Osborne meets his nemesis Mandelson

George Osborne (pictured) met his nemesis Lord (Peter) Mandelson yesterday at the Spectator magazine's annual Parliamentarian of the Year awards, where he presented Labour's Business Minister with the prize for "newcomer of the year".

Matthew D'Ancona, the magazine's editor, set the tone for the proceedings by introducing the shadow chancellor with a jibe: "Last month, he found himself at the centre of a media fire storm which will surely give him a phobia of yachts and certainly of Russian billionaires for life."

After thanking Osborne for the award, Mandelson pursued the yachting theme, saying: "Having walked down the political gangplank a couple of times, it is great to be back on board – as we say in Corfu." It was while holidaying there in August Osborne met with Oleg Deripaska aboard his yacht.

According to his old Oxford and Bullingdon Club friend Nat Rothschild, he attempted to get a £50,000 donation from the Russian billionaire, a revelation that has left him badly wounded. Rothschild made the calim in a letter to the Tiimes shortly after Osborne revealed that Mandelson, who was also a guest of Rothschild in Corfu, had dripped "pure poison" about Gordon Brown when they met for lunch in a taverna on the island.

However, Osborne riposted: "Next year, we are going to be in a rowing boat in the North Sea off Hartlepool [Mandelson's former constituency] – a place that neither of us have visited for a number of years."

He added: "I have to say I was a little nonplussed when I was told I was going to give an award to someone named Lord Mandelson and then I remembered – it was the guy I met on holiday! You know how it is – he was the only other English guy at the resort, you swapped stories about work back at home, thinking that you are never going to see the guy again and..."

Even Mandelson, whose relationship with Deripaska has come under painful scrutiny as a result of the rift with Osborne, smiled at that.