UK PM Sunak defends Conservative chairman appointment

Chairman of the Conservative party Nadhim Zahawi looks on outside CCHQ, in London

LONDON (Reuters) -British Prime Minister Rishi Sunak has defended the appointment of his Conservative Party chairman, saying he was not aware of any tax issues at the time but had launched an investigation as soon as questions were raised.

Questions over the tax affairs of Nadhim Zahawi have dogged the prime minister for a week, prompting some in his governing party to call for their chairman to resign to avoid the government again being buffeted by allegations of sleaze.

Sunak's office said separately the prime minister himself had "never paid a penalty" to the tax authority and that he would publish his tax returns in due course.

Zahawi has said Britain's tax authorities ruled he had been "careless" with his declarations but had not deliberately made an error to pay less tax. Allies of the chairman, who is also minister without portfolio, have said he will not stand down.

"The issues in question occurred before I was prime minister," Sunak told parliament on Wednesday. "With regard to the appointment ... the usual appointments process was followed. No issues were raised with me when he was appointed to his current role."

Sunak's spokesperson said the prime minister had asked his ethics adviser to look into the case after Zahawi, who served briefly as finance minister under Boris Johnson, issued a statement which brought new information into the public domain.

With Sunak's deputy prime minister, Dominic Raab, being investigated over bullying allegations, he is under scrutiny after pledging to lead Britain with "integrity, professionalism and accountability".

"I think it's right that there is an independent process when all of these facts are established as facts before any further action is taken and that is proper professionalism and accountability in action," the spokesperson said, adding that Sunak retained confidence in Zahawi.

Several Conservative lawmakers have called on Zahawi to step down, with one saying the issue was a distraction for a government already running behind the opposition Labour Party in opinion polls before a national election expected next year.

After Sunak was grilled about the issue at Britain's prime minister's questions in parliament, one Conservative lawmaker said: "This is exactly why he should have stepped down."

The issue relates to Zahawi's co-founding in 2000 of opinion polling firm YouGov, in which he said his father had taken a stake to support its launch.

However, Britain's tax office disagreed with the number of shares given to Zahawi's father, when the issue was raised during his appointment as finance minister last year.

Zahawi said on Saturday he had paid dues and settled the matter with the tax office, which he said concluded that he had made a "careless and not deliberate" error.

Sunak said he could not prejudge the outcome of the ethics investigation. "But it is right that we fully investigate this matter and establish all the facts," he said.

(Reporting by Elizabeth Piper and William James, writing by Sachin Ravikumar; Editing by Kate Holton, Emelia Sithole-Matarise and Jonathan Oatis)