Tempers flared in Parliament today over the controversial Saudi farm deal with the Prime Minister labelled a liar.

John Key locked horns with the opposition for the second week in a row as they continue to use Parliamentary privilege to label the deal a bribe. With Foreign Minister Murray McCully overseas, it was up to his boss to defend that Saudi farm deal, and Mr Key's strategy was to drag Labour in too.

"He has just been set up by his deputy leader," Mr Key said of Labour leader Andrew Little.

Deputy Labour leader Annette King responded: "That's a lie!"

The Prime Minister got away with repeating the statement before Speaker David Carter asked him to "withdraw that part of the answer" which Mr Key did.

It's week two of questions over the Foreign Minister's controversial payment of $11.5 million towards businessman Hmood Al Ali Al Khalaf's Saudi farm.

The Prime Minister claimed today that the previous Labour Government also considered resolving the stand off.

Mr Key has hinted there are Cabinet papers from the previous government that may implicate Labour. Political reporter Heather du Plessis-Allan says the PM is "clearly trying to take the heat off his own administration, especially now that Murray McCully's reasons for doing this deal are unravelling".

First Mr McCully said he struck the deal to avoid a $30 million legal threat. Then he admitted any legal threat had actually been withdrawn in February 2012, a year before the deal was struck. Now ONE News has revealed he told us there never was any legal threat.