Blair plans reshuffle

Labour crashed to defeat in one by-election today and came within a whisker of losing a second as the public delivered an angry verdict on the Iraq affair.

An even bigger, 27 per cent, swing against Labour was recorded in Birmingham Hodge Hill, where a 11,000 majority was slashed to 460 votes.

The night brought even greater humiliation for Michael Howard whose party trailed third in both seats, prompting deep Tory unease that they have failed to make headway since he won the leadership last year.

Tony Blair was today retiring to Chequers to plan a ministerial reshuffle to reassert his authority in the wake of these contests and damage caused by the Butler report and other setbacks. Up to three Cabinet ministers were said to be facing the sack, including Labour chairman Iain McCartney, Work and Pensions Secretary Andrew Smith and Chief Treasury Secretary Paul Boateng.

Ministers tipped for promotion to the Cabinet include Alan Johnson, who pushed university top-up fees through the Commons, Ruth Kelly, who would be the youngest ever woman Cabinet member, Health Minister John Hutton and Cabinet Office Minister Douglas Alexander.

The Cabinet changes will follow a blizzard of domestic policy announcements, starting on Monday with Home Secretary David Blunkett's five-year plan for law and order, aimed at levering Iraq out of the headlines. But Mr Blair also faces a difficult Commons debate on the Butler report, forced by the Conservatives. Anti-war protest votes were being cited as the main factor in the by-election results.

Ironically, Labour probably owed its survival in Birmingham to the breakaway Respect Party founded by expelled Labour MP George Galloway. It polled 1,282 votes which would probably have gone to the Lib-Dems.

Parmjit Singh Gill, the first ethnic minority Lib-Dem MP, declared in a victory speech in Leicester: "The people have spoken and the message is that the Prime Minister has abused and lost their trust." Health Secretary John Reid conceded that Iraq was a major factor but said Mr Howard was the clear loser. "We have effectively had a score-draw with the Liberals but there has been a disaster for the Conservatives," he said. "It presents Michael Howard and his party with a crisis because they are going backwards."

Any inquest into the Tory defeats is likely to focus on MP Andrew Mackay, the head of the party's byelection unit specifically set up to avoid a repeat of last year's Brent East by-election. Mr Mackay will be asked to explain why the party again slumped to third place despite an unprecedented campaign effort which saw daily coachloads of Tory MPs visiting the constituencies and the distribution of more than 400,000 leaflets in the Leicester seat alone.

Tory chairman Liam Fox said the results showed "voters feel let down by Labour" and were looking for any party to punish the Government.

"A lot of Labour Cabinet ministers must be now wondering which jobs they will be occupying next week after a panic reshuffle," he added.

Both seats are natural Labour territory with high ethnic minority populations. Turnouts were low, with only 36 per cent voting in Birmingham Hodge Hill.