The Labour Party has escaped prosecution for breaching electoral law with its pocket-sized pledge cards, despite police finding there was a prima facie case against it.

It is the third time the police have found a prima facie case against the Labour Party or a Labour MP and not pressed charges.

Last November police found a prima facie case that Cabinet Minister David Benson-Pope had assaulted students while he was a teacher, and in 2002 a prima facie case was found that Prime Minister Helen Clark committed forgery when she signed a painting someone else had created.

The latest prima-facie finding has brought claims from Opposition MPs that the Government appears to be above the law.

But police were yesterday defending their decision not to prosecute Labour over the breaches of the Electoral Act, involving the party's red pledge cards and large colour fold-out pamphlets, which sent to homes before the election.

Acting deputy commissioner Roger Carson said there was a prima facie case the material had breached the Electoral Act, which prohibits advertising promoting a party unless the party secretary has given written authorisation.

He said Labour were given a warning rather than prosecuted because it was clear a number of other parties had also used similar tactics and it would have been unfair to single Labour out.

He also said the offending was because of a general misunderstanding of electoral rules.

Police also investigated Labour for overspending in the election campaign.

The party had wanted to exclude the $446,000 it spent on the pledge cards from its campaign expenses, but the Electoral Commission ruled the pledge cards should be included.

This pushed Labour about $400,000 over its $2,380,000 limit for campaign spending. However, the police found there was insufficient evidence to prosecute overspending, because there was no evidence it had been intentional.

Labour president Mike Williams said the party was glad the matter was over.

"We maintain we did nothing wrong, but we will except the warning in good grace and read the fine print of the decision. Virtually every party made the mistake we are accused of."

Prime Minister Helen Clark said, through a spokeswoman, that the decision was not unexpected, and said the electoral law was confusing, contradictory and needed to be reviewed.

Mr Carson said a lot of the problems had evolved from a misunderstanding of the electoral rules.

"We are hoping as a result of some of the recommendations we have made to the Chief Electoral Office and others that things will be a lot tidier the next time around. It is in everyone's interest - we want to run fair and proper elections in this country."

Mr Carson would not give details of the recommendations but said they were comprehensive and would make the process clearer.

National Party MP Murray McCully said the decision not to charge Labour was a "gutless cop-out".

"This is Paintergate, Speeding-gate and David Benson-Pope all over again. A prima facie case exists, but Labour is being let off the hook with a warning."

Mr McCully said the Electoral Act provisions were an important part of NZ's constitutional democracy and the police should have enforced them.

"In that regard they have failed our system of Parliamentary democracy and they have failed New Zealanders."

Act leader Rodney Hide said he was disappointed but not surprised that Labour had not been prosecuted.

"It's wrong that Helen Clark and the Labour Party are constantly put above the law that everyone else in New Zealand has to obey."

Police had also been investigating numerous other complaints - relating to five other political parties, the Exclusive Brethren and three Unions - referred from the Electoral Commission and Chief Electoral Officer in regard to breaches of the Electoral Act, but said no prosecutions would be made.

There is a six month deadline for prosecutions under the act after an offence has been committed.