Rishi Sunak will take a zero-tolerance approach to future breaches of the ministerial code after sacking Nadhim Zahawi for failing to be honest about his tax affairs, senior allies have said.
Sir Laurie Magnus, the independent adviser on ministers’ interests, found that Zahawi had repeatedly failed to disclose details about an investigation by HM Revenue and Customs. He also accused the former chancellor of making an untrue public statement.
Sunak sacked Zahawi within an hour of receiving Magnus’s report. The prime minister had been accused of failing to act quickly enough when details of Zahawi’s multimillion-pound settlement with the taxman were leaked a fortnight ago.
A senior ally of Sunak said his decision to sack Zahawi demonstrated that he would not hesitate to act when there was ministerial impropriety.
Dominic Raab, the justice secretary and deputy prime minister, is being investigated over allegations that he bullied members of his private office. He has denied the claims.
Zahawi is furious at the decision to sack him and is considering issuing a formal response to Magnus’s report.
Allies say he was given only 30 minutes to make his case to Magnus and claim that he declared his settlement with HMRC in September, before his appointment as a Cabinet Office minister by Liz Truss and chairman of the Conservative Party by Sunak. They say he has text messages and emails to back up his claim.
“He’s opened himself up to all sorts of problems in the future,” the ally said of Sunak. “The Boris lot always accused Sunak of not having any loyalty. He’s proved the point. Good luck keeping ministers on side now.”
Sunak plans to take his time appointing a new party chairman; the process may last into next week.
Several serving cabinet ministers have been mentioned but there are concerns that there are few candidates who will be able to raise as much as Zahawi was expected to bring in from donors. Jacob Rees-Mogg, the former business secretary, suggested that Boris Johnson should be installed as Zahawi’s successor but there was no expectation that he would take the role.
In his letter to Zahawi, Sunak said: “Following the completion of the independent adviser’s investigation it is clear that there has been a serious breach of the ministerial code. I have informed you of my decision to remove you from your position in His Majesty’s government.”
Zahawi did not mention the findings of the inquiry into his tax affairs in his response but told Sunak he was concerned “about the conduct from some members of the fourth estate in recent weeks” — a reference to the media.
Magnus disclosed that Zahawi was first questioned about his tax affairs in April 2021 but did not view it as a “serious matter” or accept that he was under formal investigation. He said Zahawi’s repeated failure to disclose the investigation and details of the subsequent settlement, including a penalty for tax avoidance, represented breaches of the ministerial code.
He identified seven breaches, including an “untrue” public statement in which Zahawi said that claims he was being investigated by HMRC were unfounded smears. He said: “I consider that Mr Zahawi, in holding the high privilege of being a minister of the Crown, has shown insufficient regard for the general principles of the ministerial code and the requirements in particular, under the seven principles of public life, to be honest, open and an exemplary leader through his own behaviour.”
George Osborne, the former chancellor, told Andrew Neil on Channel 4: “At the moment [Sunak] is being pulled down by a series of scandals which do not directly involve him, are kind of hangovers of the Johnson era. But he needs to do something pretty quickly.
“I think he’ll have learnt lessons even from the Zahawi affair — that you need to act more quickly than he did — and I think that he’s going to try and define himself now as ‘the sleaze buster’, but it’s extremely hard.”
Michael Portillo, a former Tory chief secretary to the Treasury, said Sunak looked weak and must have been kicking himself for ordering an investigation instead of sacking Zahawi. Labour said Sunak must come clean with what he knew about Zahawi’s tax affairs and when.
Seven breaches that determine mr Zahawi’s fate.
Nadhim Zahawi breached the ministerial code on at least seven occasions, the independent adviser on ministers’ interests has found.
A report by Sir Laurie Magnus found that the HM Revenue and Customs investigation into Zahawi’s tax affairs began in April 2021 but he repeatedly failed to declare it. He also said Zahawi made “untrue” public statements about his tax affairs and failed to correct them.
APRIL 2021
HMRC investigation into Zahawi begins, and a face-to-face meeting is held in June 2021. Zahawi does not declare it, later claiming he failed to realise it was a formal investigation.
Magnus, the independent ethics watchdog, says he should have realised it was an investigation and treated it as a “serious matter”. The failure to declare it represents a breach of the ministerial code.
October 2021
Zahawi is promoted to the role of education secretary by Boris Johnson in October 2021. Again Zahawi does not declare ongoing HMRC investigation.
July 5, 2022
Zahawi is promoted to chancellor by Johnson. Again he does not disclose ongoing HMRC investigation.
July 5, 2022
Zahawi is promoted to chancellor by Johnson. Again he does not disclose ongoing HMRC investigation.
July 10, 2022
After reports of an HMRC investigation Zahawi issues a public statement saying that the claims are “inaccurate, unfair and clearly smears”. Zahawi later claims that he was still under the impression at the time he was not under a formal investigation, just answering HMRC queries. Zahawi does not update the record until January 21 this year . Magnus says delay in correcting an “untrue public statement” is a breach of the ministerial code.
July 15, 2022
Zahawi finally declares that his tax affairs are under investigation “following receipt of HMRC’s letter”. He does not provide any further details other than to say that he is clarifying queries.
August 2022
Zahawi reaches an in-principle agreement with HMRC, and makes a final settlement in September 2022. It includes a penalty for tax avoidance. Zahawi does not disclose settlement and penalty until mid-January 2023.
September 2022
Zahawi is appointed chancellor of the Duchy of Lancaster by Liz Truss. He fails to disclose the nature of the HMRC investigation and the fact that he has received a penalty for tax avoidance.
October 2022
Zahawi is appointed chairman of the Conservative Party by Rishi Sunak. He again fails to disclose the nature of the investigation and the fact he has received a penalty for tax avoidance.
January 16, 2023Zahawi updates his declaration of interest to include the outcome of the HMRC investigation.
