Mr Hughes, who angered Mr Kennedy during this week's Liberal Democrat conference by suggesting he was weak on policy, was made the party's home affairs spokesman when the new leader announced the first batch of appointments to his frontbench team.
There was speculation that Mr Hughes, previously the party's health spokesman, might be denied the home affairs brief after saying Mr Kennedy had "never been a great policy promoter" or "an ardent position taker". Although Mr Hughes will not win the party's deputy leadership because Alan Beith is staying on in the post for another year, Mr Kennedy's decision to give him the portfolio he wanted is an attempt to draw a line under the differences between them.
Mr Hughes, who ran Mr Kennedy close in this summer's leadership election to choose Paddy Ashdown's successor, said he was "pleased and excited" by his appointment. "I shall serve our new leader, all my colleagues and our party enthusiastically and well."
Matthew Taylor, 36, who acted as Mr Kennedy's chief lieutenant in his leadership campaign, is promoted to Treasury spokesman. He succeeds Malcolm Bruce, who is taking on a new role as chairman of the parliamentary party. Menzies Campbell will stay on as foreign affairs and defence spokesman and Robert Maclennan will keep his constitutional affairs brief.
Mr Kennedy has also decided to set up a "shadow cabinet" of between a dozen and 15 senior spokesman, and a second tier comprising their deputies. The top team is expected to include established MPs such as Nick Harvey and Don Foster and "new faces" elected in 1997, including Michael Moore, Mark Oaten and Steve Webb.