Sir Keir Starmer has sacked his shadow chancellor in a shake-up of his team after poor election results in England.
Anneliese Dodds will now become the Labour Party's chair - replacing deputy leader Angela Rayner, who Sir Keir fired from the role on Saturday.
Ms Rayner will instead replace Rachel Reeves in shadowing Michael Gove at the Cabinet Office, as Ms Reeves is promoted to the shadow chancellor role.
The Labour leader said he had faith in his "refreshed and renewed team".
In a statement, he added that Labour "must be the party that embraces the demand for change across our country" - and that the new shadow cabinet was the right one to take on the challenge.
After the announcement, Ms Rayner said she would use her new role to "focus on the future of work and the future of our economy".
And new shadow chancellor Ms Reeves said she was "honoured" to take on the job, tweeting: "Our economic recovery must be fair. We must transform lives and back businesses in every part of our country."
Sir Keir is facing criticism after losing control of eight councils in his first test at the ballot box since becoming leader last April.
Labour also failed to keep hold of the Westminster seat in Hartlepool in Thursday's elections - which had voted for the party since its formation in 1974, but went to the Tories.
They faired better in mayoral races, securing the positions in London, Liverpool, Greater Manchester, West Yorkshire and the West of England.
A change to the top team had been expected from Sir Keir's office throughout Sunday, but news of the reshuffle only broke in the late evening.
Labour's leader had been accused of making Ms Rayner a "scapegoat" for the election results after her sacking was confirmed, but Sir Keir insisted he took "full responsibility" for the party's performance.
Labour MP for Birmingham Ladywood, Shabana Mahmood, has taken on Ms Rayner's other former role as campaign coordinator.
But Ms Rayner remains deputy leader of the party as it is an elected post voted for by members - and will be given additional duties to focus on the future of work and "levelling up".
An ally of Ms Rayner said she had come out "significantly more powerful, both in terms of the party and policy", while a Labour insider told the BBC: "Who would want to be national campaign coordinator in name only with no power when you're just made the scapegoat for the failures of Keir's team?"
In response to the change in role, Ms Rayner tweeted: "I will work tirelessly to reform our party and deliver a policy agenda that will enable us to reconnect with the voters that we need to win, especially in our traditional heartlands, and show that the Labour Party speaks for the working class."
She also thanked "friends from all across the Labour Party and our movement" who had contacted her over the weekend, adding: "United we stand, divided we fall."
Nia Griffiths, who will stay in her post as Labour's shadow Wales secretary, said reshuffles were "perfectly normal" for political parties.
But she told BBC Radio 4's Westminster Hour: "We would all like to have seen things happen a little more smoothly."
Sir Keir Starmer's first reshuffle has been a very messy affair.
It began badly with a bust up with his deputy, Angela Rayner, who was being moved from one of her roles - in charge of campaigns.
Her allies said she was being sacked. Sir Keir's team said she was being moved.
They can't both be telling the whole truth. But there was a late night howl of backlash to the notion she was being ousted, putting pressure on the leader to find a way to make her stay.
It took all day for the two to agree. That may seem astounding given that Sir Keir is meant to be the boss. Clearly, she was in no mood to compromise.
Although an accommodation of sorts has been reached over her job, it doesn't seem like the two have reached a truce.
It's easy for moments like these to be over-played as seismic and massively significant, when in a few months, the mood calms, events fade.
But these last few days have been an important political test for the Labour leader.
Other movements in the reshuffle include:
- Thangam Debbonaire changing from her housing brief to become the new shadow leader of the House of Commons - replacing Valerie Vaz who has been in the role since 2016
- Lucy Powell replaces her as shadow housing secretary
- Wes Streeting taking on a newly formed role as the shadow minister tackling child poverty
- Alan Campbell will replace Nick Brown as chief whip having served as the deputy chief whip since 2010
- Ms Dodds will also become the chair of the Labour Policy Review
Lisa Nandy is expected to remain as shadow foreign secretary, while Jonathan Ashworth will stay in his role as shadow health secretary.
A spokesman for Mr Brown - who was chief whip under five Labour leaders - said the MP thought it was "a reasonable time for Nick to move on", adding he and Sir Keir had "parted on good terms, with mutual respect".
Mr Streeting celebrated his promotion, tweeting: "Having grown up on a council estate, on free school meals, I'm happy to join [Sir Keir's] shadow cabinet to help deliver a Labour government that lifts children out of poverty."
The party confirmed there would be no further appointments announced.
'Labour must change'
Sir Keir said: "The Labour Party must be the party that embraces the demand for change across our country.
"That will require bold ideas and a relentless focus on the priorities of the British people.
"Just as the pandemic has changed what is possible and what is necessary, so Labour must change too."
He praised the mayoral wins and Labour's performance in Wales - where party leader Mark Drakeford won another term as first minister - as well as the performance of Scottish Labour leader Anas Sarwar in the Holyrood elections.
But, Sir Keir added: "The challenge for us now is to build upon these successes and learn from the places we lost.
"I look forward to working with our refreshed and renewed team to take on that challenge, deliver that change and build the ambitious programme that will deliver the next Labour government."
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Labour reshuffle: Anneliese Dodds out in Starmer's post-election reshuffle - BBC News
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