Nadhim Zahawi is not planning to resign as Conservative Party chairman despite paying a penalty to resolve a tax dispute with HMRC.
His position is “totally untenable” and Prime Minister Rishi Sunak should sack him as Tory Party chair, shadow culture secretary Lucy Powell has said.
An ally said on Monday that the former chancellor “absolutely” will not be quitting in the face of growing pressure over his settlement, estimated to be around £5 million.
Rishi Sunak has been urged by Labour to sack Mr Zahawi, whom he brought back into a Cabinet-attending role after entering No 10.
The Prime Minister faces questions about the appointment as his promise of a premiership of “integrity” was thrown into disarray by a series of scandals.
A source close to Mr Zahawi did not answer questions on the penalty but said: “He is absolutely not resigning.”
Mr Zahawi has insisted his “error” over shares in the YouGov polling company he co-founded was “careless and not deliberate” .
The BBC was told that Mr Zahawi did pay a penalty – reported by the Guardian to be around 30% – taking the total estimated settlement to around £4.8 million.
The broadcaster confirmed the dispute was resolved while Mr Zahawi was chancellor, between July and September, and ultimately the minister in charge of HMRC.
Labour has called for Mr Zahawi to be sacked and for Mr Sunak to “come clean” on what he knew about the minister’s tax affairs when he appointed him party chairman.
A challenging weekend for Mr Sunak began when police fined him for failing to wear a seatbelt as he filmed a social media clip from the back of a moving car.
The Sunday Times then reported that BBC chairman Richard Sharp helped Boris Johnson secure a loan weeks before recommending him for the role.
Mr Zahawi sought to end questions about his tax affairs by releasing a statement saying questions were raised about his tax affairs when he was being appointed chancellor.
“Following discussions with HMRC, they agreed that my father was entitled to founder shares in YouGov, though they disagreed about the exact allocation,” he said.
“They concluded that this was a ‘careless and not deliberate’ error.
“So that I could focus on my life as a public servant, I chose to settle the matter and pay what they said was due, which was the right thing to do.“
Mr Johnson was prime minister when he appointed Mr Zahawi chancellor and the shadow of his leadership continues to raise challenges for Mr Sunak.
The Sunday Times reported that Mr Sharp helped secure Mr Johnson an £800,000 loan weeks before the then-prime minister recommended him for the role.
Labour is demanding an investigation into the appointment of Mr Sharp, a Tory donor.
Mr Sharp told the Sunday Times he had “simply connected” people and there was no conflict of interest.
Mr Johnson’s spokesman dismissed the report as “rubbish” and insisted his financial arrangements “have been properly declared”.
Ms Powell told BBC Radio 4’s Today programme: “His position is totally untenable and it shouldn’t be a case that we are sitting around waiting for him to resign, the Prime Minister should be sacking him.
“The Prime Minister took office only a few months ago declaring that his Government was going to be one of integrity, accountability and professionalism, and here we have a very senior member of his cabinet who at the time of these allegations was the chancellor when we now know he was negotiating with HMRC to pay taxes that he was due to pay and a settlement and a penalty for those – yet he is still in office.
“I think this is just totally unacceptable and every day that passes just shows the weakness of the Prime Minister (in) that he is unable to sack Nadhim Zahawi.”