The Tory party chairman and UK government minister, Nadhim Zahawi, is fighting for his political life after it emerged he made a previously undeclared settlement with UK tax authorities over his personal affairs while he was chancellor of the exchequer, and had effective oversight of British tax policy.
Mr Zahawi is facing calls to resign over the affair, which on Monday also left the British prime minister, Rishi Sunak, exposed to uncomfortable questioning over his own tax affairs.
Mr Sunak has appointed an independent ethics adviser to examine whether Mr Zahawi breached the UK government’s ministerial code over previous non-disclosure of the tax settlement, which related to the transfer to his father and to an offshore trust of his ownership of shares in the polling company YouGov. The BBC has reported the settlement was for about £5 million (€5.7 million) and included a penalty.
“Integrity and accountability is really important to me and clearly in this case there are questions that need answering,” Mr Sunak said on Monday.
The issue is acutely embarrassing for Mr Sunak, who came to power promising ethical leadership and appointed Mr Zahawi as Conservative Party chairman last October after taking over the leadership. He also appointed him to cabinet as a minister without portfolio.
Just last Wednesday in the House of Commons, Mr Sunak rebuffed opposition pressure over Mr Zahawi’s tax affairs by suggesting the matter was closed. Mr Zahawi has faced persistent questioning over his tax affairs since last summer, when former prime minister Boris Johnson appointed him chancellor following the resignation from that position of Mr Sunak. In recent months, Mr Zahawi had even threatened legal action against journalists over the issue.
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Despite the prime minister’s assurances last week that the matter was closed, Mr Zahawi on Saturday released a statement confirming speculation that he made a financial settlement with HM Revenue & Customs. He insisted his actions were “careless” but not “deliberate”.
When pressed on why the prime minister backed Mr Zahawi in the House of Commons just last week, Mr Sunak’s official spokesman told Westminster reporters that the statement made by Mr Zahawi at the weekend constituted “additional facts” previously unknown.
The spokesman said the prime minister had been told at the time of Mr Zahawi’s appointment that there “were no outstanding issues”, when asked what Mr Sunak knew about his tax troubles when he anointed him Tory party chairman and a minister. He said the seemingly incorrect assurances came from officials in the UK’s cabinet office, which vets ministerial appointments. It will be up to the ethics adviser to decide whether to investigate other issues beyond possible ministerial code breaches, such as Mr Zahawi’s legal threats and denials to journalists who investigated his affairs.
The spokesman was asked if the prime pinister will publish his own tax returns. He confirmed that Mr Sunak’s information would be made public “fairly soon”. Such questioning is politically sensitive for Mr Sunak after he faced intense scrutiny last year while chancellor, when it emerged his wife, Akshata Murty, claimed “non-dom” (non-domiciled) UK tax status. She is said to be worth £400 million.
Mr Zahawi, an Iraqi immigrant to the UK, will stay on as Tory party chairman and a minister while he is being investigated. Keir Starmer, the Labour Party leader, called on Mr Sunak to “sack him today”. Further political pressure was heaped on the embattled Mr Zahawi when a report in the Times emerged on Sunday night that he had failed to tell officials about WhatsApp messages he had exchanged with former prime minister David Cameron about a previous financial scandal.