The Nadhim Zahawi scandal risks a blow to Rishi Sunak’s reputation

According to Rishi Sunak, there are “questions that need answering” about the troubled tax affairs of Nadhim Zahawi. That is something of an understatement. Why did Mr Zahawi not pay the correct tax in the first place? Why did he fail publicly to declare a beneficial interest? Why did he deny the truth? Why did he say he’d sue journalists for libel? Who did he inform, and when?

Ever since The Independent broke the story last July, the questions about Mr Zahawi have been insistent and growing, but never answered – because Mr Zahawi has consistently refused to give a full account of himself. Indeed, he flatly denied the claims made in The Independent about official investigations into his tax liabilities and offshore family trust, dismissed them as smears, and threatened to sue anyone who dared to repeat them.

Yet now Mr Zahawi has himself issued a statement of clarification – which only begs further questions – and the prime minister has ordered his ethics adviser, Sir Laurie Magnus, to look into the affair.

As well as offering the prime minister the benefit of a full report into the Zahawi tax affair in all its intricate detail – including the earlier involvements by the National Crime Agency and the Serious Fraud Office – all the evidence Sir Laurie collects must also be made public. People need to know what kind of people are running the country.

One allegation, for example, is that Mr Zahawi was being investigated by HMRC at the very time when he was nominally in charge of the tax system and was the minister responsible for HMRC. That was a bizarre and unacceptable state of affairs, for obvious reasons. It is said Mr Zahawi paid a total of £5m in taxes including a substantial penalty payment during his time as chancellor – an unprecedented event. If it had been known publicly at the time, Mr Zahawi would have been forced to quit.

It has also been claimed that Mr Johnson, when prime minister, had been made aware of the HMRC investigation when he appointed Mr Zahawi chancellor of the Exchequer, and retained him even after he had to pay the penalty charge for “carelessness” (ie negligence). Presumably Mr Johnson wasn’t overly concerned about financial propriety, and didn’t want to lose yet another chancellor, having had Sajid Javid and Rishi Sunak previously quit in protest at the way he ran the government; but the embarrassment for the party is obviously far greater now. In any case, it doesn’t reflect well on Mr Johnson.

There are also questions about what Mr Sunak knew and when he knew it. It’s understood that Mr Sunak only learned of the tax penalty when it appeared in the press a few days ago. But that leaves the possibility that Mr Sunak knew about the general questions about Mr Zahawi’s tax bill, and Mr Sunak certainly knew about the allegations that appeared in The Independent last July. The prime minister cannot claim complete ignorance of these matters.

So when he became prime minister, did Mr Sunak move Mr Zahawi out of No 11 because of what he knew about the affair? And, if so, why did he then keep Mr Zahawi in cabinet and place him in another high profile and senior role, as party chairman, instead?

It’s also been reported that Mr Zahawi was refused a knighthood in the recent new year honours, after Cabinet Office staff made routine inquiries of HMRC and questions were raised about his tax affairs. This may have been in December, or earlier, and it is difficult to understand how Mr Sunak could have been unaware by this point of how his party chairman had been conducting himself. Again, all of these matters of public interest were settled behind closed doors.

Even after the latest revelations became public, Mr Sunak and his fellow ministers still defended Mr Zahawi (albeit not always with much conviction). Now, at last, the ministerial inquiry that should have been launched months ago is under way. It's unlikely to exonerate Mr Zahawi. One way or another, Mr Zahawi is doomed as party chairman, because his position is untenable. He cannot make extravagant claims about Labour's tax plans, for example, and be taken seriously.

Whatever Sir Laurie concludes, Mr Zahawi’s reputation is shattered, as it was always going to be. The affair also further damages Mr Sunak’s attempts to portray himself as morally superior to Mr Johnson, and leaves his pledge to lead a government with “integrity, professionalism and accountability at every level” looking rather sickly.

Young as he is, Mr Sunak has been around Whitehall long enough to be acquainted with the ministerial code, and its stricture that ministers should “avoid a conflict or the perception of a conflict of interest”. The latest stories about how the chair of the BBC, Richard Sharp, put Mr Johnson in touch with someone who could arrange an £800,000 overdraft facility reminds us that Mr Johnson’s approach to money was more cavalier than Mr Sunak’s – but that is not saying much, and it is now Mr Sunak who is disappointing his public.

After Wallpapergate, Partygate, the controversies over Owen Paterson, Neil Parish, Chris Pincher and Suella Braverman, the revelations about the Sunak family trust and non-dom status, as well as these fresh stories, the Conservative Party seems endemically compromised, and incapable of cleaning up its act.

Whatever goodwill Mr Sunak enjoyed is being rapidly squandered, and some of the blame lies firmly with him. He should have jettisoned Mr Zahawi long ago; that he did not, raises awkward questions about the prime minister’s own judgement and competence.