Louise Haigh has resigned as transport secretary only 12 hours after it emerged she had been convicted of fraud over a missing work phone.

Haigh quit the cabinet with a letter to Keir Starmer saying that “whatever the facts of the matter, this issue will inevitably be a distraction from delivering the work of this government”.

Haigh’s dramatic departure came after news broke that she had pleaded guilty to fraud by false representation in 2014, following an investigation by her former employer, Aviva, into a missing work phone.

Sky News and the Times reported that Haigh was investigated by Aviva and the police over the incident.

In a statement, Haigh said that while she was working for Aviva in her mid-20s, she was mugged while on a night out. She gave police a list of items missing from her handbag, including her work phone, which she thought had been stolen.

Haigh was issued with a new phone but when she subsequently found her old work phone and turned it on, the police called her in for questioning.

In her letter to the prime minister published on Friday morning, Haigh said not informing Aviva straight away that she had found her missing work phone “was a mistake”.

Accepting her resignation, Starmer thanked Haigh for her work and “huge strides to take our rail system back into public ownership”. “I know you still have a huge contribution to make in the future,” he wrote. Downing Street later named Swindon South MP Heidi Alexander as the new transport secretary replacing Haigh.

Haigh’s conviction has been spent and is therefore no longer on her record. She disclosed the incident when she was appointed to Starmer’s shadow cabinet in 2020, though she has never spoken about it publicly.

The circumstances around it are disputed. The Times reported that Aviva launched an investigation after Haigh said that company mobile phones had been stolen or had gone missing on repeated occasions.

The newspaper said the police were given details of more than one instance that had been looked into by Aviva, but that the criminal charge related to one phone.

Sky News cited two sources alleging that Haigh had reported her phone stolen in order to gain a newer model from her employer. A source close to her said on Thursday that was “absolute nonsense” and it was an honest mistake.

Haigh, who was the youngest person appointed to Starmer’s cabinet, has become the first person to leave it five months after Labour’s election landslide.

She thanked Starmer for his support in her resignation letter and said she took “great pride” in what Labour had achieved since the election.

She said she was “totally committed to our political project” but believed “it will be best served by my supporting you from outside government”.

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“I am sorry to leave under these circumstances, but I take pride in what we have done. I will continue to fight every day for the people of Sheffield Heeley who I was first and foremost elected to represent and to ensure that the rest of our programme is delivered in full,” she wrote.

Haigh was elected MP for Sheffield Heeley in 2015 and served as shadow policing minister under Jeremy Corbyn. She was given the Northern Ireland brief when she was first appointed to Starmer’s shadow cabinet in 2020.

As transport secretary, she has been in charge of some of the government’s most high-profile policies including rail nationalisation. Early on in her role she negotiated a pay settlement for striking train drivers.

Last month, she was rebuked by Downing Street after calling for a boycott of “rogue operator” P&O Ferries. DP World, the ferry company’s Dubai-based owner, threatened to withdraw a planned £1bn investment in the UK in response.

Mick Lynch, the general secretary of the Rail, Maritime and Transport union, said: “Louise achieved a great deal during her time as transport secretary including laying the foundations for the public ownership of our railways – a landmark achievement that prioritises the needs of passengers and workers over private profit.

“Her vision and dedication have set the stage for a fairer, more efficient, and publicly accountable transport system. I want to thank her on behalf of RMT and wish her every success in the future.”