Out of the bunker

In the end the rescue package for the banks was the right thing but the Prime Minister stands accuse

At a time of national crisis, it seemed there was only one man with the experience and steadfastness of purpose to see us through these dark times. This had been the mantra since Gordon Brown's Manchester speech and, as the economy unravelled, it was beginning to gain purchase. It's spin. Of course it is. But there is a time and a place for propaganda, as the cabinet's latest addition, Peter Mandelson, knows so well. No 10 would not confirm that the Prime Minister was enjoying the situation. "'Relish' would not be the right word," said a Downing Street source, "but let's just say he's in his element."

Brown is at his best when forced into action and at his worst when he is left to brood over decisions. This was true of his first days in power, when he had to deal with flooding, the failed terrorist attacks on Glasgow and London and an outbreak of foot-and-mouth disease. At the same time, the best aspects of Brown are magnified when he is acting on the international economic stage. Even his fiercest critics, such as Charles Clarke, concede that when it comes to the global financial arena Brown's contacts and access are unparalleled. As one Blairite cabinet minister said: "There's no getting away from it. He's just bloody good at that stuff."

An active Gordon Brown can be a dynamic Prime Minister. So he was well advised to head straight from the Labour conference to New York for discussions with the UN on poverty. For a while the action didn't stop. From New York he travelled to Washington to see George Bush and on to discussions with President Sarkozy in Paris. Barely catching breath for the reshuffle and the creation of the National Economic Council, he launched straight into a series of phone calls with world leaders and an emergency summit with the governor of the Bank of England and chair of the Financial Services Authority.

There is a political payoff in all of this. Every time Gordon Brown holds talks with an international leader or calls a summit with senior figures in the financial world, the British public is forced to ask itself whether David Cameron would have been up to the job. But the outcome could also be Churchil lian: a grateful nation may well thank Brown for seeing us through the war, by voting in a new man for the peace.

It is those periods Brown spends deep in thought in the Downing Street bunker that often prove his undoing and so it has been this week. There remain serious questions about Brown's ability to make the political weather rather than allowing himself to be buffeted by the storm of events. Clearly, the package was not hammered out on the back of an envelope in the early hours of Wednesday morning. Whoever is to blame for leaks over the weekend - Mervyn King, the Tories or the Treasury itself - the option of partial privatisation has been Plan B for a considerable time. Why then did Brown and Alistair Darling not roll out the plan on Monday or at least announce their intention as soon as the markets opened? Was it an ideological resistance to the nationalisation option?

The £500bn rescue of the banking system was, in the end, the right thing. But there will be a heavy reckoning for the failure to intervene sooner if share prices fail to rally after the rescue package. The Labour Party knows this. Following the reshuffle, Labour strategists have identified the three serious weak points that leave Brown vulnerable to attack from the Tories. The first is the perception that the Prime Minister is seen to have a difficulty with decision-making. Let's call this the "dither factor". As one senior figure said: "We have to be just ahead of the curve rather than just behind it." The second is the perception that the government is hamstrung by the level of public debt, which restricts its freedom to act. The third is that it did not set up the necessary regulatory framework to constrain the excesses of the banking sector. In this last case it faces the very real risk of being held directly responsible for the current downturn. All three areas of weakness have been hugely exacerbated by the banking crisis.

One explanation for the Brown government's delay in tackling the bank crisis is that new Labour still has an ideological resistance to intervening in the markets. Until events rendered such stubborn fundamentalism unsustainable, politicians of both major parties remained locked in a thought-system thoroughly unsuited to present circumstances. The return of Peter Mandelson to the cabinet table is all the more shocking for this reason. He will unquestionably bring considerable experience to bear from his work as the European commissioner for trade. But he has staked his reputation on his defence of globalisation and his resistance to protectionism. Some say his years in Brussels have persuaded him of the attractions of European-style social democracy. We shall see.

The reshuffle gave little evidence that the government was shifting to the left. The promotion of the right-winger Liam Byrne to the Cabinet Office, where he will co-ordinate government policy across Whitehall, was an important symbolic appointment signalling that the party was not shifting from its ideological roots. Like Mandelson, Byrne is a formidable administrator. But he has new Labour running through his veins and will not be providing a new philosophical paradigm.

For the most part, the reshuffle was thoughtful and considered - Brown took the time to phone many of the lower ranking ministers, something Blair never bothered with and often left to officials. It was right to give Ed Miliband his own department to run, for example, in order to test him at the highest level. Similarly, the promotions of David Lammy and Shahid Malik, both increasingly impressive, demonstrate that the Prime Minister is able to identify rising talent.

But the most significant appointment is one that didn't happen at all. The failure to find a job for Jon Cruddas, the most prominent figure on the soft left of the party, may prove to be a serious oversight. He was sounded out for the crucial job of housing minister in the Department of Communities and Local Government, but ministers took flight when he suggested that the state might have to step in to provide properties to ease the housing shortage where the private sector would inevitably fail in the present market conditions. Brown may come to regret his refusal to countenance the merest whiff of socialism when the government spectacularly fails to hit its target of 240,000 new units a year (this year a mere 80,000 have been built).

In the appointment of Margaret Beckett to housing, there could not be a starker signal that the party is opting for trusted new Labour solutions rather than seeking a radical approach.

For the time being, attention is focused on the inadequacies of the banking sector. But what are the government's plans for the construction industry, civil engineering or the manufacturing sector? What are the contingency arrangements when unemployment starts to rise? What happens to the regeneration agenda? Jon Cruddas is the only senior politician in Britain asking these difficult questions and he should be asking them from inside government, not from the back benches.

There are those in government, such as Ed Miliband, who argue that the new economic circumstances demand solutions from the social democratic left rather than the tired politics of the centre right. But his ideas have yet to make an impact in terms of hard policy. In his new job he continues to take responsibility for the manifesto so perhaps this will change as we come closer to the election.

Gordon Brown's predicament has been compared to those faced by former Labour leaders Jim Callaghan and Harold Wilson. Parallels have also been drawn with the final years of the Major government. In the good times, Brown's aides liked to talk of him as the new Macmillan and now they would have us believe he has the dogged determination of Winston Churchill. None of the historical parallels quite work because Gordon Brown finds himself in a uniquely awful position, with his own set of challenging circumstances.