Blue Blood: The Inside Story of the National Party in Crisis

By Andrea Vance

'A political bombshell book' - Sunday Star Times

Beginning with the shock resignation of John Key, Blue Blood reveals the reasons behind one of the most dramatic falls in popularity in New Zealand's political history and tells the full story of how the National Party went to war with itself.

Informed by campaign emails and internal party communications, and with commentary from key advisors, staffers, and past and current MPs, Andrea Vance sheds new light on the ministers and motivations that made headlines: negotiations with the kingmaker, high-profile resignations, secret recordings and text messages, allegations of bullying and harassment, and leaders gone rogue on the campaign trail.

Blue Blood takes the reader inside the rooms where fatal decisions were made, asks what values lie at the heart of a modern-day National Party, and questions who else might be waiting in the wings.

'I was unable to put it down. Stranger than fiction and yet entirely factual. A timely reminder of how quickly things can change in politics' Tova O'Brien, Today FM

'A bizarre, gothic psycho-drama of National's recent political history' The Listener

'A blockbuster of a book that reads like a thriller - or a horror story' Capsule

• Language: English
• Publisher: HarperCollins Publishers Australia
• Release date: Jul 1, 2022
• ISBN: 9781775492467

Andrea Vance

Andrea Vance is a senior journalist at Stuff. Born in Northern Ireland, she worked in the Press Gallery at the New Zealand Parliament for nearly a decade, first with Stuff and then TVNZ. She spent seven years as an investigative journalist with the News of the World and was night news editor at the Scotsman. She is a Press Fellow of Wolfson College, University of Cambridge.

Book preview

DEDICATION

For Sam and Dubh

CONTENTS

DEDICATION

1: LOST KEY

2: THE STAYER AND THE SPRINTER

3: THE PATIENT ENGLISH

4: JACINDAMANIA

5: QUEENMAKER

6: KNIVES OUT

7: THE YOUNG AND THE RESTLESS

8: A TRAIN WRECK

9: INTO THE UNKNOWN

10: THE COUP THAT SHOULD NEVER HAVE HAPPENED

11: THE HOSPITAL PASS

12: CRUSHED

13: THE TEA PARTY

14: THIS IS YOUR CAPTAIN SPEAKING

ACKNOWLEDGEMENTS

ENDNOTES

ABOUT THE AUTHOR

COPYRIGHT

1

LOST KEY

JOHN KEY WAS EXHAUSTED. He’d escaped Auckland, retreating to the family’s holiday home in Hawaii for the summer break. As the sun dipped below the Pacific Ocean horizon, Key turned to wife Bronagh and said: ‘I’m certain it’s my last year.’

The year 2015 had been bruising for the prime minister. It opened with sustained attacks on the government over public funding for SkyCity’s multi-million-dollar convention centre. Before the casino operator was finally dissuaded from its $100-million demands for a top-up of taxpayer cash for the controversial development, there were days of damaging headlines.

Ever since, Key’s National Party was dogged by the sense it was becoming ‘out of touch’. Key upset a waitress at his local café by repeatedly yanking her hair, creating a storm that would become known as ‘ponytail-gate’. Steven Joyce, one of his most trusted ministers, was beset by details of extravagant spending on hair-straighteners, sun decks and enormous televisions at the business and employment super-ministry MBIE, one of his pet projects.

By mid-year, protests objecting to the Trans-Pacific Partnership (TPP) trade deal had reached fever pitch. Over the winter, thousands rallied in the streets to oppose the international pact, anxious it gave too much power to large, foreign corporations.

A row about the deportation of New Zealand-born criminals from Australia also drove much of the political agenda. Although the Beehive was powerless to influence the hard-line and domestically popular Canberra policy, Key found himself having to answer for the desperate plight of New Zealanders stuck in detention centres. In a testy Parliamentary debate he made a rare misstep, admonishing Labour for its stance on the issue by saying the party supported rapists, child molesters and murderers. The clumsy remark sparked a walkout by 12 female Opposition MPs and made headlines around the world.

Even the prime minister’s bold mission to change the New Zealand flag was unravelling. After public disappointment at the official choice of four designs, he had to bow to a social media campaign to include the ‘Red Peak’ flag in the shortlist.

There were other disappointments that would have lasting impacts too. March saw National’s candidate Mark Osborne humiliated by Winston Peters in a by-election in Northland. Peters, once National’s favourite son, was now its bête noir.

Northland was a messy campaign. Only weeks after the 2014 general election, it emerged second-term National MP Mike Sabin was the subject of a police investigation regarding an alleged assault. Sabin, a former police officer who was on the verge of being appointed a minister, was forced to step down in late January, and the party was under considerable pressure to reveal what it knew about the assault allegations, and when.

Aware that National was in trouble and that incumbent governments are often defeated in by-elections, Key dispatched four young, ambitious MPs to bolster the campaign. They were on hand to support Osborne, a virtual unknown, with local meetings and media opportunities. A promise to upgrade 10 one-way bridges became a central focus of the campaign. Over a few weeks, Mark Mitchell, Alfred Ngaro, Chris Bishop and Todd Muller bonded over the loss of a seat National had held for close to two decades. Later, they would become known as the ‘Four Amigos’, an alliance that would dramatically shape the fortunes of the party.

Winning Northland gave Peters’s New Zealand First party an extra MP, and at the same time weakened National’s ability to push policies through Parliament. A long-promised package to reform the Resource Management Act, the country’s critical planning and environment legislation, was consequently much weakened when revealed in November.

Even Key family holidays were not exempt from controversy. The prime minister’s 20-year-old son, Max, created a minor fuss by posting an envy-inducing YouTube holiday video while staying at the family’s 322-square-metre Hawaii townhouse. Quartered in a luxury gated community, with its cherry-wood cabinetry, private lift and golf-course views, it was an untimely reminder of how far removed Key’s life was from his constituents’. The prime minister found himself having to defend his family from accusations of indulging in a lavish lifestyle at a time when the national debate was beginning to shift to unaffordable housing, an issue that would persist through the next two elections.

At times it felt as though the government was being attacked on all sides. A lift in the refugee quota to welcome 750 Syrians, as Europe was besieged by desperate migrants, was dismissed as ‘too token’. Senior minister Paula Bennett was taking fire over plans to sell off tens of thousands of state houses, the biggest shake-up of the system in 80 years. Finance Minister Bill English risked appearing mean-spirited when he applied a rarely used financial veto to torpedo Labour’s bill to increase paid parental leave.

Even so, Key had plenty of reasons to smile as he relaxed into his Maui holiday. Media pundits and the Opposition were bent on suggesting National was showing the early signs of third-termitis, an affliction caused by a mixture of arrogance and a public itch for change. But this was wishful thinking: those sentiments were not yet resonating with voters. The first public poll of 2015 showed National with 49.8 per cent support, and Labour languishing on 29. The year closed with National retaining that commanding lead: the final Roy Morgan poll put National on 49 per cent, while combined support for the Labour/Green vote could only reach 41.5 per cent.

But a conversation with US President Barack Obama was playing on Key’s mind. The pair were elected to lead their countries within four days of each other in November 2008 and had developed a warm friendship after first meeting at a lunch hosted in New York the following year by UN Secretary-General Ban Ki-moon.

During Key’s previous summer break, at the end of 2014, he and Max had met Obama for a round of golf at a military base near the US president’s rented holiday home on the island of Oahu. As Key was contemplating his future in politics, Obama was beginning his last full year in the job. Key had long believed that most prime ministers stayed on one election too many, and thought the US system, which limited presidents to two terms, had merit.

He had a long talk with Obama and asked him what he would do if he had the opportunity to run for another term — would he take it? Both men concluded they wouldn’t. ‘There was something nice about that: that you throw everything at it, but there’s a finality about it,’ Key thought. Only months earlier another world leader, British Prime Minister David Cameron, had clearly been grappling with the same conundrum. Announcing in 2015 that he would not seek a third term as prime minister if his Conservative Party remained in government, he told the BBC: ‘Terms are like Shredded Wheat — two are wonderful, but three might just be too many.’

As Key weighed up his own options in early 2016, he was keenly aware that this year would be an important one for setting the party up for the 2017 general election. He reflected on the experience of former Australian Prime Minister John Howard, who was toppled in 2007 from the seat he’d held for 33 years: if the most successful Australasian prime minister in a lifetime could lose an unlosable seat, then there was a reason. Key thought he might suffer the same fate if he stayed one election too many, admitting to himself that ‘everything they [voters] like about you for a long period of time, at some point they don’t like’.

From the moment Key entered the political fray, during the tumultuous 2002 election campaign and through eight years in government, Bronagh was loyal to his ambitions. While she was a member of the National Party, she was not an activist. Key says, ‘She’s the most understated person, so she is happy having a life out of the limelight. She doesn’t feel the need for me to be there for status. But the job [as MP and PM] is pretty 24/7. You are away one hell of a lot, and when you are home you are busy.’

Much has been made about Bronagh’s influence on Key’s decision to quit politics, with speculation she issued an ultimatum. There was a final demand — but not the one journalists would later assume. As that evening on Maui in 2016 cooled and they relaxed over drinks, she told him: ‘Look, you’ve been in this for 15 years and you’ve been busy for 35. So, if you want to do one more and have four terms I’m 100 per cent with you. But, if you do go, please tell me you won’t go back [again after that].’

When Key returned to New Zealand from holiday, it was to one of the most tempestuous years since the economic and societal changes of the 1930s. It would see political earthquakes like the election of Donald Trump, Brexit, Islamic terror attacks across Europe and the strengthening influence of Russia’s Vladamir Putin. The ‘Shaky Isles’ would experience their fair share of ructions too.

There were early warning signs that 2016 would be a difficult year. In February, Steven Joyce copped a flying, flesh-toned dildo to the face as he spoke to journalists ahead of Waitangi Day celebrations. The sex toy was thrown by Josie Butler, a Christchurch nurse who claimed to be protesting against the TPP, shouting: ‘That’s for raping our sovereignty’. Sizeable demonstrations against the pact continued, with thousands blocking streets and motorway on-ramps as Pacific rim trade ministers inked the deal at Auckland’s SkyCity.

Although National was still polling well, the public mood was unmistakably scratchy. In March, Kiwis rejected Key’s bid to change the national flag, opting to retain the traditional Union Jack design. He would later say the referendum failure was his biggest regret. Third-term blues also saw Key spending more time in front of microphones, soothing the voter. Cracks were beginning to show in key public services, which National had made a virtue of making ‘more efficient’. The themes that would dominate the 2017 election began to emerge: housing inequality, water quality and inadequate health services.

Key was also feeling the pressure of what seemed like a relentless barrage of issues that distracted from the main work at hand. A good example was the year-long wrangle over the infamous ‘Saudi sheep deal’. The $11.5 million agreement to set up a farm in the desert using taxpayer funds had created a political storm. Murray McCully drew much of the flak, and Key came under considerable pressure to sack his foreign minister. The project was an effort to placate businessman Sheikh Hamood Al-Ali Al-Khalaf. The Saudi exporter had earlier bought farms to breed Awassi sheep to be slaughtered in Saudi Arabia, only to be thwarted by New Zealand’s ban on live sheep exports. His subsequent threats to sue were souring chances of a free trade agreement, or FTA, with the Gulf States, which stalled after 12 years of negotiations. McCully was hoping that establishing a joint agri-hub in Saudi Arabia would sort matters out and put trade relations back on track. The demonstration farm, which would be owned by Al-Khalaf, was a form of compensation, which also doubled as a way of showcasing New Zealand’s agricultural technologies.

The irregular arrangement only came to light in April 2015 after Key held talks in Riyadh to try to get the trade deal back on track. Key knew the proposal was controversial, and Cabinet had discussed the problem at least four times, looking for a creative solution that would be in any way acceptable. The government claimed legal advice was that the exporter had a legitimate lawsuit. Given the FTA was in jeopardy, Key thought it was worth it. But it came at a high price.

Opposition parties called it a bribe, and over the following months the government was variously accused of breaking rules of political process and being secretive, deceitful and incompetent. Much of 2016 was spent defending the decision to send 900 ewes to Damman, and it squandered valuable political capital. While ultimately Auditor-General Lyn Provost found no evidence of corruption, this did little to dilute the impression that National was willing to bend the rules for the wealthy.

By September, Key was in New York for a week-long meeting of the UN General Assembly, the world’s most important diplomatic convocation. It was the culmination of New Zealand’s two years of presidency on the Security Council, a major diplomatic accomplishment. He was to chair a high-level meeting on the unfolding Syrian crisis. It was also a crucial moment to lobby for former Prime Minister Helen Clark, who was competing for the UN Secretary-General role. The trip was gruelling, with Key’s flight to Houston diverted to Tahiti for a medical emergency. On their delayed arrival, the PM’s entourage was greeted with news of a bombing just blocks from the UN headquarters, which injured 29 and put the leaders’ security teams on edge.

The 19 September attack on a UN aid convoy close to Aleppo in Syria further set the scene for a tense meeting, with Britain and the United States blaming Russia. There was scant progress: New Zealand’s presidency would lapse in October with no resolutions in place.

On the long flight back to Auckland, Key finally turned his attention to his exit, telling Bronagh he had made up his mind: he would retire by the end of the year.

At two minutes past midnight on 14 November, a magnitude 7.8 earthquake jolted the northeastern coast of the South Island. Two people died, and the shake caused widespread damage to the road and rail routes leading to the tourist town of Kaikōura and closed State Highway 1. Buildings in Wellington were later condemned and insurance claims eventually topped $1.8 billion.

The natural disaster delayed Key’s intended retirement announcement by some weeks. Earlier in the year he had confided his intentions to some of his closest colleagues, who believed they’d talked him out of stepping down. As one former minister in the Key Cabinet confided: ‘I thought he’d got past the point — only just — but past the point where he was going to pull the pin.’

Nothing was further from the truth. The fractious nature of 2016 had only hardened Key’s resolve. It wasn’t a matter of not feeling physically up to the challenge; more a sense of dispiritedness. A realisation that even though he was working as hard as he possibly could, he was left dealing with a seemingly endless stream of contentious issues and conflicts.

Initially, only Bronagh and Key’s equanimous chief of staff Wayne Eagleson were in the know. But there would be many more late nights to come in the Beehive, sustained by packets of nuts, tinned baked beans and pinot noir, before the PM would tell the public. Key barely wavered in his decision, being someone who generally sleeps well. But there were other considerations, including that the contracts of his staff ended when he was no longer leader.

He also worried about National’s fortunes. Key, with his affable personality and political astuteness, was the party. He was not unaware of this, and, given his deep wish for National to ‘be the government in every day of the week’, he battled with thoughts that resigning would be selfish and not in the best interests of the party. This was no lack of humility; it was a clear-eyed assessment of historical fact.

For the past decade, Key had been National’s centre of gravity, and he was about to send it spinning out of control. He was the embodiment of the party’s self-help credo: a rags-to-riches story of a state-house child from Christchurch who worked his way into owning a mansion with a swimming pool and tennis court on one of Auckland’s wealthiest streets.

Key’s ascension through the National Party ranks to the top job may have been swift, but it was not the result of some spur-of-the-moment whim. He’d nurtured the ambition to be prime minister from the age of 11. As a 16-year-old, on one of his first dates with high-school sweetheart Bronagh, at the rural A&P show, he had shared how he wanted to be prime minister. So his later political aspirations came as no surprise to her.

They graduated Christchurch’s Burnside High School in the late 1970s and married in 1984. And while Key had ambitions for public office, Bronagh’s were firmly focused on family. It was her role to keep their family life intact as Key’s career as a foreign exchange dealer took them to Singapore, where Max was born when daughter Stephie was still a toddler, and then on to London, Sydney and New York. Hers was a supporting role that enabled his public achievements.

In 2001, aged 40, Key left banking for politics. He had calculated that the average length of time it took to rise from the backbenches of Parliament to prime minister was 18 years. It took him six — the fastest rise to the top in a century of New Zealand politics. However, the National Party he inherited in 2006 had been demoralised and divided, cycling through leaders and recovering from the worst election defeat in its nearly 70-year history.

Key instilled discipline and focus. He ended almost a decade of Labour Party rule, guiding National through three terms in office. His time in power included the global financial crisis (GFC), a series of devastating earthquakes and the Pike River mine disaster. Under New Zealand’s proportional representation voting system, he formed a minority government with the support of three minor parties: libertarian ACT, centrist United Future and Te Pāti Māori (the Māori Party). These alliances endured for his entire time in office.

Astonishingly popular, Key also changed the face of political communication in New Zealand. Before Donald Trump, Boris Johnson or Jacinda Ardern, Key recognised and exploited the personalisation of politics. He was a celebrity, appearing on talk shows, music radio stations and the covers of women’s magazines. His appeal was partly down to his ability to appeal to the average voter by conveying his ordinariness. His favourite movie was spy spoof Johnny English, and he frequently fan-boyed over All Blacks captain Richie McCaw.

He also possessed extraordinary political intuition, usually in lock-step with what the public would accept. On the rare occasions when he strayed over to the wrong side of the argument, he evinced remarkable dexterity, smoothly changing position rather than compromising his popularity. Under Key, National re-established its reputation as a prudent economic steward against an apparently fiscally irresponsible Labour Party. The narrative would dominate for a decade.

But the position of the National Party when Key arrived at Parliament, as MP for Helensville, in 2002 was anything but dominant. While Key himself was undoubtedly already a success story, being Parliament’s richest MP, then worth an estimated $50 million, this stood in stark contrast with his party. At the time National was at its lowest ebb, its caucus reduced to 27 members, and its support at an all-time low of 20.9 per cent.

The crushing electoral defeat signalled a phoenix moment. It was time for a fresh start after a series of missteps, the last of which had seen, the year before the election, a young, laconic Southlander, Bill English, inheriting a divided party from Jenny Shipley. Still smarting from losing to the Labour Party led by Helen Clark, the party was ideologically confused and became paralysed by internal warring. The first change came when former Reserve Bank governor Don Brash replaced English in 2003.

Under Brash, Key rose from 26 in the diminished party ranks to become the finance spokesman and was the star of National’s 2005 campaign, easily matching Labour veteran Michael Cullen in debates. Cullen, in a memorable but waspish retort, would later call his opposite mark ‘a rich prick’.

In fact, Key was affable, with an easy grin and unnerving self-confidence. Before long the public was charmed, and shortly after the 2005 election he began to appear in the preferred prime minister ratings of opinion polls. But according to one of Key’s inner circle, he didn’t do a lot of manoeuvring to become the leader. ‘He waited for quite some time to let the conditions deliver the leadership change rather than forcing it. He just had a natural understanding of a team environment.’

Brash was lamed by allegations of an extramarital affair, involvement with the Exclusive Brethren evangelical sect, and revelations about the party’s election strategies in Nicky Hager’s book The Hollow Men. When Brash resigned in November 2006, Key seemed to be the obvious contender, with his ‘numbers man’ Murray McCully counting potential votes. Key wanted Ilam MP Gerry Brownlee to stay on as his number two.

But another MP stepped out of the wings: Bill English saw a second chance. Significantly, doing the numbers for English was Rangitīkei MP Simon Power, now Television New Zealand’s chief executive but then seen as the unofficial leader of the 1999 intake of MPs, a substantial voting bloc. While English had taken a lower profile with the education portfolio, he still had leadership ambitions. A fellow MP remembers that English made it clear that he wanted to contest the leadership; that he was frustrated that he’d ‘never really got a good shot’ in his previous term as leader.

At that point National was outstripping Labour in the polls. It could ill-afford to squander that momentum with another messy public battle. There were doubts about Key within caucus. Some disliked his naked ambition. Second-term MP and Brash loyalist Judith Collins would later write: ‘He had come into politics with a very clear agenda of being Prime Minister. It seemed to me from his actions . . . that John Key was on a course where nothing would get in his way.’ Others were unsure of what he stood for and wary of a tendency to equivocate on policy. English was experienced, respected and a more accomplished performer in the House. But, crucially, he trailed behind Key in opinion polls. And he carried the mark of his previous failure, National’s worst-ever defeat.

The day after Brash’s resignation, Key invited English to his Parnell home. They were joined on that Saturday by McCully and Power. An accommodation was reached: the leader-in-waiting rang Brownlee and confided that he had agreed to make English his deputy, an arrangement he would soon have to make public. It was not a difficult conversation. Brownlee, a staunch party man, offered to hold a press conference in Wellington the next day to announce he was stepping aside. It would be a very deliberate demonstration of unity. The way was cleared for one of the great double-acts of New Zealand politics: John Key and Bill English.

Although John Key was the right person for leader, the only way he would get a good run at it was if the team was tight. With English accepting the deputy role, his supporters were placated and discontent stifled. Effectively, they would get the best of both worlds.

Jonathan Coleman, elected to Auckland’s Northcote electorate in 2005, believes the group was simply tired of losing. Although a cycle of destruction, losing and bad polling is a natural part of renewal and comes to every party from time to time, it can lead to desperation. People pull in different directions, and into the mix go egos and jostling for position. ‘In the end, they came to the realisation that unless we settled down and fell in line as a team, we were never going to get anywhere,’ Coleman says. ‘There were senior roles for all of them. They just had to back this guy. There was a strong desire to win.’

From the Parnell machinations, Key built his ‘kitchen Cabinet’, the political management group that saw him through his entire time in office, with only modest changes. Essential to its success was that it included the key players from both sides of the caucus. For his first term of government, the inner circle would include English, Power, Brownlee and McCully. They would be joined by Eagleson and, when Power stepped down, Paula Bennett.

The electoral decimation of 2002 and near-miss of 2005 had cleaned out a lot of deadwood. When English and Key did the deal, they rallied the remaining troops, established a hierarchy and organised themselves into a very professional machine.

With the power structure settled, Coleman says Key’s charisma began to shine through. ‘I don’t think his personality was really unveiled until he became leader. He was a quiet, relatively serious guy in caucus. This playful, exuberant side had not really been evident to people. I think it was very deliberate. Once he got the leadership, his real personality emerged. And it was strongly optimistic, there was a lot of fun. And he gave people a huge amount of confidence.’ Journalists and colleagues soon fell under his spell.

There was one other pivotal figure: Steven Joyce, a wealthy broadcasting entrepreneur and the party’s election campaign manager. Joyce had flirted with electioneering, having briefly appeared on the party’s draft list in 2002, but was never a confirmed candidate. He had exceptional qualities that would hugely improve the party’s chance at a rebuild but would first have to be persuaded to enter Parliament. McCully and Eagleson went to see Key. The suggestion was floated of getting Joyce to stand on the list, with a commitment that he would become a key cabinet minister. The advantages of being a list MP are multiple: there is no need to fight an election head-to-head, as their place is decided by the number of votes the party receives; they are not tied to a geographical electorate and are unencumbered by constituency duties. In the case of Joyce, this had the added advantage for the party that his sole focus could be on bigger-picture campaigning and strategising.

Joyce would guide the party through the 2008 election, with the help of Australian strategist Mark Textor, of the influential consultancy Crosby Textor. Now known as C|T Group, the conservative-aligned firm has been used by Australia’s Liberal Party and Britain’s Tories, including Boris Johnson’s London mayoral campaign. The campaign was built around Key as a political cleanskin with a sunny outlook, and a risk-averse manifesto. It was a decisive victory, sweeping a tired-looking third-term Labour-led government and, at the same time, New Zealand First from the Beehive.

A new dynasty had begun, one that would dominate politics for the next decade. It would only start to crumble on 5 December 2016 when Key resigned, leaving