Budget papers show that money from the partial sale of state-owned power companies will be used upgrade New Zealand's High Commission in central London.
But Finance Minister Bill English says the $150 million needed for the upgrade will not come from the asset sales money-pot and the papers are wrong.
Budget papers, released on Thursday, say the New Zealand House upgrade is a potential capital decision expected to be funded from the Future Investment Fund - the proceeds from the contentious selling of state-owned Meridian Energy, Solid Energy, Mighty River Power and Genesis Energy, 3News reported.
On Friday, Mr English disagreed with that section of his budget.
"We don't want to pay for it out of the Future Investment Fund," he told the broadcaster.
Labour leader David Shearer says the idea of upgrade the London High Commission with sale money from well-performing assets was ridiculous.
"People don't want their assets sold at all. They will be even more angry at the fact [the proceeds] will go toward New Zealand House in London."
Green Party co-leader Russel Norman said the budget papers showed the government had no coherent plan to spend profits from the asset sales.
He said parliament speaker Lockwood Smith was widely tipped to be the next ambassador to the United Kingdom and a makeover of his new office was was not an investment.
"This slip up revels the Government's Future Investment Fund is a sham... [it] is now revealed as government spin to make the asset sales look better."
The plans come amid cost-cutting measures at the Ministry of Foreign Affairs and Trade, which is trying to save $10m from its European operations.It was recently announced the New Zealand embassy in Sweden will close and last week it was confirmed that around 80 staff would lose their jobs.
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