Angela Rayner has refused to return the £16,876 exit payment she received when she left Government last autumn over her tax affairs.
The Labour MP for Ashton-under-Lyne was reinstated as Housing Secretary by Prime Minister Andy Burnham on Monday.
Ms Rayner picks up the mantle of the role she lost barely 10 months ago, and has faced calls to pay back the severance money.
However, Ms Rayner today confirmed she would not be doing so, saying: “I had worked in Government for a period of time and then I came out of Government for just under a year.”
The decision has faced criticism from various opposition parties, including Shadow Housing Secretary James Cleverly.
He told the Daily Mail: “She pocketed a £17,000 reward courtesy of the taxpayer, and now she's got her old job back courtesy of her mate Andy Burnham, who wants to hike taxes on the family home for everyone else.”
The former home secretary said: "Ms Rayner should hand back the cash. Her reappointment just confirms that there is one rule for Labour, and another for everyone else."
Ms Rayner was compelled to leave her positions as Deputy Prime Minister and Housing Secretary last September after a Telegraph investigation revealed she had underpaid £40,000 in stamp duty on an £800,000 property she owned in Hove, East Sussex.
The tax controversy forced her departure from Labour's frontbench in disgrace, and she only resolved the outstanding bill with HMRC in May of this year.
Ms Rayner has maintained HMRC's inquiry found no deliberate wrongdoing or carelessness on her part, and she had always acted "in good faith" throughout.
Property industry figures have reacted furiously to the appointment.
Craig Fish, Director at Lodestone Mortgages, told Newspage: "This feels like a slap in the face to anyone who plays by the rules."
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Rohit Kohli, of The Mortgage Stop, added: "This looks like loyalty being rewarded, not competence being recognised."
Harvey Dhillon, of Zmartly, cautioned ordinary taxpayers would face severe penalties for making the same mistake, stating: "Whatever you think of the politics, that is a two-tier message about tax."
Anita Wright, of Ribble Wealth Management, described the decision as "moral hazard in a sash and rosette", arguing: "The problem isn't that people make mistakes; it's that at the top, mistakes have stopped costing anything."
Red Wall voters have savaged the appointment of Ms Rayner, with residents of Worksop, Nottinghamshire telling GB News that reappointing her was “another mistake.”
The locals were also not fans of Ed Miliband being moved from Energy Secretary under Sir Keir Starmer to Foreign Secretary by Andy Burnham.
Locals told the People Channel: “Out of 10, I’d probably rate Ed Miliband a two!”
“(Ed) Miliband is just a waste of time. He's an absolute waste of time,” another man said.
Reflecting on Mr Miliband’s time as Energy Secretary, the voter said: “You don't know what he's doing.”
He also shared a gloomy outlook for Britain under Mr Burnham generally, despairing: “Things are not going to get better."
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