Newly released Treasury papers show it was sceptical about the chances charter schools will improve student performance and warned they could affect nearby schools by sucking away teachers and students, and therefore funding.
Despite Treasury's lukewarm response the Government has gone ahead with plans to introduce charter schools from 2014 - and groups including Destiny Church and Tuhoe are interested in running them.
The schools are part of National's confidence-and-supply agreement with Act leader John Banks and are aimed at raising achievement among disadvantaged communities.
In a report to Finance Minister Bill English in July, just before Mr Banks took charter schools to Cabinet, Treasury said it was "doubtful" about Mr Banks' claims that it would help achieve better NCEA results.
The papers also show Treasury sided with the Ministry of Education when it warned about the perils of allowing more unregistered teachers at charter schools than state schools - something Mr Banks has proposed.
It said quality teaching was the most important factor on student achievement and teacher registration, "while not perfect", provided some assurance of quality.
Mr Banks could not be contacted yesterday. Labour education spokesman Chris Hipkins said Treasury's arguments had fallen on deaf ears.
"Ultimately, this is an ideological experiment rather than something that is being driven by any evidence."
He said Treasury's advice showed charter schools - which have been rebranded as "partnership schools" - were deeply flawed.
"You know the Government is stepping well outside the mainstream when even the Treasury thinks there is no evidence for what they are trying to do. It will cost the taxpayer - what we are going to see is a bunch of languishing state schools with huge capital invested in them not being used while money gets ploughed into new charter schools."
Primary teachers' union the New Zealand Educational Institute said the reports showed charter schools would be an economic and educational mistake.
In reports dating back to November last year, Treasury had said while charter schools could be used to test-drive Treasury's favoured policies such as new measurements for school performance, bulk-finding and performance pay for teachers, there was no evidence internationally it would improve student performance.
"We remain sceptical around the student achievement benefits that could be gained from introducing more actively competitive mechanisms."
Treasury said the NZ system included a competitive element because funding and principals' salaries were based on rolls, and schools which performed well attracted more students.
Treasury said the Government could instead promote competition by restricting fees schools can charge and making some school funding contingent on good performance.
It also proposed tightening school enrolment schemes so schools could not cherry-pick the best students and had to work on lifting performance rather than relying on having brighter students than other schools.