Gordon Brown defended his Cabinet reshuffle yesterday as being in the national interest, saying that he was revamping government to meet the challenge of the financial crisis.

The Prime Minister has set up a National Economic Council, which will meet twice weekly, brought in a host of leading industrialists to be business ambassadors, made Paul Myners, a former chairman of Marks & Spencer, his City Minister, and recalled Peter Mandelson from Brussels.

He said that he was assembling the best team possible to bring Britain through its troubles because serious people were needed for serious times.

Asked whether he had taken leave of his senses in restoring the twice-resigned Mr Mandelson, he said: “He has unrivalled experience as the Trade Commissioner of the European Commission. Everybody has said right round the world that he has done a brilliant job. We need all those people with brilliance and expertise to help us as we meet these uncharted times.”

Twelve Cabinet ministers will serve on the council, which meets for the first time on Monday. It will take advice from experts from all parts of the economy and provide a new approach to coordinating economic policy. Mr Brown has removed several posts from the Cabinet to ensure that more members are seen as economic.

“We are bringing together the best team possible to deal with the difficulties that everybody knows have caused consternation in America and have caused worries here. We are going to work as a team because my primary aim is to get people through and to show that Britain can lead the world in coming out of the difficulties that the world has.”

Mr Brown said that he had “set aside” his past differences with Mr Mandelson. Their relations were good.

“Peter Mandelson has proved himself as commissioner in the last few years as someone of great distinction,” he said. “What I have decided is what I believe is in the national interest.

“If you have got someone with unrivalled experience in international business issues, someone who is respected by business for what he has done and who has built a reputation over these last few years as someone who can get things done, then if the British Government can benefit from that, it’s the right decision.”

Asked whether the council was in effect an “economic war Cabinet”, Mr Brown said: “Call it what you will. The important thing is that we are taking all the action that is necessary and we will do whatever it takes to ensure not just the stability of the economy, because that is absolutely crucial, but also that we get the economy on to a path of growth, where people can see we are being fair in the way we deliver prosperity for the future.”

Mr Brown added: “This is a new way of governing that is based on the uniqueness of the circumstances. These are new times. The global economy will never be the same again. Huge changes are taking place. We have to deal with it in a new way.”

Mr Mandelson’s was not the only comeback in a wider than expected change that brought the return of other experienced figures, including Margaret Beckett and Nick Brown.

Mrs Beckett, a former Foreign Secretary, becomes Housing Minister and will serve on the economic council.

None of the most senior posts was changed – Alistair Darling, the Chancellor, David Miliband, the Foreign Secretary, and Jacqui Smith, the Home Secretary, all remain in their posts. But John Hutton, who is making way for Mr Mandelson, was named Defence Secretary, with Des Browne leaving the Government. Mr Browne is understood to have been offered other jobs.

The transport brief, being vacated by Ruth Kelly, who is stepping down as an MP at the next election, goes to Geoff Hoon, previously Chief Whip.

No 10 also announced the creation of a new department, covering energy and climate change, to be headed by Ed Miliband, who moves from the Cabinet Office.

Mrs Beckett, now in charge of housing, and Nick Brown, in a second spell as Chief Whip, are among several new ministers of state who will attend the Cabinet.

Others are the Home Office high-flyers Tony McNulty, who becomes Employment Minister and Minister for London, and Liam Byrne, who switches from Immigration to the Cabinet Office. Hilary Benn remains as Secretary of State at a slimmed-down Department for Environment, Food and Rural Affairs.

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