct of monetary policy needs."

He had an equally tough message for businessmen who complain about the level of sterling. "This is the time for companies to be looking at the full range of their relative costs. If these are greater than their competitors', they will suffer."

Mr Mandelson said wage rises without productivity gains had made many manufacturing firms less competitive. "As a priority, they should addressing what they can do most about. There is no point in hiding behind the value of the pound."

In Blackpool on Thursday, there will be no hiding place for Mr Mandelson, and it will be interesting to see how the TUC greets its former employee.