David Young, 78, an unpaid adviser on small businesses, was earlier forced to apologize after he had embarrassed Cameron with his comments in a newspaper interview.
“He has offered his resignation and we have accepted it,” a spokeswoman for the Conservative prime minister said.
Young’s comments were widely seen as callous when half a million public sector workers face losing their jobs and millions more will see their benefits cut as the government slashes spending to curb a record peacetime budget deficit.
His resignation is a blow to Cameron and hands a political scalp to the opposition Labour Party, who had demanded that Cameron fire him.
Young’s comments played into Labour’s charges that Cameron and his lieutenants, many of whom are from a wealthy, privileged background, are out of touch with ordinary people who are feeling the sharp edge of austerity policy.
Young, a Conservative who served as a cabinet minister in former Prime Minister Margaret Thatcher’s government in the 1980s, reflected overnight and did not want his comments to damage the government, a government source said.
Young, who Cameron appointed as enterprise adviser just three weeks ago, told The Daily Telegraph that the vast majority of Britons “have never had it so good ever since this recession — this so-called recession — started.”
Record low interest rates meant most homeowners were paying far less in mortgage payments, he said.
The 100,000 public sector jobs a year expected to go were within “the margin of error” in a 30-million-strong job market, said Young, a businessman and member of the Lords, the upper house of Parliament.
He said he hoped that when the spending cuts were over, “people will wonder what all the fuss was about.”
Cameron quickly distanced himself from Young’s comments but it seemed at first that Young might survive the uproar.
“This is obviously extremely embarrassing, but he was very quick to retract completely what he said. It wasn’t acceptable,” Cameron told reporters during a visit to a flood-hit area of Cornwall in southwest England.
Young’s resignation was a second public relations mishap in a week for Cameron. He took his personal photographer off the government payroll on Tuesday after the appointment sparked a political and media backlash.
The most damaging loss so far to the six-month-old coalition government was in May when Treasury Minister David Laws, a key architect of deficit-cutting plans, resigned after revelations about his expense claims.
Young was echoing former Conservative Prime Minister Harold Macmillan, who said in 1957 when the British economy was prospering that “most of our people have never had it so good.”
