Alan Johnson is to step down as Labour shadow chancellor and be replaced by Ed Balls, the former education secretary, little over three months after being appointed.

Mr Johnson’s surprise departure will spark a major reshuffle of the Labour front bench, a big overhaul of its economic policy, and raise fresh doubts over the judgment of Ed Miliband, the Labour leader.

Yvette Cooper, married to Mr Balls, takes her husband’s role as shadow home secretary.

Mr Johnson said his move was “for personal reasons to do with my family”.

“I have found it difficult to cope with these personal issues in my private life whilst carrying out an important front bench role,” Mr Johnson said in a statement.

Mr Balls, a close ally of Gordon Brown and former Treasury adviser, will take over an economic brief that he has long coveted.

His promotion from shadow home secretary could mark a more leftward turn under Ed Miliband, with more forceful opposition to spending cuts. During the Labour leadership campaign, Mr Balls argued that even Mr Brown’s plan to halve the deficit by 2015 was too fast and put the economy at risk.

Mr Miliband said it was “with great regret” that he had accepted Mr Johnson’s resignation.

“As shadow chancellor and a politician who held five cabinet positions, Alan showed real leadership on issues that mattered to families across our country, warning of the dangers posed by the government’s gamble on growth and jobs, promoting educational opportunity and delivering neighbourhood policing.

“Ed Balls is an outstanding economist and is hugely qualified to take our economic message to the country,” he said.

Other shadow cabinet changes include Douglas Alexander moving to shadow foreign secretary and Liam Byrne taking over the work and pensions brief.

Mr Johnson, a former postman who rose to become a cabinet minister, was chosen by Mr Miliband to bring an earthy approach to the economic portfolio that would highlight the impact of spending cuts.

However he was criticised for his inexperience on economics and found himself at odds with Mr Miliband over key policy issues, including over his opposition to a permanent 50p higher rate of tax and qualms over a graduate tax.

Mr Balls said: “It is a great honour to be appointed to this post, and to succeed my friend and colleague Alan Johnson whose commitment to social justice and service to the Labour Party is second to none.

“Over the past few months, Alan and Ed have set out a clear direction on economic policy and challenged the Conservative-led government’s false claim that our investment in schools, hospitals and police, rather than the global financial crisis, caused the deficit.”

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