Rishi Sunak has told his ethics adviser to investigate suggestions that Nadhim Zahawi was forced to pay a fine and millions of pounds in unpaid taxes to HMRC, as the prime minister acknowledged there were “questions that need answering”.
In a move that will place Zahawi, the Conservative party chair, under further intense scrutiny but allows the government to deflect immediate calls for him to be sacked, Sunak reiterated the importance of “integrity and accountability”.
He said his ethics adviser, the newly appointed Laurie Magnus, had been asked to “get to the bottom of everything, to investigate the matter fully and establish all the facts and provide advice to me” on whether Zahawi broke the ministerial code.
Zahawi had “agreed with that approach and has agreed to fully cooperate with that investigation”, Sunak said, stressing that “clearly in this case there are questions that need answering”.
During the investigation, Zahawi will remain chair of the Conservatives, a job that over the next few months will involve masterminding the party’s strategy in the runup to the local elections this spring.
Defending the decision not to suspend Zahawi while Magnus’s inquiry is carried out, Sunak said: “I think it is important we do these things professionally. Integrity and accountability’s really important to me, but it’s also important we do these things properly.”
He said he would “decide on the appropriate next steps” after seeing Magnus’s report.
The approach is similar to that taken by Downing Street after accusations of bullying were made against the justice secretary, Dominic Raab, which Raab denied. Raab has been allowed to remain in post while an independent investigation continues. However, the former Cabinet Office minister Gavin Williamson stood down when a formal complaint about similar behaviour, which he also denied, was made to parliament’s independent complaints and grievance scheme.
Zahawi has faced mounting calls to quit since the Guardian was told he had agreed to pay a penalty to HMRC as part of a seven-figure settlement over his tax affairs. He has not denied that he was under investigation by the tax collection agency while chancellor, when he was in charge of the nation’s finances including taxation.
Labour is pressing Zahawi to reveal when the payment to HMRC was made, and address the estimate that he owed £3.7m but was charged a 30% penalty – taking the total sum paid to £4.8m.
The dispute between Zahawi and HMRC was the result of a non-payment of capital gains tax due after the sale of shares in YouGov, the polling company he co-founded.
Having spent months refusing to answer questions about the unpaid taxes, Zahawi admitted over the weekend that he had paid HMRC what “was due” after it “disagreed about the exact allocation” of shares in YouGov. He said the team that looked at his case found it was a “careless – and not deliberate” – error.
Keir Starmer, the Labour leader, said what had already been revealed about Zahawi merited his dismissal. He called on Sunak to “show some leadership” and sack the Conservative chair, telling broadcasters: “This is a test of the prime minister. He promised us – his first words – integrity and accountability. Well, if those words mean anything, the prime minister should sack him … If he doesn’t, it’s just going to be further evidence, I think, for the British public, as to just how weak this prime minister really is.”
Some Tories have also piled on the pressure. The backbencher Peter Aldous said on Sunday: “Really you shouldn’t have a situation where the chancellor, his private advisers, have or are negotiating a settlement with HMRC. That’s not acceptable.”
The former Tory leader Iain Duncan Smith urged Zahawi to “just clear it up” given the remaining questions the minister has refused to answer about whether he incurred a penalty, when the payment to HMRC was made and the size of it.
The former minister Tim Loughton said Sunak would “take the appropriate action” if further damaging details emerged about Zahawi’s tax affairs, and said it would have been “more helpful” if the Tory chair had explained himself “more fully rather earlier on”.
Fresh allegations about Zahawi continued to emerge after the weekend, with the Times reporting that when he was a business minister, Zahawi wrongly told officials during the Greensill lobbying scandal that he had not exchanged WhatsApp messages with the former prime minister David Cameron that later turned out to have been deleted from his phone. Zahawi has declined to comment on the claim.
Sunak still has confidence in Zahawi and hopes the investigation is finished “as quickly as possible”, No 10 said.
The prime minister’s spokesperson claimed Sunak was not aware that Zahawi had paid a penalty to HMRC when he told MPs in the Commons last week his colleague had “addressed the matter in full”, adding that when Sunak appointed Zahawi he was assured by officials there were “no outstanding issues”.
The investigation into Zahawi’s behaviour will cover his declarations, but Downing Street said it was not being “prescriptive” about the remit, meaning it could also cover any false claims made by Zahawi, legal threats, the missing messages with Cameron and his time as chancellor.