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16 January 2023

Nadhim Zahawi’s tax affairs undermine Rishi Sunak’s call for Conservative “accountability”

If they want to prove their integrity, ministers should make their tax returns public as a matter of course.

By Rachel Wearmouth

Tory chairman Nadhim Zahawi has agreed to pay several million pounds in tax after a dispute with HMRC over his family’s financial affairs, according to the Sun on Sunday. The news comes after intense scrutiny of his use of an offshore family trust called Balshore Investments, registered in Gibraltar, which held shares in YouGov – the polling company he co-founded.

Zahawi says he was not a beneficiary of the trust but, according to the report, records show that payments made to YouGov on his behalf came partly from Balshore dividends. Balshore’s £20m stake in YouGov was sold in 2018, and the think tank Tax Policy Associates estimates the company’s sale of the shares could have incurred capital gains tax of £3.7m.

A spokesperson for Zahawi has said the cabinet minister’s taxes “are properly declared and paid in the UK. He is proud to have built a British business that has become successful around the world.”

Why is it so important that ministers pay their taxes and be transparent about it? Because they expect others to do so, and make important decisions about public finances which have a huge impact on people’s lives.

The payment to HMRC to settle the Balshore issue could be more than the £2m Zahawi, as the former schools minister, boasted the Department for Education had allocated to a holiday hunger programme in 2018, for example. The “exciting” pilot scheme, held up as an example of a compassionate Conservative government, was needed because kids on free school meals were not getting enough to eat out of term time.

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Since being elected in 2010, Zahawi has voted: for the two-child cap – also known as the “rape clause” – which limited benefits to two children unless the mother could prove the third was a result of rape; for some disability benefits to be cut; for welfare not to rise in line with prices and for the £20 uplift to Universal Credit to be slashed.

Zahawi, who is thought to be worth more than £100m, also voted for the bedroom tax. This is not to be confused with his “spare groom tax”, when the Stratford-upon-Avon MP notoriously claimed public money to heat the stables at his mansion – something he later said was a “genuine mistake”.

One of his first actions when appointed chancellor – he was in post for just 63 days because… Liz Truss – was to declare himself “determined” to cut taxes. The levy that appeared to vex the one-time leadership contender most was corporation tax. This is the politician whom Rishi Sunak has appointed party chairman, to convince voters who backed the party in 2019 that the Tories are on their side. In this economy? Good luck with that!

The Prime Minister doesn’t exactly have a clean sheet himself when it comes to transparency on tax. His wife, Akshata Murty, who now lives in No 10, was registered as a non-dom until last year, when she was effectively shamed into giving up this status and began paying British taxes on her worldwide income. Murty said she was “so proud” to live in the UK and defended her former status as “entirely legal”. Legal, but harmful to her husband’s political prospects perhaps.

Cabinet ministers have extraordinary powers to shape the lives of people in Britain. If Sunak meant it when he pledged “integrity, professionalism and accountability at every level”, asking his ministers to publish their tax returns as a matter of course would be a good start.

This piece first appeared in the Morning Call newsletter; subscribe here.

[See also: The murky case of the tax expert, the Chancellor and his lawyers]

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