Ian McCartney, a Trade and Industry minister, is expected to become Labour's campaigns co-ordinator and will act as the party's voice in government, with a brief to revive the morale of activists.
He will join an "A team" to be set up in the autumn in order to plan Labour's strategy for the next general election. It will be headed by Gordon Brown, the Chancellor, Mr Blair has decided.
In the reshuffle, which may take place on Wednesday, Mo Mowlam is likely to stay on as Secretary of State for Northern Ireland for a final attempt to push forward the stalled peace process. Peter Mandelson, who resigned from the Cabinet last December over his pounds 373,000 home loan from the former paymaster-general Geoffrey Robinson, but had been tipped as Ms Mowlam's replacement, will probably have his comeback deferred.
Paul Murphy, Ms Mowlam's deputy, is expected to become secretary of state for Wales, succeeding Alun Michael, now First Minister in the new Welsh Assembly.
Mr Blair, frustrated at the lack of progress in driving his policies through Whitehall, looks certain to sack Jack Cunningham, the Cabinet's "enforcer".
Replacement candidates at a more powerful Cabinet Office include Alan Milburn, the Chief Treasury Secretary, and Lord Falconer of Thoroton,who is a Cabinet Office minister.
Mr Blair will candidly acknowledge his government's failings. He will say that today's annual report on his administration's performance - on sale at Tesco supermarkets - shows "a government governing for all its people", but he will admit: "Not everything has gone well and we put up our hands and acknowledge that. We will seek to learn the lessons."
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