Blue Blood: how the National Party went to war with itself

In 2016, an exhausted John Key told wife Bronagh: “I’m certain it’s my last year”. She said she would back him “100 per cent” if he went for a fourth term. “But if you do go please tell me you won’t go back.” This exclusive extract from the book Blue Blood by senior Stuff journalist Andrea Vance reveals how that conversation set in train events that would lead to Key’s shock resignation, and plunge the party into a bloody leadership crisis.

On his return from New York in September 2016, Key told his deputy and Finance Minister Bill English he was intending to step down. Momentarily stunned, English said there was no need to go: ‘It’s been a great Government, we’re a great team.’

In the blur of the weeks to come, Key can recall little of the conversation, only that English didn’t try to force him out, saying ‘it was almost the opposite’. MP Nick Smith – part of the so-called ‘Brat Pack’ intake of young MPs in 1990, alongside English – spoke to English in the hours afterwards and confirms that the deputy tried to talk Key out of resigning.

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There has been speculation about the nature of the deal struck between the two men before they took control of the party. Did they have an arrangement similar to that agreed by Tony Blair and Gordon Brown when in Opposition in 1994, known as the ‘Granita pact’ after the London restaurant in which they supposedly hashed it out? Brown agreed to not run in the upcoming Labour Party leadership election, and Blair promised that, should he win, he would hand over the reins of power in his second term. Brown was to take charge of economic and social policy.

Key says the speculation of a similar agreement is not true: English was never going to get the numbers to win the leadership. The reason behind their deal was simply because, in their eyes, they felt they were the dream team. And there was an understanding that it was a time to avoid further division in the interests of unity. Others agree but add that as both men were still young at that time, English could well have calculated that he would get his own chance after Key had done five or six years.

Although he would never have relied on it.

However, Key believes English had got to the point where he thought that if prime ministership was off the cards, he could go down in history as a long-serving, highly successful minister of finance. And this should not be seen as some placatory consolation prize. As Key points out, both the caucus and the media had enormous respect for English. ‘Many of them would say I was “grip and grin” and he was the real intellectual core of the decision-making.’

As it was, in 2016, Key and English’s conversation was brief and did not turn to succession. The two men and their Cabinet colleagues soon became consumed with the aftermath of the Kaikōura earthquake. They were also coming to terms with the surprise election of Donald Trump as United States President, and what that might mean for the country’s economy and foreign policy.

A few days after the reality television star’s astonishing presidential win, the USS Sampson was due in Auckland for the New Zealand Navy’s seventy-fifth anniversary celebrations. The first US warship to dock in New Zealand waters in 33 years, it marked a major shift in diplomatic relations since the country was effectively suspended from ANZUS – the Australia, New Zealand, United States security alliance – over an anti-nuclear policy. On learning of the quake, the guided-missile destroyer redeployed to provide humanitarian relief to those stranded in Kaikōura. It was the culmination of a gradual improvement of defence relations under the Key administration, dexterously balanced with its more commercially oriented ties to Beijing.

Key also had to grit his teeth through Auckland’s Mount Roskill by-election. Labour’s Phil Goff was vacating the seat, held by Labour for 40 years, for the Auckland mayoralty. Key was curiously absent from National candidate Parmjeet Parmer’s campaign, telling media in the final days that he thought she’d lose.

As the polls were closing in Mount Roskill, Mike Munro, Helen Clark’s long-serving chief press secretary, was tramping in Kahurangi National Park in the northwest corner of the South Island. In the group with him was Nick Venter, English’s chief press secretary, Labour’s pollster Stephen Mills, and Brad Tattersfield, once an advisor to National Minister of Finance Bill Birch.

They had all known each other for years, working on both sides of the political divide. On the Monday morning after the by-election, 5 December, they were descending from the glacier-scoured peak of Mount Owen when their cellphones simultaneously sprang into life.

Venter received an urgent text message to telephone his boss and walked away to make the call. Enjoying lunch in the early summer sunshine, the seasoned political operatives thought little of it. When Venter came back he looked shocked, saying only that was there was going to be an announcement at 1pm. The group began speculating, but Mills was the only one to pick that it would be Key’s resignation. The others scoffed at the idea: Key was well on track to win the election in 12 months’ time.

Back in Wellington, Key and English’s staff were preparing the ground for one of the most significant and shocking announcements in recent political history. There was no outward hint of what Key was planning. He’d dutifully attended the lower North Island National Party Christmas function in Palmerston North. On his way home on Sunday, he and Eagleson had dropped into Paraparaumu Beach Golf Club, north of Wellington, for a round of golf and a couple of beers.

Key spoke with Joyce at 6.45am on Monday. It was the usual rehearsal before Key’s regular Monday morning media slots.

He had cancelled the appearances in Auckland, opting to do the interviews over the phone. But he didn’t tell Joyce what he was planning until a second call around 9am. Joyce spent the next few moments unsuccessfully trying to talk him out of it.

After hanging up, Joyce immediately left his Wellington flat and hurried to the Beehive. Key and his chief of staff hit the phones: Eagleson using his ministerial telephone line to call each Cabinet minister; Key firing off texts. Ministers were invited, one by one, up to Key’s office.

With a regular Cabinet meeting due to take place midmorning, most assumed they were needed to discuss a proposed policy from their portfolio. The more suspicious suspected a reshuffle. According to Nick Smith, being summoned by text prior to a Cabinet meeting ‘generally means one of two things. You have a Cabinet paper on the agenda – I had five that day – and the prime minister is completely opposed and wants you to withdraw. Or you’ve screwed up somewhere.’ Smith feared he was about to be sacked.

When Smith arrived, Key was sitting in his lounge, white shirt-sleeves rolled up, and wearing a silk tie in National’s traditional blue. Smith sat opposite him on the leather sofa.

Behind them, hanging above Key’s desk, was a framed front page from the Herald on Sunday. It pictured Key on election night 2008, arms aloft, above the headline VICTORY. The last four letters – Tory – were outlined in blue. Below the newspaper cutting was a framed picture of the Queen. ‘John said that he was pulling the pin,’ Smith remembers. ‘I had to ask him to repeat it, because when he said “resign” I thought he said he wanted me to resign.’

Key explained his motivations, including that Bronagh was spending lonely nights in Auckland now that Stephie and Max had left home. For Smith it came as a bolt out of the blue. He had always felt Key was quite competitive with Helen Clark and thought Key would want to do something that Clark hadn’t been able to achieve, ‘to get the fourth term that had evaded others’. Smith says he had misread that part of Key’s ‘chemistry’ and believes that actually it wasn’t as big a motivator for him as family.

For some, there was an element of grief. A number of senior ministers knew he was tired and perhaps contemplating an end. He was known for being a real workhorse, and they acknowledged someone can only sustain that for so long. Nevertheless, many wanted him to stay on, to hang on. But it soon became apparent that he’d made up his mind and was not to be dissuaded.

Attorney-General Chris Finlayson arrived just as Health Minister Jonathan Coleman was leaving Key’s office. ‘I remember it very well,’ Finlayson says, ‘because Key rang me and said: “Hello, my little legal beagle. Would you come over and see me?” I thought: I don’t think I’ve done anything wrong.’ As soon as he was in the room, Key gave him the news: ‘He said: “I’m out of here.” I immediately had an “oh dear” moment. How few politicians get out while they are ahead? Unless you have the good fortune to die, most people fail in politics. John’s a very special guy: it shows how smart he was, to get out while he’s ahead and plan a new life.”

Each minister spent just a few minutes with their boss as he clinically told them what the deal was. Even though it had always been a possibility, it came as a shock. For some, it brought down the curtain on their own careers. Months earlier, while recovering from surgery and a serious illness, Murray McCully had tied his political future to the prime minister, vowing to leave Parliament when Key did. Others saw it as an opportunity. Throughout his premiership, Key had been grooming the talent he saw in caucus. His post- 2014 election ministry consolidated who was in the next wave of seniority, handing meaty portfolios to Nikki Kaye, Simon Bridges, Jonathan Coleman and Amy Adams.

Kaye had ousted Judith Tizard from the prized Auckland Central seat in 2008, ending a 90-year Opposition grip. She twice beat Labour’s enskied Jacinda Ardern in the electorate.

In 2013 Key promoted Kaye to Cabinet, and the following year she was handed responsibility for the complex state insurance scheme, as Accident Compensation Corporation minister. On leave from her duties to undergo breast cancer treatment in the later half of 2016, Kaye made an emotional return to Parliament to attend a caucus meeting the day after Key resigned.

Bridges was another electoral star, launching his political career aged just 32 by jettisoning New Zealand First from Parliament in 2008. Its leader, Winston Peters, had been trying to regain the seat of Tauranga, which he narrowly lost to National’s Bob Clarkson in 2005. But Bridges, the Oxford-educated son of a clergyman and a school teacher, was young and energetic, with a solid-gold back-story in prosecuting criminals. He beat Peters by a whopping 11,742 margin, denying the old warhorse the electorate seat he so desperately needed to keep his party in Parliament.

Key rewarded Bridges quickly. He was appointed a minister outside-Cabinet in 2012, moving into the Cabinet the following year with the hefty labour and energy portfolios. In 2014 he moved onto the front bench, pinching the transport ministry from Gerry Brownlee, and also becoming Key’s deputy leader of the House.

Bridges attributes much of the stability of Key’s government to the good job the PM did of cultivating a range of potential successors, employing the sort of succession planning adopted in big business. This meant that in Team Key there was a sense of assured continuity; as Bridges puts it, if one of the top guys fell under a bus, there was a plan in place. As a result there was no need for people to worry about succession. While in the background there was the inevitable consideration of who was up and who was down, it was not something the vast majority thought about.

Adams was also of the ‘class of 2008’: an influential group of MPs who were elected in the Fifth National Government’s first term. A former commercial and property lawyer, she’d had a rapid rise, taking charge of the Finance and Expenditure Committee in the closing months before the 2011 election, always a sure sign of impending promotion. Adams was one of only a handful of MPs to boost their majorities, winning by more than 17,000 votes in the blue-ribbon Selwyn seat once held by one-time finance minister and economic reformer Ruth Richardson.

Adams held various portfolios, including environment, before being moved to the front bench as justice minister. There she made her mark with a liberal streak, wiping the convictions of men convicted of homosexual acts and raising the age of criminal juvenile jurisdiction to 18.

Once one of Australia’s flying doctors, Coleman gave up practising as a GP to stand for Parliament in 2005. He was promoted in his third term, taking on defence. In 2014, Key handed him one of the most difficult jobs in politics: health minister. The role was made harder by being vacated by Tony Ryall, who kept the portfolio out of the headlines while implementing a large programme of centralisation and reducing waiting times even while budgets were constrained. Also picking up sport and recreation, Coleman rose from number 10 onto the front bench to be ranked number six.

Paula Bennett was at the front of the pack. A former beneficiary and a single mother, she was drawn into Key’s kitchen Cabinet and given the challenging social development, climate change and associate finance portfolios. ‘He called it the rounding out of Paula,’ she says.

Bennett was one of the few Key told about his plan to back English to succeed him as leader. The reason he did so was because he believed she would make English an ideal deputy. Shocked at the suggestion, her focus shifted from thinking about English to herself ‘pretty bloody quickly!’

Coleman had a similar train of thought. After the shock of being told of Key’s departure, within a matter of seconds his thoughts raced to why it was happening and what was next.

And then immediately: if there was going to be a leadership competition, he wanted to be in it. When he confessed his ambitions to Key, the outgoing prime minister replied that he was not surprised but added, ‘Bill is the guy who I will be supporting.’ Naively, Coleman thought he could overcome that.

Nick Smith takes a dim view of Key’s overt succession planning. In fast-tracking talent like Simon Bridges, Amy Adams, Nikki Kaye and Paula Bennett, he believes Key ‘inadvertently left a legacy where everybody thought they should be leader’.

Coleman thinks differently. To his mind, while Key wanted to create a pool of people who all had the potential to succeed, it could never be a detailed succession plan. This is because everyone in caucus has an equal vote, whether you are number one in the caucus or the last-ranking person. ‘All a leader can really do is bring talented people in and give them the chance to shine. The rest really is up to them. And their ability.’

Another senior minister has observed wryly that history has shown that if there was succession planning, it was poorly done. While Kaye, Adams, Bridges and Bennett all ended up in very senior positions, all of them are now gone. ‘And all of them absolutely blew it,’ he believes.

Back on the morning of Key’s bombshell announcement, the show had to go on, and Key chaired a palpably shell-shocked Cabinet meeting at 11am. Tearful staff and the leaders of United Future, ACT and Te Pāti Māori were also informed. The rest of the backbench MPs heard the news in a telephone conference at 12.15pm. A mysterious press conference was scheduled for 12.45pm, in the Beehive’s Theatrette, stumping Press Gallery journalists who were expecting the normal 4pm post-Cabinet briefing.

At the press conference, it took Key three minutes to get to the point. ‘I absolutely believe we can win the next election,’ he said. ‘But I do not believe that, if you asked me if I was committed to serving out a fourth term, that I could look the public in the eye and say yes.’ Key wrote the speech himself, and at points in its delivery he was choked with emotion. The country’s television and radio stations broke into scheduled programming with live updates.

Key said he would formally tender his resignation to Governor-General Dame Patsy Reddy the following week, once caucus had chosen a new leader. ‘If Bill English puts his name forward then I will vote for him,’ he added. It was an endorsement that divided opinion in caucus. Some felt he could do no less than offer his public support to English after a whole decade of partnership. Nevertheless, the degree of his open support was debatable. There were those who thought that if you are going, it is those who remain who have to live with the consequences and therefore you should respect them to make their own decisions. In offering such a strong, unequivocable endorsement, others would be hurt.

Sources say the one who was most hurt was Steven Joyce.

A senior minister recalls that ‘Steven was just very grumpy and going, “Why the f… not me? I’m smarter than everybody else, I’m better.” It was an interesting few days, that’s for sure.’ But those close to Joyce deny this, saying he wasn’t interested in standing against English, and quickly made that clear to him. Even so, Joyce the strategist felt it was ‘unhelpful’ for the outgoing leader to interfere in a decision that should have been left to caucus.

Key says he felt boxed into a corner. ‘I think Steven would say I tainted the process. One or two people were a bit angry, or disappointed, that I did that. And I get that. The leader is first amongst equals. If you are no longer the leader, you don’t have any right to impose that. But I didn’t have that luxury. If I didn’t say, “I’m supporting Bill,” I was, by definition, not supporting

Bill. That’s the inference the media would take. After a decade together, with us being hand-in-glove, if I didn’t say, “He’s right,” then I’m actually saying he’s not right. And I believed him to be right. And in politics, you have to wear your heart on your sleeve.’

Tomorrow: The final hours of the last National Government – and the coronation of Jacinda Ardern as New Zealand’s youngest-ever Prime Minister.

Join us to watch a live Q&A with author Andrea Vance, right here, on Thursday 28 July from 6.00pm sharp.

© Blue Blood: The inside story of the National Party in crisis by Andrea Vance and published by HarperCollins goes on sale July 19. RRP $36.99.