'On no level does this look good': 'Nadhim Zahawi should 'just go' to save the Tories, says ex-Downing Street comms chief

26 January 2023, 11:24 | Updated: 26 January 2023, 23:58

Nadhim Zahawi should step down for his own good and for the benefit of the Conservative Party, a former top Tory adviser has said.

Sir Craig Oliver, who worked for former Prime Minister David Cameron told LBC's Andrew Marr that Mr Zahawi was "causing huge damage" to himself, the PM and his own party by not resigning amid a brewing tax scandal.

The Tory chairman has admitted that "errors” in his tax affairs were deemed “careless” by HM Revenue & Customs but the mistake was "careless" rather than deliberate.

That later prompted Rishi Sunak to get the government's independent ethics adviser to launch an inquiry into the former Chancellor's tax affairs.

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But Sir Craig said: "I think it's been clear for some time that Nadhim Zahawi just has to go. And he either has to be privately told look, go now. And maybe there's an opportunity for you to come back in the future.

"But you've got to understand you are causing huge damage to yourself, to the Prime Minister and to the party."

He added: "I can't see that there's going to be some magnificent revelation of a fact that suddenly changes all our perspectives on this. There was a sin of omission of not telling the Prime Minister and actually the previous Prime Minister too. And he's also been in the situation where when you look closely at what he was trying to say to HMRC he feels deeply uncomfortable.

"And he seems to have had the misjudgement that he thought he could be Chancellor of the Exchequer while he was in dispute with HMRC. On no level does this look good. I think somebody needs to take Rishi Sunak to one side and say, look, you're trying to protect him, we sort of understand that. But be in no doubt that you are taking on a huge amount of damage with every minute that you keep him in that post."

It came after Mr Zahawi gave tax officials permission to give details of his affairs to the government's ethics adviser, who is investigating his alleged breach of ministerial rules.

A source close to Mr Zahawi said that he has now given HMRC the green light to speak to the adviser, Sir Laurie Magnus, who is looking into whether his actions represented a breach of the ministerial code of conduct.

It comes after the head of HMRC suggested that Mr Zahawi did not make an “innocent error” in his tax affairs

Jim Harra, HMRC’s chief executive, told MPs on the Public Accounts Committee this morning that “there are no penalties for innocent errors in your tax affairs”.

Being careful to point out that he was not discussing anyone in particular, the chief executive of HMRC told MPs: "Carelessness is a concept in tax law. It can be relevant to how many back years that we can assess, can be relevant to whether someone is liable to a penalty and if so, what penalty they will be liable to for an error in their tax affairs.

"There are no penalties for innocent errors in your tax affairs. So if you take reasonable care, but nevertheless make a mistake, whilst you will be liable for the tax and for interest if it's paid late, you would not be liable for a penalty.

"But if your error was as a result of carelessness, then legislation says that a penalty could apply in those circumstances."

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He pointed out, to laughter from MPs, that "innocent" was not the term used in legislation.

"If you have been careless in your tax affairs, and as a result of that carelessness have made a mistake, then you could be liable to penalty."

Tory chairman Mr Zahawi has faced calls to step down from his role despite releasing a statement on Saturday to "address some of the confusion about my finances".

He did not disclose the size of the settlement - reported to be an estimated £4.8 million including a 30% penalty - or confirm whether he paid a fine.

The row centres on a tax bill over the sale of shares in YouGov, the polling firm Mr Zahawi founded, worth an estimated £27 million.

The shares were held by Balshore Investments, a company registered offshore in Gibraltar and linked to Mr Zahawi's family.

Downing Street said it did not know last week that Mr Zahawi had paid a reported 30% penalty to HMRC.

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Mr Zahawi has insisted he is "confident" he has "acted properly throughout" but Prime Minister Rishi Sunak has ordered an investigation by Sir Laurie Magnus, his independent adviser on ministers' interests, into whether he broke ministerial rules.

Mr Sunak was challenged about the scandal during Wednesday's PMQs, where Labour leader Sir Keir Starmer accused the PM of being too "weak" to sack Mr Zahawi.

Sir Keir asked: "Does the PM agree that any politician who seeks to avoid the taxes they owe in this country is not fit to be in charge of taxpayer money?"

Mr Sunak acknowledged that he had not been given the full picture about the Tory chairman's financial matters when he told MPs last week that Mr Zahawi had given a "full" account.

But he insisted that when he entered No10 and gave Mr Zahawi the job of Minister Without Portfolio "no issues were raised with me".

Downing Street declined to comment on Mr Harra's remarks at the Public Accounts Committee on Thursday.

A spokesman for the PM referred reporters to Rishi Sunak's remarks in the Commons on Wednesday.

"The independent adviser will establish the facts and provide advice to the PM and then he will obviously consider next steps. I obviously can't pre-empt that. It is right that the independent adviser is allowed to continue with that work," he said.