Labour has agreed to a huge provincial Development Fund as part of its coalition agreement with NZ First.

The fund is Labour’s answer to NZ First’s manifesto promise to restore GST collected from tourists back to the regions where it was collected.

The money will be under the control of NZ First Ministers.

It is estimated that around $1.5 billion in GST  is collected from tourists each year.

POLITIK understands that the Provincial Development Fund will have at least hundreds of millions of dollars in capital – possibly more with a total nearer $1.5 billion.

The money is likely to be borrowed or from bond issues.

It would be used for tourism, roads, infrastructure and to stimulate job training and opportunities 

Labour’s willingness to agree to it appears to have been one of the key factors that swung New Zealand First in favour of Labour.

National also offered some regional development money to NZ First, but accounts vary as to how much, however, it is believed to have been less than $1 billion.

As details of both the negotiations and the final agreement trickle out it appear that National’s strategy was to offer NZ First “baubles” rather than solid policy gains.


National offered the party five Cabinet seats and three more Ministries outside Cabinet which would have meant that only one NZ First MP would not have been a Minister.

Labour offered only four positions inside Cabinet and one outside.

As the negotiations progressed there were reports that the New Zealand First negotiators felt they were being patronised by National; that they were often being given lessons in how Government worked.

Beehive sources, on the other hand, say that the New Zealand First team often did not understand the practicalities of how Government actually worked nor did they fully recognise the implications of some of their policy proposals.

There are also suggestions that the NZ First negotiators often did not push their claims very hard.

A number of different sources say that the New Zealand First caucus went down to the wire before it agreed to go with Labour.

There were questions raised about whether joining with National would mean that if (as the Caucus apparently thought likely) it did not win the next election, NZ First would go down with them.

On the other hand, there was apparently concern about being involved in a Government with the Greens, particularly if they held Ministerial portfolios.

Another key moment came when National sent over to NZ First its proposed legislative programme for the next three years.

Nothing of any significance that NZ First had proposed was on it.

It was, said one source, a National Government business as usual legislative programme.

That National was reluctant to make any major policy concessions was seen as a virtue by party board members when they held their telephone conference on Thursday to approve the final offer made to NZ First.

In a way, it seems that NZ First and National talked past each other.

National was reluctant – paranoid even – about being seen to be going back to a Muldoonist style interventionist economy.

NZ First, on the other hand, wanted to restore the economies of small town and provincial New Zealand back to the way they were when Suir Robert Muldoon was Prime Minister.

The “P” epidemic has made that desire more urgent in the minds of many in NZ First.

This was a substantial divide and much more substantial than some commentary which has suggested it was about the baubles of office or Peters’ personal ego.

National will have to address that now because at the moment it has been left stranded as the only centre-right party in New Zealand politics.

Already there is talk within National of waiting to see what happens when (or if) Winston Peters retires. Would NZ First survive?

NZ First, meanwhile, will be hoping that its regional fund, likely to be administered by either Winston Peters or Shane Jones, will help maintain  its support in its heartland.