Government reputation hit by Mandelson

Tony Blair has lost the man credited with creating New Labour

By Nick Assinder, BBC News Online political correspondent

Peter Mandelson, the man most credited with creating New Labour, has ended his extraordinary political career as the person who did it the most damage.

By being forced to resign from the cabinet twice in less than three years, he has allowed the sleaze label to be attached to the government in the crucial run-up to a general election, and has a thrown a serious question mark over Tony Blair's judgement.

Media pressure mounted on Mandelson

And, for the man dubbed the Prince of Darkness for his obsession with spin, there will be no resurrection this time. Many even believe he may now be forced to leave politics altogether.

At the same time as resigning from the cabinet he relinquished his role as chair of Labour's general election planning group.

And some think he may even now stand down from his Hartlepool seat at the election.

His alleged slip of memory has not only cost him his career but has handed the Conservatives a major propaganda weapon as the election approaches, still expected on 3 May.

Weather the storm

As is often the case with such affairs, it was the attempted cover-up rather than the initial act that appeared to have done most damage to Mr Mandelson.

As with his previous resignation, he at first attempted to weather the storm with a series of media interviews in which he insisted he had not acted improperly.

But as the truth finally dripped out it became increasingly clear he could not survive.

He may have been able to brush aside Tory claims that he had tried to use his influence to win favours for a wealthy individual by claiming, as he still does, that he made no representations in favour of Mr Hinduja's application for a passport.

Alastair Campbell: furious with Mr Mandelson

But it was the fact that he appeared to mislead colleagues by claiming it was officials, not he, who had spoken to the Home Office Minister, that finally did for him.

The prime minister's official spokesman, Alastair Campbell, was clearly furious that Mr Mandelson had not told him the whole truth when the story first broke last weekend - which led him to misinform political journalists in the following days.

And Mr Blair is also certain to have been angered and dismayed that, for the second time, his closest and most trusted ally had let him down.

While Mr Mandelson will seek to take all the blame for the affair himself, he of all people knows the damage it will do for his party.

Major backlash

His ministerial career is certainly over and his ambitions for high office - which some claim included the dream of becoming a Labour prime minister - are also dashed.

He has plenty of enemies within the Labour Party to ensure that any attempts to rehabilitate him this time would spark a major backlash. And it was notable that there were few of his colleagues ready to leap to his defence this time around.

But his actions will also reflect onto Tony Blair and his government.

Mr Blair faced widespread criticism even from within his own ranks when he brought Mr Mandelson back to the cabinet just nine months after his first resignation.

Critics have already used that row over Mr Mandelson's home loan from Geoffrey Robinson to suggest New Labour was as sleaze-ridden as the old Tory Party.

Mr Mandelson was approached by Mr Hinduja

And Mr Blair's decision to reinstate him to the cabinet so swiftly led many to question whether his loyalty to his great friend and confidant was crowding his political judgement.

Probably the greatest damage for the government, however, is the effect the row will have on voters' perceptions.

There is already widespread disillusion with politicians as a breed and Tony Blair's suggestion that his government would be whiter than white now sounds hollow to many voters.

Whatever the truth, many will be only too ready to believe that Mr Mandelson's friendship with the Hinduja brothers, combined with his desperation to find backers for the Millennium Dome, were at the heart of the affair.

And that can only lead to further disillusion with New Labour.

The latest polls are already suggesting the biggest problem Tony Blair faces at the next election will be a low voter turnout. Many fear Mr Mandelson's actions will only worsen that trend.

And for a man whose entire adult life has been built around politics and winning power, that would be the final and most bitter irony.