Ed Miliband has sprung a surprise by appointing the free-thinking Labour MP, Jon Cruddas, as his policy chief with a brief to draw up a radical programme for the next general election.
Liam Byrne, a Blairite, lost his attempt to hang on to the policy brief but retained his post as shadow Work and Pensions Secretary.
Mr Cruddas, Tony Blair's former link man with the trade unions, is an independent-mined MP who is popular with the Labour grassroots. He performed strongly when he ran for the party's deputy leadership in 2007, topping the poll in the first ballot.
The Conservatives seized on his appointment as a left turn. Baroness Warsi, the Tories' co-chairman, said: "By replacing the Blairite in charge of Labour's policy review with a former trade unions man, it's clear Ed Miliband is lurching further to the left and abandoning the centre ground of British politics."
But Labour sources said Mr Cruddas was entering the Shadow Cabinet to do some fresh thinking. "It's no surprise people will go back through the Jon Cruddas cuttings, but they'd be unwise to read too much into them," one said.
Mr Miliband balanced Mr Byrne's loss of the policy job by appointing another Blairite, Lord (Andrew) Adonis, as an adviser on industrial strategy. The former Transport Secretary was the driving force behind the city academies schools programme and plans for a high-speed rail link between London and Birmingham. He is a strong supporter of a third runway at Heathrow, which Mr Miliband opposes.
Miliband aides insisted Mr Byrne was happy to step aside from his role leading the policy review, as he recognised that it now required the attention of someone working on it full-time. Some Blairites believe Mr Miliband has been too slow in revealing Labour's hand on policy and where to cut spending. But Labour sources said the reshuffle would bring "momentum, drive, ideas and energy" to the party. Mr Byrne said: "This is the biggest policy review we've ever undertaken. It's seen us already get back in touch with over a million people and lay down the ideas and arguments which are setting the terms for political debate in Britain. As the policy review moves into its next phase, Labour can be confident that we are developing the ideas that matter to people and which will take our country in a new and better direction."
Owen Smith, a Treasury spokesman, won promotion to the Shadow Cabinet as shadow Welsh Secretary after Peter Hain stood down. There was no return for David Miliband or other "big beasts" such as Alistair Darling.
RCN conference: Nurses give Labour leader a clean bill of health
Ed Miliband earned two standing ovations in his first appearance in front of the Royal College of Nursing annual congress yesterday as he attacked the Coalition's failure to listen to nurses.
The Labour leader was cheered throughout his speech, in which he promised that a Labour government would scrap key aspects of the NHS and Social Care Act. In contrast, Health Secretary Andrew Lansley was jeered and laughed at by nurses during his address on Monday.
Today a health service leader is expected to tell the conference that patients must be seen as people rather than tasks to be completed.
Sir Keith Pearson, co-chair of the Commission on Dignity in Care, will argue that patients will only be treated compassionately if nurses are recruited for their values and not just their qualifications, warning that delivering dignified care is one of the biggest challenges facing the NHS.
Labour reshuffle: Who's in – and out
Jon Cruddas becomes co-ordinator of the Labour policy review.
Angela Eagle becomes chair of the National Policy Forum.
Lord Adonis will advise the policy review on industrial strategy.
Owen Smith becomes shadow Welsh Secretary.
Catherine McKinnell becomes shadow Treasury minister.
Lisa Nandy becomes shadow minister for children.
Tom Harris becomes shadow environment minister.
Peter Hain steps down as shadow Welsh Secretary.
Fiona O'Donnell steps down as shadow environment minister.