FORMER Minister Peter Mandelson was today appointed

Secretary of State for Northern Ireland .

Prime Minister Tony Blair decided to rehabilitate the fallen Trade and Industry

Secretary to the Cabinet.

Mr Mandelson resigned at

Christmas after a scandal erupted because he received a £373,000 home loan from former Paymaster General Geoffrey Robinson.

Alan Milburn, chief secretary at the treasury, was this afternoon named Health Secretary.

He takes over as Frank Dobson steps aside to concentrate on running to become mayor of London.

Before today's announcement Mo Mowlam had been tipped for the job.

Scottish Secretary John Reid and Cabinet Enforcer Jack Cunningham were believed to be vying to become Defence Secretary, as Lord Robertson takes up his appointment as NATO Secretary General.

Mr Mandelson's appointment will be welcomed by New Labour

modernisers.

Many believe his talents, especially his communication skills, could help to break the Northern Ireland peace process deadlock.

The job will be a stern test of his abilities but his appointment will give the stalled peace talks new momentum.

However, some in the Labour Party will undoubtedly be concerned at the swift rehabilitation of Mr Mandelson.

They are likely to question whether he has fully paid for his political misjudgement over accepting the large loan from a colleague and keeping it a secret.

Ulster Unionists welcomed Mr Mandelson appointment.

Fermanagh South Tyrone MP Ken Maginnis said: "There will be huge relief, particularly among unionists, that there is a change in Secretary of State at this stage.

"I do not know him very well, but I imagine his ability to handle matters in the public arena will be an advantage."a

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