Peter Mandelson, the controversial cabinet minister and close friend of Tony Blair, resigned yesterday with few tears after it emerged he had misled Alastair Campbell, his cabinet colleagues and the "Observer" over the details surrounding his intervention in the Hinjuda passport application.

As Mandelson met with Blair yesterday to fully brief the prime minister on the events, an enraged Campbell briefed the press at an "extraordinary" lobby briefing. Fleet Street concludes that Mandelson crossed Campbell and therefore had to go.

As he left Downing Street and public office for a second time, the politician dubbed "the prince of darkness" denied that he had acted improperly, but said he wanted to live a "more normal life".

The "curse of the dome" had claimed another victim and few on the Labour benches showed much sympathy for the man who did much to secure Labour's 1997 election landslide.

Home Office minister Mike O'Brien, who had received the telephone call from Mandelson alerting him to the Hinduja passport query, remains in post claiming that the final citizenship application, which was awarded after just six months, was processed in the usual manner. O'Brien said yesterday that he was "very sad that I had to make it clear that that conversation did occur".

Tony Blair, who moved swiftly yesterday to limit the damage done by the revelations, has ordered Sir Anthony Hammond QC to conduct an inquiry into the affair.

In the Commons, William Hague attacked Blair's "error of judgement" saying that "standards of truth, honesty, and integrity have taken second place to spin and smear".

Mandelson is replaced as Northern Ireland secretary by Scots secretary Dr John Reid, who is in turn replaced by the feisty Scottish MP Helen Liddell.

Liddell's energy portfolio is taken by Foreign Office minister Peter Hain. Hain is replaced by Brian Wilson, who was until last night Reid's deputy at the Scotland office.