Rishi Sunak sacks Nadhim Zahawi after tax probe finds ‘serious breach’ of rules

Sacking comes six months after The Independent revealed HMRC probe into former chancellor’s taxes

Adam Forrest
Political Correspondent
Sunday 29 January 2023 19:04 GMT
Nadhim Zahawi sacked for 'breach of Ministerial Code'

Rishi Sunak has finally sacked Nadhim Zahawi as Tory party chair over a “serious breach” of the ministerial code, more than six months after The Independent first revealed details of an HMRC investigation into Mr Zahawi’s tax affairs.

The former chancellor – who is now facing calls to resign his seat as an MP – did not apologise for his handling of his tax affairs and lashed out at the media in his exit letter to the PM.

More than eight days after it emerged that Mr Zahawi had paid a £1m fine to HMRC, the prime minister told him in a letter that there had been “a serious breach of the ministerial code” and that he would be stripped of his cabinet role.

Mr Sunak revealed on Sunday morning that his ethics adviser, Sir Laurie Magnus, had judged Mr Zahawi to have broken ministerial rules seven times by failing to be open and honest during the tax saga – including by making “untrue” public statements.

But former Tory minister Michael Portillo said the length of time it took Mr Sunak to act had made the prime minister “look weak”, while Craig Oliver, a former director of communications for No 10, agreed that the delay had made the PM appear “quite weak”.

Conservative MP Nigel Mills also shared this frustration. “I don’t see why we couldn’t have been here a week ago,” he told The Independent, adding that it was “odd” for Mr Zahawi to be sacked for a lack of transparency rather than the fact that he had been fined £1m by HMRC while chancellor.

Tory MPs shared their anger at Mr Zahawi for dragging the controversy out. One senior party figure said the former chancellor had badly damaged the government by not “stepping back and sorting it” last week. Another MP said Mr Zahawi had “ruined himself”, adding that “there is no way back for him” in government.

Former Brexit secretary David Davis told Channel 4 that the chances of Mr Zahawi returning to the cabinet were “vanishingly small”, adding that it would be “quite difficult for him” to keep his seat despite a majority of almost 20,000.

Labour accused Mr Sunak of being “too weak” to act quickly during the tax saga, and called for “full transparency” from No 10 about when the PM became aware of the HMRC probe into Mr Zahawi’s tax affairs, and what due diligence was carried out before Mr Zahawi was made party chair.

The Independent was first to reveal that HMRC was investigating Mr Zahawi’s taxes in relation to an offshore company holding shares in YouGov, the polling company he co-founded. It emerged earlier this month that Mr Zahawi had paid a £1m penalty to HMRC as part of a £5m tax settlement.

Mr Zahawi initially dismissed the story as a “smear”, claimed he was “not aware” of the HMRC investigation, and threatened The Independent and others with legal action. But last Saturday, the minister admitted that HMRC had found he had made an “error” that he claimed was “careless and not deliberate”.

Sir Laurie’s report revealed that Mr Zahawi had attended a meeting with HMRC tax officials in June 2021 about an investigation launched a couple of months earlier – well before he was made education secretary in September 2021.

The Independent was first to reveal the HMRC investigation
The Independent was first to reveal the HMRC investigation (Independent)

Mr Zahawi told Sir Laurie he had “formed the impression” that he was only being asked “certain queries” over his tax affairs. But the ethics adviser said Mr Zahawi should have understood the investigation was a “serious matter”.

Sir Laurie also accused him of making an “untrue public statement” about the investigation last summer. In addition, the report found a series of serious “omissions” in the information offered by Mr Zahawi to government officials, which amounted to a further breach of the ministerial code.

By failing to declare the tax issue before Boris Johnson made him chancellor in July 2022, Mr Zahawi had failed to declare interests “which might be thought to give rise to a conflict”, said the report.

Sir Laurie also told the prime minister that Mr Zahawi had “failed to disclose relevant information” on the tax investigation when he was appointed Cabinet Office minister by Liz Truss in September and Conservative Party chair by Mr Sunak in October.

Nadhim Zahawi is now facing calls to resign his seat
Nadhim Zahawi is now facing calls to resign his seat (AP)

“Taken together, I consider that these omissions constitute a serious failure to meet the standards set out in the ministerial code,” wrote Sir Laurie, adding that Mr Zahawi had “shown insufficient regard” for the code and its requirement that he should be “honest, open and an exemplary leader through his own behaviour”.

In a letter to the prime minister, Mr Zahawi said Mr Sunak could be “assured of my support from the backbenches in the coming years” – but offered no apology over the controversy. Mr Zahawi said he took pride in having worked on the Covid vaccine rollout along with his role in making arrangements for the Queen’s funeral.

Anneliese Dodds, the Labour Party chair, said Mr Zahawi should have been sacked “when this murky affair first surfaced”, adding: “This doesn’t change the fact that [Mr Sunak’s] government is drowning in sleaze.”

The Observer reported that Mr Sunak had received informal advice in October on the possibility of a reputational risk arising from Mr Zahawi’s tax affairs. But a No 10 spokesperson denied the claim, saying the PM “was not informed of these details, informally or otherwise”.

Rishi Sunak and Nadhim Zahawi have both been under pressure over the tax saga
Rishi Sunak and Nadhim Zahawi have both been under pressure over the tax saga (PA/Getty)

The Liberal Democrats called on Mr Zahawi to resign his seat as an MP. “He has shown he is unfit to serve in cabinet and unfit to serve the people of Stratford-on-Avon,” said deputy leader Daisy Cooper.

The party also called on the government to clarify whether Mr Zahawi had informed the attorney general before issuing threats of legal action against journalists, and demanded an inquiry into the matter.

Some Tories called for an overhaul of the vetting process for ministerial appointments. Former culture secretary Ed Vaizey criticised the fact that ministers don’t receive “any kind of positive vetting”. Tory MP Robin Walker told the BBC that he “did not see” why ministers were not vetted in the same way as those put forward for honours.

Former Tory chancellor George Osborne he told The Andrew Neil Show on Channel 4 that Mr Sunak was being “pulled down by a series of scandals” and would have to act “pretty quickly” to draw a line under perceptions of Tory sleaze.

He said Mr Sunak may need to explain in greater depth his own resignation last year over Mr Johnson’s approach to standards. “I think he’ll have learned lessons from the Zahawi affair, that you need to act more quickly than he did – and I think he’s going to try and define himself now as ‘the sleaze-buster’,” said Mr Osborne.

Cabinet minister Michael Gove suggested that the Tories should not be “damned” by Mr Zahawi’s “sin”, when he was questioned on the BBC’s Sunday with Laura Kuenssberg. He said Mr Sunak had acted “decisively” and that Mr Zahawi should “absolutely not” quit as an MP.

Mr Sunak now faces the tough task of replacing Mr Zahawi at CCHQ, while Stephen Massey, the party’s chief executive, has stepped in as interim chair.

Jacob Rees-Mogg said Mr Johnson has “all the qualities” to be Tory chair. “He is charismatic, he rallies the troops – he’s a sort of fully loaded Conservative,” the Johnson loyalist told GB News.

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