Mandelson's mission

LORD Mandelson's immaculately coiffured hair is being buffeted by the brisk Aberdonian breeze. He is attempting to shepherd two slightly embarrassed oil men in front of the cameras to publicise a new pipeline they plan to build off the west coast of Shetland. Standing outside the Aberdeen Conference Centre on Friday lunchtime, the Business Secretary politely manoeuvres the pair alongside him, to ensure the cameras get the right shot.

More than 25 years have passed since plain old Peter Mandelson started doing this kind of thing; first as Labour's director of communications, then as part of the Blairite revolution that swept the party to power in 1997, and finally as the holder of a bewildering array of ministerial portfolios in the years since. Brian Wilson, the former Scottish Office minister, once argued that front-line political leaders had an absolute maximum shelf-life of 15 years, before the public get totally fed up with them. Somehow, however, Lord Mandelson has managed to avoid this fate. It may be because, unlike Gordon Brown, he has not been a constant presence in all that time (having had to resign – twice). It may be also because the Peter Mandelson seen these days is quite different from the one who first came upon the public consciousness: not so much Peter Mandelson, as a man who enjoys playing a Peter Mandelson character, with all its dark lord overtones.

The retired assassin of British politics, however, still has bullets in his gun. Behind the post-modern, avuncular image, on display in Aberdeen on Friday, is a politician still intensely driven by the desire to kill his sworn foe. This week, the election campaign proper begins, when Chancellor Alistair Darling stands up to deliver Labour's last Budget of this parliament. Darling and Mandelson are now close allies so while it will be Darling's Budget, the unmistakable fingerprints of the First Secretary of State will be all over it as well.

The Business Secretary had already managed to charm his audience in Aberdeen: the sturdy, practical men and women of the Federation of Small Businesses, gathered in the Granite City for their conference. They were quite happy with George Osborne too, though, who had appeared before Mandelson. The presence of the pair, whose shared holiday in Corfu two years ago nearly brought Osborne's career to an end, had created a frisson in the hall. Now both, having made their speeches, and attended to their photo calls, were flitting for the airport to catch the same British Airways flight. So which one would get the coffee spilled over their lap by the rebelling cabin crew? "I'm sure we'll be able to divide the tea between us," Mandelson says, in the car on the way to the airport. Soon, he is filleting an old enemy, Charlie Whelan, the Unite political director, whose influence on the Labour campaign has been widely talked up in the press over the previous week. "His influence is largely exaggerated," he notes drily. Pause. "Chiefly by himself."

Mandelson had been irked by that morning's headlines, which used a quote on tax he had given the day before to suggest that Labour is planning extra tax rises on top of those already announced (increases in NI and the top rate of tax). Not so, he insists. "The reality is that taxes are going to go up under either party," he declares. "The difference is that we've been honest. We've set out at the end of last year what taxes will have to go up and we have no other plans or proposals. The Conservatives are not telling the truth."

Ah yes, the Conservatives. We have barely left the conference centre car park before Mandelson gets onto his favourite topic. The Cameron wobble over the early part of the year has given Labour hope that they might just yet claim victory. The attacks led by Mandelson, most effectively on the funding of Tory peer Lord Ashcroft, have clearly wounded Cameron's campaign. The trouble is, Wilson was right wasn't he? The public have had enough of you lot.

Mandelson snaps back: "It depends on the alternative." And then he launches into the attack lines that voters can expect to hear a lot more of over the coming weeks. Cameron and Osborne have "neither experience nor backbone". He goes on: "People know that things are fragile. We are on the road to recovery but we have not travelled that road. And if we were to abandon those policies that have worked to get us out of recession before the recovery is locked in then we will be taking a huge risk with future jobs."

The portrait Mandelson and others hope to paint is of the 1992 pre-election period. Then standing for parliament for the first time, Mandelson experienced the elation of a personal victory, tainted by Neil Kinnock's devastating national defeat to John Major's unpopular government. "I remember '92," he reminisces. "I was standing for the first time myself in Hartlepool. People were disenchanted with the Conservatives but I'm afraid they didn't look at us with great enthusiasm either. We hadn't remade ourselves as a party, we hadn't brought about the changes in our party that the public demanded. It is very similar with the Conservatives now."

That's the pitch that Mandelson hopes to sell to the public – and, of course, he has rarely got their instincts wrong. But an outright Labour victory, however, still looks a long shot, with a more realistic aim that of a hung parliament. I ask Mandelson what would happen if the Tories were to emerge as the bigger party, but short of a majority. "The largest party that doesn't have an overall majority is given the opportunity to form an administration once the incumbent government and Prime Minister has resigned," he says. That qualification is quite a big one. Gordon Brown isn't the resigning type (Brown would be under no immediate obligation to resign until it was clear the majority of the House was against him, and he could attempt a deal with the Liberal-Democrats).

It is said that, when asked what would happen to Gordon Brown if he lost, Mandelson once replied: "You don't think a little thing like losing a general election is going to stop Gordon Brown, do you?" Back in the car, he half-heartedly denies making the comment. "He is a very determined man," Mandelson says of Brown. "That's why he is head and shoulders above Cameron. Look, Cameron has a shiny exterior but not much inside. Gordon Brown has rough edges on the outside but an absolutely sold brain and a strong beating heart inside him."

Mandelson must know, however, that the odds on him returning to his office at the Department for Business after the election are against him. The experience there has cemented his Blairite Third Way views. "I have learnt that neither laissez-faire economic and industrial policies, nor interventionist policies that are heavy-handed or short-term work." The work of government, he says, is to pick out the strengths in the UK economy (earlier he had mentioned the off-shore energy sector in the Pentland Firth), and to back them. Mandelson wants to position Labour as the party of "industrial activism", taking big bets on sectors which may add growth to the UK economy, against the Conservatives' more hands-off approach. "They haven't left the 1980s, never mind the 1990s," he spits.

The big prize for Osborne and Cameron in answering this, may well be if they can promise to reverse Labour's planned 1 per cent increase in National Insurance, due next year – the "tax on jobs".

Both parties know that the economy, more than ever, will count for everything in the coming campaign. Mandelson and Darling's strategy this week will be twin track: cutting the deficit and going for growth. What it won't be, he says, is a traditional pre-election bribe. Mandelson asserts: "It's not the time for giveaways; it's not the time for political Budgets. It's the time to be serious and honest with people.

"The public know we can't afford, in the present economic circumstances, to deliver a giveaway Budget, nor do they want the government to put the recovery at risk, cut spending and pull the rug from underneath the recovery or fail to take the measures that we need to build economic growth in our country because that is where future growth comes from."

So Darling's hand is limited, but not entirely constrained. The theme in the Budget is likely to be all about jobs. One major item is likely to be an extension of the young person's job guarantee scheme – which provides a training place or a job for 18-24-year-olds - to older unemployed people as well. Mandelson adds: "It's worked really well and it has made a big impact to tackle unemployment created by the recession. We will look at all our measures both for the unemployed and business and make judgments." It will allow Labour to push one of their favourite themes – that while people in the last recession were cast onto the dole queue indefinitely, in this one, the government is supporting them. And Darling is also tipped to use the limited flexibility he has – brought about by lower than expected borrowing figures - to delay a planned increase in fuel duty, which had been scheduled for 1 April.

To pay for it, the losers look likely to be drinkers and bankers. Increases in alcohol duty of as much as 10 per cent have been mooted by industry insiders, while certain low-taxed drinks, such as cider, will face even higher increases. And Darling is expected to support a global bank levy – compulsory insurance which banks will be forced to pay governments for the risk they pose. He will, however, stop short of David Cameron's proposal to impose the tax even if other countries do not.

Mandelson's car arrives at the airport. Two cars ahead in the drop-off area, Osborne has just arrived, and heads into the airport terminal just ahead of his rival. Mandelson offers a cursory farewell, consults his BlackBerry, and marches in Osborne's direction, no backward glances.

Be careful, George. Remember to look behind you.