OUCH!

Labour to pay back election spending

Labour has announced it will refund the money it owes from improper election spending.

The climbdown came just minutes after the release of a report by Auditor-General Kevin Brady which ruled that $1.17 million of taxpayer money had been spent unlawfully at the 2005 election - $768,000 of it by Labour.

Parliament's Speaker Margaret Wilson, reacting to the report, has said parties should think about paying back the money if the public was to have confidence in Parliament.

Prime Minister Helen Clark said this afternoon Labour believed strongly that it spent the money within the rules as they were understood at the time.

But she said: "Refunding the money is one step in a series of responses which need to be taken to ensure public confidence in the political process."

Before this afternoon's report was announced, Labour has repeatedly said it would not pay the money back.

Ms Wilson gave all parties one week to decide if they are willing to pay the money back. The Speaker also recommended passing a so-called validating law to allow the spending at the 2005 election on the grounds the rules were unclear.

His report found $1.17 million of taxpayer-funded parliamentary funding was misspent overall, across seven of the eight parliamentary parties.

* Labour spent $768,000 wrongly
* New Zealand First $150,400
* The Greens $80,900
* United Future $63,800
* Act $17,800
* National $11,300
* Maori Party $48

National and the Maori Party have already paid back $10,500 and $53, respectively.

In a statement Ms Wilson said she did not accept the Auditor-General's legal analysis. She also said that parties were not required to reimburse the money.

But she did state: "In this instance the matter must be considered seriously if public confidence in Parliament is to be maintained."

The Speaker, who received the report from the Auditor-General late last week and released it to Parliament today, said parties needed to study the findings urgently and report back to Parliament.

"I therefore require the parliamentary parties to consider the two reports and report back to me on whether they intend to reimburse the unlawful expenditure in time for me to report back to Parliament next Thursday," she said.

'Genuine misunderstanding'

The Speaker said there appeared to have been "a genuine misunderstanding" of the interpretation of the rules which the Auditor-General expected to be applied by the parties and the Parliamentary Service, who are Parliament's bureaucrats and pay out on spending invoices.

The report by the Auditor-General and its subsequent report by the Speaker was immediately seized on by the Opposition in Parliament.

When National leader Don Brash rose to question Deputy Prime Minister Michael Cullen, the Speaker had to step in to quell the shouting across the House.

Mr Cullen said the Prime Minister and Labour had yet to study the report which had only just been tabled in Parliament. He said: "The Government will take whatever steps are appropriate when we have had the opportunity to properly consider the report."

Ms Wilson said in her statement that both a report by the Auditor-General and her own report found that there were big misunderstandings over what money could be spent under the heading "parliamentary purposes", including whether election advertising was permissible.

"The present position is so uncertain that it may be unworkable on a practical day to day basis," she said.

"Because of the uncertainty I am recommending that consideration should be given by Parliament to legislation to clarify the meaning of parliamentary purposes in the interim.

"MPs and the public need certainty that the resources used to fulfil responsibilities to the electorate are lawful. This can only be achieved by closer statutory direction."

The Speaker said that there were conflicting legal opinions on whether the election spending was unlawful or not.

She recommended that Parliament passes validating legislation, under the Public Finance Act 1989, to remedy the breaches.

"Although the unlawfulness in this instance is surrounded by much political controversy, it does not alter the fact that legislation is required to validate the unlawfulness," Ms Wilson said.