KEY POINTS:
National Party leader Don Brash is "acutely embarrassed" that his party gained $100,000 of unlawful taxpayer-funded advertising in the last election.
But he says the miscalculation over GST - which led to the extra TV and radio advertising - was made by the party, not the MPs.
"We got more broadcasting time than we were allowed under the law. That is correct," Dr Brash said this week before leaving for Britain.
Calling it a genuine error, he said if the party could correct it without breaching the law it would do so but it was nothing to do with him.
"It is a party issue, not a caucus issue. It has got nothing to do with my office or my staff or any action which any MP took. It is acutely embarrassing."
National's critics have seized on the issue since the Auditor-General found Labour had received $825,000 of unlawful taxpayer-funded advertising in the last election through parliamentary spending.
Labour and all other parties except New Zealand First found to have unlawfully spent money have agreed to pay it back. National now has to listen to chants of "pay it back" from Government benches.
And Dr Brash continues to be taunted by Labour and New Zealand First over the fact that, when he was a public servant, he led the committee on the design of GST.
"I did chair the GST design committee but this mistake had nothing to do with me or any of my caucus colleagues or any of my staff."
He said the National Party caucus was unhappy with the position relating to GST. "That's not a secret."
National MP Mark Blumsky said most of the caucus shared his view that "from a political point of view, it's an absolute pain in the backside and the sooner it is got rid of the better".
If the rules had been followed, National should have received $800,000 of taxpayer-funded radio and TV advertising time, not the $900,000 it got.
The result is that five media outlets are owed an amount equivalent to the GST on the total spent - $112,500.
In political shorthand, that is being reduced to National owing GST and calls for it to pay it back.
Marianne McKenzie, of Rainmakers, who placed National's ads, worked for Act in two previous elections. She told the police she had always worked on a GST-exclusive basis, as she had with Act.
Steven Joyce, National's general manager and campaign manager, believed she had been told the Electoral Commission's allocations for broadcast advertising included GST. Neither could find anything in writing.
Dr Brash said there was no comparison between Labour's "stealing" taxpayer money for its pledge card and National's "genuine error".
The party recognised the error, declaring it to the commission as soon as it was discovered.
National has engaged a Queen's Counsel to advise it on ways it might lawfully pay its debts.
President Judy Kirk said the party wanted the issue resolved.
THE OPTIONS FOR NATIONAL
1. Pay up and cop it
National pays the five media outlets that are collectively out of pocket by $112,500. The Electoral Commission refers the matter to the police who prosecute National president Judy Kirk if she writes the cheques.
Risk: That the party is ordered to pay a huge fine, up to $100,000, that Ms Kirk gets a conviction against her name and, a remote possibility, that the media companies are also prosecuted.
2. Pay up, don't dop it
National pays its debts. The Electoral Commission refers the matter to the police who say they are too busy chasing real criminals to waste time prosecuting people for repaying their debts.
Risk: That the cops are not that sensible and would ignore potential claims of bias against National, given the prima facie cases against Labour figures they have not pursued (such as Helen Clark, Heather Simpson and David Benson-Pope).
3. Be sued and be damned
One or all of the five creditors sue the National Party for the money through the courts.
Risk: That the court, instead of ordering National to pay - which it says it wants to - says it would be unlawful to, leaving the party no better off, and arguably worse off for having drawn more attention to the fact it received $100,000 of advertising it was not entitled to.
4. The back door
Form an overseas trust or company to repay the money to the local creditors, making it more difficult for the police to prosecute.
Risk: An extremely bad look that would be seen for what it was; a contrivance to defeat the law. Better to break it honestly than get around it sneakily. And it might not avoid prosecution anyway.
5. Paying with the enemy
Persuade Labour to back Don Brash's private member's bill allowing National to lawfully repay the creditors without any chance of prosecution.
Risk: It looks hypocritical for National to want validating legislation for its own actions when it pilloried Labour for retrospective legislation to validate its unlawful use of parliamentary funds last election.
True, there are differences between the two cases but validating legislation is validating legislation.
6. Putting it right - eventually
Do nothing until the broadcasting allocations are made for the 2008 election and then National voluntarily decides to underspend its entitlement by $112,500.
Risk: That it seriously disadvantages the party at the time that matters most in the election cycle and by which time the funding rules will have been so comprehensively reworked that there may be no comparable fund.
7. More of the same
Do nothing at all and hope that people forget about it.
Risk: That people remember - and make them pay at the 2008 election.
BLOW BY BLOW
The Broadcasting Act bans parties from buying their own TV and radio advertising time at elections. The Electoral Commission gets $3,212,000, including GST, to divvy up for parties' broadcast advertising. Of that, it set aside $900,000, including GST, for National to spend (Labour got $1.1 million). The totals are not counted in the election expenses caps under the Electoral Act. The parties send their invoices for TV and radio time to the commission for payment.
Breaking the rules
National hired professional agency Rainmakers to buy its advertising time. Former National general manager and campaign manager Steven Joyce said he told Rainmakers the $900,000 included GST. Marianne McKenzie, of Rainmakers, has no recollection of that, saying she thought the quoted figure excluded GST, as is usual in the advertising industry.
The aftermath
National submitted a final invoice to the Electoral Commission from Rainmakers for five media outlets that was $112,500 less than the actual advertising costs. The invoice was reduced to keep it within the $900,000 limit. Rainmakers waived its fee but five media outlets were not paid the full amount they were owed. The shortfall of $112,500 is equivalent to the GST on the amount National should have spent. This is how much they are out of pocket:
TVNZ $57,369; TV3 $20,013; Prime $6887; Sky $3327; Radio Bureau (for various stations) $24,895.
What happens next?
National leader Don Brash tried to get the support of the House to introduce a bill that would allow his party to pay its debt without breaking the law. But it needed the permission of all parties and was opposed. He has put a bill in the private member's bill ballot but that's pot luck. In the last draw, there were 31 bills. The next draw is on November 23 but even if the bill is drawn, there is no guarantee it will get enough support to pass.
