Nadhim Zahawi sacking: the questions still facing Rishi Sunak

Decision came out of the blue, say sources, as Tory MPs ask what prime minister knew and when

Although Nadhim Zahawi has now been sacked and Rishi Sunak has vowed to “restore integrity” to UK politics, the prime minister still faces scrutiny over his handling of the whole affair.

Tory MPs have questioned his judgment in appointing Zahawi to his cabinet in the first place – and asked what he knew, and when.

Sunak has also faced criticism over the political damage that has been inflicted on the party from weeks of bad headlines, when he could have sacked his former Tory chair on the spot.

The checks and balances of Whitehall’s system of ministerial declarations have also come under the spotlight. Here are some of the key questions that remain not fully answered.

Were Zahawi’s legal threats to journalists and a tax campaigner a breach of ministerial code?

The prime minister’s ethics adviser, Sir Laurie Magnus, said Zahawi’s initial statement to the media in July – that he was not under investigation by HMRC – was “an untrue personal statement” and that the ministerial code had a “general duty to be accurate in statements to ensure a false impression is not given or maintained”. He did not update his statement until January this year.

What the report did not mention was that Zahawi threatened legal action against newspapers as well as the tax commentator Dan Neidle, who said there were demands that he retract his statements and warnings that publishing his correspondence with Zahawi’s lawyers would be “a very serious matter”.

Was the substance of avoiding paying tax a breach of the code?

At the No 10 briefing on Monday, Downing Street suggested that on the substance of tax avoidance in general, there were theoretically “elements of code that could have been breached”, but said that was hypothetical.

Magnus did not examine this – only Zahawi’s conduct in public, as well as his transparency with officials and the prime minister. In his letter, Magnus said that the “technical detail of HMRC’s investigation and their determination is outside my scope”.

Did Zahawi tell the Treasury’s top official about his settlement with HMRC and what did he do with the information?

Sir Tom Scholar was permanent secretary while Zahawi was chancellor – though removed by Kwasi Kwarteng when Liz Truss became prime minister. Furious allies of Zahawi have briefed that he told Scholar about the HMRC investigation and the fine – a claim that did not appear in the letter from Magnus to Sunak.

No 10 has said that Magnus was able to speak to all the parties involved, without specifically confirming one of them was Scholar. “I would say that he was able to speak to whoever he wished during that process and we’re confident he established the facts,” Sunak’s spokesperson said.

Was Zahawi given the opportunity to respond before being dismissed?

The other key grievance from Zahawi – according to those close to him – is that his dismissal came like a bolt from the blue at a time he thought the investigation was ongoing. It is claimed he was still sending information to Magnus on Saturday evening, having had a 30-minute interview with him on Wednesday.

Magnus sent the report to the prime minister at 7am, who spoke to Zahawi an hour later, and it was released before 9am. This has led to claims of unfairness, that the minister was given no opportunity to challenge anything in the letter which sealed his demise.

Was Sunak given an informal warning about the reputational risk around Zahawi and his tax affairs before he appointed him in October?

Yes, according to well-placed sources. They claim that during the period when the prime minister was drawing up his new cabinet, senior government officials gave him informal advice about the risks from an HMRC investigation that had been settled just months earlier, including that the tax issue involved a significant sum of money and was not a trivial accounting error. No 10 strongly denied that Sunak had been informed of the details of the case “informally or otherwise” and that he had been told, through official channels, that there were no outstanding issues with appointing Zahawi.

Why is Sunak claiming he knew no more than media reports about the HMRC investigation until Zahawi issued a public statement in January?

This is where the prime minister’s claim that no issues were flagged doesn’t quite withstand scrutiny. Sunak told MPs that “no issues were raised with me” when Zahawi was appointed. Yet the Independent first reported that he was under investigation in July 2022. Days later the former chancellor updated his ministerial declaration to reflect this. Is the public really expected to believe that nobody in the Conservative party machine or in the senior civil service felt it was their responsibility to investigate? And failing that, why did Sunak not make his own inquiries? Some feel that his lack of curiosity stretches credulity.

Is there a ‘VIP fast lane’ for government ministers settling tax disputes with HMRC, and were any measures put in place at the Treasury to address the conflict of interest?

Some observers felt Zahawi’s HMRC case was resolved surprisingly quickly, prompting speculation that he may have been given special treatment. But the tax body clarified that this was not the case. Instead, HMRC prioritises maximising revenue, so if they can agree a settlement of £5m, including a penalty, they’d rather conclude the case. HMRC also has a duty to minimise cost, and proving an error is deliberate rather than “careless” is time-consuming and expensive. So, as the former Treasury mandarin Nick Macpherson has suggested, it is in their interests to do the deal and move on.


Jessica Elgot and Pippa Crerar

The GuardianTramp

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