Lord Grabiner has become the second Labour peer to quit the party whip in a week. He cited the direction Jeremy Corbyn was taking the party as the reason for stepping down. The barrister and master of Clare College Cambridge described the Labour party as being in "disarray" and that he could not "square [staying] with my conscience".
He told the Times: "I have nothing in common whatever with Corbyn — and I don't believe we are ever going to win an election."
The peer was also concerned about the Labour leader's decision to appoint John McDonnell as his shadow chancellor. He said: "I am concerned with the economic stuff; I am really concerned with the shadow chancellor."
Lord Grabiner will remain a party member but will sit as a crossbencher. A Labour spokesman said to the BBC: "We welcome Tony's continued membership and support of the party.
"We know he has been increasingly busy and less able to attend the Lords to participate in House business and we of course understand his decision to relinquish the Labour whip." The spokesman also highlighted the fact that Lord Grabiner had not voted in the Lords since 2013.
He is the second peer to leave the Labour benches this week, after the former health minister Lord Warner resigned the party's whip, saying that the party is no longer "a credible party of government-in-waiting".
In a letter to the Labour leader, Lord Warner said he would sit as a cross bencher in future, adding: "Labour will only win another election with a policy approach that wins back people who have moved to voting Conservative and Ukip, as well as to Greens and SNP. Your approach is unlikely to achieve this shift."
The news comes just over a month after Corbyn won the leadership with almost 60% of the vote. He has faced criticism from a number of party supporters, with some describing him as being unelectable. Lord Adonis, the former cabinet minister, was the first peer to leave the Labour benches last month.