Labour may turn out to be biggest victim of Peters fiasco

Listeners to Radio New Zealand's Morning Report could not help noticing there was something very different, even something amiss, when they heard Winston Peters being interviewed by Sean Plunket yesterday.

The pair usually scrap like pit-bulls on heat. But not on this occasion. Mr Peters sounded tired. He sounded like a man whose world was collapsing.

And it was. The politician who built a stellar reputation as the representative of the underdog by crusading against corporate fraud and greed is now in the demeaning position of being the subject of a Serious Fraud Office investigation.

While he still had to speak to the Prime Minister, Mr Peters would have known it was odds-on his ministerial warrant was only hours away from being suspended until the SFO had completed its inquiries.

Even if by some miracle he talked Helen Clark into letting him keep his portfolios, there was the wreckage to his party to contemplate.

How could he campaign with any credibility or effectiveness while he was weighed down with the SFO investigation as an albatross around his neck?

He can give all the Grey Power speeches he likes. The words "Serious Fraud Office" are as contagious as the Black Death in killing off support, no matter how hard he tried to make light of things.

It wasn't as if the week had not been cataclysmic enough. Big cracks have started to appear in Mr Peters' testimony to Parliament's privileges committee regarding the Owen Glenn donation - the latest inconsistency in his version of events being exposed by the prime minister, of all people.

Not only did Miss Clark reveal she had known for six months that Mr Glenn had donated money either to Mr Peters or New Zealand First, she had asked Mr Peters regularly whether that was the case. He continued the give assurances that it wasn't.

The upshot is that Mr Peters was aware of the donation. Yet he persisted in denying one existed.

His final ignominy was National ruling him persona non grata as far as post-election negotiations are concerned. It stamps NZ First with the label of irrelevance. Not being able to deal with National means Mr Peters will have far less bargaining power with Labour, presuming he makes it back to Parliament.

Part of National's motivation for adopting such a stance was to slash NZ First's chances of returning.

It is not unusual for major parties in proportional voting systems to have no truck with minor ones. In Germany in the 1990s, the two major parties had a tacit agreement not to take any of the then mushrooming neo-Nazi and ultra-nationalistic parties as coalition partners.

NZ First, of course, is not in that category. But the effect is the same. If you cannot influence events, who is going to vote for you?

John Key had been weighing up for some time pulling the plug on Mr Peters. It was no easy decision. It could cost National the election.

However, selling "Brand Key" as a breath of fresh air in an otherwise fetid political atmosphere was hardly credible if National was going to team up with Mr Peters once the election was over.

As the week progressed and Mr Peters slipped deeper and deeper into the mire, it became obvious that Mr Key had to cut National off from any association with him. However, Mr Key was also observing Labour's discomfort and defensiveness over Mr Peters. It was not an experience he is willing to replicate if he becomes prime minister.

The master stroke was the timing of his announcement of his refusal to deal with Mr Peters the day before the Serious Fraud Office announced its investigation into corporate donations to NZ First. It made National look ahead of the play, rather than following behind.

Mr Key can now make the election a referendum on working (or not working) with the Mr Peters. That helps Mr Key's battle against Miss Clark on the crucial question of leadership. Labour has been trying to make that a central issue in the forthcoming campaign where the focus is squarely on the leaders of the two major parties and little else.

In excommunicating Mr Peters, Mr Key is saying to Labour "make my day".

Miss Clark's declaration that Mr Glenn had told her six months ago he had made a donation to NZ First has played into National's hands.

If Labour wants to talk about "secret agendas" and "trust", so be it. Mr Key will reply by asking the sort of questions Bill English reeled off in Parliament on Thursday in Miss Clark's absence.

Why had the prime minister withheld from the Parliament and the public the fact that she had known about Mr Glenn's donation? What trust could the public have in a prime minister who had known the relevant facts all along, but did not reveal them?

Could she confirm the only reason she has made the information available was her fear that Mr Glenn would reveal it if she did not? Was that all that she knew? Would she make herself available to the privileges committee?

They were all pertinent questions, but fortune smiled on Miss Clark and the admission she had known about the donation all along was upstaged by the Serious Fraud Office's announcement later in the day.

National, however, is determined to keep Miss Clark in the frame. She will face a similar barrage in Parliament next Tuesday. National argues that Miss Clark's responsibility as prime minister was to use her knowledge of the donation to force Mr Peters to stop playing games. But it is glad she didn't. Judging from her criticism of Mr Peters's handling of the matter, she now wishes she had.

Miss Clark's difficulty was she was dealing with one of her Government's support partners - not a Labour minister.

There are obvious constraints on interfering in a partner's private affairs. As long as what was going on with Mr Glenn did not detrimentally affect the running of the Government, she had no grounds for interfering. Whether she thought Mr Peters was being wise is another matter.

The big question is whether she is willing to match Mr Key's call on NZ First. Having worked satisfactorily with Mr Peters and praised his performance as foreign minister, Labour would look hypocritical if it suddenly turned its back on NZ First without good reason.

Miss Clark needs NZ First because it needs to take votes off National. Ironically, the best result for Labour would be for NZ First to fall just below the 5% threshold. The consequent distribution of seats might be enough for Labour to just squeeze back into power with backing from the Greens, Jim Anderton and, more problematically, the Maori Party.

However, if NZ First registers above 5%, Labour would likely need Mr Peters' endorsement to secure a majority.

National wouldn't as long as it could strike a deal with Tariana Turia and company, so NZ First is out of the picture.

That is all hypothesis, though. Less so is the feeling that the ground shifted this week, not only from under Mr Peters, but from under Labour, perhaps irreversibly.

• John Armstrong is The New Zealand Herald's political correspondent.

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