Labour demands Rishi Sunak reveals non-dom tax status costs after Zahawi scandal

Labour has ramped up its pressure on Rishi Sunak by demanding he shares details on the costs of Britain’s controversial non-dom status following the sacking of Tory chairman Nadhim Zahawi over his tax affairs.

Sir Keir Starmer’s party has urged the government to publish details on whether it has considered scrapping non-dom tax status by the end of February – labelling the loophole “outdated and unfair”.

The issue hit the headlines in April last year when The Independent revealed that Mr Sunak’s wife Akshata Murty had held non-dom tax status while he was chancellor. She later renounced the special arrangement.

Chancellor Jeremy Hunt said in November that he had asked the Treasury to look into how much money could be raised from scrapping the special status, which allows people living in the UK to avoid domestic tax on overseas income.

Labour will use a humble address motion on Tuesday to demand all analysis on the impact of ending non-dom status by 28 February. “Labour will clear up 13 years of sleaze, abolish non-dom status, and provide the transparency the British people deserve,” said junior Treasury minister James Murray.

The Institute for Fiscal Studies (IFS) think tank previously estimated that scrapping non-dom status would be worth around £3bn a year. But Mr Hunt has said he wanted to encourage rich people to stay and “spend their money here”.

It comes as Mr Sunak tries to draw a line under the Zahawi tax saga, amid accusations from Labour that his government is now “drowning in sleaze”.

The prime minister insisted on Monday that he had acted “pretty decisively” by sacking the Tory chairman for breaching the ministerial code over his tax affairs, as he vowed to restore “integrity in politics”.

Speaking at an NHS hospital in County Durham, the PM said he had acted “straight away” after his ethics adviser Sir Laurie Magnus found that Mr Zahawi had breached code rules seven times by failing to be open and honest about his tax affairs.

“That should give you some confidence that these things matter to me. I will take whatever steps are necessary to restore integrity back into politics,” Mr Sunak added.

Senior Tory MP Sir Geoffrey Clifton-Brown – treasurer of the party’s powerful 1922 committee – joined the Liberal Democrats in calling for Mr Zahawi to consider standing down ahead of the next election. Sir Geoffrey said it would be the “best outcome”.

The Lib Dems also urged for Mr Sunak to withdraw the whip from Mr Zahawi, and called for an inquiry into legal threats made by the former chancellor against The Independent – after this newspaper first revealed the existence of the HMRC probe – and others.

But other Conservative MPs rejected calls for his suspension or for him to stand down in his Stratford-Upon-Avon constituency. “He has had punishment enough – he hasn’t broken the law,” one senior Tory angry at Mr Zahawi for “damaging” the party told The Independent.

Tory MP John Penrose, the government’s former anti-corruption tsar, told BBC Radio 4’s Today programme: “I don’t think having just paid an enormous fine and being sacked from the cabinet, we should find other things to heap on him at the moment.”

Rishi Sunak remains under pressure over his handling of the Zahawi tax saga (Getty/PA)
Rishi Sunak remains under pressure over his handling of the Zahawi tax saga (Getty/PA)

It came as No 10 rejected claims from allies of Mr Zahawi – sacked around an hour after Sir Laurie’s report landed on Mr Sunak’s desk early on Sunday morning – that he had been unfairly treated by the PM and the ethics adviser.

Mr Zahawi is said to be “furious” about the firing, and his allies told The Spectator that he had told Tom Scholar, then permanent secretary at the Treasury, about both the HMRC investigation and the penalty paid in September 2022.

They also claim his ministerial register of interests was up to date in September, despite Sir Laurie’s report stating that he had failed to update it until earlier this month.

But No 10 rejected the idea any government officials knew of an HMRC penalty in September. “The penalty fact was not set out until a later date. As the [ethics adviser] made clear, [Mr Zahawi] did not declare the details of the fine … until January.”

Mr Penrose said HMRC should have special permission to break the customary confidentiality of individuals’ tax returns in the case of vetting Treasury ministers. “We have got to have a system that works better,” he told Radio 5 Live.

Senior Tory MP Steve Brine, chair of the Health and Social Care Select Committee, said holding “confirmation” hearings after the appointment of cabinet ministers could help increase scrutiny. “I don’t think that is unreasonable,” he told BBC Radio 4’s World At One.

Meanwhile, a new Ipsos survey found that only one in three voters (32 per cent) believe Mr Sunak has what it takes to be a good prime minister – down 10 points since November.

The poll for the Evening Standard found that Labour leader Sir Keir Starmer has pulled ahead of Mr Sunak on credibility, with 36 per cent saying he has the qualities to be PM.

The startling results also show that just 2 in 10 voters believe the Sunak government is competent. Two-thirds of voters (66 per cent) believe it is time for a change at the next election, the poll suggests. And among 2019 Tory voters, 40 per cent believe it is time for change.

Meanwhile, the former Tory leader Lord Hague dismissed speculation linking him to the vacant party chairman post. “Please be aware that I will absolutely not be returning to politics in any shape or form, including that one,” he tweeted on Monday.

Commons leader Penny Mordaunt emerged as the bookmakers’ favourite for the job. William Hill has Mordaunt at 4/1, ahead of both Oliver Dowden and Michael Gove on 5/1.