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Amid the financial turmoil, Peter versus George is the key battle

Stand by for a mighty clash between two politicians, says Fraser Nelson. The now infamous dinner between Mandelson and Osborne was a cordial parting for power-brokers of different generations who will fight each other savagely for electoral advantage

8 October 2008

12:00 AM

8 October 2008

12:00 AM

The Taverna Agni is one of the more expensive restaurants in Corfu, but one would scarcely expect Peter Mandelson and George Osborne to slum it. As is normal for members of London’s political elite, they found themselves in the same exotic location one August weekend. So they went to chew the kleftiko together and laugh about Gordon Brown. We know that Mr Mandelson ‘dripped pure poison’ about the Prime Minister because the fact was leaked to the press within hours — but no one ran the story. Who, after all, cared about a long-retired spin-doctor named Peter?

Scroll forward six weeks and that conversation is front-page news. When Mr Mandelson counter-attacked, hinting that he might well leak whatever indiscretions Mr Osborne made over the ouzo, it was an appetising hint of many skirmishes to come between the two politicians. The economy may be imploding and banks may be collapsing, and the two may be officially cast as Business Secretary and shadow chancellor. But their real job is to be chief political strategists for their respective parties — to wage brutal political war amid the economic turmoil. And the two have more in common than either would care to admit.

The fact that they had that dinner itself is eloquent. At the time, there was even loose talk in Tory headquarters about mischievously renewing Mr Mandelson’s five-year term as a European Commissioner if he agreed to defect. The plan was more than a little fanciful — it’s one thing hating Gordon Brown, quite another turning Tory (especially if you are Herbert Morrison’s grandson). It was not ideological convergence that made it easy for Mandelson to get on with Osborne, but a shared taste for top-of-the-range networking.

When the Business Secretary was rushed to hospital on Monday morning (for kidney stone removal, as it turned out) it is tempting to guess that Mr Osborne’s first thought was, ‘I wonder what he meant by that?’ Both detect politics in everything. Both will be scouring the ransacked economic landscape this weekend for the smallest scraps of political advantage.

Socialising is what they both do, and do very well. Mr Mandelson bought his former Notting Hill home (with an undeclared interest-free loan) for the same reasons that Mr Osborne has a west London base: to run a salon and work the metropolitan elite. Their respective mantelpieces groan with the weight of invitations to soirées hosted by the most powerful figures in London. Peter and George, though of different political generations, swim in the same social waters.

It’s a milieu in which David Cameron is perfectly comfortable but with which he does not engage so aggressively. Dinners chez Cameron are very different from Mr Osborne’s gatherings. Guests turning up at his North Kensington house usually find the table set for just six and encounter the Conservative leader either holding or proffering a beer. Chez Osborne, there is a waiter to hold the champagne on a tray and enough high-powered guests (from newspaper editors to financiers) to make clear this is not a cosy kitchen supper but hardcore networking with a purpose.

To dismiss this as gratuitous champagne-charged polenta consumption is to misunderstand the nature of power-broking in London. The job Mr Osborne carries out for his master is every bit as vital as that which Mr Mandelson did for Mr Blair in the mid-1990s. Through his gift for network-building, Osborne has managed to lure big names into the Tory orbit, from key businessmen to John McCain. Mr Mandelson still likes to play the game after all these years. This is why it was perfectly natural for him to break bread with Osborne in Greece. They are birds of a feather, albeit from different wings of the political spectrum.

Remarkably, Mr Osborne has accrued even more power in his party than Mr Mandelson managed at a comparable stage in the New Labour project. For a start, he has a real job, that of shadow chancellor — quite enough to be getting on with in the current context. And he combines this with an ever-increasing range of de facto roles. He never quite stood down as general election co-ordinator after last autumn’s false start and remains on permanent standby, in effect assuming much of the authority which has drained from the post of party chairman. Its nominal holder, Caroline Spelman, is in limbo awaiting an investigation into her parliamentary expenses claims.

Steve Hilton, still notionally chief strategist, is also losing influence for reasons that are geographical rather than political. On a personal basis he is so close to Mr Cameron that, as Michael Gove recently told me, ‘it is sometimes impossible to know where Steve ends and David begins’. But it is easier to know now that Mr Hilton is working from California, his impact limited to nocturnal emails and fleeting visits home. Mr Cameron’s regard or dependence on him has not shifted. But those working in Central Office say that Mr Osborne has hoovered up the influence ceded by Mr Hilton since he followed his wife to her high-powered job with Google on the West Coast.

Mr Hilton’s primary task was the detoxification of the Conservative brand, a mission he accomplished with success that few would have imagined possible. While he is still brimming with ideas, he is regarded as more of a blue-skies-thinking man who produces — say — half a dozen ideas of which one is put to use. Mr Osborne is now filling in the detail. Oliver Letwin, the policy chief, regards himself as junior to the shadow chancellor, who is the policy and strategy tsar. This incredibly broad remit is what will make Osborne the obvious target for Mr Mandelson’s forthcoming attacks.

The role of Business Secretary is, in truth, a non-job, as John Hutton proved — finding time to write a history book and a radio play while in the post. Bureaucracies can do almost nothing in economic crises except pretend to have power and relevance — which is why Mr Mandelson’s formidable spin skills will be at a premium. Whatever his official job title, nobody in Westminster doubts that his main function will be to bring to the imploding Brown operation the political skills that helped Tony Blair win two landslide victories (Mandelson had already gone to Brussels by the time of the 2005 election).

It is naive to think that during that dinner in Corfu, Mr Mandelson was not quietly assessing Mr Osborne’s weaknesses. He is likely to have concluded that politics comes easier to the shadow chancellor than economics and that he has not yet learned to fashion figures into weapons — the trick upon which Mr Brown’s reputation and career has been built. Given the extraordinary range of his responsibilities, Mr Osborne has let his deputy Philip Hammond deal with the grunt work. This makes him potentially vulnerable on the details of economic policy.

Mr Mandelson believes he knows the Tory game plan because (he thinks) it is a pale copy of his own. He all but confessed this in a private meeting in Brussels recently, when a member of a trade delegation asked what he thought of David Cameron’s strategy. ‘Of course I think it’s rather good,’ he replied. ‘I wrote it, after all.’ Indeed the early strategy pursued by Mr Osborne and Mr Hilton was to soft-pedal on the differences with Labour and to focus their energies fighting Tories who wanted to reverse Mr Brown’s tax-and-spend policies.

This hug-them-close approach had its attractions before the Brown bubble burst. Now, it leaves the Tories without a distinct message discernible to the average voter. At a time when the economy is a white-hot election issue, this is the weakness in the Tory offeri
ng which Mr Mandelson will relentlessly exploit. And it is one he has been thinking about for months.

Mr Brown had been calling him (and Tony Blair) on such a regular basis that he suspected he might be called in to advise on the next election campaign. But being summoned back to Cabinet took him as much by surprise as it did the rest of Westminster — hence his call to Mr Blair just to check there was not a Brownite elephant trap hidden in the political undergrowth to kill him off a third time.

Mandelson’s impact on the Labour machine has been instantaneous. Take, for example, the new National Economic Council to which Mr Mandelson was immediately seconded on arrival. It represents what the Prime Minister grandiosely declared a ‘new way of governing’. It is, in fact, a chimera. All he did was rename an existing Cabinet committee, then tell it to meet twice a week in a bombproof room in the Cabinet Office for dramatic effect. As a conjurer’s trick, it worked brilliantly.

Mr Mandelson’s strategy will be to keep up the momentum of the new narrative — a united Cabinet, Gordon to save the world — and have Mr Brown insert himself into every financial story. There are strict limits to what a Prime Minister can really do in economic circumstances of this singularity: but there is a new media enthusiasm to present the PM as a man with his shoulder to the wheel, even when he is simply making platitudinous promises to ‘do whatever is necessary’. Strategists like Mr Mandelson and Mr Osborne will know that fear favours the Left, by bringing out collectivist, protectionist instincts in the electorate during times of crisis. Even Mr Osborne has switched from attack mode to striking a consensual note.

The Tories are not yet ready to break free from the intellectual framework which Brown set in the Blair era. Meanwhile, Vince Cable is rightly asking whether the Bank of England’s Monetary Policy Committee had the right original remit. This is the smoking gun: its inflation-only target was an anachronism which flooded the economy with dangerously underpriced debt. It is a simple problem which Mr Brown is brilliantly concealing by talking about the complexity of the related, but separate, banking crisis.

Two weeks ago, I wrote that Mr Brown’s genius ‘lay in being able to get away with so much for so long’. I was wrong to use the past tense. His genius is still there, as he has shown by changing the game with Mr Mandelson’s appointment and posing as the knight commander of the British economy — a war leader, for an economic war. Polls show he has almost eliminated the Tory lead for economic competence. He may yet surf, rather than be crushed by, the financial tsunami.

Mr Mandelson may not seriously believe that Labour can win a fourth term, but his minimal goal will be to deny Mr Cameron his landslide. The unfair Westminster voting system means that the Tories still need a seven-point opinion poll lead to win a single-seat majority. Polls now show a 12-point lead — with a year and a half left to go. But Mr Osborne believes that time is the Tories’ friend. The Conservatives’ strategy is to hold their nerve, hope for the crisis to die down and wait for Mr Brown and Mr Mandelson to turn on each other.

Vladimir Putin once observed that there is no such thing as an ex-KGB agent. In the same way, there is no such thing as an ex-Brown aide, as anyone who saw Charlie Whelan at the Labour conference in Manchester knows. The Prime Minister may have sworn to change his ways, to wean himself off his old friends and accept that he has lessons to learn from this strange breed of Mandelson/Osborne metropolitan power-broker. But the Tories are betting that, come the next crisis, he will ignore his new consigliere, retreat into his comfort zone and consult the old team which Mr Mandelson so despises (and whose members fully reciprocate that sentiment).

But even if the truce between Mandelson and Brown doesn’t last beyond next month’s by-election in Glenrothes, there is another option which is worrying some senior Tories. It is possible that a Brown v. Mandelson battle will not hurt Labour any more than the ten-year, gore-strewn Brown v. Blair battle did. Better a government of warring titans than a huddled gang of irrelevant pygmies. Whatever they say to the contrary in public, the Cameroons fear the return of this Big Beast.

Just as the economic meltdown has transformed the American election — turning safe red states into swing states — it may yet change the political game in Britain. For all his similarities with Mr Mandelson, Mr Osborne is of a different generation and has just a fraction of his experience. He can pray that it will all go horribly wrong, and argue that Mr Brown has resorted to necromancy by hiring the Prince of Darkness. But doing a deal with Lucifer may not prove such a foolish move at a time when the voters will be increasingly inclined to stick with the devil they know.

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