Brown reshuffles Cabinet to calm crisis

British Prime Minister Gordon Brown sought to fend off a challenge to his authority yesterday, reshuffling his Cabinet to secure the loyalty of several ministers and averting a government collapse.

In his second reshuffle in eight months, Mr Brown changed the heads of 10 ministries, but retained his finance minister, foreign minister and the head of the business ministry, shoring up his power in the teeth of widespread party dissent.

"I will not waver, I will not walk away, I will get on with the job and I will finish the work," Mr Brown told a news conference after giving details of the Cabinet shake-up. It included replacing six senior ministers who had quit their posts.

A day of high political drama took its toll on some markets, with the uncertainty sending sterling to a two-week low against the euro, before it recovered some ground.

The possibility of Mr Brown's government collapsing has caused rumour and uncertainty in currency markets all week.

But there was some relief for investors that finance minister Alistair Darling was to remain in his job as Chancellor of the Exchaquer.

Mr Brown's government has been under severe pressure for the past month, after a parliamentary expenses scandal exposed wrongdoing among politicians from all parties and left voters particularly angry with the incumbents. In the reshuffle, Mr Brown had been expected to replace Mr Darling, a close ally, but appeared to back away from that move after Mr Darling made it known he did not want to go. In the end the shake-up produced less movement than expected as Mr Brown kept key ministers in their posts to retain their loyalty.

While he has bought himself some breathing space, his authority has been wounded at a time when Britain is in its deepest recession in 60 years and unemployment is rising. Labour is well behind the centre-right Conservatives in opinion polls.

Markets and voters are looking for strong government and clarity on when the next parliamentary election will be held. If Mr Brown manages to survive the current crisis, it looks likely that he will wait for as long as possible before calling the next election. The deadline is June next year.

Despite yesterday's moves, Mr Brown still faces a nascent revolt among Labour members of Parliament (MPs), some of whom have been gathering signatures to unseat him. A change of leader would raise the prospect of a snap election in the autumn.

Alan Johnson, whom Mr Brown moved from the Health Ministry to the more powerful Interior Ministry, had been seen as a front-runner to replace Mr Brown. His appointment to a senior position appeared to have ensured his loyalty for now.

The limited personnel moves mean few abrupt changes in policy are likely, while the bolstering of Business Secretary Peter Mandelson's portfolio, giving him greater economic powers, underlined Mr Brown's determination to tackle the financial crisis.

While the shake-up appeared to remove some of the doubt about the government's future, six ministers still quit their posts and Mr Brown's authority may still be called into question.

One of the most serious resignations was that of James Purnell, the Work and Pensions Secretary and a rising star within the Labour Party, seen as potential future leader.

In a letter sent to newspapers announcing his resignation, Mr Purnell made it clear Mr Brown should go if Labour have any chance of beating the opposition Conservatives at the next election.

"I now believe your continued leadership makes a Conservative victory more, not less likely," he told Mr Brown. "I am therefore calling on you to stand aside to give our party a fighting chance of winning."

Meanwhile, Labour saw its popular support evaporate yesterday after it suffered heavy defeats in local council elections across the country.

In Staffordshire, under Labour control since 1981, councillor Derek Davis said his party had suffered a "complete wipe-out" after losing 28 seats as the Conservatives romped home.

"I've been a member of the Labour party since 1963 and I've never known it as bad as this," said Mr Davis. "This is the lowest ebb I have ever known," he told BBC television.

Labour also lost Derbyshire and Lancashire to the Conservatives, and saw Nottinghamshire pass to no overall majority - thereby losing control of its last four county councils in England.

The Liberal Democrats lost control of Somerset to the Conservatives for the first time since 1989.

"Today's results are remarkable," said Tory leader David Cameron.

"The Conservative Party have won all over the country - from Lancashire to Devon and Somerset to Derbyshire. We have won councils that we haven't held for three decades."