The Government has vetoed a Labour Party bill which would have extended paid parental leave from 18 weeks to 26 weeks.
Finance Minister Bill English confirmed this afternoon that he had exercised the financial veto - the first time he has used it to sink an entire piece of legislation.
Labour MP Sue Moroney's bill had broad support in Parliament and was expected to pass into law this month.
But Mr English said it was unaffordable.
"Treasury estimates the cost of this legislation amounts to $278 million over the next four years, a significant extra - unbudgeted - cost," he said.
"That's on top of the $251 million a year (net of tax) taxpayers are expected to spend by 2020 under the existing paid parental leave framework."
The Government recently extended paid parental leave from 14 weeks to 18 weeks and made casual and seasonal workers eligible for compensation.
Ms Moroney said the Government had "ignored democracy" and "put politics ahead of people".
"There is no justification for a financial veto when John Key is indicating there will be $3 billion of tax cuts in 2017."
The Government had now blocked 26 weeks of paid leave on two occasions "simply because it's Labour's idea", she said.
A similar bill also in Ms Moroney's name was voted down in early 2015, but the balance of power shifted when National lost the Northland seat to New Zealand First leader Winston Peters.
Her bill was supported by the Greens, New Zealand First, the Maori Party and United Future, which meant it now had the 61 votes required to pass legislation.
She was "frustrated and disappointed" by the veto, she told reporters outside the debating chamber this afternoon.
"It is backed by the majority of New Zealanders and the majority of our Parliament.
"It is backed by all the research and evidence. The only people who are opposed to this are the National Party."
Parliament's Standing Orders allow the Government to exercise a financial veto "if, in the Government's view, the proposal would have more than a minor impact on the Crown's fiscal aggregates".
The Finance Minister has used the veto twice before, but only to sink clauses within legislation.
Speaking to reporters today, Mr English said paid parental leave was a "good idea".
The Government had looked a potential changes to paid leave as part of the Budget, he said, but 26 weeks of leave would have been a "significant extra cost".
He would not rule out further increases, saying "I am sure it will remain part of the political discussion".
United Future leader Peter Dunne, who wants an eventual increase in paid leave to 52 weeks, said there was a "delicious irony" in the Government's veto.
"Yesterday Government was saying that putting children at the centre of policy was priority. Today they ban a bill on paid parental leave."