The Lord who put the bounce into Brown

Lord Mandelson says his new role at Gordon Brown's side is to make the Brownites and Blairites laugh together again. Others insist the 'Prince of Darkness' is no jester, but really the new Deputy Prime Minister, reports Andrew Grice

"Are you happy?” Gordon Brown asked Peter Mandelson at the start of one of their frequent one-to-one meetings. For once, Lord Mandelson was lost for words. Eventually, he replied: “I am happy if you are happy.” The Prime Minister said: “I am happy.” The Business Secretary said: “We are one happy family then.” They both burst out laughing.

Many a true word is spoken in jest: the surprise return of the man dubbed “the Prince of Darkness” to the Cabinet in October has, for now at least, ended the feud between the Brownites and the Blairites which was New Labour’s faultline since Tony Blair rather than Mr Brown became party leader in 1994.

Blairite MPs who were plotting to oust Mr Brown only a matter of weeks ago now bowl him friendly questions in the Commons. Brownites who used to loathe Lord Mandelson know that the presence of Mr Blair’s soulmate at Mr Brown’s right hand means there cannot be a coup against the Prime Minister before the next general election.

The ubiquitous Lord Mandelson has become the public face of the Government in the recession. Barely a day goes by without him popping up on television or radio, making a speech or meeting banks, credit card companies, car-makers or business groups. He is increasingly regarded in Labour circles as the “real Deputy Prime Minister”, to the chagrin of Jack Straw and Harriet Harman, who both aspire to fill a post Mr Brown left vacant.

Cabinet ministers say Lord Mandelson enjoys “at least as much influence” over economic policy as the Chancellor, Alistair Darling. The key planks of his pre-Budget report – including the 45p in the pound new top rate of tax – were decided by the Prime Minister, the Chancellor and the Business Secretary.

The “Brown bounce” in the opinion polls has been widely seen as a result of the Prime Minister playing well on his home ground of the economy. But ministers and Labour MPs believe it is also due to Lord Mandelson sharpening up the Government’s strategy.

“Before Peter came back, Gordon would listen to lots of different people,” one Labour insider said yesterday. “A decision would take ages and when the message eventually emerged, it would be muddled and fuzzy. He still consults widely but two people count more than anyone else – Peter and Ed Balls. What comes out is now clear and coherent.”

Lord Mandelson and the Schools Secretary often crossed swords during the Blair-Brown era. Lord Mandelson doubted Mr Balls’ political skills, but recently has told fellow ministers he understands why Mr Brown rates him so highly. The Prime Minister’s two closest advisers speak regularly and have not fallen out yet.

Of course, the bigger feud was between Lord Mandelson and Mr Brown, who never forgave him for saying Mr Blair should be the modernisers’ candidate in 1994. People who now see them up close and personal say the wounds have healed remarkably quickly – and much quicker than

the two men thought possible. They seem to have rediscovered the intimacy and mutual admiration that existed before Mr Blair emerged against the odds as the senior partner in his |double act with Mr Brown. “Both |of us have brought closure to a ghastly, awful period of our lives,” Lord Mandelson tells friends today.

The Business Secretary wants to ensure the wider truce between the Brownites and Blairites holds. Machiavelli has become a mediator. “He wants to get the Blairites back on board, to ensure people who never thought they would sit in a room together again can all pull together for the next election,” says one friend. Lord Mandelson is said to be pressing for roles for Alan Milburn and David Blunkett – who, coincidentally, have both resigned twice from the Cabinet like himself, although Mr Milburn did so voluntarily.

Downing Street insiders say Lord Mandelson has given Mr Brown his confidence back and that it shows in public. “You can sense that Gordon is more relaxed and confident when Peter is around,” says one Brown aide.

Lord Mandelson quips to friends that one of his roles is to “make people laugh”. He is perhaps an unlikely court jester but, despite the daily dose of bad economic statistics, meetings of the Brown inner circle are more cheery than they would otherwise be.

The Business Secretary has raised his party’s morale. After giving a combative interview on BBC Radio 4’s Today programme on Wednesday, Lord Mandelson was inundated with messages from Labour colleagues delighted that the Government had finally taken the fight to the Tories over the Damian Green affair.

At a conference of the Blairite Progress group last Saturday, Lord Mandelson was feted like a returning hero. He adopted an avuncular pose, showering praise on young Cabinet turks like James Purnell and Liam Byrne. Even Brownites praised Lord Mandelson. Ed Miliband, the Energy and Climate Change Secretary, recalled Mr Blair’s words that his project “will be complete when the Labour Party learns to love Peter Mandelson”, and said it seemed to be happening.

To answer Mr Brown’s question, friends say Lord Mandelson IS happy. He has been heard to grumble that he gave up a nice life in Brussels as the EU’s Trade Commissioner, largely out of the media spotlight, with a bigger salary (£182,500 compared to £104,386 as a Cabinet minister, plus a £78,000-a-year “resettlement payment” from Brussels for three years). But a friend says: “Of course he’s loving it. He is back at the centre of things and making a real difference.”

Labour strategists say Mandelson speeches and interviews can be used to get the Government’s message over because he is “box office”. He doesn’t like the media but part of him still likes the attention.

Is the reincarnation of Lord Mandelson all too good to be true, and can it last? Mr Brown knew that recalling such a high-wire act was a huge risk. Some Labour MPs say Lord Mandelson was lucky the controversy over his links with the Russian oligarch Oleg Deripaska also embroiled the shadow Chancellor George Osborne and involved contacts that happened before he returned to the Cabinet.

Labour MPs hope the Business Secretary’s love for the rich and famous will not provoke a third spectacular resignation that would damage Mr Brown and the New Labour brand Lord Mandelson came back to save from extinction. Some fret about his contacts with businessmen and his ability to draw the line. Friends insist he is “more comfortable in his own skin” than during his rudely interrupted two stints in the Blair cabinet.

Inevitably, his new-found power has put some noses out of joint. Douglas Alexander, the International Development Secretary, wonders whether his job as Labour’s election co-ordinator will in effect be handed to Lord Mandelson when next June’s European and local elections come around. The official line is that they will work well together as they have done in previous elections.

Some businessmen complain there are too many centres of power in the Government. Bankers have been heard to moan they are under pressure from Downing Street, |the Treasury and Lord Mandelson, who has been meeting one or more of them on an almost daily basis.

The attention he attracts might be a mixed blessing. He wrote the script for the October Cabinet reshuffle: Mr Brown was re-engineering his Government to focus on the downturn and setting up the National Economic Council or “economic war cabinet” (on which Lord Mandelson plays a prominent role). In the event, the headlines were dominated by the return of the “Prince of Darkness”.

The Tories admit privately that Lord Mandelson has sharpened up the Government’s performance. They know he will make a fight of the next election, no matter how greatly Labour is damaged by the recession. They concede he is on top of his game when he answers questions in the House of Lords. But while he gets rave reviews in the Westminster village, Tory strategists think the more important reaction – among the public – is negative. One Tory MP says: “He represents the past. I am happy every time he pops up on the radio. People think he is sleazy.”

Friends insist that, whatever the election result, Lord Mandelson can emerge with his reputation enhanced. “If we perform a miracle and win, he will be the hero,” one said. His reward might be the job he has always coveted – Foreign Secretary. “If we lose, he will have done his best, and might have prevented a wipe-out. He will then want to be an elder statesman and kingmaker.”