Mr Mandelson said that the scrapping of the 10p income tax rate was "a very big mistake" which breached the New Labour tenet that the Government should help the poorest and neediest in society.

But he said he believes that the Prime Minister is still committed to the New Labour project and is capable of turning around the party's fortunes before the General Election expected in 2010.

Mr Mandelson identified the four key pillars of New Labour as fiscal discipline, investment and reform in public services, helping the poor and maintaining strong partnerships with Europe and the USA.

And he warned: "Those were the four basic tenets of New Labour, they gave us our success in the last 10 years, and if they continued to be operated and improved so that they evolve, they will provide success for the Labour Party in the years to come.

"But if you abandon those tenets you are going to abandon key segments of public support for New Labour and I'm afraid that in those circumstances we are going to lose the next election.

Asked if Mr Brown would be able to do this, Mr Mandelson replied: "I think he has satisfied his colleagues, he has satisfied me, that he is New Labour.

"But the actions of his Government, the policies of his Government, the new ideas of his Government have got to bear that out to the satisfaction of the public as a whole and I believe if they do that successfully, they can and they will win the next General Election."