Nadhim Zahawi will survive as chairman of the UK’s Conservative Party beyond Prime Minister’s Questions on Wednesday, foreign secretary James Cleverly said as he insisted tax affairs are “private matters”.
But critics said Mr Zahawi’s political survival is “difficult” after he admitted paying a settlement to HM Revenue & Customs following a tax error related to a shareholding in YouGov.
Pressure is also growing on prime minister Rishi Sunak to reveal what he knew about the unpaid taxes and when, with Labour demanding that Downing Street publish any warnings received.
Mr Cleverly stressed Mr Zahawi’s error was “careless” and not deliberate, amid allegations that Mr Zahawi avoided tax and had to pay it back as part of a seven-figure sum to HMRC.
The embattled Tory chair released a statement on Saturday to “address some of the confusion about my finances”, but it raised further questions, including whether Mr Zahawi negotiated the dispute while he was serving as chancellor.
He did not disclose the size of the settlement – reported to be an estimated £4.8 million (€5.47 million) including a 30% penalty –, nor confirm whether he paid a fine.
Mr Cleverly denied any knowledge of the details when pressed during media appearances on Sunday.
“I don’t know more than is in his statement,” he said.
Asked whether Mr Zahawi should reveal this information, the foreign secretary said: “People’s taxes are private matters. I know that as politicians we, quite rightly, are expected to have a higher level of disclosure than perhaps other people might do.
“Nadhim has issued a statement where he has admitted that he made a careless error, that this is now resolved.”
Mr Cleverly also evaded questions on what Mr Sunak knew when he appointed Mr Zahawi as party chairman.
He suggested the prime minister does not discuss ministers’ “external affairs” during appointments and that it is the cabinet office’s role to conduct due diligence on his behalf.
Reports have suggested that cabinet ioffice officials had alerted then-prime minister Boris Johnson to the tax dispute before he appointed Mr Zahawi as chancellor.
The Sun on Sunday reported that Mr Zahawi had been due to receive a knighthood in the new year’s honours list but was later blocked due to concerns over his tax situation.
Labour deputy leader Angela Rayner called for the release of all correspondence with Downing Street before Mr Zahawi’s various appointments, and for clarity over whether he was chancellor at the time of the settlement.
She said: “The prime minister must now come clean on what he knew and when about Nadhim Zahawi’s tax affairs and the concerns raised with Number 10.
“The public have a right to know if warnings were ignored and a man deemed unfit for a knighthood was repeatedly appointed to cabinet.”
Mr Cleverly said he was unable to answer questions on Mr Zahawi’s tax affairs because he was carrying out his duties as foreign secretary during the week and then “having a bit of a rest and doing some shopping”.
Asked whether Mr Zahawi will survive in his role until Prime Minister’s Questions on Wednesday, Mr Cleverly said: “What else am I going to say other than yes, because he’s a very, very effective minister.”
But Labour’s shadow chief secretary to the Treasury cast doubt on this.
Pat McFadden said: “It’s difficult for Mr Zahawi because the problem with this is what we’re being asked to believe.
“We’re being asked to believe that he had this asset worth £27 million that he didn’t really know was his, and therefore didn’t really know tax was due on it.
“He was using pretty heavy legal letters to get people to keep quiet about this ... threatening legal action, and then we’re asked to believe that it’s all just carelessness. That doesn’t quite fit.”
Reports about Mr Zahawi’s tax affairs began emerging when he was appointed chancellor by Mr Johnson last summer.
He denied allegations that he avoided tax by using an offshore company registered in Gibraltar to hold shares in the YouGov polling company he cofounded.
In his statement on Saturday, Mr Zahawi said HMRC “disagreed about the exact allocation” of founder shares held by his father.
“They concluded that this was a ‘careless and not deliberate’ error,” he said.
“So that I could focus on my life as a public servant, I chose to settle the matter and pay what they said was due.”