Disbelief and praise for Mandelson appointment

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The return of Peter Mandelson to the Cabinet as head of the Business Department drew praise from industry leaders but astonishment from left-wingers and trade unionists today.

The man who has resigned twice as Cabinet minister is no stranger to controversy and his shock appointment led to disbelief and praise in equal measure.

Labour MP John McDonnell said he was "absolutely gobsmacked" at Mr Mandelson's return to Cabinet, adding: "The whole Labour movement will be utterly perplexed at what the Prime Minister's motives are.

"This is an extraordinary step backwards into the worst elements of the Blair era, to reinstate possibly the most divisive figure in Labour's recent history."

Several union officials asked for their reaction said they "too shocked" to comment.

The Communication Workers Union said Mr Mandelson was an experienced politician who had steered through legislation on the postal industry during his previous time at the Trade and Industry Department (DTI).

"He again faces many big challenges and we look forward to working with him," said a spokesman.

Business groups widely welcomed the news that Mr Mandelson will replace John Hutton.

John Cridland, deputy director-general of the CBI, said: "John Hutton has succeeded in giving the new Department for Business a sense of mission and drive that was lacking at its predecessor, the DTI. In particular, he has taken decisive action to try to deliver energy security of supply in the future.

"The Department for Business must have a heavyweight political big hitter at the Cabinet table, and we are encouraged that Peter Mandelson is returning to this role."

John Wright, chairman of the Federation of Small Businesses, said: "This shock return is no surprise to us, given Mr Mandelson's previous tenure at the DTI and his current position as Britain's European Commissioner for Trade.

"Mr Mandelson's experience will mean that he can do away with the probationary period and get straight into the business of dealing with the current credit crunch.

"We will be seeking an early meeting with him in order to convey some very easy-to-implement measures to safeguard the future of small businesses during these difficult times."

Martin Temple, chairman of the Engineering Employers Federation, said: "John Hutton was a good advocate fighting for business across Whitehall and it was important that they replaced him with a big hitter - which Mr Mandelson certainly is.

"His experience as EU Trade Commissioner, and having previously been at the old DTI, should be invaluable in ensuring that business continues to have a strong voice at the Cabinet table."

David Frost, director general of the British Chambers of Commerce, said: "Peter Mandelson did a good job at the DTI and clearly understands business.

"His work in Europe and involvement in global trade discussions also mean that he knows where the UK fits within the international context. We look forward to working with him in these challenging economic times."

Ex-Labour MP Tam Dalyell, former father of the Commons, said: "I am absolutely delighted. Peter Mandelson was a very effective Cabinet Minister, both in Northern Ireland and other portfolios. On top of that, he has unique experience in Europe and I think this is a superb appointment. I am 100 per cent delighted.

"I have this volcanic reaction partly because he knows a heck of a lot about it and partly because he will carry great weight with the Prime Minister. All the old baggage is past history."