So we aren't all in this together after all. That mantra, used by the Chancellor George Osborne, and the Prime Minister David Cameron to justify the attack on the incomes of the working poor, now sounds pretty sick following the resignation of the Work and Pensions Secretary, Iain Duncan Smith. When even the politician responsible for the bedroom tax says that the government's welfare reforms are unfair, it's clear David Cameron's moral and political credibility is in ruins.

We're told that Duncan Smith just couldn't take it any more. He had been forced to accept “salami” cuts to his vision of a new Universal Credit which would simplify the benefits system while protecting those most in need. First it was the scrapping of Incapacity Benefit and its replacement with tougher Employment Support Allowance. Then there was the axing of working family tax credits which, despite the Chancellor's u-turn in November, will still happen in three years time. The demand for £4.4 billion cuts in Personal Independence Payments for the disabled in last week's budget was the last straw.

The Chancellor appeared to have backed down over PIP, but it was too late for the brittle IDS. Already semi-detached from the cabinet over his opposition to remaining in the European Union, he decided to throw in the towel. His project for reforming the welfare state, conceived after he visited Easterhouse in 2002, was he believed ruined. Few tears will be shed in the Glasgow housing estate over his departure, however. He has been persona non grata there since he introduced the bedroom tax.

Duncan Smith has been rightly attacked for allowing the poor and disabled to be targeted by Conservative-led governments for six years. But at least in his departure he has finally done the right thing. His letter of resignation condemned the Chancellor for penalising the disabled in “a budget that benefits higher earning taxpayers”. This is hugely damaging to a Conservative government which has insisted, all evidence to the contrary, that it has been acting out of economic necessity and fairness to the working poor.

It is surely a shambles too far for George Osborne. It seems scarcely believable that the Chancellor could have delivered last week's budget without first squaring it with the minister most affected: the one in charge of welfare reform. Osborne has presided over a catalogue of budget disasters from the “pasty tax” and the “omnishambles” in 2012, to the u-turn on tax credits last year. It's not as if he has even hit his financial targets either, since the national debt has nearly doubled under his watch to 80% of GDP.

But perhaps the most immediate impact will be in the EU referendum campaign. All campaigns need a martyr. Iain Duncan Smith, a Eurosceptic politician who always claimed the moral high ground, has shaken David Cameron's government to its foundations. Now he's found his voice, he's unlikely to shut up before June.