Oct. 3 (Bloomberg) -- Prime Minister Gordon Brown, aiming to shore up his faltering administration, named Peter Mandelson as business secretary, returning one of Tony Blair's closest allies to the Cabinet.

Mandelson, Britain's representative at the European Commission since 2004, will take over fromJohn Hutton in the biggest revamp of U.K. ministerial jobs since Brown succeeded Blair in June 2007. Hutton, criticized by unions for backing industry over workers, replaces Des Browne as defense secretary.

Mandelson supported Blair over Brown to lead the Labour Party in 1994 and was one of the chief architects of its election victory in 1997 after 18 years in opposition under Conservatives John Major and Margaret Thatcher. In government, he resigned twice in three years.

``It's like hiring Machiavelli to help, and God knows Brown needs someone to help him,'' Bill Jones, a professor of politics at the University of Manchester, said in an interview. ``He has a creative and imaginative political brain.''

Brown enjoyed a lead for three months after taking over from Blair as prime minister but since has trailed Conservatives in polls as economic growth stalled and house prices began falling. While he has narrowed the opposition lead in the last month, pollsters say his support among voters isn't enough to win an election, which must be called by the middle of 2010.

Economic Advisers

Accompanying the reshuffle were changes to the machinery of Brown's office, including a new Cabinet committee of 17 ministers to oversee the economy and 17 executives including Barclays Plc Chairman Marcus Agius to advise officials.

``We are bringing together the best team possible to deal with the difficulties,'' Brown said at a press conference at his office today. ``The way we take decisions and the way we govern has got to change.''

Support for Labour rose 4 points to 29 percent of voters, while the Conservatives shed 3 points from last month to 41 percent, according to a poll by ComRes Ltd. The survey of 1,017 voters was conducted between Sept. 26 and Sept. 28. No margin of error was given.

Opposition parties ridiculed Mandelson's return to Cabinet and said the changes suggest Brown's government is weak and divided by factions.

Opposition View

``With this bizarre reshuffle the prime minister has achieved the impossible and made the Government even more dysfunctional,'' Conservative lawmaker William Hague said. Danny Alexander, a Liberal Democrat, said, ``resurrecting ex-ministers from the political graveyard is not going to breathe new life into the zombie government.''

Mandelson will lead a reconfigured business department, with responsibilities for energy and climate change hived off into a new ministry led by Ed Miliband, who will move from the Cabinet Office.

``If Mandelson is allowed to have wider influence, he may be able to help with the government's sloppy presentation,'' Steven Fielding, director of the Center for British Politics at Nottingham University. ``There will be lots of very upset people -- those who were hoping Brown was going to go after business.''

Chancellor of the Exchequer Alistair Darling, Foreign Secretary David Miliband and Home Secretary Jacqui Smith remained in their Cabinet posts. Margaret Beckett, who served as foreign secretary under Blair, becomes a minister in charge of housing and will sit in on Cabinet meetings.

Other Jobs

Geoff Hoon will oversee the transport department that Ruth Kelly quit last month, triggering the changes Brown announced today. Nick Brown, a close ally of the prime minister, becomes chief whip. Browne, the defense secretary, is leaving government along with trade envoy Digby Jones.

Mandelson, 54, was one of Brown's own chief political allies until the death of then-Labour leader John Smith in 1994. While Brown was in mourning for his mentor, Mandelson switched his allegiance to support Blair for party leader over his older and more senior colleague.

Mandelson acknowledged that he has had ``ups and downs'' in his relationship with Brown and that this appointment was ``certainly not what I was expecting.'' Speaking outside Brown's office today, he said, ``our economy, like every other, is facing very hard challenges. It's all hands on deck.''

In government under Blair, Mandelson had a turbulent history. He was forced to resign twice, first as trade and industry secretary -- the job he is effectively returning to -- over an undeclared loan he'd used to buy a home, and then as Northern Ireland secretary.

Mandelson's Record

In that job he led peace talks until he quit over allegations, later disproved, that he'd intervened to help two supporters of a government project get passports. Such was his career that on his appointment as EU commissioner in 2004, bookmaker William Hill Plc offered odds of 3-to-1 that he wouldn't complete his term.

Cathy Ashton was named to serve out Mandelson's term, which runs until the entire 27-member commission is replaced in October 2009. The commission's president, Jose Barroso, will decide whether the new U.K. commissioner keeps the trade portfolio or gets a different post.

Hutton clashed with unions by backing companies and opposing a windfall tax on energy producers and by saying Britain benefits from the super-rich. He also has pushed for more nuclear power stations, concerning Labour activists, many of whom oppose atomic energy of any kind following their days working for the Campaign for Nuclear Disarmament.

Hutton's Record

``Hutton has succeeded in giving the new department for business a sense of mission and drive that was lacking at its predecessor,'' said John Cridland, deputy director-general of the Confederation of British Industry. ``The department must have a heavyweight political big hitter at the cabinet table, and we are encouraged that Peter Mandelson is returning.''

John Bond, chairman of Vodafone Group Plc, will become a ``business ambassador'' advising the government along with 16 other executives. They include Barclays' Agius, Lloyds TSB Bank Plc Chairman Victor Blank, BAE Systems Plc Chairman Dick Olver, J Sainsbury Plc Chairman Philip Hampton and former BP Plc Chief Executive John Browne.

Brown also appointed Paul Myners, a former chairman of Marks & Spencer Group Plc, as minister in charge of the City of London financial district.

To contact the reporters on this story: Kitty Donaldson in London at kdonaldson1@bloomberg.netRobert Hutton in London at rhutton1@bloomberg.net

Last Updated: October 3, 2008 13:03 EDT