On 14 October 2011, Liam Fox resigned as defence secretary, following scrutiny over his relationship with his close friend and former flatmate, the businessman Adam Werritty. Fox became the first Tory cabinet minister to resign from the Conservative-Liberal Democrat coalition government.

The scandal centred on the fact that Werritty, who held no official government position or security clearance, had met Fox on at least 18 overseas visits since 2010. Werritty, the best man at Fox’s wedding, had also been present at sensitive meetings with military figures, diplomats and defence contractors.

Media scrutiny focused on who had paid for Werritty’s international travel, and whether he had personally benefited from his frequent access to the defence secretary.

Prime minister David Cameron responded by launching an official inquiry, led by Gus O’Donnell as cabinet secretary, into whether Fox had breached the ministerial code.

Fox, having initially resisted opposition calls for his resignation, stepped down before O’Donnell’s report was published. In his resignation letter, he admitted that he had “allowed the distinction between my personal interest and my government activities to become blurred.”

He added: “The consequences of this have become clearer in recent days. I am very sorry for this.”

Cameron said Fox had done a “superb job” as defence secretary. He praised Fox for having “overseen fundamental changes in the Ministry of Defence and in our armed forces, which will ensure that they are fully equipped to meet the challenges of the modern era.”

He added: “I appreciate your commitment to the work of this government, particularly highlighting the need to tackle the deficit, and the relationship between Britain’s economic strength and our national security.”

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The resignation deprived the government of a prominent figure on the Conservative right – upsetting the coalition cabinet’s fine ideological balance. Fox had stood in the 2005 Conservative leadership election, securing the support of 51 MPs in the second ballot.

He served as shadow defence secretary on Cameron’s opposition frontbench from 2005 to 2010.

Fox had previously challenged Cameron’s authority, notably through a leaked letter opposing a proposed increase in Britain’s aid budget.

Philip Hammond, seen as a more centrist figure, was appointed as the new defence secretary. He was shuffled across from the Department of Transport (DoT). In the mini-reshuffle that resulted from Fox’s resignation, Treasury minister Justine Greening replaced Hammond as transport secretary.

In a statement, Hammond commented: “I look forward to picking up the baton from Liam and working closely with the prime minister, foreign secretary and international development secretary to ensure that our defences are robust and that the finances that lie behind them are equally robust.”

Hammond’s appointment sparked fears on the Conservative right that he would wield a “Treasury axe” at the Ministry of Defence.

John Redwood, the former Tory leadership contender, wrote on his blog that the “right felt the old cabinet grossly under-represented their strength and views”.

He added: “The reshuffle does nothing to correct that feeling.”

O’Donnell’s subsequent report found that Fox’s conduct constituted a “clear breach of the ministerial code” and that his actions posed a “security risk”.

The investigation concluded: “The ministerial code requires ministers to ensure that no conflict arises, or could reasonably be perceived to arise, between their public duties and their private interests, financial or otherwise. Dr Fox’s actions clearly constitute a breach of the ministerial code which Dr Fox has already acknowledged.”

The report added: “The disclosure outside MOD of diary details about future visits overseas posed a degree of security risk not only to Dr Fox, but also to the accompanying official party.”

In a statement, No 10 responded: “Today’s report makes clear that Dr Fox did breach the ministerial code.

“This government has already introduced changes that significantly increase government transparency – publishing lists of meetings with external organisations and all procurement over £500.

“In this case, the MoD permanent secretary has accepted that there should have been much tighter procedures within the department and is taking steps to strengthen them to ensure that the ministerial code is properly adhered to in future.

“The cabinet secretary has now recommended further strengthening of procedures across government. The prime minister accepts the cabinet secretary’s recommendations and the cabinet secretary will write to permanent secretaries setting this out.”

Fox stood as a candidate in the 2016 Conservative leadership election. He finished fifth after he secured the support of only 16 MPs in the final ballot. He had supported ‘Leave’ in the recent Brexit referendum.

Fox returned to government as international trade secretary from 2016 to 2019.