Andrew Grice: Just as Mandelson was finally winning over his party...

After Lord Mandelson wowed last month's Labour conference, Tony Blair sent him a text in which he jokingly asked whether the party had been won over by the Business Secretary or whether it was the other way round.

Mr Blair once famously said his project would be complete when Labour learnt to love Peter Mandelson. It seemed that his electrifying speech made it mission accomplished. Now, only three weeks later, the unlikely love affair has been rudely interrupted. Among trade unions and some Labour MPs, Cuddly Peter seems to have reverted to his role as Nasty Peter in the postal workers' dispute.

Distancing the party from its union founders was one of the New Labour tablets of stone carved out by Lord Mandelson, Mr Blair and Gordon Brown in the late 1980s. So, his allies claim, the Business Secretary made a convenient fall guy for the Communication Workers Union to blame when talks with Royal Mail bosses failed to avert the two-day strike that began yesterday.

The union's blame game was helped by Lord Mandelson's retreat over his controversial plan to part-privatise Royal Mail this spring. Officially, the reason was a lack of buyers in the global recession. But there was also a huge backbench rebellion by 147 Labour MPs who backed the CWU's opposition to the sell-off. So it was tempting for the union to accuse the Business Secretary of launching a revenge attack.

Lord Mandelson's aides are adamant that he did not scupper a deal that was on the table on Tuesday, accusing the union of using "scattergun attacks" on him and the Royal Mail chief executive, Adam Crozier, to divert attention away from its own internal politics. Ministers are convinced that the CWU leaders Billy Hayes and Dave Ward wanted to accept the proposed agreement but were blocked by hard-line branches, mainly in London.

Although the dispute is between a management and union, it is becoming a hot political potato. Royal Mail is one of the few remaining industries in state ownership and feelings are running high among Labour MPs. Some 121 of them have signed a Commons motion welcoming the CWU's proposals to resolve the conflict and urging the Government "to do all in its power to ensure that Royal Mail responds positively".

David Cameron scents blood. He devoted all his six questions at Prime Minister's Questions on Wednesday to the dispute, citing it as an example of Mr Brown's weakness. His gamble paid off when the last-minute talks failed and he made the TV news bulletins, underlining the Government's involvement in the minds of some voters and giving Mr Brown yet another headache he could do without.