Dido Harding, a Conservative peer who heads up England’s widely criticised test-and-trace system, has been chosen to run a new institute to replace Public Health England, after the controversial decision to axe the agency.

Harding will be named as the chair of the National Institute for Health Protection, which will be charged with preventing future outbreaks of infectious diseases, despite the poor performance of NHS Test and Trace, which she has led since May.

Her appointment, which the health secretary, Matt Hancock, is due to confirm on Tuesday in a speech on the future of public health as a result of the pandemic, has sparked a row over yet another Tory politician being handed a senior role in the health system.

The government’s decision to scrap PHE was first reported on Sunday and prompted a chorus of criticism that Boris Johnson’s administration was trying to shift the blame for its own failings during the pandemic.

Baroness Harding of Winscombe, 52, has been a Conservative member of the House of Lords since she was given a life peerage in 2014 by her friend David Cameron, the then prime minister. Harding, an ex-chief executive of the TalkTalk mobile phone company, is already the chair of the regulator NHS Improvement as well as the contact-tracing programme that is under fire for tracking down too few people who have tested positive for the virus.

“Given Dido Harding’s track record overseeing the set up of England’s sub-par test-and-trace system, many people will be worried to hear that she may be given a pivotal new role in the NHS,” said the Liberal Democrat MP Munira Wilson, the party’s health, wellbeing and social care spokesperson.

“We need to have total transparency in how appointments of this kind are made, to ensure we get the best people for the job.

“Rather than focus on promoting yet another Tory insider, the government would do well to reflect on their handling of this pandemic and launch an independent inquiry to ensure we don’t repeat past mistakes,” said Wilson.

Labour has criticised the “huge holes in the contact-tracing system” in England, which is supposed to trace those who have been in contact with someone who since tested positive for Covid-19, and ask them to self-isolate. Test and Trace has a £10bn budget and the private firms Serco and Sitel are centrally involved. However, it has only contacted 78% of people diagnosed with the virus, and 72% of their contacts, since its creation in May, the organisation’s latest performance figures show.

Harding will be named as the interim chair of the new institute – a merger between PHE and Test and Trace – and will steer it through its first few months as it seeks to improve the testing and tracing of people who may have Coronavirus. Speaking in central London on Tuesday, Hancock will laud it as a combination of PHE’s expertise and Test and Trace’s capacity to track down large numbers of carriers and their contacts.

Dr Chaand Nagpaul, the leader of the British Medical Association, warned ministers that the new public health body should be free of any political influence that might hinder its work. “The BMA strongly believes that the nation’s public health medicine service should be truly public, [and] completely independent of political influence.

“It must be able to operate with full transparency in order to advise the government, inform the public and do its work, which is so vital to the health of the nation””, he added.

Another Tory peer, Lord Prior of Brampton – an ex-Tory MP and ex-deputy chair of the Tory party – has been the chair of NHS England, which runs the health service, since 2018.

Meanwhile, the Guardian also understands that Duncan Selbie – PHE’s chief executive – will become an adviser to the Department of Health and Social Care after losing his job in a shake-up which has been heavily criticised by doctors and public health experts.

The Royal Society for Public Health has voiced its concern about PHE being axed. “We question the timing of an announcement to scrap our national public health agency, in the midst of a global pandemic and before any public inquiry has started, let alone reported,” said Christina Marriott, its chief executive.

“We recognise that there have been some serious challenges in terms of our response to Covid-19, including the timing of the lockdown, the ongoing ineffectiveness of Tier 2 Track and Trace and postcode-level data previously not being available to directors of public health,” she added.