David Blunkett resigned from the Cabinet for the second time in a year today, blaming a "mistake" over unauthorised business dealings for ending his ministerial career.

There were none of the tears that marked his first resignation, last December, when Mr Blunkett was forced out of the Home Office after an affair with Kimberly Quinn. Instead, he said, he had realised that endless news coverage of his breaches of a ministerial code of conduct was starting to damage the Government.

"I'm guilty of a mistake and I'm paying the price for it," he said.

The Work and Pensions Secretary told a press conference that he had phoned Downing Street early this morning and organised a meeting with Tony Blair at 9.15am at which "Tony asked me to stay".

But on his way to a select committee hearing at Portcullis House in Westminster, where he was due to be grilled by MPs on his work as a minister, Mr Blunkett then decided that his position had become untenable. He ordered his chauffeur to turn the ministerial Jaguar back to No 10 so that he could offer his resignation.

"When you've been in politics as long as I have you can smell and feel when it is right to step away," Mr Blunkett said. "And I felt that between Downing Street and Portcullis House."

A Downing Street spokesman said that the Prime Minister "reluctantly accepted" the resignation offer. Mr Blunkett entered and left No 10 by the back door.

Commenting on the resignation at Prime Minister's Questions, Mr Blair said: "I would like to say that whatever mistakes my Right Honourable Friend has made, I have always believed and believe now he is a decent and honourable man... He goes, in my view, with no stain of impropriety against him whatsoever."

Mr Blunkett resigned after the revelation that he had three times broken the code governing the employment of former ministers, by failing to consult an independent advisory committee on business dealings during his six-month absence from frontline politics.

It comes as a blow to Mr Blair, who was criticised for welcoming Mr Blunkett back to Cabinet so quickly after last year's 'Nannygate' scandal.

Mr Blunkett will be replaced at the Work and Pensions Department by John Hutton, a little-known Cabinet Minister who is Chancellor of the Duchy of Lancaster. Mr Hutton, the 50-year-old MP for Barrow and Furness, will have to oversee major reforms of the welfare and pensions systems.

Mr Blunkett's resignation ends one of the most remarkable of political careers, which saw a blind man who grew up in poverty in Sheffield climb the political ladder to hold two of the great offices of state.

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