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Theresa May is taking personal control of Brexit talks with the EU, with Dominic Raab deputising for her.
Mr Raab was drafted in as Brexit Secretary to replace David Davis, who quit in protest at the prime minister's proposals for post-Brexit trade.
A special unit in Mrs May's office has played an increasing role in Brexit talks during recent months.
Tuesday's announcement, in a written statement by Mrs May, formalises that shift in responsibility.
Mr Raab, who was a leading figure in the Leave campaign in the 2016 EU referendum, insisted he had not been sidelined, telling MPs the changes would ensure there was "one chain of command" to "get the best possible deal".
He said it always been the case that Mrs May was in charge of the talks and the announcement amounted to "shuffling the deckchairs" in Whitehall.
The Europe Unit led by senior civil servant Olly Robbins in the Cabinet Office, which reports directly to the prime minister, will have "overall responsibility for the preparation and conduct of the negotiations", Mrs May said in her written statement.
"DExEU (the Department for Exiting the EU) will not stop to lead on all of the Government's preparations for Brexit: domestic preparations in both a deal and a no-deal scenario, all of the necessary legislation, and preparations for the negotiations to implement the detail of the Future Framework.
"I will lead the negotiations with the European Union, with the Secretary of State for Exiting the European Union deputising on my behalf."
Mrs May stated that DExEU would recruit some new staff to work on preparations for Brexit, while a number of Cabinet Office officials would move over to the department.
There will be no net reduction to staff numbers in Mr Raab's department, she said.
Mr Raab told MPs on the Brexit committee, he would be going back out to Brussels shortly to continue talks with EU negotiator Michel Barnier, alongside Mr Robbins.
It comes as the government published a White Paper saying how the UK's EU withdrawal agreement will be put into law.
Mr Raab said the proposed legislation would deliver a "smooth and orderly" Brexit.
The EU Withdrawal Act, passed last month after fierce debate and attempts to change it, will repeal the 1972 European Communities Act, which took the UK into the EU, on 29 March next year.
Mr Raab said "some parts" of the European Communities Act would be retained until December 2020when the 21-month transition period is due to come to an endunder the proposals in the White Paper.
Shadow Brexit secretary Sir Keir Starmer said "large parts" would, in fact, be retained, including the continued jurisdiction of the European Court of Justice.
And it was now clear that the EU Withdrawal Act "will need major surgery," adding that the 29 March Brexit day was a "gimmick" which had come "unstuck".
"I can't remember legislation which has needed such great revision and amendment before the relevant parts have even come into force," he told MPs.
Mr Raab told MPs the Withdrawal Agreement and Implementation Bill would kick in only once MPs had given their backing to any deal struck with Brussels in the autumn. If there is no deal it will not be enacted.
"It provides the clarity and certainty to EU citizens living here and UK nationals abroad that their rights will be properly protected.
"It will enact a time-limited implementation period, giving businesses greater certainty, giving the public finality with respect to our relationship with the EU and it provides for the appropriate means for paying the financial settlement.
"Above all, with 80% of the withdrawal agreement settled with our EU friends, the White Paper is another key milestone on the UK's path to leaving the EU."
The bill would create a financial authority to manage "divorce" payments, which will total between £35bn and £39bn, to the EU.
Mr Raab repeated his warning that the UK could withhold payment if the EU fails to reach agreement on its future trade relationship with the UK.
He said the publication of the white paper will allow "maximum scrutiny" of the government's plans by Parliament.
"It also sends a clear signal to the European Union that the United Kingdom is a reliable, dependable negotiating partner, delivering on the commitments it has made across the negotiation table," he told MPs.