Mandelson: working class alone will not win us power

Business Secretary calls for risk-takers to be rewarded as rumours surface of fresh plot to unseat Brown

Lord Mandelson will admit today that Britain became too dependent on the City of London for its growth and tax revenue while Gordon Brown was Chancellor. The Business Secretary will call for proper rewards for risk-takers and entrepreneurs in a slap-down to ministers who want the party to wage a "class war" against David Cameron. Yesterday, Lord Mandelson warned that Labour could not win the general election by appealing to its traditional working-class supporters.

His two-pronged attack came amid fresh speculation at Westminster about another attempt to force the Prime Minister to stand down before the election. As MPs returned from the Christmas break, there were reports that a senior minister would resign in the hope of persuading cabinet ministers to move against Mr Brown.

The latest rumour is that Alan Johnson, the Home Secretary, would be "anointed" as Prime Minister without a contest under a deal approved by two potential leadership rivals – David Miliband, the Foreign Secretary, and Ed Balls, the Schools Secretary. But two previous anti-Brown plots have fizzled out and Brown allies last night dismissed the latest speculation as "complete crap". One said the Prime Minister was "relaxed and dismissive" about manoeuvring by "a handful of irreconcilables".

Lord Mandelson's remarks appeared to lift the veil on what Labour MPs have dubbed "the battle of Gordon's ear" between him and Mr Balls. The Schools Secretary, Mr Brown's former chief economic adviser, is accused by Blairite critics of urging a "core vote" strategy – a charge he strongly denies. The Business Secretary told the London Evening Standard: "We are not a sectarian party. We are not a heartlands party." Asked about a strategy of targeting Labour's heartlands, he said: "We are not going to win the election on that basis."

In a speech today setting out a new "go for growth" post-recession strategy, Lord Mandelson will come close to admitting that Mr Brown made mistakes as Chancellor, which he is wary of doing as it would hand ammunition to the Tories. Lord Mandelson will tell the Work Foundation: "The global economic crisis has exposed structural problems in all developed economies, including Britain's, that we did not entirely foresee ... For the last decade, we allowed ourselves to become over-dependent on the City and financial services for our growth and tax revenue. That is why ... we need other industrial strengths and sources of revenue and to grow faster."

In a warning against a return to Old Labour policies, Lord Mandelson will say: "Reality demands that the centre-left cannot and must not confine itself to the politics of [wealth] distribution. We need a new and renewed politics of production and New Labour, above all, has to articulate this new politics that will allow Britain to earn its way in the world and support our public services and welfare system." The Business Secretary will argue that a full recovery from the recession depends on reasserting the values of long-term investment in competitiveness.

Tomorrow, the Government will publish a post-recession industry strategy. Lord Mandelson will warn that Tory plans to cut spending would "pull away the prop", reduce the government's tax take, push up unemployment and make the public deficit worse. He will praise the Chancellor's pre-Budget report as "tough", putting the emphasis on the plan to halve the deficit over four years – a coded criticism of Mr Balls, who has trumpeted the above-inflation rise he won on schools spending.

Last night the Tories voted against the Fiscal Responsibility Bill, which will enshrine Labour's deficit reduction plan into law. The Tories said it was "irrelevant" and published their own legislation to set up an independent Office for Budgetary Responsibility.

Eric Pickles, the Tory chairman, said: "We are just days into the new year and now Gordon Brown's chief lieutenant has rubbished his class warfare strategy. Lord Mandelson's comments expose just how deep the tensions and divisions over Labour's election strategy run in the party."

Mandelson: Decoding his words

What he said "We are not a sectarian party. We are not a heartlands party."

What he meant Tony Blair won three elections by appealing to the middle classes. If we don't do that, we leave the field clear for David Cameron and we are toast.

What he said "We are not going to win the election on that basis."

What he meant If we pursue a "core vote" strategy and preach to the Labour converted, we will not only lose but lose badly and could be out of power for a generation.

What he said "Of course, we want to retain the vote that is most loyal to us."

What he meant We hope the prospect of a Tory government will rally disaffected Labour supporters behind us but we must appeal to a wider audience.

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