Fran O'Sullivan: Clark damaged goods after battle of Helengrad

We won. You lost. Eat that!" No, we're not talking about Finance Minister Michael Cullen's crowing over Labour's dirty election victory.

We're talking about the roar from the courageous journalists, bloggers, National Party MPs, gutsy public servants, and lawyers who dug deep into the electoral-spending scandal.

They faced down vituperative abuse from the Prime Minister, her colleagues, and minor party leaders until sufficient public pressure was created to force the political parties to dip into their pockets and pay back the $1.17 million they purloined to fund advertising campaigns for last year's election.

More than a bit of champagne has been quaffed in Wellington this week, as those who have put their reputations and careers on the line to do battle with Helengrad toasted a victory that was sorely needed if New Zealand's reputation as a corruption-free country was to be maintained.

The "pay it back" cry their courage inspired reached such a crescendo that Helen Clark - possibly New Zealand's most powerful prime minister - was forced to resile from her obdurate defence of Labour's huge $825,000 raid on her parliamentary leader's budget to fund her party's election campaign. The party will now pay back the funds and has launched a website drive to come up with the cash.

Clark's usual "front-up, punish the culprit, then move on" approach to dealing with the many crises she has ridden out during seven years in power failed her this time round.

Other Cabinet ministers have been sacked for typically human frailties, like a "drunk in charge" episode (Ruth Dyson); and telling porkies to journalists (Lianne Dalziel). Clark should heed this - but will she?

It is not National leader Don Brash - who Labour threatened to crucify over his extramarital affair - who is the damaged goods. It is Clark herself.

She will inevitably be the focus of extremely cruel attack advertising at the 2008 election which may well outweigh the positive effects of the tax cuts bribes the party will offer to get a fourth term in Government.

My sense is that she is already facing pressure from her Cabinet colleagues to ensure an orderly leadership transition takes place as doubts about her political judgment grow.

Loyal footsoldiers, such as party strategist Pete Hodgson, have been made to look like idiots for going on television at their leader's behest to steadfastly maintain Labour would not pay back the overspending.

When he did front, the hapless Hodgson had to admit he had not been briefed on all the tactics the Beehive's 9th floor has been employing to try to squash the controversy.

Other colleagues - some of whom probably want to give Clark and her chief of staff Heather Simpson a touch of the "front-up, punish the culprit" medicine in return for the humiliations she has dished up to them - are quietly shifting allegiances as they think through the implications of Clark's massive miscalculation.

Clark basically hung Simpson out to dry in Parliament earlier in the week when she absolved herself from any prime ministerial responsibility for the funding raid.

Although the $825,000 advertising campaign was signed off by Simpson, it was a Labour Party matter and not within her responsibility.

It remains a national scandal that H2 - as Simpson is commonly known - was lucky to escape criminal charges in the first place, after a gutless police force refused to take action against her for alleged breaches of the Electoral Act.

It is no accident that Cullen fronted for Labour in Parliament this week taking the heat for Clark while she stayed in Auckland safe from the penetrating questions of her political opponents and experienced press gallery journalists, who have followed every twist of this affair.

Cullen is relatively untouched and would be best placed as a transitional prime minister if Clark's colleagues decide she will not have sufficient credibility to lead Labour into the 2008 election.

He is already preparing to reverse his Uncle Scrooge approach with personal tax cuts and building his leadership profile.

Others like Steve Maharey and Phil Goff have being doing some quiet positioning of their own.

In Maharey's case he pulled rank on Labour Party president Mike Williams and went on television to outline future public funding options as the imbroglio deepened.

Goff broke away and made his own representations over alleged overspending in his electorate directly to Auditor-General Kevin Brady, instead of staying under the dictate of Simpson, who had been managing the negotiations for Labour.

This affair exposes the fact that Labour has forgotten its moral footing. Seven years ago Clark rode to power on the back of an "anti-sleaze" campaign against a tired National Government.

Helengrad has loftily held itself above others when touched by the hint of scandal - aided by a police force that cuts it slack - but takes legal actions against its opponents on the most trivial pretexts.

Clark's colleagues have some reflecting to do.