Nadhim Zahawi's career on the line over tax affairs

Party chairman fighting for his job after Prime Minister orders investigation into tax dispute

Nadhim Zahawi's explanation that he had been 'careless' has not been entirely accepted by fellow MPs. Getty
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Nadhim Zahawi is fighting for his political life as cracks begin to appear in support within his party over the investigation into his tax affairs.

Prime Minister Rishi Sunak ordered the inquiry into the conduct of the chairman of the Conservative Party on Monday after claims he resolved a multimillion-pound tax dispute by paying a penalty while serving as chancellor under former prime minister Boris Johnson.

On Tuesday, Home Office minister Chris Philp said Mr Zahawi should be treated as “innocent until proven guilty” and it is “reasonable” for him to continue as party chairman.

Policing minister Mr Philp said it was his understanding that Mr Sunak was told there were “no outstanding issues” in relation to Mr Zahawi's tax affairs when appointing him to the role in the autumn.

Mr Philp, asked on BBC Breakfast about Ms Nokes's call for Mr Zahawi to step aside during the investigation, said: “I don't take that view.”

He added: “We do have a principle, don't we, in this country … innocent until proven guilty. That applies to a whole range of different circumstances.

“The investigation has been launched by the Prime Minister; that is the right thing to do.

“It will get to the bottom of this and then the Prime Minister will make his decision.

“But I don't think it is fair to jump to any conclusions before the investigation has concluded.”

But pressure is mounting on the minister after a senior Tory MP broke ranks to call for Mr Zahawi to “temporarily recuse himself” from his party and Cabinet role until a probe into his conduct is over.

Caroline Nokes, chairwoman of the Commons Women and Equalities Committee, told BBC Breakfast Mr Zahawi should “stand aside until this matter is all cleared up”.

Zahawi's position 'tenuous'

It comes as senior Tory MPs have told The National that the Iraqi-born politician’s position was “tenuous”.

“Clearly in this case there are questions that need answering,” Mr Sunak said on Monday.

He said that “integrity and accountability is really important to me” which was why he had appointed an independent adviser “to get to the bottom of everything”.

The focus on Mr Zahawi, 55, who has agreed to fully co-operate with the investigation, has intensified after it was reported that he had paid almost £5 million in outstanding taxes to His Majesty’s Revenue and Customs (HMRC) that included a £1 million penalty for late payment. He did not disclose the size of the settlement — reported to be an estimated £4.8 million — or whether he paid a fine.

Reports of the financial issue first emerged when Mr Zahawi was appointed chancellor of the exchequer following a raft of resignations in the final days of Boris Johnson’s premiership in July last year.

The substantial amounts involved had allegedly not been previously disclosed and Mr Zahawi’s explanation that he had simply been “careless” has not been entirely accepted by fellow MPs.

Mr Zahawi, the MP for Stratford-upon-Avon, has insisted his “error” over shares in the YouGov polling company he cofounded was “careless and not deliberate”.

He was also facing new allegations that he falsely told officials he had not exchanged WhatsApp messages with Conservative former prime minister David Cameron, who was lobbying for government loans for Greensill Capital.

“Simply to say that it was carelessness I don't think actually works because as it's hard to see how very large sums of money could have escaped people's attention, it's not the sort of thing that you overlook,” a former cabinet minister told The National.

Following Mr Sunak’s announcement of an investigation into the matter colleagues said Mr Zahawi’s position was “looking ever more tenuous” after he had threatened legal action on being appointed chancellor.

“If he has been asked to pay a penalty of a million pounds, that would indicate that there had been a significant omission of declaration so that needs explaining,” said the former minister.

“If he is open about it, then he has a much better chance of surviving. The problem Mr Zahawi has is that saying ‘oh, whoops I didn't declare it’ really doesn’t cut it when you're talking about such huge sums of money.”

While Mr Sunak was satisfied with Mr Zahawi's original account when he appointed him chairman three months ago it now appears he has less confidence in him after resorting to an investigation that at least buys him time.

But some MPs are questioning whether “rigorous questions” should have been asked and greater transparency demanded from Mr Zahawi, who, with a fortune of between £30 million and £100 million, is one of the richest MPs.

However, back in October Mr Sunak was attempting to establish a government representing all factions of his disunited party following the shambles of the tenures of Boris Johnson and, briefly, Liz Truss.

Rishi Sunak's judgement

Questions remain over the Prime Minister’s judgment on appointing Mr Zahawi, a Mr Johnson loyalist, who was involved in an HMRC investigation.

“Rishi needs to explain why he was told that this was not a problem because frankly on the face of it, it's a fairly obvious problem when there’s an unresolved investigation so he had to have pretty strong grounds to go ahead with the appointment nonetheless,” a veteran MP told The National.

Tim Loughton, a fellow MP, said his colleague should have been open about his tax affairs.

“The more transparency, as early as possible, might have avoided all this speculation,” he told the BBC. “If there's more to it then he will absolutely have to stand up and take the consequences.”

British Prime Minister Rishi Sunak at Berrywood Hospital in Northampton on Monday. Getty

The veteran MP stated that colleagues he had spoken to believed that Mr Zahawi was “in quite some difficulty” and needed to be “a lot more open about his answers if he's to have any hope of surviving” as party chairman.

“Unfortunately the statements that he's made have been less than open,” he added. “There's no harm in actually divulging what happened but I think a lot of people believe that his survival is looking a lot more speculative now.”

“Let's assume he was careless,” said the former minister. “Should a bloke who was careless with his own finances to the tune of millions of pounds be chancellor or party chairman?

“People are saying that he needs to give a fuller account of what happened. The sooner he does that, the better it is for him because the story is not going to go away and if he isn't transparent he may not survive.”

In a briefing to journalists on Monday the Prime Minister’s official spokesman declined to comment on Mr Zahawi’s threat of legal action against journalists who planned to expose his tax affairs.

Asked why Mr Sunak had ordered an investigation after vigorously defending Mr Zahawi last week, the spokesman disclosed that “over the weekend, additional facts have been placed in the public domain”.

He added that the Prime Minister believed there were “legitimate questions that need looking into” and therefore he decided to investigate the matter.

Asked if Mr Sunak knew Mr Zahawi had been given a penalty by HMRC at the time of his appointment last October, the spokesman said: “That’s not my understanding.”

He added that the Prime Minister “was advised there were no outstanding issues” with Mr Zahawi when he was appointed.

The spokesman said Mr Sunak retains confidence in Mr Zahawi as Tory party chair and hopes the investigation into him is completed “as quickly as possible”.

“He retains the Prime Minister’s confidence, that’s why he continues in the role,” the spokesman said.

He could not say when investigation would be finished and acknowledged it would be up to Mr Sunak if he wants to disagree with its conclusions.

“The Prime Minister remains the final arbiter of the [ministerial] code,” the spokesman said.

Labour leader Keir Starmer has said Mr Zahawi's position was “untenable” and he should be sacked.

He said: “I think it’s obvious that Zahawi can’t stay as Tory Party chair. The very idea that he can be discussing and negotiating his own tax affairs with the body that he’s supposed to be running, everybody knows it’s wrong.

“He clearly isn’t going to resign and so the Prime Minister needs to show some leadership.

“This is a test of the Prime Minister. He promised us — his first words — integrity and accountability.

“Well, if those words mean anything, the Prime Minister should sack him, and sack him today and show some leadership.”

Updated: January 24, 2023, 2:40 PM