Rishi Sunak has asked his independent ethics adviser to investigate the Nadhim Zahawi tax row, saying there were “clearly questions that need answering”.
The prime minister said Mr Zahawi will remain Conservative party chairman while he faces the inquiry into a possible breach of the ministerial code.
On a visit to a hospital in Northamptonshire, the PM told reporters: “Integrity and accountability is really important to me and clearly in this case there are questions that need answering.”
“That’s why I’ve 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,” Mr Sunak added.
Asked whether Mr Zahawi should not stand down during the investigation, Mr Sunak said: “As is longstanding practice, he will continue to play the role he does.”
Mr Zahawi welcomed the investigation and said “I am confident I acted properly throughout” after admitting at the weekend had settled a dispute with the HMRC over a “careless” error.
The Independent first revealed last July that Mr Zahawi was being investigated by HMRC over the sale of shares in the polling company YouGov he co-founded 22 years ago.
The Tory chair – who previously claimed reports of HMRC inquiries into his taxes were a “smear” – admitted on Saturday he had settled a dispute. Mr Zahawi said he was judged to have made a “careless” error in the allocation of shares.
Mr Zahawi has not disclosed the size of the HMRC settlement – reportedly an estimated £4.8m, including a 30 per cent penalty of around £1m – or confirmed whether he paid a fine. But his spokesperson has not denied that a penalty was paid.
He also revealed that “questions were being raised” about his taxes when he was appointed chancellor by Boris Johnson in July, and said it was resolved before his next cabinet job – indicating that he was chancellor when the dispute was settled.
Labour has called for Mr Zahawi to publish his tax returns for the past five years, and demanded that Mr Sunak “come clean on what he knew and when” about his minister’s tax affairs.
The Liberal Democrats’ deputy leader Daisy Cooper said Mr Zahawi should at least be suspended if Mr Sunak won’t fire him. “If Sunak won’t do the decent thing and sack Zahawi, the least he can do is suspend him for the duration of the investigation.”
Dan Neidle of Tax Policy Associates, who has been investigating Mr Zahawi’s tax arrangements for months, told Sky News that the cabinet minister should quit – claiming that the evidence suggested that his previous claims were “not true”.
An ally of Mr Zahawi said on Monday that the former chancellor “absolutely” will not be quitting in the face of growing pressure over his settlement.
But senior Tory MPs told The Independent the under-fire minister’s position as Tory chair is “untenable” and he is “unlikely” to survive.
“Carelessness with finances wouldn’t have been a recommendation for the post of chancellor, had we known about it,” said one former cabinet minister. “It’s hard to see how it can be acceptable for the post of chairman.”
The Conservative chairman had reportedly been due to receive a knighthood in the recent New Year’s honours list, but was blocked due to concerns over his tax situation.
Mr Zahawi is also facing questions about his contact with David Cameron, after he reportedly failed to tell officials that he had exchanged WhatsApp messages with the former PM when he was lobbying for Greensill Capital loans.
The Tory chair wrongly told Information Commissioner’s Office (ICO) investigators that he had not exchanged messages with Mr Cameron, according to The Times. Mr Zahawi later said messages had been deleted.
Meanwhile, Mr Sunak has said “regrets deeply” the decision not to wear a seatbelt last week while travelling in a moving car which saw him fined by Lancashire Constabulary.
Asked if would apologise for not wearing a seatbelt, Mr Sunak said: “Yes, I regret not wearing a seatbelt. It was a mistake and that is why I apologised straight away.”
Grilled on whether the public could trust him as PM to follow the “laws of the land” following his fine, Mr Sunak replied: “Of course I do. In this instance, I made a mistake which I regret deeply and that’s why I apologised straight away.”
Mr Sunak also said BBC chairman Richard Sharp went through a “rigorous” appointments process amid claims he was helped Boris Johnson secure a £800,000 credit line.
The BBC board will review the appointment of its chair, it was announced on Monday. Mr Sharp – who has denied any conflict of interest – said the row had become “a distraction for the organisation, which I regret”.
Mr Sunak said: “The appointments process itself for appointing the BBC chairman is a rigorous process, it is independent, there are two stages to it, it is transparent and published online. Mr Sharp’s appointment went through that full process.”
Mr Johnson said he was “ding-dang sure” that claims of a conflict of interest were “a load of complete nonsense” when asked about the matter by Sky News on Monday morning.