Laws, the Treasury Minister in charge of cutting public spending, quit last night after it was revealed that he had directed more than 40,000 pounds of taxpayers' money to his secret gay lover.
Although Prime Minister David Cameron had privately made clear that his job was safe in the short term, millionaire Laws was so devastated by the combined impact of disclosures about his sexuality and financial probity that he felt he had no option but to go.
Announcing his decision to step down from the Cabinet, the Liberal Democrat MP said, "I do not see how I can carry out my crucial work on the Budget and spending review while I have to deal with the private and public implications of recent revelations."
His decision after 17 days in the jobs means Laws had the shortest Cabinet career in modern political history. And the resignation came despite frantic last-minute efforts by Lib Dem leader Nick Clegg to talk to him out of it.
Lib Dem Scottish Secretary Danny Alexander will take over as Chief Secretary to the Treasury, with fellow Lib Dem Michael Moore stepping in at the Scottish Office.
In his resignation letter addressed to Cameron, Laws said: "The last 24 hours have been very difficult and distressing for me, and I have been thinking carefully about what action I should take in the interests of the Government, my constituents and -- most important of all -- those whom I love.
"I am grateful for the strong support which I have received from my friends, family, and from you, the Deputy Prime Minister and the Chancellor.
"This support has been incredibly important, but nonetheless, I have decided that it is right to tender my resignation as Chief Secretary to the Treasury."
In response, Cameron told Laws he was a "good and honourable man".
Cameron wrote: "The last 24 hours must have been extraordinarily difficult and painful for you. I am sure that, throughout, you have been motivated by wanting to protect your privacy rather than anything else.
Your decision to resign from the Government demonstrates the importance you attach to your integrity. I hope that, in time, you will be able to serve again as I think it is absolutely clear that you have a huge amount to offer our country."
Chancellor George Osborne expressed his sadness at Laws's resignation, saying it was "as if he had been put on Earth" to do the job of Chief Secretary, while Clegg said Laws had made a "very painful decision" to resign after his privacy had been "cruelly shattered".
Laws was left in turmoil after it was revealed that for eight years since 2001 he had claimed up to 950 pounds a month to rent a single room in properties owned by his partner, lobbyist James Lundie.
Since 2006, MPs have been banned from claiming back the cost of renting a property from partners.
Laws initially attempted to explain the arrangement on the grounds that though he and Lundie were living together, "we did not treat each other as spouses -- for example, we do not share bank accounts and have separate social lives".
He admitted the couple had been in a serious relationship for nine years but said he had wanted to disguise the fact because his situation was "unknown to both family and friends."
Laws issued an immediate apology for his actions on Friday evening, promising to pay back the money and referring himself to John Lyon, the Parliamentary Standards Commissioner.
