Labour looks at ways to repay taxpayer cash

Labour is looking at ways it could effectively pay back any election spending deemed unlawful by the Auditor-General.

Faced with overwhelming public hostility to passing retrospective legislation to validate spending, it is also planning ways to hit back at National in retribution.

Prime Minister Helen Clark says the Government will not consider any firm options until the Auditor-General's final report is finished.

And she described the phrase "pay it back" as a "National Party slogan".

But the Herald understands that one of the backroom options under private discussion is for Labour to underspend its parliamentary budget by whatever amount Auditor-General Kevin Brady deems to have been unlawful.

So a finding that $800,000 of its 2005 election expenditure - the present estimate - was unlawful could see Labour under-spend its $4.9 million entitlement in the current financial year by, say, $400,000 this year and the same amount next year.

In that way, it would save the taxpayer the same amount it had unlawfully spent - on communications such as mail-outs, or other costs funded from the same appropriation such as research, or whips' office costs.

Meanwhile, Helen Clark launched war against National yesterday with counter-claims of corruption in last year's election.

She foreshadowed an electoral law change that would prevent National channelling many of its donations anonymously through trust funds.

That could hit National in a significant way. Of the $1.88 million of donations declared by National last year, $1.74 million was channelled anonymously - though legally - through trust funds.

"Our electoral law allows for secret money with other motivations to buy elections and that is what needs to be tidied up this time around," Helen Clark said.

She accused National of accepting "cash for policy" in terms of corporate funding, and again suggested the insurance industry backed National because of the party's promise to privatise accident compensation.

"They've declared war and they'll get it," Helen Clark told the Herald.

"They have crossed a line on their use of language and they'll get it back with both barrels.

"We believe the way they funded their campaign was corrupt and lies were told about it," she said, referring to a $1.2 million anti-Government campaign by the Exclusive Brethren.

Helen Clark's toughening position on the matter comes in the wake of a Herald- DigiPoll survey published last week showing that 81 per cent of voters believe the parties fingered by the Auditor-General should pay back unlawful expenditure.

It also follows an increasing use of the word "corrupt" by National to describe Labour's election spending, which Helen Clark is attempting to return.

"The National Party had so much covert funding which you will not be able to find out the origin of because it drops its major corporate funding - cash for policy - into trust funds which cannot then be traced," she said.

"If there is one thing that needs to be corrected with a review of the election it is to prise open that kind of secret funding because if anything is going to lead to corruption in New Zealand politics, it is big corporates buying elections."

Questioned at length at her post-Cabinet press conference, the Prime Minister defended the five of the eight parliamentary parties deemed to have spent unlawfully in the three months before the election.

She said the parties had believed they were following the rules, which were now being reinterpreted.

Dr Brash accused Helen Clark of trying to confuse the public and said her claim that the issue was a "National Party beat-up" and "lies" was ridiculous.

- Additional reporting by Paula Oliver