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23 January 2023

Rishi Sunak must sack Nadhim Zahawi to retain any credibility

The Prime Minister’s promise of “integrity, professionalism and accountability” has been shattered.

By Martin Fletcher

Did you understand Nadhim Zahawi’s weekend statement on his tax affairs? I didn’t either.

It was evidently crafted with immense care by the Conservative Party chairman’s lawyers and PR advisers. It was designed to portray him in the best possible light while seeking to conceal his transgressions.

He talked about the “confusion” over his finances when the right term would have been “raging controversy”. He insisted that “scrutiny and propriety are important parts of public life”. He talked of YouGov, the polling company he founded, and how he was “incredibly proud of what we achieved. It is an amazing business that has employed thousands of people and provides a world-beating service”. He referred to “discussions” with HM Revenue and Customs about the division of YouGov shares between him and his father.

Drill down through the verbiage, however, and you finally reach a hard and inescapable fact. HMRC took issue with a share allocation that minimised, or negated, Zahawi’s tax bill when those shares were sold. “They concluded this was a ‘careless and not deliberate’ error. So that I could focus on my life as a public servant, I chose to settle the matter and pay what they said was due, which was the right thing to do,” Zahawi’s statement concluded piously.

Let’s translate all that into plain English: Zahawi, the man Boris Johnson appointed chancellor of the exchequer last summer and, by extension, put in charge of HMRC and the nation’s finances, had avoided paying his taxes.

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We have learned, though Zahawi failed to mention this in his statement, that he was forced to pay more than £3m – an oversight which stretches the definition of “carelessness” to its limit; that he paid up only after he became chancellor last summer; and that he had to pay a 30 per cent penalty (a fine, in common parlance) that brought the total to £4.8m. It appears that the contentious YouGov shares were held by Balshore Investments, an offshore company registered in Gibraltar. It has also transpired that Zahawi had sought to sue those who first began to investigate his affairs, and had categorically denied that he had ever avoided taxes.

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It is hard to disagree with Rachel Reeves, the shadow chancellor, who says of the unfolding scandal: “It stinks.”

Nor is it a one-off. A concurrent “confusion”, to use the fashionable euphemism, involves Richard Sharp, the BBC chairman and an old chum of Boris Johnson’s. In late 2020, the Sunday Times reports, the former Goldman Sachs banker helped to arrange an £800,000 loan guarantee for the cash-strapped prime minister from Sam Blyth, a wealthy Canadian. Weeks later Johnson nominated Sharp for the BBC post.

None of this was declared at the time. We are asked to believe that Johnson promised no quid pro quo, and that the subject was not even mentioned when he, Sharp and Blyth dined privately together at Chequers that December. Once again, Labour is rightly demanding an investigation into an affair that may or may not have broken the rules, but undoubtedly fails the smell test. Indeed, it stinks too.

In the meantime the Tory peer Michelle Mone is being investigated over allegations that she and her children secretly received £29m via an offshore company from the profits of a government PPE contract. That contract was awarded to a business that she had recommended to ministers during the Covid-19 pandemic, securing it a place in the government’s infamous “VIP lane”.

And Johnson’s resignation honours list is expected shortly. It reportedly runs to more than 100 names, and if Johnson’s past record is anything to go by those names will include numerous donors, cronies, political stooges, supportive newspaper editors and relatives. Might Christopher Harborne, the Thailand-based businessman who has given Johnson £1m to set up a post-prime ministerial office, be on the list? Or (were he not already a peer) Anthony Bamford, the JCB chair who paid for Johnson’s wedding last July and has seemingly paid his living costs ever since?

Less than three months have passed since Rishi Sunak entered No 10 promising a government of “integrity, professionalism and accountability at every level”. Already we seem to have returned to the bad old days of peak Johnsonism when the so-called “people’s government”, the self-styled champion of deprived Red Wall voters in the north and Midlands, routinely doled out jobs, baubles, contracts and access to a tiny, well-connected metropolitan elite; when the prime minister constantly evaded and obfuscated, cabinet ministers had to defend the indefensible in interviews, and the public were contemptuously fed explanations that defied all credibility; and when the Financial Times asked the question: “Is the UK’s democracy for sale?”

To be fair, today’s scandals are mostly Johnson’s legacy (though it appears that Sunak knew of Zahawi’s tax avoidance when he appointed him the Tory party chairman). The alleged transgressions took place during his prime ministership, not Sunak’s. But it’s not good enough for the Prime Minister to tell parliament, as he did last Wednesday, that Zahawi “has already addressed this matter in full and there’s nothing more that I can add”.

It’s not acceptable for Dominic Raab, the Deputy Prime Minister and Justice Secretary, to brush aside legitimate questions, as he did last weekend, by saying that Zahawi had been “very transparent” when he so manifestly had not. It’s wrong for James Cleverly, the Foreign Secretary, to duck questions about Zawahi, as he did on Sunday, by saying he did not know the answers because he had been “having a bit of a rest and doing some shopping”.

There’s not a lot Sunak can do about Sharp’s appointment two years on, but the Zahawi story is not going away. It will continue to generate embarrassing headlines about Tory sleaze. It will dog Zahawi as he seeks to carry out his duties as party chairman. It will tarnish Sunak’s government unless and until he does the right – and politically prudent – thing. Belatedly acknowledging that “there are questions that need answering” and asking his ethics adviser to investigate, as Sunak did this morning, is merely a diversionary tactic. The Prime Minister must know the truth. He was surely told it before he appointed Zahawi to his present post. He should dismiss him now.

[See also: Can Nadhim Zahawi survive the tax row fallout?]

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