Nadhim Zahawi’s future threatened as Labour steps up pressure over tax affairs

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Nadhim Zahawi’s political future appeared under increasing threat on Sunday night, after Labour pushed hard for answers about his tax issues and government colleagues offered little support for his plight.

After a weekend dominated by questions over the Conservative party chair’s tax position, Labour signalled its intention to pin the controversy on to Rishi Sunak, demanding the prime minister explain if he knew about the issue when he appointed Zahawi to his cabinet.

However, it is understood No 10 will argue Sunak only knew Zahawi is believed to have paid a penalty to HMRC as part of a seven-figure settlement when the Guardian reported this on Friday.

James Cleverly, the foreign secretary, spent the Sunday morning broadcast round trying to deflect questions about Zahawi, at one point saying he had been unable to find out more details as he was busy over the weekend “having a bit of a rest and doing some shopping”.

Even his supporter, former Tory leader Iain Duncan Smith, urged Zahawi on Sunday to provide more detail about the tax settlement.

Zahawi, who in his role as party chair attends cabinet, accepted on Saturday that he had reached a settlement with HMRC over his shareholding in the polling company he co-founded, YouGov.

He seemingly confirmed that the tax authority had carried out an investigation into his affairs while he was Boris Johnson’s chancellor, and thus in overall control of tax policy. HMRC concluded he had made a “careless but not deliberate” error, Zahawi said, but gave minimal details.

Angela Rayner, Labour’s deputy leader, said Sunak must “now come clean on what he knew and when about Nadhim Zahawi’s tax affairs and the concerns raised with No 10”.

She said: “This whole episode is corrosive to public trust, with a chancellor in charge of the nation’s finances asking the public to pay their taxes while apparently having failed to do so himself.”

Sunak, who entered No 10 with a pledge to restore integrity and professionalism after the scandals under Boris Johnson and the economic chaos of Liz Truss, will be particularly keen to avoid spending weeks having to answer questions on Zahawi.

While the official position remains that Zahawi should and will remain in his post – Cleverly called him “a very, very effective minister” who was not about to quit – there is a growing sense of colleagues seeking to distance themselves from the controversy.

It is understood that because the settlement was made before Sunak took over as prime minister, when Zahawi was vetted by the Cabinet Office’s propriety and ethics team before the new cabinet was announced, No 10 was only told that there were no outstanding issues preventing his appointment.

But Duncan Smith said he did not believe Zahawi had been deceitful, telling BBC One’s Sunday with Laura Kuenssberg: “I’m always of the view with these things that the sooner you can get the actual facts out the better, rather than have them coming out in phases. I would say to him if he was here, get it all out now, whatever you have to do, and clear it up.”

While Sunak knew about previous media reports on Zahawi’s tax affairs, he is understood not to know any other details in advance of Friday’s Guardian report and Zahawi’s statement the next day.

In media interviews on Sunday morning, Cleverly said he too knew nothing beyond Zahawi’s account.

“The only information I know is this information that he’s put out in his statement,” Cleverly told Sky’s Sophy Ridge on Sunday show. “Now, you know, Nadhim was a very, very successful entrepreneur. As he said in his statement he had an outstanding settlement with the HMRC, which is now settled. I don’t have any more details.”

Quizzed about whether Zahawi was investigated when he was chancellor, from July to September last year, Cleverly said: “I don’t know any more detail about the timing, about the granularity, of what’s in his statement.”

According to a report in the Sun on Sunday, Zahawi had been due to receive a knighthood in the most recent new year honours list but this was blocked due to concerns over his tax situation.

The former executive chair of HMRC, Sir Edward Troup, later told BBC Radio 4 that while the organisation does not block honours, it gives a red, amber or green rating of an individual’s tax affairs.

“They don’t decide whether the honour or the peerage is given but they give the information to those who do make the decision, who form their own judgment,” he said.