PETER Mandelson is to make a shock return to the Government it emerged today as Gordon Brown carried out his first Cabinet reshuffle.

Mr Mandelson, who is currently Britain's European Commissioner, has twice resigned as a Cabinet minister under a cloud.

It was reported that he will return to one of his old jobs at the Department for Business, Enterprise and Regulatory Reform.

That would mean taking over from John Hutton who was said to be heading for Defence where he will be replacing Des Browne who is expected to leave the Government.

In other moves, Chief Whip Geoff Hoon was said to be going to Transport, taking over from Ruth Kelly who is standing down to spend more time with her young family.

He is likely to be replaced by Deputy Chief Whip Nick Brown, one of the Prime Minister's closest political allies.

The Leader of the Lords, Baroness Ashton of Upholland, is to replace Mr Mandelson in Brussels.

As a peer, her appointment would avoid the need for a potentially difficult by-election if a sitting MP had been chosen for the post.

Former foreign secretary Margaret Beckett was also said to be making an unexpected return to the Government, although it was not immediately clear in what capacity.

Surprise

However, the big surprise is the return of Mr Mandelson.

It would also mark the end of a feud with Mr Brown dating back more than a decade to when Mr Mandelson supported Tony Blair to become Labour leader following the death of John Smith.

Having given up his parliamentary seat in 2004 in order to take up the post of Trade Commissioner, he would have to be given a peerage and a seat in the House of Lords if he returns to government.

His appointment would be seen as a major olive branch to Blairites in the Government still smarting after Mr Brown's perceived put-down of their favourite - Foreign Secretary David Miliband - as a "novice".

The move was welcomed by Derek Draper, a former adviser to Mr Mandelson who has recently returned to work for the Labour Party.

"I think Peter will prove to be a pretty formidable secretary of state, a really brilliant contributor to the strategy of the Government and the presentation of the Government," he said.

"People will look at Peter and think: 'you know what, we misjudge Peter Mandelson sometimes', and actually the strengths of Peter and the good side of Peter will come through now.

"As someone who knows him and has had my issues with him, I think he deserves this and I think he will prove to people why he deserves that place at the top table of British politics."

The move suggests that Mr Brown's reshuffle will be more widespread than had been originally anticipated, although senior figures like Mr Miliband and Chancellor Alistair Darling are expected to retain their current jobs.