The Prime Minister is coming under pressure to disclose how much taxpayer's money has been spent on legal costs in so-called 'teapot-tapes' defamation case.

John Key will not cover the cost of his cash payment to a freelance journalist from taxpayer funds, but his legal costs have already been paid out of his Leader's Budget, which is taxpayer funded.

Photo: RNZ / Alexander Robertson

Journalist Bradley Ambrose took legal action after Mr Key accused him of deliberately recording a cafe conversation he had with the then ACT party candidate for Epsom, John Banks, in 2011.

Mr Key said on Monday he accepted the recording was not deliberate, and he would make a small payment from the leader's budget.

But it turned out yesterday that he could not use that fund to make the payment.

However, Mr Key had no problem with using his leader's budget to pay for his legal costs.

"Historically the Crown has paid, because when Helen Clark was sued, Crown Law paid for that. So the government paid, the taxpayer paid for that.

"Every rule is a bit different, I took the view that I was acting in my role as leader of the National Party, not as Prime Minister. I could have elected to try and do something different, but I think that was appropriate at the time and so on the basis of the rules, it's appropriate that the National Party pays."

Parliamentary rules clearly state leader's budgets can not be used for settlement payments, but the speaker of the House did approve the use of that fund to pay for John Key's legal costs in 2013.

Mr Key said it was up to the Parliamentary Service to disclose how much that was.

But it declined to do so when approached by RNZ News.

The Parliament Service is also not subject to the Official Information Act, so it was likely the amount will remain confidential.

Photo: RNZ

However, Labour leader Andrew Little said that amount should be made public.

"This all arises because even after having got the police on to it, the police refusing to prosecute, it was left up to Bradley Ambrose to file defamation proceedings and there will be cost associated with that.

"I think we are entitled to know at least, from the Prime Minister's point of view, just what costs have been faced and to know that taxpayer money hasn't gone into paying for his mistake."

New Zealand First leader Winston Peters said he wanted the speaker to explain why Mr Key was able to pay for some of the case using taxpayers' money and not now.

"What was it about the past that was right, and what was it about now that is wrong? It's so inconsistent you could drive a horse and cart through it.

"He should not have been using the taxpayers money back in 2013, 14, 15 or in 2016 on a private political issue."

Mr Key said the National Party would now foot the bill for his payment to Mr Ambrose and he would not be drawn on whether he would put any of his own money in, saying that was his business.