By John Armstrong

political editor

The Prime Minister is suffering her most serious credibility crisis after a journalist reported that she admitted inventing the allegation of John Hawkesby's $1 million payout from TVNZ.

Last night's One Network News report of a conversation between Television New Zealand's Linda Clark and Jenny Shipley - during which Mrs Shipley allegedly said, "I made it up" - plunged the Prime Minister's office into fresh turmoil.

Mrs Shipley later issued a statement in which she did not deny she might have used those words. However, she did not recall them and if she had, they had been "flippant comments." She was furious about the publicising of a private conversation during the "after-match function" that followed her appearance on Monday night's Crossfire programme in which she made the Hawkesby claim. "A number of flippant comments were made by all concerned, but I do not recall using the words used on One Network News."

But TVNZ's record of the conversation and the absence of a denial will prompt more questioning of her credibility and deepen worries within her caucus about her failure to clear up a political mess which has lasted all week.
Labour plans to lay a breach-of-privilege charge against her alleging she misled Parliament - a charge, which if proven, would force the Prime Minister's resignation.
Mrs Shipley was at a Beehive reception for the All Blacks last night when One Network News revealed details of the conversation at TVNZ's Auckland studios. She returned to her office and was closeted with advisers and ministerial colleagues before issuing her statement more than two hours later.

All week, Mrs Shipley has insisted in Parliament that someone else led her to believe that TVNZ had paid an exit settlement to its former newsreader, although she accepted that she had been wrong. But on One Network News last night, Clark, the TVNZ political editor, said that after Crossfire had ended she asked Mrs Shipley exactly where the Hawkesby payout allegation had come from.

Clark, reading from her reporter's notes of the conversation, then quoted the Prime Minister as replying: "I made it up. You people do that all the time." Noting that Mrs Shipley's mood had been "fairly flippant," Clark said her recollection of the conversation was backed by others present, including her Crossfire co-host, Mike Hosking.

Their conversation did not become public knowledge until yesterday afternoon when the IRN news service broadcast an unsourced story. That was raised in Parliament, and Labour's deputy leader, Michael Cullen, called on Mrs Shipley to give a personal explanation of the seemingly contradictory answers. She chose not to do so.

A pressured Mrs Shipley also ducked a volley of questions during a late-afternoon press conference. She refused 15 times to make any comment.

Meanwhile, TVNZ said yesterday that its chairwoman, Rosanne Meo, had never discussed the Hawkesby settlement with the Prime Minister. Earlier this week, Mrs Meo refused to answer questions on the subject. A TVNZ spokesman, Liam Jeory, said the answer was: "Absolutely no - it was not and has never been discussed."

Last night, State Owned Enterprises Minister Tony Ryall said that he had briefed Mrs Shipley on the Hawkesby negotiations but would not say when or what sums had been discussed.