Bombshell hits Westminster as Mandelson resigns over loan scandal

The bombshell hit Westminster just before 12.30 p.m

The bombshell hit Westminster just before 12.30 p.m. Number 10 had the benefit of advance warning, as the reverberations registered throughout Whitehall, and in the wider political community beyond. Peter Mandelson - in so many ways the creator of New Labour, just last week a hot-tip for future Foreign Secretary, if not Prime Minister - had resigned after only 62 days in the cabinet.

Seasoned political commentators stared at each other in disbelief as the rumour mill raced ahead of the dramatic lunch-time bulletins. Even as the tale of "Mandelson, the minister and the secret £373,000 loan" had gathered in its complexity and danger, the settled assumption seemed to be that the Trade Secretary - though badly wounded, and with his still-loftier ambitions now firmly in check - would survive.

Downing Street, after all, had come out fighting on his behalf on Tuesday night. The Prime Minister let it be known that Mr Mandelson and Mr Geoffrey Robinson enjoyed his "full confidence". Whatever the personal embarrassment, Mr Blair was reportedly satisfied that Mr Mandelson had not broken the ministerial code of conduct, and that he had properly "insulated" himself from his department's investigation into allegations that Mr Robinson's businesses had been in breach of company law. No wrong-doing, so no question of resignation then.

Yet even as his spokesman fought-off the baying press pack, Mr Mandelson was telling the Prime Minister he was "minded" to resign. Mr Blair resisted - urging his embattled friend to "sleep on it".


It is doubtful if Mr Mandelson enjoyed much sleep on Tuesday night, holed-up in the luxury Notting Hill home which would prove his undoing. As was his habit, the master of media management would have had the first editions faxed through to him as they hit the streets. And a cursory glance would have told him the assorted front page headlines and editorial comments had sealed his fate.

The broad-sheets were slightly restrained by Mr Blair's apparent determination to save Mr Mandelson and, by extension Mr Robinson - for, no matter that the Paymaster General's departure had come to be considered inevitable, it suddenly seemed clear that one could hardly go without the other. But on top of the already established questions - about a possible breach of Commons' rules on disclosure, and the tax implications of any benefit Mr Mandelson derived from the Robinson loan - the Financial Times led on the question of Mr Mandelson's £150,000 mortgage application to the Britannia Building Society, after he said he could not "recall" whether he had told the lender he was also receiving the £373,000 loan from Mr Robinson.

More crucially for Mr Blair and Mr Mandelson, the newspapers on which they had come to place such importance and reliance had reached their verdict without need of further answers. The Daily Mail branded him the "Master of Deception", declaring that "Mr Blair will only reach prime ministerial maturity when he finally frees himself from the embrace of his flawed favourite". As Mr Blair would later in the day, in the formal exchange of resignation letters, the Mail offered Mr Mandelson the hope of eventual return. Urging him to resign, it suggested "a penitential term on the back-benches, before resuming what could still be a valuable ministerial career".

The Sun's headline was still more brutal, demanding: "So how the hell can Mandy stay?" Even before he emerged to brave the cameras, Mr Mandelson had decided he could not - his taste for the high life having laid him open to perhaps the most grievous charge of all, a lack of political judgment, and, more crucial still, having brought the charges of "croneyism" and "sleaze" to the door of Number 10.

It was without doubt a terrible personal tragedy for Mr Mandelson. It was, moreover, a calamitous day for Mr Blair and his government.

Sure, some on the left would be positively euphoric at the humiliation of the man who had come to encapsulate everything they hate about New Labour. But there was no doubting, either, the genuine sadness and regret, reflected by Mr Blair, Dr Jack Cunningham and others, that a man who - arguably more than any other - had been responsible for making Labour electable, should suffer such a spectacular personal fall.

Politics, as they say, is a rough old trade. And the sadness will pass soon enough. As Mr Robinson finally followed Mr Mandelson down the resignation path, Mr Blair was already granting promotions and re-ordering his ministerial line-up. But as he prepares for the Christmas break, and savours the prospect of a family holiday in the Seychelles to come, Mr Blair knows this episode bequeaths him problems of an altogether greater order than the loss of a close ally, or the question of with whom to fill which departmental vacancy.

For many close observers at Westminster, the real question is: will this government learn anything from this bitter and deeply damaging experience?

One last night expressed wonderment that "the Conservatives now have virtually an equivalence of sleaze, after just 18 months of a Labour government". To many, with memories still-fresh of the scale of the Tory collapse and fall, that will appear a harsh judgment. But the issue at the heart of the Mandelson affair - the perception at least of a possible conflict of interests - has been a consistent thread running through the various controversies which have caused Mr Blair most real difficulty and embarrassment.

It was at the heart of the Bernie Ecclestone affair, and the £1 million donation subsequently repaid after Mr Blair had met the Formula One chief and subsequently changed his policy on tobacco advertising. It echoed through "Drapergate" and the questions about "the butterflies", as Mr Blair termed them, who enjoyed a foot in both camps, advising government while making their mark, and their money, as well-placed lobbyists. And, of course, it was there, too, in the case of the now departed Mr Robinson - put in charge of closing down off-shore trusts while enjoying the benefit of one himself.

Mr Blair rewrote the ministerial rules on taking office. He may now be expected to read the riot act, making sure that his ministers have read and comprehended them. For the prime minister knows that he and his colleagues cannot forever rely on the public perception of him as "a pretty straight sort of guy". There is a cumulative effect in these things. Each such episode diminishes, if only slightly, the government's reputation for probity, strengthens the opposition, and emboldens the press.

Ministers will now be watching the press for opinion polls, and for any sign of a significant drop in support ahead of important elections next year. They will be particularly concerned to assess the reaction of their own Labour voters, and for evidence of any inclination on their part to stay at home, damning this government for being "as bad as the other lot".

Mr Blair came to office with the promise it would not be so. He will find it harder now to deliver.