Mandelson makes shock government return

Peter Mandelson has returned to the government for the third time as part of a significant cabinet reshuffle.

The European trade commissioner, who twice resigned from Tony Blair's cabinets in controversial circumstances, has been appointed secretary of state for business by Gordon Brown.

The former Northern Ireland and trade and industry secretary's shock return to Westminster as a peer sees John Hutton move to the Ministry of Defence.

And the appointment is being seen as a strengthening of the government's response to the credit crunch.

Speaking outside Number 10 on Friday, Mandelson said he had not expected to be asked to return but that it was "all hands on deck" to cope with the "very hard challenge" of managing the economy.

It is a "great challenge and a great opportunity" he said.

Committee

Brown is also expected to create a new cabinet committee on managing economic emergencies, including the chancellor Alistair Darling and the new business secretary.

However the news has not been welcomed by some unions and Labour MPs, who see Mandelson as an arch-Blairite and too pro-business.

The reshuffle had been sparked by the resignation of Ruth Kelly as transport secretary. She is to be replaced by chief whip Geoff Hoon, who had been tipped as a replacement for Mandelson in Brussels.

The prime minister was therefore required to reshuffle his team, but did not move any of his most senior ministers.

The chancellor, foreign secretary, home secretary, children's, health and justice secretaries all stay in post.

However the appointment of Mandelson as a senior adviser and a shake-up of his Downing Street staff signalled a bigger than expected attempt to relaunch his premiership following the party conference season.

Appointments

Also brought into the centre of government was immigration minister Liam Byrne as minister for the Cabinet Office, co-ordinating government policy and communication.

Byrne replaces Ed Miliband, who takes on a new role as energy and climate change secretary.

And Hoon was succeeded as chief whip by his deputy Nick Brown, a close ally who held the post for the first year of the Labour government from 1997-98.

Defence and Scotland secretary Des Browne, who has been heavily criticised for holding both roles, steps down. Browne, like Kelly, is a Catholic who is known to be uncomfortable with the government's Human Fertilisation and Embryology Bill.

Jim Murphy takes his place at the Scotland Office, while housing minister Caroline Flint succeeds Murphy as Europe minister.

She is replaced by former foreign secretary Margaret Beckett, who returns to government after a year on the backbenches, and will attend cabinet meetings.

Departures

Outside the cabinet, Tony McNulty was also promoted from his Home Office role to become and employment minister and minister for London.

As well as Browne and Kelly, trade minister Lord Jones and farming minister Lord Rooker are also standing down.

Meanwhile Mandelson will be replaced in Brussels by Baroness Ashton, who steps down as leader of the Lords, replaced by her chief whip Baroness Royall.

In other changes in the upper house, Lord Drayson returns as an innovation and science minister after a year away to pursue his motor racing interests.

And Stephen Carter moves from his senior strategy role in Number 10 to become a broadcasting and technology minister.