UK prime minister Rishi Sunak has asked his ethics adviser to investigate the tax affairs of Nadhim Zahawi in a move that raises questions about the future of the Conservative party chair.
Downing Street also admitted on Monday that when Sunak publicly defended Zahawi last week, the prime minister had not known that the former chancellor recently paid a penalty to HM Revenue & Customs, the UK tax authority.
The government is confronting an ethics crisis on two fronts with BBC chair Richard Sharp facing allegations that he helped Boris Johnson secure a private loan shortly before the former prime minister recommended his appointment.
Sharp asked the broadcaster’s board on Monday to review any potential conflicts of interest, just before Downing Street said it had asked for an investigation into Zahawi’s tax affairs.
“Integrity and accountability is really important to me,” Sunak said.
“There are questions that need answering and that is why I have asked our independent adviser to get to the bottom of everything — to investigate the matter fully and establish all the facts and provide advice to me on Nadhim Zahawi’s compliance with the ministerial code.”
He added: “I am pleased Nadhim Zahawi has agreed that approach and has agreed to fully co-operate with that investigation.”
By contrast, the prime minister told the House of Commons last week that Zahawi had “already addressed this matter in full and there’s nothing more that I can add”.
Sunak’s spokesman said on Monday that the ethics adviser, Sir Laurie Magnus, had been asked to look at potential breaches of the ministerial code but said the investigation — of an unspecified length — would not be “prescriptive”. “Obviously it is up to him if he wishes to look into any other issues as well.”
The spokesman said he did not know when Sunak first found out that Zahawi had been in a dispute with HMRC. He said he did not know if Simon Case, the head of the civil service, had known about the negotiations.
Zahawi said in a separate statement on Monday that he looked forward to explaining the facts to Magnus.
“I am confident I acted properly throughout and look forward to answering any and all specific questions in a formal setting to Sir Laurie,” he said.
Angela Rayner, deputy Labour leader, said Zahawi had been chancellor at the time he was negotiating a tax settlement with HMRC: “You don’t need an ethics adviser to tell you that’s unacceptable,” she said.
Downing Street’s announcement of an investigation followed revelations that Zahawi settled a dispute with HMRC while chancellor last year and paid a penalty as part of the settlement. Reports suggest the total settlement was about £5mn.
Conservative MPs have raised doubts about Zahawi’s ability to remain in post given the mounting questions about his tax settlement.
However, Sunak said that, in line with “longstanding practice”, Zahawi would remain in post while the investigation was being carried out. Zahawi also expressed his determination to stay.
In the separate review under way at the BBC, Sharp, a former Goldman Sachs banker who became BBC chair in 2021, said he wanted to ensure “all the appropriate guidelines” had been followed.
The Sunday Times reported that Sharp was involved in arranging a guarantor for a loan of £800,000 to Johnson in 2020.
“We have many challenges at the BBC and I know that distractions such as this are not welcome,” Sharp said in the statement, adding that he agreed with the BBC board’s senior independent director that the nominations committee of the board would look at the matter when it next met and, “in the interests of transparency”, publish the conclusions.
Sharp denied any wrongdoing. He said he facilitated indirect contact — via the Cabinet Office — between Johnson and the Canadian businessman Sam Blyth, who underwrote the loan.
“I was not involved in making a loan or arranging a guarantee, and I did not arrange any financing,” Sharp said.
Johnson told Sky News on Monday the whole incident was “complete nonsense” and that Sharp “knows absolutely nothing about my personal finances”.
“This is just another example of the BBC disappearing up its own fundament,” Johnson added.
Meanwhile Britain’s commissioner for public appointments, William Shawcross, announced on Monday he would review the process that led to the appointment of Sharp as BBC chair.
Shawcross said he intended “to review this competition to assure myself and the public that the process was run in compliance with the government’s governance code for public appointments” and in a manner that was done “fairly, openly and on merit”.