Cabinet minister Phil Heatley has resigned from his housing and fisheries portfolios.
Heatley told a media conference he offered his resignation to John Key this morning and it had been accepted. Heatley says he has failed to live up to his own standards.
He will stay on as MP for Whangarei.
The Prime Minister cut short what was supposed to be an all-day trip to Christchurch and north Canterbury to deal with the fall-out. Key confirmed that he suggested his Housing Minister Phil Heatley stand aside while the Auditor General looks at how he had been using his ministerial credit card ever since becoming a minister. Heatley instead resigned.
Key says if the audit of his card use shows Heatley has simply been careless then the door is always open for his possible return to Cabinet. The PM says his actions were untidy and careless and he has accepted the resignation with regret.
He says his office has been working with the Audit Office in regards to Heatley's expense claims and a full investigation will now be carried out.
For the time being, Maurice Williamson and David Carter will take on the Housing and Fisheries portfolios respectively.
Earlier this week a teary-eyed Heatley apologised after being caught out using his Ministerial credit card to pay for movies and takeaways.
He also used the taxpayer-funded card to pay for a family road trip.
He admitted on Tuesday he should have known the rules much better around the credit card use.
"It doesn't look good at all and I'm terribly embarrassed and I've apologised to the Prime Minister and I apologise to the public and I apologise to the people of Whangarei and I'm just not particularly pleased with myself," Heatley said.
Key said Heatley had made some silly mistakes which he wouldn't expect his Ministers to make.
In accepting Heatley's resignation, the Prime Minister said he expects high standards from his ministers but is also prepared to accept that from time to time, people make mistakes.
"I have no reason at this stage to believe that Mr Heatley has been dishonest," Key says.
Heatley was also caught up in controversy over his housing expenses last year. Deputy Prime Minister Bill English and Heatley had been claiming close to $1,000 a week in accommodation costs, despite owning property in the capital.
Heatley says his decision comes after he had a closer look at his Ministerial credit card expenses for the past 18 months. He has also submitted his accounts to the Auditor General's office for an independent inquiry.
"I am embarrassed and immensely sorry," says Heatley.
"Rather than arguing semantics about whether this was deliberately misleading or not, I have decided that this is one step too far and I offered my resignation to the Prime Minister.
"I have absolutely no desire to become the focus of a distraction for this government."