Prime Minister Bill English faces an uphill battle to form a coalition Government or get a supply and confidence agreement with New Zealand First.

NZ First sources say that Leader Winston Peters remains convinced National Party politicians leaked details of his superannuation payments and orchestrated a campaign to drive him out of politics which resulted in him losing his seat.

As a consequence, POLITIK understands NZ First will not take part in any Government formation negotiations involving Finance Minister and National Campaign Manager, Steven Joyce.

But English’s challenges don’t stop there.

There is a gaping policy gap between NZ First and the National Party.

On Saturday night and again yesterday English had begun to hint that he might be prepared to relax some existing Government policies to accommodate NZ First.

Asked on Saturday night if he was willing to move on the immigration issue to meet New Zealand First’s call for a cut English, said: “We respect the negotiation process.

“Mr Peters has got some well-known positions.

“We would expect to be working from tomorrow on how we could find common ground with him on those positions which do represent policies which are different from ours.

“That’s the coalition-forming process.


“We know we have to give ground.

“He’ll be aware that we have pretty strong support in the New Zealand public.”

And yesterday he made similar comments when asked about the New Zealand First policy to have a referendum on the Maori seats.

Asked if National’s policy on the seats — which is currently to retain them — could change, he said: “I am not going to get ahead of the discussions which we would have as part of the coalition negotiations.”

English said the negotiations would begin by him talking directly to Peters.

“We won’t be taking public positions on issues which would be more appropriately negotiated with Winston Peters and NZ First.”

But National is going to have huge challenges meeting some NZ  First policies such as its long time persistent demand that the Reserve Bank Act be changed to broaden the criteria it uses to set the Official Cash Rate to include to include not just control of inflation “but also critical macro-economic factors such as the rate of growth, export growth, the value of the dollar, and employment.”

NZ First opposes foreign investment and particularly the foreign purchase of farms. Its new Clutha Southland MP, Mark Patterson, earlier this year opposed the sale of a Landcorp station near Te Anau to a Chinese investor and also opposed the sale of part of Silver Fern Farms to Shanghai Maling.

The party also opposes the TPP and has been critical of other free trade agreements.

One of English’s most frequent boasts about National’s economic policies is that New Zealand is an open economy.

In July this year, he told investors in Hong Kong that New Zealand was “open to trade, open to investment, open to migration.”

And on Saturday night English was arguing that the vote for National was an endorsement of the economic direction that had been taken by his Government.

How difficult would it be, therefore, to reconcile that direction with NZ First’s economic policies which have been founded on its opposition to neoliberalism”.

“Those matters that are going to be raised by New Zealand First we will negotiate with them rather than through the media but the general point I made last night is one that I’d stand by; New Zealand has had some real economic success.

“We would want to negotiate in a way that seeks to preserve the basics of that success.”

And that is where the sticking point in any negotiations is most likely to be.

As various Labour spokespeople have been saying for some time, there is a much closer policy alignment between Labour and NZ First.

But yesterday Labour and a potential coalition of the Greens and NZ First would have a majority of only one seat in the House.

Presuming they supplied the Speaker, that would leave the Speaker with the casting vote on all contested Bills.

But though English can argue that this is a potentially unstable arrangement; the numbers may well change when all the Special votes are counted.

This year 15% of all votes are Specials — 384,072 votes.

Last election 13.6% of all votes were Specials, and these leaned to the Greens who got an extra seat while National lost one.

If that situation repeats this year, the final result could end up being National 57 seats; Labour, 45; NZ First, 9; Greens, 8 and ACT 1.

That would mean a National – NZ First Government would have 66 seats while a Labour, NZ First, Greens Government would have 62 seats.

It is the uncertainty about these results that has caused Winston Peters to say he will not be in a position to make a final decision until October 12, the day the writs must be returned.

Final results will be confirmed on October 7 but there are five days to allow any legal challenges to take place.

One cannot be ruled out by Peters against the Northland result.

Nevertheless though these numbers offer a pathway for Labour to form a Government, it is not a particularly secure one.

 Party at Jacinda's place

Leader Jacinda Ardern has been circumspect and cautious since election night.

“A majority of people have voted against the status quo,” she said yesterday.

“It’s up to us to see whether we can produce Government from that.”

She said the number of seats would be important, but there were other factors which would come into play.

“Where there are shared views and common ground to work from.”

There’s no doubt that the New Zealand First was an anti-Government vote but whether it was a “pro Labour” vote is more problematical to judge.

New Zealand First’s party vote came overwhelmingly from the North Island provincial electorates.

 It’s top 10 electorates (in order) were Whangarei; Northland; Coromandel; Bay of Plenty; Tauranga; Wairarapa; Waikato; Rodney; Rangitikei and Whanganui.

In first-past-the-post 1970s these were the marginal seats; where they went the Government went.

But they were also strongholds for Social Credit where voters went to “hide” if they wanted to vote against the National Party but couldn’t bring themselves to vote Labour.

It was when those Social Credit votes converted to Labour votes (as they did in 1984) that Labour won power.

There were a  number of sources inside both the National Party and caucus who yesterday acknowledged this and picked up on a suggestion made earlier in the year privately to some National MPs by Sir John Key that the best arrangement might be to have Peters abstain on confidence and supply and vote on a case by case basis on legislation.

The downside of that is that he could end up holding the whole Parliamentary process hostage which might only be able to be resolved by a snap election.

POLITIK understands that this scenario has been discussed at the highest level within the National Party where officials are wary of the idea because they believe any Government calling a snap election risks alienating the electorate.

There are other challenges that English faces.

If he gets to form a Government, he will face a renewed clamour from his backbench to renew the Cabinet.

Again, there is a call for Environment Minister, Nick Smith, to be moved on.

And there are also suggestions that the Speaker, David Carter, might be persuaded to retire.

That would be a move which might get the approval of Peters who has clashed on an almost daily basis with him during Question Time.

English on Saturday night and yesterday was playing the “Prime Ministerial” card.

What should not be forgotten in all this is what an extraordinary achievement his win on Saturday night was.

Sir John Key won more votes on the night than Saturday night only once — in 2011.

No New Zealand political party has won the largest share of the vote four elections running since Keith Holyoake in 1969.

And no Leader who replaced another leader midterm has won a subsequent election since Peter Fraser in 1940 after he replaced Michael Joseph Savage.

Holyoake, Sir John Marshall, Bill Rowling, Mike Moore and Jenny Shipley all failed to win after they replaced an elected leader.

This win will give English enormous authority within the National Party, and that may give him flexiblity which could be important as the next three weeks of negotiations with NZ First unfold.