Probe into Budget botch-up 'terminated' over undeclared 'conflict of interest'

The investigation into how Budget-sensitive material was accessed from Treasury by the National Party has been terminated over an undeclared "conflict of interest".

State Services Commissioner Peter Hughes announced on Wednesday that the current investigation's integrity has been "compromised" and a new one will take its place.

Hughes said a member of the investigation team led by Murray Jack failed to declare a conflict of interest - but that conflict of interest hasn't been disclosed to the public. 

"It is very disappointing this has happened," he said. "Unfortunately, this person has not met my expectations or Mr Jack's expectations."

The commissioner said in a statement he had the option of continuing the investigation but he was not prepared to risk any possibility of compromise.

"Starting the investigation again is the right thing to do," Hughes said. "Near enough is not good enough when it comes to integrity."

Hughes has appointed Jenn Bestwick to lead the fresh investigation, which will commence immediately and report back in February.

He said the expected total cost of the inquiry, including the new investigation, will be completed within or near the original budget of $250,000.

National's finance spokesperson Paul Goldsmith said it's "more evidence of a bumbling Government that botched the Budget by having details leaked, and now has botched the investigation". 

He said he thinks New Zealanders are "getting tired of paying for this Government's mistakes and endless inquiries and working groups that aren't making any progress". 

Prime Minister Jacinda Ardern said the Government is "disappointed". 

"We just want this to be dealt with and dealt with properly - but it's ultimately a matter for [the State Services Commission]."

The investigation was launched following revelations the National Party had obtained sensitive Budget 2019 information from Treasury's website ahead of its official release date in May. 

It led to former Treasury Secretary Gabriel Makhlouf's public apology over his handling of the scandal after Hughes labelled his actions "clumsy".

Hughes said Makhlouf "did not act reasonably" in his use of the phrase "deliberate and systematically hacked" in a media statement on May 28, after National released the Budget material.

It turned out National had simply used a search tool on the Treasury website to uncover the classified material - no hacking involved.

Earlier this month it was revealed Treasury knew for certain it had not been hacked for about 12 hours before issuing a public statement to clarify.

Jack had been leading an investigation into how National had been able to obtain the information on Treasury's website.  

He led a previous investigation into whether Treasury had misled Finance Minister Grant Robertson before he also issued a public statement echoing the Treasury's stance that it had been hacked.

At a select committee briefing on Budget 2019 in June, Struan Little, deputy secretary of Budget and Public Services, said there was "clearly vulnerability in our system".

He said Treasury was "looking forward to working with Mr Murray Jack in terms of how we resolve those and the lessons learnt".