Margaret Hodge has made a formal court apology for falsely branding a sex abuse victim as "extremely disturbed".
Mrs Hodge says she's up to the job
The children's minister had already agreed to give £10,000 to a charity nominated by victim Demetrious Panton and pay his legal costs.
But despite welcoming Mrs Hodge's statement, Mr Panton insisted she should still quit the government.
The minister made her remarks in a letter to the BBC which was then broadcast by the corporation
Mrs Hodge was complaining about an inquiry into a child abuse scandal in London's Borough of Islington - the council she used to lead.
After Mr Panton threatened to sue, a deal was hammered out by his solicitors and those representing the minister in which she also agreed to write to him to explain her comments.
Mr Panton said later: "It's the first time I have smelled the sweet smell of victory.
"I am here today victorious over a minister who made a damning remark about me and has had to withdraw that remark because there was absolutely no basis for it."
In an earlier statement Mrs Hodge confirmed the money would go to crime prevention charity Nacro.
On Sunday Labour's former deputy leader Roy Hattersley stopped short of calling on Mrs Hodge to resign but said she was now "vulnerable".
That came after Tory calls for the minister to quit
Lord Hattersley said: "She's not perhaps vulnerable in the short term, but she has to do a number of things which many individuals would regard as such a humiliation as to be too great to endure - or at least too great to endure in office - perhaps endure from the backbenches."
He stressed: "It's perhaps a sign of her toughness, her resilience, her principles, that she wants to go on fighting...
"But I think some people would find that easier to endure on the backbenches than on the front."
Mr Panton said at first he assumed someone from social services had told Mrs Hodge he was "extremely disturbed", but it has emerged that this was not the case.
On Saturday, he told the BBC: "There is a moral context in our society and that makes it clear that you
do not malice an individual who has already been through such a traumatic
"If she can't provide a satisfactory explanation as to why she described me
as an extremely disturbed person then I am left with no alternative but to think
that she did so out of pure malice."
Mrs Hodge's "extremely disturbed" comments came in a letter to BBC chairman Gavyn Davies, read out on Radio 4's Today programme.
Mrs Hodge said the letter was never meant to be published.
A Downing Street spokesman has dismissed speculation she would be sacked by Prime Minister Tony Blair.
The minister's court statement read: "Mrs Hodge is sorry for the distress caused to Mr Panton in recent days.
"She would like to apologise unreservedly for using the words
"an extremely disturbed person" with reference to him - as she said in her letter she will not repeat these words again.
"She knows he suffered appalling abuse in the 1970s when he was young
and vulnerable from the very people who should have protected and
cared for him.
"Anyone in this situation would rightly feel angry and
let down after so many years of being disbelieved.
"She has never
sought to belittle or invalidate the experience of those who have
experienced physical or sexual abuse.
"Over many decades all victims
of abuse in children's homes in Islington or elsewhere were betrayed
by those in whose care their safety and well being was entrusted.
"She wishes Mr Panton all the best for the future and she is genuinely
sorry for having contributed to his pain and anger. Mrs Hodge
withdraws the published words and accepts that they ought never to
have been written."
Outside court Mr Panton said: "She has done the right thing by me but she should still resign as Minister for Children".