Shock move as Reid stands aside

The Home Secretary revealed he would not oppose the Chancellor's bid to succeed Tony Blair, saying there was "no eagerness" in the Labour Party for a contest.

In a move that took observers by surprise, he added that he would leave the Government at the same time as Tony Blair.

The succession looks all but sealed as Mr Blair prepares to announce his resignation this week - possibly Thursday - and trigger a leadership contest.

Ending months of speculation about his ambitions, Mr Reid said there was no desire for a leadership challenge.

"Whatever the pros and cons of a contest, I do not believe that there is eagerness in the party for what might be a divisive exercise at this time," he said in a letter to the Prime Minister. "Moreover, I believe that it is in all our interests that the incoming Prime Minister should have the widest opportunity to make a fresh start, with the maximum flexibility in introducing his own agenda, ideas, and ministers.

"For that he needs space. This has persuaded me that I should stand down from the Cabinet at the time you stand down as Prime Minister."

Mr Reid said he had spoken about his decision to the Chancellor, who had assured him he would have a job in a Brown government. But he said that he wanted to make room for "new people" to allow Mr Brown to establish new policies.

Mr Blair said the Chancellor had the qualities necessary to beat the Tories at the next general election.

"He has steered our economy from one of boom and bust to one of the best in the world," the premier wrote in the News of the World. "He didn't do it by choosing the easy way. He did it by sound judgment, holding his nerve and putting the long-term interests of Britain first. At general election time, that is still the route to victory."