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It comes after a senior Tory MP broke ranks to call for Mr Zahawi to “temporarily recuse himself” from his party and Cabinet role until a probe into his conduct is over. Caroline Nokes said Mr Zahawi should “stand aside until this matter is all cleared up”.
But Home Office minister Chris Philp said he should be treated as “innocent until proven guilty” and it is “reasonable” for him to continue as party chairman.
Announcing the ethics probe into Mr Zahawi on Monday, Rishi Sunak said it is “longstanding practice” for ministers being investigated to remain in their post.
Mr Zahawi is subject to an inquiry by the new independent adviser on ministers’ interests, Sir Laurie Magnus, into declarations about his tax affairs.
He resolved a multimillion-pound tax dispute with HMRC by paying a penalty – reportedly around 30 percent of a £5million settlement – while serving as chancellor under former prime minister Boris Johnson.
Mr Zahawi said the error in his tax affairs was accepted by HMRC as having been “careless and not deliberate”.
After Mr Sunak entered Downing Street in October, he appointed Mr Zahawi Tory chairman and minister without portfolio, allowing him to attend Cabinet.
Policing minister Mr Philp said he understood Mr Sunak was told there were “no outstanding issues” in relation to Mr Zahawi’s tax affairs when appointing him to the roles.
Asked on BBC Breakfast about Ms Nokes’s call for Mr Zahawi to step aside during the investigation, Mr Philp, said: “I don’t take that view. We do have a principle, don’t we, in this country innocent until proven guilty.
“The investigation has been launched by the Prime Minister. That is the right thing to do. It will get to the bottom of this.
“But I don’t think it is fair to jump to conclusions before the investigation has concluded.”
Sir Laurie is expected to focus on Mr Zahawi’s ministerial declarations.
But the investigation could extend to his prior tax arrangement and whether he lied to the media.
Downing Street said it hoped the investigation could be carried out “swiftly”, but no date had been set for Sir Laurie to report back.
Labour said Mr Zahawi’s admitted carelessness should see him removed from Government.
Shadow foreign secretary David Lammy told Sky News: “When you’ve been chancellor of the exchequer and you said you’ve been careless despite the fact that offshore trusts have been set up in Gibraltar, I’m sorry, you really ought to resign or be sacked.”
In a statement on Monday, Mr Zahawi said he is “confident” he “acted properly throughout”.
His tax affairs formed one of two controversies Mr Sunak has been forced to confront this week, with questions also being raised over the decision to appoint Richard Sharp BBC chairman while he reportedly helped former No 10 incumbent Mr Johnson secure a loan of up to £800,000.
Mr Sunak distanced himself from the allegation, saying the chairman’s appointment was made by “one of my predecessors”.
William Shawcross, the commissioner for public appointments, said he would review competition for the post to ensure it complied with Whitehall rules.
Mr Sharp has insisted he was “not involved in making a loan or arranging a guarantee” for the then-prime minister.
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