Caving in to pressure, Bill English has paid back $32,000 and vowed to stop claiming a housing allowance.
The deputy prime minister admitted yesterday that the row over his housing allowance had taken his attention away from running the economy, while Prime Minister John Key said the row had become "an unfortunate distraction".
Mr English has come under fire over allowances he claimed for living in his $1.2 million Karori house, but has failed to shut down the controversy since it was revealed by The Dominion Post in July.
He said yesterday he had paid back $32,000 and pledged not to claim any more taxpayer cash for housing.
But Labour says it will continue the attacks, with MP Pete Hodgson saying Mr English's surprise backdown did not end the matter.
"Given Mr English has told everyone else to tighten their belts, he had no choice but to not take any housing allowance," he said. "But we believe other issues around his housing allowance still need to be cleared up."
In an attempt to defuse Opposition claims that he arranged his affairs to qualify for extra taxpayer cash, Mr English also issued a legal opinion from Stephen Kos, QC.
Mr Kos found Mr English did not have a beneficial interest in the trust that owned his family home in Wellington, despite his declaring it in his 2008 return.
Mr Kos said changes to the English family's Endeavour Trust, which saw Mr English quit as a trustee, had not affected his eligibility for the allowance.
"It is clear that no pecuniary interest arises from the fact that Mr English was a trustee and discretionary beneficiary of the trust."
He also found that, although Mr English had declared a beneficial interest in the trust in his 2008 declaration of pecuniary interests, he did not need to do so.
His opinion reveals that Mr English quit as a trustee in January – at least two months later than he had previously disclosed.
Asked about the discrepancy, Mr English said he had been busy after the election preparing a Budget in the face of the global recession.
He refused to elaborate on why he quit as a trustee, repeating that it was for family and personal reasons.
Mr English considers his house in Dipton, Southland, to be his primary residence under Parliament's rules, allowing him to claim a housing allowance in Wellington.
But his family has lived in the Karori house for years, his wife is a GP in the city and his children go to school in Wellington.
Mr English revealed yesterday that he had not received any allowances since July 28, three days before The Dominion Post revealed that he had claimed more than $900 a week – twice what he was eligible for as an ordinary MP.
He had earlier acknowledged that claiming the extra cash was a "bad look" and paid back $12,000.
But yesterday he said he had now paid back all the housing allowance received since the November 2008 election – about $32,000 – and would claim no more.
"Public discussion about housing allowances has become an unnecessary distraction, and doubt about my eligibility has become unacceptable to me as finance minister."
He assured people the Government was totally focused on their needs, and not on his allowance.
Mr English's announcement came before an informal meeting last night with the auditor-general's office to discuss a possible investigation. It is not expected to affect the auditor-general's decision.
Meanwhile, a One News poll has found 62 per cent believe the accommodation question has damaged Mr English's credibility as finance minister. Fifty-four per cent say he has not acted with integrity.
- The Dominion Post
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