Labour has withdrawn its support of a controversial bill to shake up local council services.
Labour supported the Local Government Act Amendment Bill through its first reading, but now at the select committee stage says there's too much opposition from councils to stand behind it.
This week, Local Government New Zealand, representing all councils, told the committee the bill gave the government-appointed Local Government Commission dangerous new powers.
LGNZ said the commission would be able to create and appoint council-controlled organisations (CCOs) to handle utilities such as water and roading without first gaining council support.
"The bill poses a real threat to local democracy and the future of communities," LGNZ president Lawrence Yule said.
Labour now says the Government has shown no signs of acknowledging the fears and has dropped its support.
"We supported it through to select committee in good faith so the issues could be debated nationwide and important amendments could be made," local government spokesperson Meka Whaitiri said.
"However, in spite of massive opposition from mayors and councils throughout the country, local government Minister Sam Lotu-Iiga shows no sign that he's listening at all."
She said local councils had not been properly consulted.
The Green Party has also called for the bill to be withdrawn.
Comment has been requested from Mr Lotu-Iiga.