UK prime minister Rishi Sunak has sacked Nadhim Zahawi as chair of the Conservative party after his ethics adviser concluded there had been “serious breaches” of the ministerial code.
Sunak finally jettisoned Zahawi after weeks of stories about his tax affairs, which have been politically damaging for the ruling party during a historic cost of living crisis.
The sacking represents a major U-turn for Sunak who previously stood behind Zahawi, claiming in the House of Commons earlier this month that the MP had “addressed this matter in full”.
In a letter published by Downing Street on Sunday morning, the prime minister said he had intervened in line with his pledge to ensure his government would have “integrity, professionalism and accountability at every level”.
Sunak asked Sir Laurie Magnus, ethics adviser, to investigate Zahawi’s tax affairs on Monday after it emerged that the MP had made a settlement of about £5mn to HM Revenue & Customs last summer — including payment of a penalty.
“It is clear that there has been a serious breach of the ministerial code,” Sunak wrote. “As a result, I have informed you of my decision to remove you from your position in His Majesty’s Government.”
Magnus’s investigation found that the former Tory chair started his “interaction” with HMRC in April 2021 and settled the dispute in August last year, with a settlement agreement signed in September.
The ethics adviser said the technical details of the tax investigation were outside the scope of his review, which instead focused on Zahawi’s handling of the matter and whether he had behaved with the “highest standards of propriety”.
All ministers are required to a complete declaration of interests form — which include questions about their tax affairs — and ensure the forms are kept up-to-date at all times, while also discussing potential conflicts regularly with their permanent secretaries.
Magnus said Zahawi had thought that his meeting in June 2021 with HMRC was not a formal investigation but “merely being asked certain queries . . . concerning his tax affairs”. Only on July 15 2022 did he receive a letter from the tax authority making it clear there was an investigation, the MP had said.
“I consider that an individual subject to the HMRC process faced by Mr Zahawi should have understood at the outset that they were under investigation by HMRC and that this was a serious matter.”
Zahawi should have informed his permanent secretary and sought their advice, he concluded.
“I would likewise expect a minister proactively to update their declaration of interests form to include details of such an HMRC process,” Magnus added.
When Zahawi was appointed chancellor on July 5 last year he completed a declaration of interests form with no reference to the HMRC investigation.
A later form acknowledged in an attachment that Zahawi was in discussion with HMRC to “clarify a number of queries”. Only after receiving HMRC’s letter on July 15 did Zahawi update his declaration of interests — repeating the previous statement that he was clarifying inquiries.
As a result, Zahawi failed to meet a requirement in the ministerial code to declare any interests that might be thought to give rise to a conflict of interest, Magnus concluded.
The ethics adviser confirmed that the settlement with HMRC included a penalty applied on the basis of “carelessness”, indicating a failure to take “reasonable care” in relation to his tax affairs.
Zahawi failed to update his declaration of interest form when he agreed a settlement in principle with HMRC in August, failing to declare it until last weekend, he concluded.
In October, when Sunak reappointed Zahawi to the cabinet, the MP had failed to disclose sufficient information to the Cabinet Office — meaning that the prime minister was uninformed of the situation.
These omissions breached the ministerial code, said Magnus.
The report also criticised Zahawi for claiming on July 10 last year that news reports about him being under investigation were “inaccurate, unfair and are clearly smears”.
Ministers have to be open with parliament and the public and not give misleading statements under the code.
“I consider that an individual subject to the HMRC process faced by Mr Zahawi should have understood that they were under investigation by HMRC and that this was a serious matter,” said Sir Laurie.
Daisy Cooper, deputy leader of the Liberal Democrats, said Sunak should never have taken so long to act. “Sunak has finally acted after spending days defending the indefensible . . . his first 100 days in office have been tarnished by endless Conservative sleaze and scandals.”
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