Sajid Javid has resigned as chancellor as Boris Johnson carries out a post-Brexit cabinet reshuffle.
Mr Javid rejected an order to fire his team of aides, saying “no self-respecting minister” could accept such a condition.
He has been replaced as chancellor by Chief Secretary to the Treasury Rishi Sunak – who just seven months ago was a junior housing minister.
Mr Javid had been due to deliver his first Budget in four weeks’ time.
The former home secretary was appointed chancellor by Mr Johnson when he became prime minister in July.
His resignation follows rumours of tensions between Mr Javid and the prime minister’s senior adviser Dominic Cummings.
“He has turned down the job of chancellor of the exchequer,” a source close to Mr Javid, who had been expected to remain in place, said.
“The prime minister said he had to fire all his special advisers and replace them with Number 10 special advisers to make it one team.
“The chancellor said no self-respecting minister would accept those terms.”
There will now be a new joint team of No 10 and 11 special advisers, the BBC understands.
Mr Sunak, 39, was educated at Winchester College and Oxford University, after which he went on to found an investment firm.
In 2015, he was elected MP for Richmond, North Yorkshire, replacing former Conservative leader William Hague.
Mr Sunak became a housing minister in 2018, before being promoted to chief secretary to the Treasury last July.
He stood in for Mr Johnson during the BBC’s seven-way debate ahead of December’s general election.
In other reshuffle moves:
- Northern Ireland Secretary Julian Smith and Business Secretary Andrea Leadsom have been sacked
- Housing Minister Esther McVey and Environment Secretary Theresa Villiers are also out of the government
- Attorney General Geoffrey Cox, who attended cabinet, was asked to resign by the PM
- Priti Patel remains home secretary
- Dominic Raab remains as foreign secretary
- Michael Gove remains in his role as minister for the Cabinet Office
International Development Secretary Alok Sharma has been appointed business secretary and minister for the upcoming climate conference COP26, in Glasgow, Downing Street said.
Commenting on Mr Javid’s resignation, Labour’s shadow chancellor John McDonnell said: “This must be a historical record with the government in crisis after just over two months in power.
“Dominic Cummings has clearly won the battle to take absolute control of the Treasury and install his stooge as chancellor.”
The relationship between the two next door neighbours in Downing Street is vital in any government.
The relationship between Sajid Javid and Boris Johnson, as individuals, has been OK but there have been clashes between their wider teams.
This is a massive elevation for Rishi Sunak – a year ago he was one of the most junior ministers in the communities department.
A step up to chancellor this quickly is a huge ask.
He has not been tested in any significant way – but was seen as a reliable performer during the general election campaign.