Sunak fires Zahawi citing “serious” ethics violations on taxes

(Bloomberg) — Prime Minister Rishi Sunak has sacked Nadhim Zahawi, citing “serious” violations of ethics rules after revelations about tax matters by the Conservative Party chairman made his position untenable.

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In a letter to Zahawi on Sunday, Sunak said the independent examination of the matter had been concluded and “it is clear that there has been a serious violation of the ministerial code. Accordingly, I have informed you of my decision to remove you from your position.

Zahawi had acknowledged that he had been “negligent” with his taxes and had settled a multi-million pound retroactive bill with the country’s tax collector. That—and the revelation that he had also incurred a tax penalty for failing to pay the right amount at the right time—led to mounting pressure within his own party for him to resign or for Sunak to fire him.

The protracted controversy had threatened to throw Sunak’s administration off course, detracting from its stated priority of reviving Britain’s moribund economy, as well as its attempt to reverse the slump in Tory prospects two years before the general election.

The situation has allowed Labor leader Keir Starmer, whose party currently holds a large lead over the Conservatives, to accuse Sunak of being “hopelessly weak” and to draw a link between the party chairman’s tax issues and Sunak’s wife Akshata Murty, who had enjoyed so-called non-Sun tax status in the UK.

Zahawi is the second cabinet minister to walk out of Sunak’s three-month rule over ethics breaches, allowing Labor to revive ‘Tory sleaze’ charges. Gavin Williamson resigned as minister without portfolio in October after allegations he mistreated staff. Deputy Premier Dominic Raab is under an ethics investigation after multiple allegations of bullying.

After initially standing by Zahawi, Sunak commissioned the ethics inquiry, saying his colleague’s Jan. 14 statement about his tax payments had changed the calculus. He told the House of Commons on Wednesday that it was right to let “due process” take its course and wait for the outcome of the investigation, also suggesting that the easy option would be to sack him now. Stephen Massey, chief executive of the Tory party, will take care of party affairs on an interim basis until a successor to Zahawi is named.

Zahawi himself had spent several days telling colleagues he had done nothing wrong, according to Conservative MP Bim Afolami. But anger among Tory lawmakers was building. In a letter posted to Twitter on Sunday, Zahawi did not acknowledge the tax issue and pledged to continue supporting Sunak from the sidelines.

A cabinet minister and several Conservative MPs have said privately that Zahawi should step down. An article in The Times on Thursday suggested Sunak was “livid” with Zahawi, a claim denied by the prime minister’s office.

Sunak takes UK cabinet into retreat with Conservatives eyeing Zahawi

Zahawi said in his Jan. 14 statement that His Majesty’s Revenue and Customs concluded he had been “negligent and not deliberate” in his tax reports. His tax bill for the sale of shares in the polling firm YouGov he co-founded came to £4.8 million ($5.9 million), including a 30% penalty, according to a person at knowledge of the matter. The deal occurred while Zahawi was Chancellor of the Exchequer in mid-2022.

“There are no penalties for innocent mistakes in your tax affairs,” HMRC Chief Executive Jim Harra told Parliament’s Public Accounts Committee, speaking broadly on the matter on 26 January. according to HMRC guidance.

Conservative MPs also described reports that Zahawi threatened legal action against those seeking to publicize his dealings with the tax authority as unacceptable. Dan Neidle, a blogger and Clifford Chance’s former tax chief who made a series of revelations on the subject last year, told Bloomberg Radio earlier this week that he had been the target of such an attempt.

“Instead of saying maybe there was a problem, he simultaneously issued a series of denials threatening to sue me and others who report it,” Neidle said.

Zahawi, 55, was born in Baghdad to Kurdish parents and arrived in the UK as a boy after his family fled Saddam Hussein’s Iraqi regime in the 1970s. Unable to speak English when he arrived, Zahawi recounted how he was bullied at school.

He trained as a chemical engineer at University College London and went on to work in the oil industry. A self-made millionaire thanks to his role at YouGov, Zahawi entered Parliament in 2010, where he has represented Stratford-on-Avon ever since. He supported Brexit in 2016.

He rose to prominence for his role in overseeing the nation’s successful vaccine rollout during the Covid-19 pandemic under then Prime Minister Boris Johnson, and was widely regarded within the Conservative Party as a pair of hands secure with a delivery record. He served briefly as Chancellor after Sunak left office in July over Johnson’s breach of Covid restrictions in the so-called Partygate scandal. Sunak’s departure led to the collapse of the Johnson government.

(Adds more resignation in sixth paragraph, backstory on Zahawi in last two paragraphs.)

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