Revealed: The Damning Report That Sealed Nadhim Zahawi's Fate

"Zahawi’s conduct as a minister has fallen below the high standards expectedfrom those who serve in government".
Rishi Sunak was left with no option but to sack Nadhim Zahawi.
Rishi Sunak was left with no option but to sack Nadhim Zahawi.
Victoria Jones via PA Wire/PA Images

In the end, the decision to sack Nadhim Zahawi was an easy one for Rishi Sunak.

Over four precisely-argued pages, the prime minister’s ethics adviser, Sir Laurie Magnus, set out why the Tory Party chairman was guilty of breaking the ministerial code over his handling of his tax affairs.

Sunak - who told MPs that the matter had been dealt with less than two weeks ago - was forced to call in Sir Laurie following further revelations after Zahawi’s tax affairs in the Sunday Times last week.

In his letter to Sunak setting out his findings this morning, the adviser explained why the PM had no option but to remove Zahawi from the government.

The letter also shed more light on the extent of the scandal, and how Zahawi sought to dodge scrutiny as more details of it emerged.

How it all started

Sir Laurie’s letter to the prime minister reveals that Zahawi’s dealings with HMRC over his outstanding tax bill began in April 2021, when he was vaccines minister.

He said Zahawi had “formed the impression that he and his advisers were merely being asked certain queries by HMRC concerning his tax affairs”.

According to Zahawi, this impression persisted until he received a letter from HMRC on July 15 last year, just 10 days after he became chancellor - the man in charge of the country’s tax system.

But Sir Laurie says in his letter: “I consider that an individual subject to the HMRC process faced by Mr Zahawi should have understood at the outset that they were under investigation by HMRC and that this was a serious matter.”

What happened next?

Sir Laurie Magnus is clear that Zahawi should have made clear HMRC’s interests in his tax affairs in his declaration of ministerial interests.

However, the ethic adviser says: “After his appointment as chancellor on July 5, 2022, Mr Zahawi completed a declaration of interests form which contained no reference to the HMRC investigation.”

He says that a later form “acknowledged (by way of an attachment) that Mr Zahawi was in discussion with HMRC to clarify a number of queries”.

It was only after receiving the letter from HMRC on July 15 last year that Zahawi updated his declaration of interests to acknowledge that his tax affairs were under investigation.

Sir Laurie is clear that breached the ministerial code by failing to declare at an earlier stage “any interests which might be thought to give rise to a conflict”.

Zahawi’s deal with the tax man

Sir Laurie’s letter reveals how Zahawi finally reached a deal with HMRC in August last year which included a penalty for failing to take “reasonable care” in relation his tax affairs.

“I consider that Mr Zahawi should previously have declared the fact of the
investigation,” Sir Laurie says. “The subsequent fact that the investigation concluded with a penalty in relation to the tax affairs of a minister also requires declaration and discussion.

“It is a relevant interest which could give rise to a conflict, and particularly so in the case of HM Treasury ministers and the Chancellor of the Exchequer, who has responsibility for the UK tax system.”

Truss and Sunak kept in the dark

Sir Laurie also says Zahawi should have informed Cabinet Office officials about his settlement with HMRC when Liz Truss made him minister for equalities and inter-governmental relations in September, and when Rishi Sunak made him minister without portfolio in October.

“Taken together, I consider that these omissions constitute a serious failure to meet the standards set out in the ministerial code,” says the eithics adviser.

Zahawi’s attempt to dodge scrutiny

Following media reports about his tax affairs last July, Zahawi issued a statement saying he was the victim of a “smear” campaign.

He said: “I’ve always declared my financial interests and paid my taxes in the UK. If there are questions, of course, I will answer any questions HMRC has of me.”

Sir Laurie points out that the ministerial code says ministers have a duty to “be as open as possible with parliament and the public”.

He adds: “Whilst this duty clearly does not extend to disclosing personal tax
information, it does include a general duty to be accurate in statements.”

Zahawi did not correct the record until his confirmation on January 21 that he had reached a settlement with HMRC following an investigation.

“I consider that this delay in correcting an untrue public statement is inconsistent with the requirement for openness,” says Sir Laurie.

The damning conclusion

Sir Laurie does not sugar-coat his views in his conclusions.

He says: “I consider that Mr Zahawi, in holding the high privilege of being a minister of the crown, has shown insufficient regard for the general principles of the ministerial code and the requirements in particular under the seven principles of public life, to be honest, open and an exemplary leader through his own behaviour.”

While he commends Zahawi for helping him with his inquiry, he ends his letter to Sunak by saying: “Mr Zahawi’s conduct as a minister has fallen below the high standards that, as prime minister, you rightly expect from those who serve in your government.”


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