The adviser hired by David Cameron to get 120,000 "problem" families back to work has resigned after a week of mounting allegations about her firm, the arrests of four former employees and criticism of the £8.6 million dividend she was paid last year.
The Prime Minister was criticised for having appointed Emma Harrison after it emerged that her company A4e, which runs the Government's scheme to make unemployed people work without pay, has been at the heart of investigations into alleged financial irregularities five times since 2005.
Pressure is now building on the Government to suspend A4e from its £5bn back-to-work scheme.
Four former members of A4e staff have been arrested on suspicion of fraud and police have visited the A4e offices to gather evidence. The company revealed that a former A4e subcontractor is being investigated in a separate police investigation.
A4e, which earned £180m of public money last year, also revealed that it has been investigated nine times in total by the Department for Work and Pensions in recent years. It was cleared in all but the two remaining police matters.
The Serious Fraud Office confirmed this week that it would look into any concerns raised by an MP, after Labour's Fiona Mactaggart, in whose Slough constituency the firm is based, wrote to the SFO demanding action.
Ministers attempted to distance themselves from the woman installed by the Prime Minister in December 2010 as responsible for getting 120,000 "problem families" back into work. Questions were asked over the awarding of government contracts despite concerns over the company's performance.
It was revealed earlier this month that Ms Harrison paid herself £8.6m in dividends, despite A4e's failure to meet government targets on finding jobs for unemployed people. The company moved to tackle accusations of "systematic" abuse. But Ms Harrison's resignation will come as a blow to David Cameron, who championed her, and for the Employment Minister Chris Grayling, who has been mounting a fierce defence of his department's "workfare" scheme, of which A4e was one of the employment agencies responsible for placing jobseekers.
In a statement, Ms Harrison said: "I have asked to step aside from my voluntary role as family champion as I do not want the current media environment to distract from the very important work with troubled families.
"I remain passionate about helping troubled families and I am grateful for the opportunity to contribute in an area where I have been active for many years."
A spokesman for the Prime Minister said: "We respect her decision and thank her for the contribution she has made."