Ed Miliband made changes to his top team today by bringing in Owen Smith to replace Peter Hain as shadow Welsh secretary.
Left winger Jon Cruddas has been appointed to lead the party's policy review - a job previously held by shadow work and pensions secretary Liam Byrne.
But Mr Byrne gets to hang on to his main role despite speculation that Mr Miliband could drop him.
Mr Miliband said: "Jon Cruddas is already known as one of the most radical and deepest thinkers in the party.
"As the policy review enters its next phase, I look forward to him bringing his energy and new ideas.
"I am also delighted he will be working with Angela Eagle, in her proposed role as Chair of the National Policy Forum, combined with Shadow Leader of the House. She brings great policy and political acumen to the role.
"Owen Smith has shown himself to be a real talent and I welcome him to the post of Shadow Welsh Secretary.
"I am also pleased Andrew Adonis will be working on areas of industrial strategy, bringing his experience of government and fresh thinking to the role.
"I want to thank Liam for his excellent work in kick starting the ideas that Labour will need to win in 2015, and for working so hard to make sure our agenda is rooted firmly in the issues that matter to hardworking people in Britain."
ord Adonis was education adviser and then minister to Tony Blair and then became transport secretary under Gordon Brown.
His appointment today will mean a return to the Labour front benches after two years.
As transport secretary, Lord Adonis was an advocate of a third runway for Heathrow airport - something which Labour now opposes.
Sources close to Mr Miliband said his appointment did not signal any change in policy on Heathrow. He was chosen to advise on industrial policy because of his experience of handling issues like high-speed rail and has just returned from a visit to Germany to study how industrial strategy is handled there.
Dagenham and Rainham MP Mr Cruddas was an adviser to Mr Blair at 10 Downing Street and made an unsuccessful bid to be elected Labour's deputy leader in 2007.
Mr Miliband's aides said he was "very much qualified" to lead the Policy Review because of "his thinking and his radicalism" and his deep involvement in policy matters throughout his career.
Mr Smith is replaced in Labour's Treasury team by Newcastle North MP Catherine McKinnell, who was elected to Parliament in 2010 and previously served as education spokeswoman.
Wigan MP Lisa Nandy, also a member of the 2010 intake, is promoted to the role of education spokeswoman.
Fiona O'Donnell, MP for East Lothian, has stood down voluntarily from Labour's environment team, where her place will be filled by Tom Harris, the Glasgow South MP and former transport minister who stood unsuccessfully for the leadership of the Scottish Labour Party last year.
Sources close to Mr Miliband said that Mr Byrne was happy to step aside from his role leading the policy review, as he recognised that it was at a stage where it required the concentrated attention from one person working on it full-time.
In a statement, Mr Byrne said: "I am delighted to hand the policy review on to my friend Jon Cruddas.
"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."
Regarded as one of the most prominent Blairites in Mr Miliband's team, Mr Byrne indicated earlier this year that he would stand down from the shadow cabinet to stand for mayor of Birmingham, but voters rejected the creation of the post in a referendum on May 3.
Mr Miliband made clear in a letter at the time that he would like him to stay on in the shadow cabinet if Birmingham voted no to an elected mayor, but made no such assurance about the Policy Review job.
Mr Hain said: "I have personally congratulated Owen who will make a fine shadow secretary of state for Wales and also a future cabinet minister who I am sure will go far.
"He will speak up for Labour in Parliament and Wales with the authority and verve we need to take on the bankrupt Tories and Lib Dems in the UK Government."
Conservative Party co-chairman Baroness Warsi 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."