Rishi Sunak has sacked the Conservative party chair, Nadhim Zahawi, after he was found to have breached the ministerial code by failing to declare the HMRC investigation into his tax affairs.
An investigation by the prime minister’s ethics adviser, Sir Laurie Magnus, concluded that Zahawi had made a “serious breach” of the code by not telling officials he was under investigation by the tax body when he was appointed chancellor by Boris Johnson.
He had also failed to officially declare that he paid a settlement to HMRC for tax avoidance when he was given cabinet positions by Liz Truss last September and when Sunak made him Tory chair and minister without portfolio in September.
His departure comes after a damaging few weeks for Sunak, who had pledged “integrity, professionalism and accountability at every level” of his government on entering No 10 but was facing growing calls to sack Zahawi over his tax affairs.
Sunak’s judgment for reappointing Zahawi has come under question from some Conservative MPs, while others felt that the prime minister, who acted within hours of receiving Magnus’s report on Sunday morning, should have sacked him sooner.
He also continues to face scrutiny over what he knew about the minister’s tax affairs and when, amid suggestions he was told there could be a reputational risk to the government when he appointed him in October.
His deputy prime minister, Dominic Raab, is also under investigation over bullying allegations while Johnson, the former prime minister, faces a high-stakes Commons privileges committee inquiry into whether he misled parliament over the Partygate scandal.
Zahawi had faced extensive questions in parliament and the media after it emerged earlier in January that he had agreed to pay an estimated £5m in a settlement to HMRC. The Guardian then reported that the minister had paid a penalty as part of the settlement.
In a letter to the Tory party chair, Sunak said his ethics adviser had concluded there was a “serious breach” of the ministerial code. “As a result, I have informed you of my decision to remove you from your position in His Majesty’s Government,” he said.
Full letter from PM to Nadhim Zahawi here 👇🏼 pic.twitter.com/Eq7hthA8cL
— Pippa Crerar (@PippaCrerar) January 29, 2023
In his own letter to the prime minister, Zahawi did not apologise or explicitly mention the findings of the ethics inquiry into his tax affairs, and suggested that he planned to stay on as an MP “in the coming years”, despite calls to step down.
However, he raised concerns about some media conduct in recent weeks, which he said went beyond legitimate scrutiny of his tax affairs. He singled out a piece in the Independent, headlined “The noose tightens”, which was about calls from fellow Conservative MPs for him to resign.
The former Tory cabinet minister Michael Portillo said it was “commendable” that Sunak had wanted to go through the proper processes. However, he told GB News: “This thing has been in the headlines now for days and days and days and it’s been doing terrible damage to the government, and to him and to the party.
“I think he did have an opportunity to get rid of him earlier. So I think the prime minister will face some criticism for having taken so long … It pains me to say this, but I think on the whole it makes Rishi look weak.”
David Cameron’s director of communications at No 10, Sir Craig Oliver, tweeted: “The PM finally reaches the obvious and inevitable conclusion by sacking Nadhim Zahawi. Rishi Sunak knew nothing this morning that he didn’t know a week ago – he will be lamenting feeling unable to stand up to some backbenchers; instead more damage to the Conservatives brand.”
The cabinet minister Michael Gove defended Sunak’s decision to refer the matter to an ethics inquiry before sacking Zahawi. “As a general rule I think it is important when allegations are raised that they are investigated promptly, but also we shouldn’t rush to judgment before there’s been that investigation,” he told the BBC’s Sunday with Laura Kuenssberg programme.
The HMRC investigation into Zahawi began in April 2021, including a meeting with the minister and his advisers in June 2021. Zahawi told the ethics adviser he had “formed the impression” he was simply being asked questions over his tax affairs. But Magnus said Zahawi should have understood he was under serious investigation.
The minister failed to declare the HMRC investigation to the Treasury’s permanent secretary after his appointment as chancellor by Johnson on 5 July 2022. By that stage the investigation had been ongoing for more than a year; however, Zahawi only updated his declaration on 15 July 2022.
Zahawi committed a second breach of the ministerial code by failing to disclose the fact he had paid a penalty for tax avoidance when he was first appointed to Liz Truss’s cabinet last September, and then to Sunak’s in October.
He had reached a settlement with HMRC in August 2022, but it was not until January this year that the details came to light in the media, with the Guardian then told he had paid a penalty imposed by HMRC.
In his letter to Sunak, the ethics adviser said: “Taken together, I consider that these omissions constitute a serious failure to meet the standards set out in the ministerial code.”
Zahawi issued a statement the day after his HMRC penalty came to light, saying the tax office had concluded that he had made a “careless but not deliberate” error.
But his statement raised as many questions as it did answers, and called into doubt earlier remarks including the assurance in July that his taxes were “fully paid and up to date”, and letters from lawyers threatening legal action against reporters who said this was potentially not the case.
In his letter to the prime minister, Magnus said Zahawi had failed to disclose relevant information – in this case the nature of the HMRC investigation and its outcome in a penalty – at the time of his appointments to cabinet by Truss and Sunak.
“Without knowledge of that information, the cabinet office was not in a position to inform the appointing prime minister,” he added.
However, sources told the Observer that senior officials gave Sunak informal advice about reputational risks of appointing Zahawi given the HMRC investigation, during the period when the prime minister was drawing up his new cabinet. Downing Street strongly denied had been given an informal warning about Zahawi’s finances.
