SUE Gray quit as Keir Starmer's chief of staff yesterday as she admitted fearing she was "becoming a distraction".
The key figure in the Prime Minister's circle said she will now take on a new government role.
In a statement, she said it had "become clear to me that intense commentary around my position risked becoming a distraction to the government's vital work of change".
It came as Mr Starmer tries to regain control of his party after weeks of damaging stories.
Ms Gray has been at the centre of controversy since Labour was elected. Last month a row broke out after it emerged she was paid more than the PM- £170,000.
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