In a sweeping post-election reshuffle, Michael Howard has given all his potential successors an opportunity to prove their effectiveness in senior posts.

In a move that surprised observers, the Tory leader made George Osborne, aged just 33, the new shadow chancellor.

David Cameron, who is also often seen as a potential leader, switches from being policy co-ordinator to shadow Ruth Kelly on education issues.

Osborne said that despite gains in the election there was still a lot of work to be done: "We have to face the fact that we only got 33 per cent of the vote and we need to get more than that next time.

"We need to broaden the appeal and obviously the economic policy of the party is central to that."

Alan Duncan was made shadow transport secretary and Sir Malcolm Rifkind, the former foreign secretary who has returned to parliament after an eight year absence, will face David Blunkett on work and pensions.

And Liam Fox, widely seen as a leadership contender, was made shadow foreign secretary.

Other potential candidates such as David Davis, the shadow home secretary, and Andrew Lansley, the shadow health secretary, stay in their jobs, while Michael Ancram remains deputy leader but moves to shadow defence secretary.

Howard made Francis Maude, a leading moderniser and manager of Michael Portillo's leadership effort during the last parliament, the party chairman.

Oliver Heald was made shadow constitutional affairs secretary and Chris Grayling is promoted to shadow Commons leader.