By PETER OBORNE Just over one year ago the dramatic return of the disgraced Peter Mandelson to the Cabinet sparked a recovery in Gordon Brown's fortunes. The beleaguered Prime Minister suddenly seemed more relaxed. Colleagues noted that he visibly perked up when in the presence of Mandelson, whom he had appointed as both the Government's chief strategist and his own close adviser. More significantly, Labour's dreadful opinion poll ratings also recovered. Indeed, it is not going too far to say that Mandelson's role as a central directing force in Downing Street has been the glue that has held the Brown government together over the past 12 months. Rivals: Gordon Brown and Peter Mandelson have disagreed over the Pre-Budget Report and the election strategy However, I can today reveal that this happy and harmonious relationship between these two Labour titans is on the rocks. Once again (for there was also a long period of mutual loathing during the Blair years), the two men find it hard to speak together, and insiders say the damage is irreparable. The breakdown in their friendship happened after they fell out over tactics about how Labour should fight the forthcoming General Election campaign. This ugly and unforgiving battle, which boiled over last week over the Pre-Budget Report, had been simmering for months. Mandelson is bitterly unhappy with the strategy, adopted by Gordon Brown over the past few weeks, of turning the fight against the Tories into a class war. Indeed he is appalled by the personal attacks on Tory leader David Cameron and his immediate entourage as 'toffs'. Mandelson believes that, while such jibes may help motivate core Labour supporters to turn out and vote at the General Election, they are deeply off-putting to the majority of middle England voters who hold the key to victory. Nor is that all. Mandelson has also been dismayed by the attacks on the City of London that have been such a distinctive feature of Labour rhetoric over the past few weeks. One of the many aspects of Wednesday's Pre-Budget Report which angered him was Alistair Darling's tax on bankers' bonuses. Torn: Alistair Darling had to deliver a Pre-Budget Report whose policies he didn't agree with In general, Mandelson - who, most unusually, has been silent all week, keeping away from television cameras - believes that the Pre-Budget Report was a disastrous missed opportunity. He has told friends that the Chancellor should have been much more rigorous in explaining how the Government will cut public spending and start to reduce the obscene level of national debt. Intriguingly, Mandelson's much tougher approach towards tackling the economic crisis is shared by Darling, but the Chancellor's freedom of action has been brutally shackled by the Prime Minister. Indeed, in the run-up to the Pre-Budget Report, the two rival camps squared up to each other in Cabinet, advocating two alternative, very divergent, messages that they argued should be issued to the public. On the one side were ranged Gordon Brown and his increasingly meddlesome Education Secretary Ed Balls. They are both determined to fight the election around what they see as distinct 'dividing lines' between Labour and the Tories. They want to polarise public debate between so-called 'Tory cuts' and Labour's 'generous' ring-fencing of the public services. Unsurprisingly, this latter strategy has the strong support of the trade unions whose members' jobs are at risk if an axe is taken to some of the less productive areas in the public sector. There is, of course, a cynical reason why Brown is desperate to court the union barons - they are a key source of money to fund Labour's election campaign. On the other hand, Mandelson and Darling believe this strategy is wrong-headed and prefer the one that worked so brilliantly under Blair. Rather than create Brownite 'dividing lines' between the two parties, Mandelson and Darling wanted to adopt an opposite approach: aim to destroy the Tories' popularity by stealing their more ruthless - yet more realistic - economic policies. This would have meant confronting the financial crisis head-on with the announcement of sharp and painful spending cuts, as well as some tax rises, in an austerity Pre-Budget Report. However, as we now know, Mandelson and Darling lost the argument. The result was the breathtakingly deceitful budget statement which failed to tackle this country's debt crisis. This, in turn, triggered a negative reaction from the financial markets. The price of British government debt fell sharply - sending out a clear signal that the Treasury will find it very hard to finance the huge national deficit on the international bonds markets next year. All this has been hugely damaging to Labour. With the Cabinet now split down the middle over strategy, the Government is now at war with itself over the two most important areas it has to deal with in the next few months: how to try to win the election, and how to combat the economic recession. In a moment of candour, Mandelson recently admitted the truth about this internal row during a private meeting with industry bosses at the CBI when he said that the Government was 'in a pickle.' More dangerous still for Gordon Brown is the fact that the Treasury (including Darling) actually agrees with much of the economic analysis of the shadow chancellor George Osborne. Both Osborne and Darling believe that public spending cuts should be severe and that they should be made sooner rather than later. As a result, Alistair Darling was forced into the most uncomfortable position of having to deliver a Pre-Budget Report whose policies he himself did not agree with. This incredible state of affairs probably explains why he put in such a wretched and unconvincing performance when interviewed on Radio 4's Today Programme the following morning. His heart just wasn't in it. All this leaves a burning question: what now happens to Peter Mandelson, the man who played such a brilliant role in saving Gordon Brown's skin 12 months ago? It is certainly hard to imagine his playing a significant role in overseeing Labour's general election strategy, as many once predicted. Indeed, I have heard rumours that he may be in the market for jobs in the private sector after a Labour defeat. What is certain, though, is that he made a desperate last-minute bid to bail out of a frontline domestic role when he made a serious play to become the EU's High Representative for Foreign Affairs in Brussels a few weeks ago. When that job went to Brown's crony Baroness Ashton, Mandelson blamed the PM. Meanwhile, Gordon Brown has retreated into his bunker and is now depending on the inner coterie of advisers who surrounded him during the years when he was Chancellor - Ed Balls, Cabinet Secretary Gus O'Donnell and his old Treasury aide Charlie Whelan (now a crucial link to the unions and key election strategist). This has left him very exposed. Twelve months ago, the return of Peter Mandelson to the heart of the government machine signalled a revival of Gordon Brown's fortunes. It may be that his departure from the inner circle now presages the end. Back IN 1947, the Labour Chancellor Hugh Dalton carelessly leaked a stray detail about his Budget to an Evening Standard journalist as he made his way to the Commons chamber to deliver his speech. In the ensuing uproar, Dalton, a man of honour, felt compelled to resign. Last Monday, Alistair Darling deliberately leaked to the BBC his decision to tax City bonuses, thus showing the total contempt for Parliament that has been a long-standing feature of New Labour in government. Although this is not a resignation matter for Darling, the question arises: why on earth did Commons Speaker Bercow not demand an apology from the Chancellor and an assurance that similar behaviour would not be repeated? Bercow campaigned for the Speakership six months ago on the basis that he would restore the respect and authority due to Parliament, and yet repeatedly he has held back from rebuking ministers who have broken the rules by making official government announcements outside the Commons. Revealed: How Brown and Mandelson are at war again
Last updated at 3:42 AM on 12th December 2009
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Sunday, 13 December 2009
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