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Leader of the House, Dr Michael Cullen, has confirmed that validating legislation, as recommended in the Speaker's response, will be introduced to remedy issues around election spending.
"Legislation will be introduced next week to validate spending by parties dating back some years," said Dr Cullen.
"This is necessary as the report by the Controller and Auditor-General raises questions about the validity of spending dating back to July 1989 when the current framework for Parliamentary Service expenditure was established.
"There is also doubt about the validity of current spending. Therefore the legislation will also clarify the rules going forward, but will be limited in time to the end of next year. This will allow changes to be made following any new review of spending rules and the current review of Parliamentary appropriations.
"The Public Finance Act requires spending to be within the scope of a particular appropriation. Any spending deemed to be outside the scope of a particular appropriation, in this case Vote Parliamentary Service, will breach section 4 of the Act.
"The only legal remedy for such a breach is for these expenses to be validated by an Act of Parliament.
"While the Labour Party has undertaken to repay money identified in the report by the Controller and Auditor-General, this does not change the fact that the original spending has still been deemed unlawful. This applies to spending of all parties except the Progressive Party.
"It is a bit like a building contractor failing to properly weather proof a new home.
While he may repair the roof and the damage to furnishings that may result from a downpour, this does not change the fact that the builder has failed to comply with the building code."
"As a matter of course, unappropriated expenditure occurs every year in a number of votes. The validation of such expenditure is a usual part of the overall budget legislative cycle and a routine bill is introduced to facilitate this.
"Last year's bill (for the 2004/05 year) included validation of $309
million in relation to the recognition of the forecast liability under
the Kyoto Protocol.
"In 1996 the then National government passed legislation validating $56 million under Vote Tourism for the Tourism Board and $12 million under Vote Corrections to cover custodial sentencing.
"It is important we now resolve this issue for future elections. Parliament needs clear rules on what constitutes parliamentary business, what is deemed ‘electioneering’, and what activities by MPs and their political parties can be supported from parliamentary funding.
"Every party except National has indicated it will play a constructive role in developing clear rules. I hope that all parties now work together so all of us, MPs, and voters, in future can have confidence in the rules we must work under," Dr Cullen concluded.
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The New Zealand Labour Party today joined National, the Greens, ACT and the Maori Party in saying they would pay back the money received from Parliamentary Services that the Auditor-General  says was wrongly used for electioneering. 

The Auditor-General report, tabled today, found $1.17 million of taxpayer-funded parliamentary funding was misspent over all political parties. Labour was found to have overspent $768,000. 

The Prime Minister is adamant the Labour Party did not break any rules, but she is still going to pay back money spent unlawfully in the lead up to the election.

Labour "strongly maintains" that its spending was within the rules as they were understood but given the new ruling it would refund the money.

"Labour has strongly stated its case as was its right...The party welcomes the Auditor-General's findings that inadequate guidance has been available to MPs and parliamentary parties on what constitutes appropriate advertising, particular in the pre-election period." Clark said.

The Government will now follow through with plans to pass retrospective legislation on election spending. Deputy Prime Minister and finance minister, Dr Michael Cullen says legislation will be introduced into Parliament next week to validate spending by parties dating back some years.

He argues the only legal remedy for the breaches identified by the Auditor General is for them to be validated by an act of Parliament.

Meanwhile National Leader Dr Don Brash is viewing the Auditor General's report on election overspending as a victory for National.

Dr Brash says it is only public, political and media pressure that is making the Prime Minister repay the money that Labour spent.

He claims she led a dirty campaign punctuated by threats, bullying and diversionary tactics, and he says she is clearly paying the money back with great reluctance.

Dr Brash says the Prime Minister should also apologise to the Auditor General, as she bullied him publicly to try to get him to change his report.

Dr Brash said it had taken a year to persuade Labour to "admit its guilt". 

"I am delighted they have finally done it... after trying every trick known."