John Key will not be able to use taxpayers' money to pay off the 'Teapot Tapes' camera operator as he planned.
The Prime Minister's Office has issued a statement saying it will not use the Parliamentary Service leader's fund to pay for the out-of-court cash settlement of Bradley Ambrose's defamation claim.
"The costs involved in the settlement with Mr Ambrose will not be met by the taxpayer. Funds will be raised via the National Party or by private contributions for this purpose," the statement says.
The taxpayer will still pay Mr Key's legal fees, but the cash settlement will be paid by the National party or through private means.
Yesterday, the Prime Minister said he wanted the taxpayer to pick up the bill after he admitted he was wrong to say Mr Ambrose used "News of the World-style tactics" and deliberately recorded the meeting in the 2011 election.
However, the Greens raised questions about whether the fund could be used for cash settlements.
The Prime Minister's office statement says: "On the basis of advice from Parliamentary Service the costs involved in the Ambrose matter will be met as follows: "The legal advice and representation costs incurred by Mr Key in achieving the settlement will be met by the National Leader's Office.
"Approval for the National Leader's Budget to meet Mr Key's legal costs in this case was sought and granted from the Speaker in 2013."