David Cameron has been accused of encouraging the revolving door between Westminster and the private sector by appointing a former Conservative minister, who earns up to £800 a day from a political consultancy firm, to chair the government’s lobbying watchdog for a five-year term.

The prime minister named Tory peer Angela Browning as chairman of the advisory committee on business appointments (Acoba), which recommends whether ministers, senior civil servants, and top aides can take up private sector jobs on leaving their government posts.

The installation of a party insider to such a sensitive role is likely to reignite concerns about the effectiveness of Acoba, which has been criticised by Labour for being toothless when it comes to stopping former ministers taking up lucrative lobbying jobs.

Her appointment was announced on the last day before the Christmas recess.

Browning has promised to be “absolutely” independent in the role.

She was a minister in the Home Office until 2011 and is now paid between £300 and £800 a day for occasional work for a political consultancy firm, Cumberlege Eden. The firm trains people in the health industry on topics such as “how to influence the political agenda” and how to “gain experience of influencing the local MP over a topical health issue”, according to its website.

Lady Browning, a former deputy chairman of the Conservative party, will take up the role four months before the general election, after which it is possible a raft of her colleagues will want to take up private sector jobs, and will need approval.

A senior Tory source said Browning had been through the usual process for public appointments including applying for an advertised role and having a panel interview, while a spokesman for Acoba stressed that her private sector job was fully declared to the committee, of which she is already a member.

Her appointment was also accepted by the House of Commons public administration committee, chaired by Tory backbencher Bernard Jenkin. However, not all members of the committee were happy with the choice, with opponents including Paul Flynn, a Labour MP, and Greg Mulholland, a Liberal Democrat MP.

Flynn said the appointment was a sign of Cameron’s failure to overhaul the system that scrutinises lobbying, which the prime minister once warned would be the next big political scandal.

“I have known Baroness Browning for a long time. She was a very good backbencher. But she sees nothing wrong with the way the committee currently operates,” Flynn said. “The revolving door is deeply corrupting not just when ministers leave government but when they look for these jobs while still in government. It’s not theoretical, it’s actually happened.”

He added: “You’ve got the great and the good who think it’s normal to pick up huge sums for a few days’ work and are actually presiding as judge and jury over what people like themselves do. In no way is it a watchdog. In no way is it a body in the public interest. It is a body to protect their own over-awarded jobs in retirement years. It ... goes to the heart of what is wrong with the political system.”

At the public administration committee hearing Browning stressed that she would be neutral, pointing to her work as an electoral commissioner and on the standards committee as an example of where she had to “balance sometimes quite delicate facts and issues in a very non-partisan way”.

The appointment is one of several instances in which Cameron has allowed political figures to run independent watchdogs.

He was criticised earlier this year for allowing Tony Caplin, a former Tory chief operating officer, to chair the £60bn Public Works Loans Board. Caplin was forced to resign after it emerged he was made bankrupt in 2012.

Cameron put Laura Wyld, a PR consultant and former Conservative campaigns officer, in charge of his public appointments unit, a politically impartial role.

Browning was a Conservative MP for Tiverton from 1992 until 2010, during which time she was an agriculture minister, sat on the shadow front bench and was a deputy chairman of the party. After being made a peer in 2010, she was made a minister for crime prevention in 2011 before stepping down for health reasons.

A former teacher and then management consultant, Browning will receive around £8,000-a-year in public money for the role, which will be two to three days a month of work.

Labour has already accused the advisory committee of being “toothless”, even before the appointment of a Tory peer to run it, because the body has never recommended any outright ban on a former minister taking up a private sector job.

Ed Miliband’s party has said it will shake up Acoba and give it proper powers to curb lobbying.