Legislation to set up the two referendums on the flag has passed its first hearing in Parliament but Labour and NZ First both withheld support, saying it could save millions of dollars if New Zealanders were asked if the flag should change in the first referendum.

The Flag Referendums Bill passed its first stage by 76 votes to 43 today and will be considered by the Justice and Electoral Select Committee.

NZ First's spokesman for constitutional review, Denis O'Rourke, said the Government should first ask the public whether they wanted to change the flag before ploughing ahead with a costly process to select designs for a new flag and holding a further referendum.

In the bill, the first referendum will ask voters to rank their preferences from a shortlist of four designs for a new flag. In the second referendum next year, voters will choose between the old and new flags.

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"If the government was really interested in asking if New Zealanders want a new flag, it should ask that simple question first. It has got the process the wrong way around. National has started down the track of republicanism. Perhaps John Key is working on a career succession plan to be New Zealand's first president. That might explain his arrogant approach."

Mr Key is a strong supporter of changing the flag, but describes himself as a monarchist. Deputy Prime Minister Bill English said the two referendum had no bias toward changing the flag and the legislation was simply to set up the process. Trevor Mallard, Labour's spokesman on the flag, wants the first referendum to ask two questions: whether the flag should change and for voters to choose their favourite design for a new flag. If a majority wanted change, it would go to a second referendum but no second referendum would be held if voters opted to stick to the current design. The cost of the two referendums is estimated at $17.3 million while the cost of the 12-person flag design panel charged with selecting shortlisted designs will take the total cost to $26 million.

The Green Party and Maori Party were also concerned about the order of questions and have not yet decided whether to support it through all stages.

However, they voted for it at first reading so the public could have input on the issue in select committee.

Mr English said members of the public who wanted to have a say on the design of a new flag should so when the Flag Consideration Panel held its consultation mid-year rather than submit to the select committee. The select committee process for the bill related to the questions and process of the referendums.