Osborne versus Mandelson: The grudge match

They both stand at their leader's right hand – smart political strategists and compulsive gossips with a taste for high-living. And there's not much love lost between them.

(PA)

It's not exactly the kind of debate to set the political pulse racing in normal times. Not even in the silly season. But there has been real edge to the exchange between the Labour and Conservative parties' sidekicks-in-chief, Peter Mandelson and George Osborne, over the unlikely subject of which party is the most "progressive".

It began with a speech by the shadow Chancellor at the traditional New Labour think-tank Demos in which the Tories' chief election strategist cited a bizarre collection of left-leaning governments – the Swedish Social Democrats, Bill Clinton's Democrats and the Canadian Liberal Party – as exemplars for the future of the Conservative party under comrade Cameron. The chameleon spirit of Tony Blair lives on.

Yesterday, the man who is in charge of the country in Gordon Brown's absence – and, some would suggest, even when he is present – Lord Mandelson, one of the chief architects of the New Labour project, poured scorn upon the notion in the most withering political terms. "I think my old friend George Osborne is involved in a bit of political cross-dressing here and I don't think it's going to fool anyone," he said.

The clue to what gave this unlikely exchange its animus lay in that phrase "my old friend". Mandelson and Osborne are, of course, not at all old friends. Quite the opposite. There has been significant needle between the two ever since the time last year when the two met on holiday on the Greek island of Corfu where both were guests of the financier Nat Rothschild and were both entertained on board the £60million yacht of the Russian aluminium tycoon Oleg Deripaska.

When, a couple of months later in October, Peter Mandelson was offered a peerage and brought back into the Cabinet as Business Secretary, Osborne began briefing journalists to the effect that Lord Mandelson, then a European commissioner, had spent his holiday dripping "pure poison" about Gordon Brown.

But his manoeuvrings backfired when Mr Rothschild wrote a letter to The Times revealing the far more politically damaging suggestion that the younger politician had been soliciting donations for the Tory party from the Russian oligarch, in breach of UK election law.

Veteran Tories poured scorn on the young shadow Chancellor's poor political judgment. "George Osborne should remember that those who sleep with dogs will get fleas," said Norman Tebbit enigmatically.

Mr Osborne was squaring up not merely to a big boy but a big beast, though this week Lord Mandelson has attempted to recast himself. Despite the fact that he attends 35 of the Cabinet's 43 committees and sub-committees – almost treble the number John Prescott used to attend as deputy PM – and now runs the biggest department in Whitehall with 11 ministers answering directly to him, he told an interviewer on Monday: "I don't really see myself as a big beast, more as a kindly pussycat."

At first Osborne elegantly laughed off his tangle with this most feline of politicians. A month after the row broke he attended a dinner in London where he had to present an award to his new foe. Osborne quipped that he was unsure of the winner's identity. "Then I remembered it was the guy I met on holiday," he said. "You know how it is, the only other English guy in the resort, you swap stories about work back at home. You think you're never going to see them again."

But the veteran politician has not forgotten his new grudge. Last month when Osborne claimed that Gordon Brown blocked the Tories from inspecting the combined online information system database, which details public expenditure in 12,000 key areas, Mandelson launched into him, accusing him of telling a "deliberate untruth" since decisions on access to the database are made by the head of the civil service.

"There is a very unattractive pattern of behaviour that is starting to emerge with George Osborne, of innuendo in pursuit of a smear," he said after embarking on Round Two of their spat with a series of anti-Osborne television interviews.

Evidence of who triumphed in the Corfu-gate scandal became clear when this summer's political holiday destinations were made public. George Osborne opted for the safety of Cornwall and Spain. But Mandelson, ever the coolest of customers, brazenly returned to Corfu – to stay, once again, with Osborne's erstwhile chum, Nat Rothschild, of the banking clan.

The shadow Chancellor returned this week to Round Three of the feud. "It is the Conservatives, as the progressive force in British politics now, who are thinking seriously about how you change the way you deliver public services so that they can improve the quality of service delivery, even in a period of budget restraint," Osborne told Demos.

Mandelson was withering in response. "After a decade of New Labour government Britain has better health and childcare, better education, better help for the unemployed, greater investment in science, better workplace rights and greater devolution of government than it did after 18 years of Tory rule," he retorted. "These things didn't happen by accident. It is no wonder that David Cameron is desperate to convince voters that this progressive legacy would be safe in Tory hands."

The vehemence of his response, in yesterday's Guardian, took commentators aback. Tory sympathisers suggested it showed Mandelson was riled and struggling to come up with a policy response. But Mandelson was dismissive in reply, accusing Osborne of "rank hypocrisy".

Round Four will surely not be long in coming.

In the red corner: Lord Mandelson

Job: First Secretary of State, Secretary of State for Business, President of the Board of Trade, Lord President of the Council.

Real job: Deputy leader and chief election strategist.

Family: Labour aristocracy. Grandson of Baron Morrison of Lambeth (Herbert Morrison).

Education: Oxford, PPE.

Career: Began as a journalist. Managed Labour's widely admired 1997 general election campaign. Ran the successful campaign to get Tony Blair elected as Labour leader. House: Once had to resign over a mortgage scandal. Now has no mortgage on his £2.2m Regents Park townhouse, thanks to a windfall from the sale of an advertising agency he helped set up.

Holidays: Last year Corfu, this year Corfu.

Style: Aloof, patrician. Likes: The super-rich.

In the blue corner: George Osborne

Job: Shadow Chancellor of Exchequer.

Real job: Deputy leader and chief election strategist.

Family: Tory aristocracy. Heir to 17th Baron of Ballentaylor, co-founder of Osborne & Little wallpaper fortune.

Education: Oxford, history.

Career: Wanted to be a journalist. Became speechwriter and aide to Conservative leader William Hague. Ran the successful campaign to get David Cameron elected as Tory leader.

House: Got in hot water over a mortgage scandal in which he claimed a second homes allowance on a London property and then switched it to a large farmhouse in his Cheshire constituency of Tatton.

Holidays: Last year Corfu, this year Cornwall & Spain.

Style: Aloof, patrician.

Likes: The super-rich.