Barry Legg, a close ally of Iain Duncan Smith, was forced to resign from Conservative Central Office last night after a rebellion by senior officials and MPs.

Legg, who was appointed as the party's chief executive just eight weeks ago, has been the subject of damaging allegations regarding his role at the scandal-tainted Westminster Council in the 1980s.

Conservative officials distributed a short statement from Duncan Smith last night.

"I would like to thank Barry for his work over the past three months and am sorry that the reorganisation means that he will now be leaving," the Conservative leader said.

Derek Conway, the former Tory whip and the leading critic of Legg's appointment, said: "I think Iain Duncan Smith has taken the right decision.

"He was right not to allow this to go on and on, because it was not going to go away. In this particular case, the evidence was overwhelming.

"Leaders are entitled to make mistakes over friends, like Mr Blair has with Mr Mandelson, but they should always remember that their posts are leaseholds, not fiefdoms."