Andrew Grice: Under fire and with no end to the scandal in sight, he had to go

The Liam Fox drama was always going to end in his resignation, but the last act closed more quickly than expected. Early yesterday afternoon, the mood in Downing Street was calm. Officials fully expected the Defence Secretary to be at David Cameron's side tomorrow at a ceremony in Wootton Bassett. They believed that Mr Fox's fate would be decided early next week after Sir Gus O'Donnell, the Cabinet Secretary, delivered his inquiry report on the shadowy role played by Adam Werritty, the former Defence Secretary's friend and self-appointed "adviser."

Directly across Whitehall at the Ministry of Defence (MoD), the mood was very different. Officials were scrambling to find the answers to another raft of damaging allegations to be published by tomorrow's newspapers, which had been digging all week. "There was no end in sight," one Fox aide admitted last night.

Mr Fox, a fighter by instinct, judged that it would do the Government more damage if he tried to hang on to his job. Appearing with the Prime Minister at Wootton Bassett in the full glare of the cameras after another crop of terrible headlines would embarrass Mr Cameron. He knew the latest allegations would spill over into Monday's papers.

Mr Fox phoned Mr Cameron, who was in his Witney constituency, to say it was right to resign now. The fox jumped, knowing he would almost certainly be pushed out next week.

It suited both Mr Cameron and Mr Fox for the play to end this way. The Prime Minister decided not to throw his Defence Secretary to the media wolves early this week. It was good party management, even if it ensured several days of bad headlines. He knew that a sacked Mr Fox could eventually become a dangerous focus of right-wing opposition on the Tory backbenches, where there is a sizeable group of MPs who are not signed up to the Cameron modernising project and feel that too many concessions are being made to the Liberal Democrats.

Mr Cameron may regard Tony Blair as "the master" but that means learning from his mistakes as well as his successes. Mr Blair would admit that Cabinet ins and outs were not one of his strongest suits. Breaking with his original intentions, he did not keep key ministers in their departments for long enough – even before Mr Fox resigned, Britain had had five Defence Secretaries in the past six years. Mr Blair's too-frequent reshuffles were often botched. He sacked Peter Mandelson (second time around) without waiting for the results of an inquiry which later cleared him of wrongdoing.

So Mr Cameron has won brownie points with his backbenchers – crucially, among the right-wing brigade. Even those who wanted Mr Fox to survive won't blame the Prime Minister. Nor will Mr Fox, who is less likely to become a sulky, potentially divisive ringleader on the backbenches.

Mr Fox's negotiating tactics during last year's wholesale Defence Review angered Mr Cameron and George Osborne. They suspected he had a hand in some of the leaks from the MoD, although this was never proven. On Libya, Mr Fox initially echoed – in private – the doubts of service chiefs about a no-fly zone. But once the decision was taken, he became a strong advocate of Mr Cameron's cause.

He won the respect of both the Prime Minister and Chancellor for the way he began to fill the "black hole" in the MoD budget, not least by implementing his plans, drawn up with characteristic certainty in opposition, to cull what he regarded as an army of pen-pushers.

Can the irrepressible Mr Fox bounce back? It is too early to answer, but right-wing Tories are already asking the question. In the short term, he will be a diminished figure. But fellow Thatcherites hope he can have "a big future" and the manner of yesterday's departure may make that more likely. However, a big question mark will remain over his judgement in allowing his friend to drive a tank through the ministerial code, designed to prevent a conflict of interest between ministers' public and private roles. One lesson to be learnt from this bizarre drama is that the code should be tightened to cover the friends of ministers. At present, it includes only their spouse or partner and close family.

The other lesson for politicians is that while lax behaviour and allowing hangers-on to get too close might be acceptable in opposition, it is totally unacceptable in government. Mr Fox was not the victim of a media witch-hunt. He wrote the script for his own downfall.