Rishi Sunak sacks Nadhim Zahawi as Tory chairman after multi-million pound tax row

29 January 2023, 09:02 | Updated: 29 January 2023, 11:30

Nadhim Zahawi has been sacked as Tory party chairman after a row about his tax affairs.

Rishi Sunak ordered his ethics adviser to investigate Mr Zahawi, who briefly served as chancellor last year, over an estimated £4.8m bill he settled with HMRC during his time running the Treasury.

The former Chancellor did not fully reveal the nature of the investigation into his tax affairs or the penalty against him until earlier in January, despite agreeing a settlement in September last year.

Mr Sunak had declined to sack him after the revelations as Downing Street suggested he was not aware Mr Zahawi had paid a reported 30% penalty to the taxman. For his part, Mr Zahawi responded only by repeating his achievements in his pre-political life and in his time in the Cabinet, before taking aim at the press and apologising to only his family.

Scroll down to read Rishi Sunak's letter to Mr Zahawi in full

But his ethics adviser, Sir Laurie Magnus, has found Mr Zahawi "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".

In a letter, published by the Government on Sunday morning, Mr Sunak said: "When I became Prime Minister last year, I pledged that the Government I lead would have integrity, professionalism and accountability at every level.

"That is why, following new information which came to light in recent days regarding your personal financial arrangements and declarations, I asked Sir Laurie Magnus, the Independent Adviser on Ministers’ Interests, to fully investigate this matter. You agreed and undertook to cooperate fully with the inquiry.

"Following the completion of the Independent Adviser’s investigation – the findings of which he has shared with us both – it is clear that there has been 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."

In his findings, Sir Laurie said HMRC had determined "tax was owed" and a penalty should be applied, with HMRC deeming the issue one of a "lack of reasonable care".

He said Mr Zahawi told him a settlement was signed in September last year.

He said Mr Zahawi had formed the impression that he and his advisers were "merely being asked certain queries by HMRC concerning his tax affairs" after the tax authority began its dealings with him in April 2021.

However, Sir Laurie said that after looking over the correspondence, Mr Zahawi "should have understood at the outset that they were under investigation by HMRC and that this was a serious matter".

He wrote: "I consider that an HMRC investigation of the nature faced by Mr Zahawi would be a relevant matter for a Minister to discuss and declare as part of their declaration of interests.

"I would expect a Minister to inform their Permanent Secretary and to seek their advice on any implications for the management of their responsibilities.

"I would likewise expect a Minister proactively to update their declaration of interests form to include details of such an HMRC process."

Nadhim Zahawi sacked

But when he was appointed Chancellor during the mass exodus of cabinet members at the tail end of Boris Johnson's demise as PM, Mr Zahawi made no reference to the investigation when he declared his interests.

He later acknowledged he was "in discussion" with HMRC "to clarify a number of queries". After corresponded in July, Mr Zahawi updated his interests form to say his tax affairs were being investigated but gave no further details.

Sir Laurie wrote: "Given the nature of the investigation by HMRC, which started prior to his appointment as Secretary of State for Education on 15th September, 2021, I consider that by failing to declare HMRC’s ongoing investigation before July 2022 - despite the ministerial declaration of interests form including specific prompts on tax affairs and HMRC investigations and disputes - Mr Zahawi failed to meet the requirement (at paragraph 7.3 of the Ministerial Code) to declare any interests which might be thought to give rise to a conflict."

He said the failure to declare the fact of the investigation could have given rise to a conflict of interest, especially given Mr Zahawi was in charge of the tax system.

Mr Sunak had been criticised for not sacking Mr Zahawi earlier and had been adamant he had not been given a reason to decide against appointing Mr Zahawi to his position. In his letter, Sir Laurie said that by failing to reveal the nature of the investigation and its outcome, the Cabinet Office was not able to tell the PM about it being an issue.

"Taken together, I consider that these omissions constitute a serious failure to meet the standards set out in the Ministerial Code," he said.

Mr Zahawi published a letter on Twitter, in which he said he was proud of the Covid vaccine rollout - having served as vaccines minister previously - and his part in the mourning for the late Queen.

"It has been, after being blessed with my loving family, the privilege of my life to serve in successive governments and make what I believe to have been a tangible difference to the country I love," he wrote.

But he apologised only to his family as he took aim at the press.

"I am concerned… about the conduct from some of the fourth estate in recent weeks," he wrote in a reply posted to Twitter.

"In a week when a Member of Parliament was physically assaulted, I fail to see how one headline on this issue "The Noose Tightens" reflects legitimate scrutiny of public officials. I am sorry to my family for the toll this has taken on them."

The headline appeared on the front page of The Independent.

He told Mr Sunak he would have his support from the backbenches.

Labour figures took aim at the PM over the affair, with Sir Keir Starmer having branded him as weak.

Greater Manchester mayor Andy Burnham said: "I think we're living in very strange times where the disconnect between what's going on in Westminster and the rest of the country is getting bigger and bigger.

"People are getting more and more frustrated about it and the Government really needs to hear that and deal quickly with these things, put them to one side and get the focus back where it needs to be.

"I would love to know how much time has been taken up in Downing Street and Whitethall this week dealing with this situation. I bet they've taken more time on this than the other things I've mentioned."

Rishi Sunak's letter sacking Nadhim Zahawi in full

Dear Nadhim

When I became Prime Minister last year, I pledged that the Government I lead would have integrity, professionalism and accountability at every level.

That is why, following new information which came to light in recent days regarding your personal financial arrangements and declarations, I asked Sir Laurie Magnus, the Independent Adviser on Ministers’ Interests, to fully investigate this matter. You agreed and undertook to cooperate fully with the inquiry.

Following the completion of the Independent Adviser’s investigation – the findings of which he has shared with us both – it is clear that there has been 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.

As you leave, you should be extremely proud of your wide-ranging achievements in government over the last five years. In particular, your successful oversight of the COVID-19 vaccine procurement and deployment programme which ensured the United Kingdom was at the forefront of the global response to the coronavirus pandemic. Your role was critical to ensuring our country came through this crisis and saved many lives. And as the Conservative Party Chairman, you have undertaken significant restructuring to Conservative Campaign

Headquarters and readied us for important work in the coming months. It is also with pride that I, and previous Prime Ministers, have been able to draw upon the services of a Kurdish-born Iraqi refugee at the highest levels of the U.K. Government. That is something which people up and down this country have rightly valued.

I know I will be able to count on your support from the backbenches as you continue to passionately and determinedly serve your constituents of Stratford-on-Avon and represent the many issues and campaigns you are dedicated to. Thank you for your service to this and previous governments.

Yours sincerely

Rishi Sunak