By Brian Wheeler BBC News Online political staff

If you are asking if we are going to sit in moral judgment, in political judgment, on those who wish to contribute to the Labour party, then the answer to that is no

John Reid, earlier this year

The former Northern Ireland Secretary has said he is "honoured" to have been appointed chairman of the party he "loves".

He is seen as a safe pair of hands as Labour prepares for the May 2003 polls for local councils and the devolved administrations in Wales and Scotland.

But he inherits a party set-up which is, arguably, in some disarray.

Costs

The Labour Party's debts are believed to stand at more than �10m, including a �5.5m overdraft on the new party headquarters at Old Queen Street.

Cutbacks by the unions, which remain the party's biggest single source of income, have contributed to the rise in debt.

But delaying last year's general election by a month because of the foot and mouth crisis is thought to have cost an extra �3m.

Ordinary members

Meanwhile, party membership is down to less than 300,000 from a peak of more than 400,000 in 1997.

These twin problems could seriously affect Labour's ability to mount an effective campaign at next spring's polls.

A 30% increase in Labour's membership fees, which is due to come into effect next year, should help.

But there is still the problem of attempting to enthuse ordinary Labour members - and convince them they are still valued by what is sometimes seen as a remote, autocratic leadership.

Trusted

There is little doubting Dr Reid's suitability for the role of party chairman.

Labour's new headquarters in Old Queen Street

Ultra loyal to the leadership and a confident and effective television performer, he is already trusted to speak out across the full range of policy issues.

He is also likely to have few qualms about passing the hat round at gatherings of the rich and (in)famous.

He sparked controversy earlier this year when he refused to condemn a �100,000 donation from adult magazine publisher Richard Desmond.

"If you are asking if we are going to sit in moral judgment, in political judgment, on those who wish to contribute to the Labour party, then the answer to that is no," Dr Reid told journalists.

'Honoured'

Dr Reid has admitted he is leaving his Northern Ireland post "with some regret".

He said he had talked to the Prime Minister Tony Blair twice about the decision on Wednesday evening, and again on Thursday morning.

He told BBC Radio 4's World At One: "The Labour Party is important and Northern Ireland is important.

"The Labour Party and the people who work for the Labour Party, as well as its supporters and those with whom we have dialogue are the engine of this government.

"The government doesn't act in isolation and whether it's on issues like foreign affairs or big projects like Northern Ireland or creating a fairer Britain, the Labour Party is an absolutely essential component of that."

He added: "I certainly feel honoured and I feel a great deal of humility that after all of the years in there, that I have been asked to chair the party that I love."

Change

Dr Reid denied the government was "walking away" from Northern Ireland in any way, saying Tony Blair and his ministers had probably devoted more time to the peace effort than any government in a century.

"There is never a good time to change secretary of state", he said.

But the shift did come as a new phase, "hopefully temporary", began with the return to direct rule and as the peace process reached a "definitive stage".

Dr Reid praised his successor at Stormont, Paul Murphy, saying he could not hand over the job to a better person.