June 29, 2009 3:00 am

Mandelson draws election battle lines

Peter Mandelson today sets out Labour's battle lines for the next election, promising his party will outspend and outreform the Conservatives on public services. But legislation to shake up Royal Mail may be put on hold.

Lord Mandelson, business secretary, told the Financial Times "the worst is behind us" on the economy, claiming that a pre-election return to growth would help Labour meet its ambition "to maintain frontline spending and investment".

He promised his party would mount an aggressively "New Labour" campaign, focused on more consumer choice in public services, a theme to be elaborated today in a "Building Britain's Future" document to be launched by Gordon Brown.

But Lord Mandelson admitted he may be forced to put on ice his planned sale of a minority stake in Royal Mail, which is fiercely opposed by Labour MPs.

He had planned to present legislation to the House of Commons before the summer break, but says he is being "jostled" for space in the legislative programme.

"I want to retain the slot, but . . . I have to concede that the original linking of the legislative passage and the bidding process for the strategic partner has been decoupled," he said.

He pointed to the depressed state of the markets as a reason for delaying legislation to allow the sale. So far the only bidder is CVC Capital Partners, the private equity firm. It is thought to have submitted an initial bid of less than £2bn.

Lord Mandelson said it was still his intention to legislate before the election and that he would not retreat on his insistence that there would be no taxpayer bail-out of the Royal Mail pension fund unless the private sector was involved.

Labour's focus at the election would be to present itself as prepared to use a recovery to maintain public spending in key areas - suggesting increases at least in line with inflation.

"The worst is behind us," he said. "The fall in demand, market activity and reduction in bank lending is now bottoming out. These are encouraging signs."

He said the forecasts of Alistair Darling, chancellor, of a return to growth this year were "on target". This would allow Labour to give outlines of its spending plans, short of a full departmental spending review.

"We will have a better picture of likely growth rates and whether we have resumed the trend rate of growth, but that will probably be too early for any spending review to take place, and not necessary, because the current round continues until 2011," he said.

Lord Mandelson will today give details of a new venture capital innovation fund.

Government finances, Page 2 Election agenda, Page 3 Read full interview transcript at www.ft.com/mandelson

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