Ed Balls has defended his role in the removal of Sharon Shoesmith after the death of Peter Connolly, insisting he would "do the same thing again".
Mr Balls, who was Children's Secretary at the time, removed Ms Shoesmith from her role after a damning report on the death of Peter Connelly.
Balls, who is now the shadow chancellor, said: "I made the decision to remove the person who had failed, I did so in the best interests of children across the country. Faced with the same situation I would do the same thing again."
The Labour MP earlier said the payout to Sharon Shoesmith left "a bad taste in the mouth".
Eric Pickles said Haringey Council is "bankrolling a state-sponsored cover-up" in its payout to Sharon Shoesmith.
The Communities and Local Government Secretary said there should be no rewards for failure in the public or the private sector.
– Communities and Local Government Secretary Eric Pickles
We've been very clear that legal devices like non-disclosure or compromise agreements should not be used to gag staff or brush under the carpet golden goodbyes to senior staff.
I fail to see how Haringey Council's secretive actions are in the public interest, given the astonishing sum of taxpayers' money involved and the immense public concern and upset at the Baby P scandal.
Bankrolling a state-sponsored cover-up is a massive error of judgment by Haringey Council, and compounds their mishandling of the whole affair.
Former child protection boss Sharon Shoesmith posted a statement online saying she wants to resume work with children, according to BBC Radio 4's World at One.
The statement read: "A final farewell to Haringey as my case concludes. I wish those of you in children's services, especially in Haringey, success, strength and courage in all that you do.
"Children have been my life's work and I hope to continue in some capacity soon now that my PhD is almost complete."
Downing Street has said that the Department for Education's contribution to Sharon Shoesmith's payout will be made public.
– Downing Street spokesman
As part of the Court of Appeal ruling the Department for Education was ordered to pay a contribution to her payout.
Whilst that contribution hasn't been agreed the Department for Education will make public the amount that it is contributing.
The payout to Sharon Shoesmith over her unfair dismissal following the Baby P tragedy "leaves a bad taste in the mouth", former children's secretary Ed Balls told BBC Radio 5 Live .
– Shadow chancellor Ed Balls
An independent report said there were disastrous failings in Haringey children's services.
They said the management was at fault. Sharon Shoesmith was the director of children's services and so of course it leaves a bad taste in the mouth that the person who was leading that department and responsible ends up walking away with, it seems, a large amount of money.
Time Loughton, the Conservative former children's minister, told the BBC Radio 4 Today programme that Sharon Shoesmith's payout was "effectively rewarding failure".
– Tim Loughton, Tory former children's minister
When you are appointed a director of children's services - this is the whole point of the reforms after Victoria Climbie, which again happened in Haringey - is that the buck has to stop somewhere and someone has to take responsibility.
You don't expect that person accepting responsibility, reluctantly in this case, to get a very large cheque on the back of it as well.
Conservative MP Charlotte Leslie, a member of the Commons education select committee said, Sharon Shoesmith should "demonstrate personal responsibility" following the Baby P tragedy.
The MP told Newsnight, "A blame culture is not the same as a culture in which people take responsibility and accountability."
Ms Shoesmith's lawyers argued that she was the victim of ''a flagrant breach of natural justice'' fuelled by a media witch-hunt.
Former child protection boss Sharon Shoesmith is set to receive a six-figure payout for being unfairly dismissed following the Baby P tragedy, according to BBC 2's Newsnight.
A settlement which could reach up to £600,000 has been agreed, although Ms Shoesmith may receive a lower sum, the programme reported, stating that some of the money will come from central Government.
Ed Balls, while Education Secretary, removed Ms Shoesmith from her £133,000-a-year post as Haringey Council's director of children's services after a damning report on the death of Peter Connolly, known as Baby P.
She was then fired by the north London council without compensation in December 2008, after a report from regulator Ofsted exposed how her department had failed to protect 17-month-old boy.