This week Bill English put this country on a tough Budget driven diet of restricted spending, no tax cuts and minimal increases in social spending. All of this came at a time when John Key and Bill English differed over the objectives of the budget. This probably heralds the beginning of something that will continue to feed political journalists and commentators interest in the years ahead - is there a fight coming between John Key and Bill English for the leadership?

Recently, a number of media outlets, including the 'NZ Listener' magazine have begun to speculate about what is really going on in terms of the relationship between Key and English. As this week's differing opinions on the objectives of the budget showed, it looks increasingly likely. English was touting the budget as a tough love document designed to appease the international credit rating agency Standard and Poors (whose track record in terms of predicting last year's economic crisis has already been questioned in some quarters) who were threatening to downgrade our credit rating whereas Key said it was no such thing and was designed as more of a balancing act to get us through tough times.

People do need to be reminded that when the coup against Don Brash was initiated in December 2006, both Key and English tossed their hats into the leadership ring. Then, in order to avoid a messy and divisive contest, a deal was struck between them with Key being able to go for the leadership while English was offered the finance spokespersonship and the deputy's role in return (as Key was opposition finance spokesperson under Brash).

I can't help but think that as part of such a deal that a secret leadership transition clause has been negotiated. These are not unprecedented, at least internationally, with former Australian Labor PM Bob Hawke striking a similar deal with his treasurer (finance minister) Paul Keating (known as the 'Kirribilee House Agreement' after the Australian prime ministerial residence in Sydney where it was concluded) during the 1980s. The effective reneging on this deal by Hawke was what caused simmering tensions to boil over in the early 1990s which eventually saw Keating mount a successful leadership putsch in 1991. Ditto for the British Labour Party as well during the 1990s when Tony Blair and Gordon Brown made their own leadership pact where Blair promised Brown that he would step down after two terms and it was the effective welching on this deal by Blair that precipitated his effective removal and replacement by Brown in 2007. Leadership pacts haven't been confined to the centre-left side of politics either in that John Howard and his treasurer Peter Costello made one of their own when Howard re-assumed the leadership of the Australian Liberal Party in the mid-1990s stating that Howard would retire after three terms and hand over to Costello. In this case though, Costello was unsuccessful when he challenged Howard in 2006 and again just before the 2007 Australian election.

Fighting between a finance minister and the PM in this country has been far more common. As the 'Listener' article pointed out this week, there have been stoushes beginning with that between Michael Joseph Savage and Walter Nash during the First Labour Government of the 1930s over Savage's desire to see the welfare state implemented despite Nash's observations that this was upsetting London's banks. In more recent times, we have seen the most destabilising clash that took place between David Lange and Roger Douglas under the Fourth Labour Government which led to the political demise of both men (although Douglas has recently been resurrected as an Act MP) and Jim Bolger blamed Ruth Richardson's continuation of Rogernomics policies for National's near defeat in the 1993 election and sent her to the backbenches from which she retaliated by resigning and precipitating the Selwyn by-election in 1994.

With all this local and international political history of leadership spats, it's hardly surprising then that two equally talented and ambitious politicians such as Key and English, who hold slightly different outlooks whilst believing in the same centrist Tory philosophy, have begun to show their differences more publicly. While this difference of opinion began in a low key way with English and Key both publicly differing over the level of support for Key's national cycle way idea earlier this year, it now looks that the tension between the two will continue to slowly but surely ratchet up the longer that National stays in office.

If this is the case, then it could pose one of the greatest risks to the stability of the National-led Government in the medium to longer term. Leadership instability in the case of both the Australian and UK Labour governments caused wider instability to spill over into the respective parties, particularly in the UK example where both Blair and Brown camps eventually formed within the parliamentary party who widely briefed against one another to the media. I think that this has the potential to occur within the National Party too, given time, with MPs being seductively offered promotion to cabinet and other significant roles in exchange for their support of either Key or English.

What has to be remembered is that, as I have stated above, both Key and English come from the same centrist conservative wing of the National Party but their rivalry will be fed by differences in policy outlook, personality and, as always in politics, the thirst for power. I predict that Key will easily lead the party into the 2011 election without challenge from English but if National forms the next government, then watch for the real scrap to begin as English begins to quietly elbow Key about the secret promises he may have made in 2006 to stand aside later in a second term.