Third time lucky: Mandelson returns for 'serious times'

Gordon Brown sprang a dramatic surprise yesterday by taking Peter Mandelson, his own personal hate-figure, back into the Cabinet for a remarkable third time, and sent out a message of how seriously he takes the global economic crisis.

The return of Mr Mandelson, who twice left government in controversial circumstances, was the political coup de theatre of what had been billed as the first minor reshuffle of the embattled Brown government.

Mr Mandelson, a byword for the age of spin, is neither popular in the Labour Party nor the country and represents a real risk for the ultra-cautious Brown. However, he brings unrivalled global expertise from his role as European Union Trade Commissioner and the steely political nerve to put the government and the New Labour project he helped create back on track.

It was the economic credentials of the Cabinet that Mr Brown emphasised when he announced the changes and the creation of a National Economic Council - an economic "war cabinet" - that will meet twice a week to give a co-ordinated government approach to the global financial crisis.

The Prime Minister said he needed "serious people for serious times" and true to his "no time for novices" jibe at the Tories, he took Mr Mandelson back from Brussels to become Secretary of State for Business, Enterprise and Regulatory Reform.

The return of Margaret Beckett, another Labour warrior, as housing minister was also designed to convey an image of reassurance in turbulent times and with Geoff Hoon replacing Ruth Kelly, whose resignation as transport secretary triggered the reshuffle, Mr Brown delivered a back-to-the-future line-up. Immigration minister Liam Byrne has been promoted to the new role of policy co-ordinator, not a full Cabinet role but he will attend Cabinet meetings.

The drama of Mr Mandelson dominated a reshuffle that saw Des Browne, Kilmarnock and Loudoun MP, resign from his dual role as Secretary of State for Scotland and Secretary of State for Defence. He is to be replaced at Dover House by Jim Murphy, East Renfrewshire MP, who joins the Cabinet after a successful spell as Europe minister.

John Hutton, a Blairite moderniser with little time for Mr Brown, will become Defence Secretary in another show by the PM that he was attempting to put personal rancour behind him, unify the party and finally snuff out any embers of internal rebellion.

The "all hands on deck" message Mr Mandelson took with him in his triumphant walk back up Downing Street yesterday was a clear signal that the old team who created the election-winning machine that took Labour into office in 1997 is back together..

After staving off disaster at his party conference Mr Brown looked confident as he and Chancellor Alistair Darling outlined how they wanted to restructure government to face the global economic crisis with "the best team" to help Britain through.

Mr Brown and Mr Mandelson acknowledged they had their differences in the past but used the thaw in one of the most bitter feuds of the modern political era to underline a message that they are serious about the economic challenge.

"Of course we've had our ups and downs but we have known each other for over 20 years and originally we worked very well together," said Mr Mandelson. "I am very proud to have been invited to serve in his government."

The creation of a department incorporating energy and climate change, to be headed by Ed Miliband, was welcomed by environmental groups. Mr Miliband, whose brother David remains Foreign Secretary, paid tribute to the work on climate change done by Hilary Benn, who now heads a slimmed-down Department for Environment.

Shadow foreign secretary William Hague said it was a "stunning failure of judgment" by Mr Brown: "In bringing back Peter Mandelson, the man who created Labour spin, he has broken his promise to govern in an honest and open way." For the Liberal Democrats, Danny Alexander said: "Resurrecting ex-ministers from the political graveyard is not going to breathe new life into Gordon Brown's zombie government."

SNP Westminster leader Angus Robertson renewed nationalist calls to abolish the Scotland Office. "Des Browne's departure shows just how much of a dog's dinner Gordon Brown has made of his reshuffle," said Mr Robertson. "Hard on the heels of David Cairns's resignation from the Scotland Office, Des Browne's exit shows that right through the Scotland Office team there has been huge dissatisfaction with the UK Government's approach to Scotland."

Even in Labour, opinion was divided with former home secretary David Blunkett describing Mr Mandelson's appointment as a "masterstroke" and left-winger John McDonnell MP calling it "an extraordinary step backwards into the worst elements of the Blair era".