History will look back on Peter Mandelson’s last year as one of the most surprising and successful returns to frontline politics. Within less than 12 months he has amassed an empire in government which leaves no policy area untouched. As first secretary his role has unfolded as the prime minister’s right-hand man – adviser, confidant and fixer. Communications strategy – so roundly criticised over the last two years – has certainly improved, and while the polls aren’t exactly good news, there is a sense that Mandelson has helped to bring experience and professionalism back to the top of government.

So, since our interview with Lord Mandelson in October 2008, when he joyfully admitted that he’d ‘come back home’, is he still happy to have returned to grip the reins of power? ‘I enjoy it more with every week that passes,’ he smiles, and we believe it. He adds: ‘I feel more excited about being in my job than I did at the beginning,’ saying that the additional responsibilities for universities, FE and skills training in Britain has given him ‘extra stimulation’. The business secretary’s job satisfaction seems to be closely linked to his view that government has a stronger role to play in the economy than might have been the case in the past. Signalling perhaps a shift in New Labour orthodoxy, Mandelson says: ‘I see more and more clearly the need for government to act … in ways that the government over the last 10 years has simply assumed was not government’s role.’ He suggests that this was because there was ‘too much of a mindset that markets are best left to operate freely, when ministers meddle in markets it can only be for the worst, that we’re not sufficiently informed to make judgments about markets and future technology choices’.

The role of the state has been a wonk-world preoccupation for the last few years, but Mandelson is determined to bring it to the front of the political stage, at least in the field of business and the economy. While he is clear that the government does not have ‘a dominant role in bringing about innovation and commercialisation’, Labour strategists are ‘increasingly recognising that it has an essential role to play and one that perhaps we have understated in the past as we took growth for granted’.

In a statement which might also represent a departure from previous policy, Mandelson suggests that the government has ‘assumed that our financial services sector, which has made a major contribution to GDP growth in this country, will simply continue to do so in future’. ‘Now, while hugely valuable, that will not be the case to the same extent.’ He’s careful, as one might expect, to stress that there will still be a need to ‘maintain a strong banking and financial services sector in the UK’ but that government equally needs ‘to make sure that there are other sources of growth in the economy’. This means looking towards ‘new technologies, the growing markets, the commercialisation of our science base, the application of university research, combined with entrepreneurialism which continues to be indispensable to our economic success’.

Fiscal stimulus and continued investment through the recession, therefore, are key to Mandelson’s personal vision for the economy. He is convinced that the ‘pretty lonely … decisions taken by the prime minister and others of us’ have resulted in ‘signs that the international effort that Britain led is beginning to pay off’. He prophesies that when people ‘look back on what happened, they will see that our action, and the intervention we made, averted recession turning into a great depression’. Which is why ‘it’s very important that we don’t take the Conservatives’ advice and pull the stimulus and the rug from beneath the economy before recovery is embedded, and that we don’t repeat the mistake of previous recessions where whole generations were consigned to the scrapheap’.

But all of this additional spending simply increases debt – does Mandelson recognise why Labour activists are worried about the government’s denial of the need to cut public spending? ‘It’s a matter of timing,’ he replies. While ‘it is very important that the government maintains a credible plan for paying down debt without eating into the fabric of people’s lives’, he says that ‘the last thing you want to do in a recession is to reduce spending and investment and reduce demand in the economy.’ ‘When we’re ready to withdraw the stimulus measures can come only when we’re sure we’re through the recession.’ But when that time comes, he is certain that we will see the ‘same grip’ applied by the prime minister ‘in his reaction to the banking crisis last year being demonstrated in tackling the debt that necessarily we’ve had to take on in order to meet the costs of the recession’.

This dividing line, between Labour’s state intervention to lift the country out of the recession versus the Tories’ opposition to action and recent return to the language of swingeing cuts, is still the main one for Mandelson. ‘You can see the Conservatives and their appetite for deep and savage cuts to frontline services. They’re seizing on this opportunity to cut back the state, to cut back the public sector and essential services with barely disguised glee.’ The first secretary believes that this change in tack by the Tories ‘gives the lie to that earlier veneer of Cameron compassion and centre-ground conservatism that he was working hard to nurture at the beginning of his leadership’.

If Labour now, albeit belatedly, recognises the need to introduce cuts to public spending, might Trident be a candidate for the chop, as Andrew Grice recently suggested in the Independent? ‘The decision on Trident should be taken primarily and above all on defence grounds,’ Mandelson replies. ‘I think people exaggerate the cost savings.’ Mandelson makes us sit up when we ask whether he thinks that introducing primaries in the Labour party is a good idea: ‘I think Progress are right to raise this. I think this is exactly the sort of modernising move the party should look at and consider.’ Sadly he is less convinced about our other main campaign, electoral reform: ‘I can see the case for a fairer or more representative voting system based on AV, although I am wary of coalition government with smaller parties being able to exercise disproportionate power and influence in government’.

Mandelson believes that Labour will only win if it approaches the coming election ‘not as incumbents, but with the mindset of insurgents. It’s too easy for governments to fall into the trap of defending the status quo. This is going to be a “change election”. If we don’t remain the ‘change-makers in British politics, if we stop thinking and stop entertaining new ideas then people will just assume that it’s time for the baton to pass to others, regardless of their ideas.’ But ideas won’t win on their own: ‘we also need strategy and tactics and resources to fight the election.’ In a flashback to Mandelson circa 1987, he says: ‘It’s not good enough having the right policies if you then throw them away on poor presentation and weak campaigning.’

With Labour’s final party conference before the next general election looming, what would success look like after? ‘We need to demonstrate that we have a strong vision and a strong plan for Britain’s future. That we are still a progressive reforming party and we have to display the confidence in ourselves in order to win back the commitment of voters. And that requires open debate, strong ideas, maximum unity.’ Only time will tell if those three things come to pass, but one thing is for certain: Lord Mandelson will be moving in his mysterious ways to make it so.