Controversial Blair ally replaces John Hutton in shock return to frontbench politics

Peter Mandelson has made a sensational return to frontbench politics as the government’s new business secretary, replacing John Hutton.

After Gordon Brown’s Cabinet reshuffle Mandelson, who resigned twice during the early years of the Blair administration, will have responsibilities over business, enterprise and regulatory reform, including construction.

Hutton has moved to head up the ministry of defence. Lord Jones, a minister for UKT&I and former Building columnist, has left the business department. It is not yet known whether construction minister Baroness Vadera will remain in her post.

The outgoing transport minister Ruth Kelly has been replaced by former defence minister and chief whip Geoff Hoon. Ed Miliband has been promoted to take charge of a new department for climate change and energy.

Jon Cruddas has been tipped to replace Caroline Flint as housing minister in the Department for Communities and Local Government, but there has not yet been any confirmation of this.

But it is the return of Peter Mandelson to the cabinet which will dominate the headlines. Mandelson was perhaps Tony Blair’s closest ally when prime minister and an architect of New Labour’s victory in 1997. He was appointed trade secretary during the first year of Blair’s reign, but resigned after it emerged he had bought a house with an interest-free loan from fellow Labour MP Geoffrey Robinson.

A second return to Cabinet, this time as Northern Ireland secretary, ended in 2001 when he was forced to resign after allegedly intervening in the attempts of an Indian businessman and Labour donor to get a British passport. He was later exonerated of all charges in a government inquiry.

Mandelson has been acting as the UK’s EU trade commissioner since 2004. His return to cabinet marks an astonishing comeback given his closeness to Tony Blair was said to have frayed his once-close relationship with the prime minister.