PETER Mandelson, despite twice having resigned from the Cabinet, is still credited with being one of the key strategists behind government policy.

Reports yesterday suggested that the MP for Hartlepool's rehabilitation to the front line would begin with his appointment to the European Commission as successor to Neil Kinnock.

He denies that emphatically: "It's a story that's been written at least three times," he says, "probably by the same person. It is not true."

Nonetheless, Mr Mandelson makes no secret of his continuing support for Britain's membership of the euro, which he believes would boost trade, particularly in the manufacturing sector - on which 25 per cent of the north west's GDP is still reliant.

"I think the benefits of stable and level interest rates are obvious. I know that from my own region, in the north east, where three-quarters of the export trade is with the European Union - the highest rate in the UK and far above the average 59 per cent.

"And it is applicable to the north west as well. Foreign investment has been a significant factor in the creation of jobs, and that will suffer - it has already begun to do so - as long as we remain outside the single currency."

He was taking a regional theme in his speech to the convention today. So, what constitutes New Labour's regional policy beyond the government's offer of devolution to regional assemblies - on which north west voters are due to take part in a referendum in autumn, 2004?

Mr Mandelson says: "Labour's new regional policy is not like the command and control of the 1960s and 1970s, where the government provided large sums of money to companies to relocate, nor like the Thatcherite free market philosophy of the 1980s.

"Modern regional policy must ensure that the right investment is made in the right infrastructure fitting into the right regional priorities to enable the regions to prosper in the round and for the long term. That way, you are creating the foundation and the infrastructure for indigenous enterprise to grow.

"A new and real success had been the creation of regional development agencies, which have brought together businesses, trade unions and elected representatives to devise long-term strategies for the regions. Urban regeneration companies, like New East Manchester, are also important in tackling deprivation and stimulating the enterprise that is needed to make a real difference."

He is in favour of elected regional assemblies as a means of driving initiatives forward, though he concedes it is important that they have enough powers, not only to bring them to fruition, but also to inspire the people to vote for them.

Assembly

Mr Mandelson responds to criticism that the remit of the north west assembly, as proposed in the White Paper, is too narrow - no powers over key issues like transport or health, for example - by cautioning that it was important not to devolve "too much too soon that could overburden the new structures in the early years."

He is less clear about a timescale for adding muscle to the proposed assemblies, but he does believe that it's crucial that the business community, sceptical of the process so far, plays a central role in the new assemblies - as they are doing in the regional development agencies - to harness regional strengths.

It was the way for a region to do more for itself about what it had identified as its own priorities. That was a task that could better be done by those who had real, first-hand knowledge than by central government departments in Whitehall.

But could devolved assemblies address the central issue of regional economic imbalance between themselves and London and the south east? Wasn't that a national issue?

"What the government wants is a more even economic performance and growth across all the English regions," Mr Mandelson says.

"At the moment, we are lacking capacity in the northern regions, which the UK economy, as a whole, can ill afford. At the same time, there's over-growth and over-heating in the south east. That is a national thing, which is why national government needs to take a view and devise policies to take account of it.

"But, because that's a concern and a responsibility for central government, it doesn't mean central government can tackle these issues alone. There are regional strengths and skills and enterprise which need to be liberated to stimulate growth of business activity and employment. The energy source for that must come from within the regions themselves."

A recent report by the left-leaning think-tank, Catalyst, suggested that regional development would be boosted by the disbursement of government departments out of London.

Mr Mandelson agrees. "It would be realistic to distribute Civil Service jobs to the regions to a much greater extent than is happening at the moment," he says, "and I believe it will happen. In the old Yes Minister programme, Sir Humphrey could never have contemplated departments anywhere else but Whitehall, but all that can change.

"There is no reason, at the start of the 21st century, in the new age of communication, that all government departments should be concentrated in one street in the centre of London."

Our Postbag Debate yesterday asked: Should Peter Mandelson become Britain's next Euro Commissioner? You voted overwhelmingly - by 98% to 2% - that he should not.

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