In politics, they say, the cover-up is often worse than the crime. Nadhim Zahawi’s “error” in overlooking millions of pounds he owed in tax is gobsmacking enough, to those of us who are slogging to file our own returns by next week’s deadline. But his denials of what turned out to be true should have been a strong indicator, even to the bewilderingly timid Rishi Sunak, that he was not fit for office.
The story of Zahawi’s shares and offshore family trust shows that the whole concept of “legal” tax avoidance has become absurd. The UK has a long tradition of respect for entrepreneurs. But we also used to believe in fair play. Now, one section of the population seems to think that it’s clever to avoid tax: to cheat the hospitals, schools and police we all rely on. Of course, many wealthy people see it as their duty to pay up and more: including members of the rather wonderfully named Patriotic Millionaires. But others seem to believe they are entitled to duck and weave, abetted by the myriad loopholes of our monstrously overcomplicated tax system.
Sunak’s failure to sack Zahawi has undermined his own promise to restore integrity to a government which is still suffering symptoms of “long Boris” — the casual approach to standards which tainted so many in Johnson’s orbit. But the problem goes even wider. This kind of scandal taints all politicians. The public conclude that they’re all the same and everyone is at it — that the only MPs who aren’t on the make are too stupid to pull it off. This growing suspicion, ever since the expenses scandal of 2009, is dangerous for our democracy. According to the ONS, only a quarter of the UK population now think that a high-ranking politician would refuse to take money in exchange for granting a political favour; nearly two-thirds think they would be unlikely to refuse. This level of cynicism is unwarranted. There are many decent MPs in all parties, but scandals feed the fire.
Now, more than ever, the UK needs a sense of social solidarity. We are getting poorer as a nation, with fraying public services and rising homelessness. Richard Walker, executive chair of Iceland supermarkets, told me that some of his customers have only £25 a week to spend on food (the company has launched a micro-loan scheme). But businesses are told off for “talking Britain down” by Conservatives ignoring reality.
Chancellor Jeremy Hunt’s speech on Friday was an attempt to inject some hope, by painting a vision of an entrepreneurial future. But it was overshadowed by the simmering scandals. Hunt’s audience was made up of business leaders and City executives who want standards and stability from government. Several have pointed out to me that Zahawi had already saved money because the tax due was on capital gains, not income. “At that level of money, it’s a decision,” one said. “It’s not something you fail to notice.”
In this bleak time, it is worth remembering how unified the nation felt at the start of the pandemic. Neighbours helped each other out, the young ran errands for the old, villages clapped for the NHS. There was a genuine hope that we could “build back better”, a realisation by many of just how much others were suffering, and a huge appreciation for what key workers were contributing.
The Johnson government squandered all that. He made the law-abiding feel like fools by breaking the very rules he had made, and presiding over a gold rush for cronies in sales of PPE. His own endless and never quite explained hunger for cash is now devouring Richard Sharp, enthroned as chair of the BBC shortly after helping the then prime minister secure an £800,000 loan in opaque circumstances. The impression of chumminess was bad enough in the Blair years — now it is obscene.
If Britain is to unite and prosper again, we need leaders who demand complete transparency from ministers, a radical programme of tax simplification and a crackdown on offshore trusts. Governments always fear that they will lose the very rich — whose spending is worth a great deal, especially in the luxury goods market, and who could easily move elsewhere. That is why non-dom status has never been abolished. But the door is now open for the Labour party to take a radical look at taxes.
Shadow chancellor Rachel Reeves stresses that she does not want to raise the current tax take. But others are more radical. The Resolution Foundation think-tank has named “five terrible tax breaks” which it claims cost £4bn a year; the Institute for Fiscal Studies Tax Lab has suggested aligning taxes on business and employment income. This debate is surely coming.
The wider context is that the pandemic has added insult to the injury of the 2008 financial crash. No one was jailed in the UK; many bankers seemed to carry on as if nothing much had happened while the average worker endured a decade of wage stagnation. True, during Covid the government gave unprecedented support to workers and businesses. But those who owned their own homes, or had share portfolios, did even better. In Coventry, striking Amazon workers are repeating the GMB union’s claim that Jeff Bezos could give them all a bonus and still have more money than before the pandemic.
Voters may not fully understand how quantitative easing buoyed up the wealth of those with assets, but they do know about fairness. Downing Street insists the public hasn’t really noticed the Zahawi scandal. But beyond the bunker, this looks like a classic David and Goliath story, in which Zahawi’s murky tax affairs were exposed by a dogged solicitor, Dan Neidle. We Brits love the underdog. But in this case, we are all the underdogs. And we are mad as hell.