Regions role gives Prescott new lease of political life

John Prescott's political obituary was being written just months ago as speculation grew that he planned to step down from Parliament at the next election. Although he fiercely denied the reports, it was an open secret in Labour circles that he was frustrated at his lack of control over concrete policy areas.

His complaints to Downing Street have resulted in him being given direct power over local councils and the regions in the reshuffle.

He professed himself delighted yesterday at his more hands-on job. But Mr Blair also stripped him of responsibility for reform of public services, seen as crucial for a Labour victory at the next election.

Mr Prescott will take charge of a new Office of the Deputy Prime Minister, complete with a separate civil service and new headquarters near Trafalgar Square.

The office will take over the local government and regions bit of Stephen Byers' dismantled department, including responsibility for regeneration, housing and planning. Mr Prescott will retain control of the social exclusion unit and global warming policy. He will also continue sitting on a range of cabinet committees.

Crucially, however, responsibility for speeding up delivery on public services and ensuring Labour manifesto commitments are implemented will pass to a separate Cabinet Office headed by Lord Macdonald of Tradeston, a confidant of Mr Blair. His deputy will be Douglas Alexander, the MP for Paisley South, a party loyalist who impressed Mr Blair with his strategic ability in the run-up to the last election.

The creation of the beefed-up Cabinet Office, liaising closely with Downing Street, will raise suspicions that the Government is moving to centralise more power around the Prime Minister.

Meanwhile, Mr Prescott's new fiefdom was being seen as a precursor to a department for the regions that could eventually follow devolution to Scotland, Wales and Northern Ireland. The Deputy Prime Minister said last night: "These policies – better housing, jobs, combating poverty, renewing democracy – matter to people and I have spent all my political life fighting for them."