If the resurrection of Peter Mandelson for the third time is today’s bombshell, the underlying story is Gordon Brown’s consolidation of his hold on power after a rocky few months. It is also intended to strengthen his economic team for what is certain to be a very tough period ahead.

The reshuffle has left alone the top rank of ministers — Chancellor, Foreign Secretary and Home Secretary — but is much more extensive than expected.

While the talk of a leadership challenge has receded in the past couple of weeks because of the global financial turmoil, there has been continued infighting between some of Mr Brown’s advisers and some members of the Cabinet seen as Blairites.

The reshuffle is primarily intended to heal that rift and to bind in the old Blairites. None of the key Blairite ministers has been demoted while Mr Mandelson has returned from being EU Commissioner in Brussels to take over the Business Department (minus energy). After well over a decade of estrangement, Mr Mandelson and Mr Brown have been talking regularly again in recent months about Labour’s predicament. Like Tony Blair himself, Mr Mandelson has genuinely wanted Mr Brown to succeed and Labour to win the next general election.

Mr Mandelson’s appointment has been welcomed warmly by business, not only because of his free-trade credentials as EU Trade Commissioner but also because he was regarded as one of the most effective Trade and Industry Secretaries in his short period there a decade ago. Equally, even before it was formally announced, the news was attacked by the trade unions and the Labour Left. The return of Mr Mandelson is a risk since he is a highly controversial figure whose every move and statement is seized upon by the press and bloggers.

This startling promotion was balanced by the appointment of Nick Brown, one of Mr Brown’s closest allies, to return as Chief Whip, a decade after he left the post. This move will be as controversial as Mr Mandelson’s since Mr Brown is seen by some Labour MPs as conspiratorial and divisive.

The reshuffle involves the return of experienced people such as Mr Mandelson, Mr Brown and Margaret Beckett more than the promotion of promising younger ministers.

The reshuffle is also intended to strengthen the effectiveness of the Government. The key change is the creation of a new Department of Energy and Climate Change under Ed Miliband, the younger brother of the Foreign Secretary, who has been in the backroom role at the Cabinet Office. The question about such machinery of government changes is whether all the disruption of moving civil servants around is worth the gains. The record is not good as there are still strains, and costs, from the major changes in the Business and Education departments last year.

The creation of the new department leaves Hilary Benn running a stripped-down Food and Rural Affairs Department, in effect the old Ministry of Agriculture.

The two other key changes come after the resignations of Ruth Kelly at Transport (to be succeeded by Geoff Hoon, until now Chief Whip) and of Des Browne as Defence Secretary (to be succeeded by John Hutton, the Business Secretary).

This may be a preliminary to changes elsewhere in the Cabinet in the New Year when younger ministers will be hoping for promotion.

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