National MP Todd Barclay has announced he will not stand as the candidate for Clutha-Southland in the 2017 election - but will stay in Parliament until then.

"I got into politics because I was inspired by the people I worked for: Bill English, Gerry Brownlee and Hekia Parata. I wanted the opportunity to make my contribution too," Barclay said.

"I don't want the issues that are important to Clutha-Southland and all of New Zealand to be distracted by an employment dispute.

"This has been a hard decision to make, but it is in the best interests of our government and the National Party, and I wish the Prime Minister and our team all the best for the General Election."

Speaking on his way into question time, Prime Minister Bill English said what had changed was Barclay's statement yesterday about secret recordings at his electorate office, which he had acknowledged was untrue.

Barclay also realised how the controversy was affecting the party, English said, adding the MP had made the right call - which was made by Barclay.

English again defended his own actions, saying he made a statement to the police.

"The significance of what he told me is really a matter for police."

English said he would stand by that statement if police do reopen the investigation.

He didn't accept taxpayer money had been paid to Dickson as "hush money".

"I don't accept the assertion that nothing was done about it. I reported it to police. It was communicated openly."

Asked if he had any regrets, English said: "My main regret here is that people that I know well fell out so badly and it's been an ongoing problem in different formats. It's a shame that it's ended up in this situation."

But English said the scandal was not damaging.

Deputy Prime Minister Paula Bennett said it was "a really sad day" and that Barclay had "a big career ahead of him".

Barclay had been going through "a really hard time reflecting on what his next moves were".

She defended her party's support and training for young candidates, saying they were put through a thorough initiation and were counselled by senior MPs.

Revenue Minister Judith Collins, one of Barclay's supporters, said it was a "sad day", while adding that "these things happen".

She had advised him over the last few days, but would not say whether she told him to resign.

"Todd's phoned me a couple of times, and I've just given him the support I would give any colleague who is going through tough times.

"I'm very aware he is a very, very young man to be in a place like this and it's just really tough, politics."

Barclay's executive assistant and staff were in tears shortly after his statement was sent.

Barclay said he wanted to pay tribute to his friends and colleagues in the party and caucus, particularly Invercargill MP Sarah Dowie.

Barclay said being elected Clutha-Southland MP was the proudest moment of his life, and it was a privilege to serve the people in the electorate.

Staying on as an MP for the rest of the term will ensure National maintains its current majority. The election is on September 23.

He faced pressure to step down after yesterday's bombshell admission by PM Bill English showed the MP had misled the public over secret recordings in his electorate office.

The Clutha-Southland MP last night confirmed English's statement to police was correct, and apologised for making "misleading" statements earlier in the day.

Former electorate chairman Stuart Davie contacted English last year asking him about claims Barclay had made secret recordings of secretary Glenys Dickson, during an ongoing employment dispute.

Dickson had previously worked for English, who held Barclay's Clutha-Southland seat for 18 years before becoming a list MP.