PM ‘will restore integrity’ after sacking Zahawi

Rishi Sunak insisted he could “restore the integrity back into politics” as he began a fightback against the political damage from sacking Nadhim Zahawi as Conservative party chair for breaches of the ministerial code over his tax affairs.

The prime minister, answering questions at Teesside University in Darlington, said he had acted “decisively” to dismiss Zahawi last Sunday after receiving the findings of an investigation by his ethics adviser, Laurie Magnus.

Magnus’s conclusions meant he was “able to make a very quick decision that it was no longer appropriate for Nadhim Zahawi to continue in government”, Sunak said. “It relates to things that happened well before I was prime minister, so unfortunately I can’t change what happened in the past. What you can hold me accountable for is: what did you do about it? What I did, as soon as I knew about the situation, was appoint someone independent, looked at it, got the advice and then acted pretty decisively.”

Sunak, who entered No 10 in October pledging to restore “integrity and accountability” after the Boris Johnson era, said his swift action on Magnus’s report demonstrated this was still his mission. “That should give you some confidence that these things matter to me,” he said.

Sunak’s judgment in reappointing Zahawi had come under question from some Conservative MPs, while others felt that the prime minister should have sacked him earlier.

Nadhim Zahawi’s sacking as Conservative party chairman last Sunday caps an extraordinary downfall for a man who less than a year ago ran to be Conservative party leader and, with it, prime minister of the UK.

Zahawi is, by some measures, one of the most remarkable politicians of his generation. Born in Iraqi Kurdistan, he came to England in 1978 when his family fled Saddam Hussein’s regime. The “boy from Baghdad”, as Zahawi calls himself, initially struggled to settle in and his parents were warned he may suffer from learning difficulties due to his initial inability to speak English.

He overcame those setbacks and entered politics, serving for 12 years as a borough councillor in Wandsworth, south-west London. In 2000, Zahawi co-founded the polling company YouGov with fellow Conservative Stephan Shakespeare. It floated on the stock market five years later.

The row surrounding Zahawi centred on a tax bill over the sale of shares in YouGov – worth an estimated £27m ($33m) – which were held by Balshore Investments, a company registered in Gibraltar and linked to Zahawi’s family.

The 55-year-old has for years faced questions over his links to offshore investment firms and whether they were appropriately declared. He responded by threatening to sue journalists and tax lawyers as recently as last summer, when he was chancellor of the exchequer, insisting that he had paid “all due taxes”.

In fact, he had been under investigation by HMRC since April 2021 and had agreed by last August to pay a tax penalty as part of a settlement totalling nearly £5m. Tax investigators held a face-to-face meeting with Zahawi in June 2021, when he was a business minister, but the MP failed to declare it and claimed he did not realise it was a formal investigation.

In July 2022, in the dying days of the Johnson administration, he was appointed chancellor of the exchequer – a role that put him in charge of the UK’s tax policy. Despite the glaring conflict, Zahawi again failed to declare the ongoing HMRC investigation and instead went on the attack, describing reports of the investigation “inaccurate, unfair and clearly smears”.

Zahawi was chancellor for only two months, from 5 July to 6 September 2022. It was during this time that he arranged a settlement of nearly £5m with HMRC. The Guardian understands this settlement includes £3.7m in tax due, plus a 30% penalty, taking the total to £4.8m. Again, Zahawi did not declare this payout until 16 January after further questions.

At the same time that Zahawi was resolving his tax affairs with HMRC, he was running for leader of the Tory party with a pledge to slash taxes if he became prime minister. He was knocked out of the leadership race after the first round.

He was appointed chair of the party last October, with sources telling the Observer that Sunak was warned by senior officials that the government faced a reputational risk over Zahawi’s tax matters.

The prime minister sacked Zahawi last Sunday, three months after appointing him. In a letter to Sunak after his dismissal, Zahawi said it had been “the privilege of my life” to serve in the government, adding: “I believe that in no other country on earth would my story be possible. It reaffirms my belief in the greatness and compassion of our nation.”