Key vetoes Douglas cabinet post

National appears to have parted ways with its closest political ally, ACT, over the re-emergence on the political stage of controversial former Labour finance minister Sir Roger Douglas.

National leader John Key has ruled out giving Sir Roger a cabinet post in any government led by him, and warned that ACT may not play a part in a National-led government.

"If ACT are hell-bent on following a radical right-wing agenda and won't fit in with a moderate pragmatic agenda, then we can't work with them. They're ruling themselves out if that's what they are doing," Mr Key said.

His remarks came after Sir Roger, who is now an ACT candidate and will stand in an Auckland seat and on the list at this year's general election, said he wanted to return to the cabinet if National won the election.

He gave his new prescription for the country at a news conference in Wellington. It included cutting taxes, offering education vouchers, dumping the Working for Families scheme, privatising the health system and slashing government spending by up to $5 billion.

He would not say if he wanted to be finance minister, but said he wanted to be in the cabinet. "If I have the opportunity, of course I would."

He criticised the performance of Finance Minister Michael Cullen, calling him one of the poorer ministers of finance in the past 50 years and "something of a disaster".

Dr Cullen said he was "incredibly flattered" by Sir Roger's comments. "I would hate to think I rated higher than that in the view of Roger Douglas."

National-leaning voters would be terrified at the prospect of Sir Roger's return, he said. "Just when everybody thought it might be safe to vote National, out of the box, like some old horror film, comes Roger Douglas."

On Thursday, National deputy leader Bill English was equivocal about National's position on Sir Roger, saying that though he personally did not see a place for him in a National cabinet, he could not rule it out.

Two hours later, Mr Key held a press conference to reject any possibility of Sir Roger's returning to the cabinet.

Mr Key said the radical right-wing agenda outlined by Sir Roger ruled him out of a position around the cabinet table. He said National would not be able to work with ACT, considered its most likely coalition partner, if the party pursued the philosophies of Sir Roger.

"I'm buggered if I am going to go out there and run a policy agenda that is considered and pragmatic and then turn around and sell New Zealanders down the river. I'm not doing that."