Poor living conditions for students in New Zealand as part of a Labour-linked scheme will see some fly home early - as Labour leader Andrew Little says "it is embarrassing, it is the wrong thing to do".

Immigration Minister Michael Woodhouse says it is possible employment standards and visa conditions were breached by the scheme for overseas students from the United States and United Kingdom to work on Labour's campaign.

Labour stepped in to take over from former Labour staffer Matt McCarten following complaints from some of the 85 university students about the accommodation at a marae and the programme that was offered.

Woodhouse said Labour had to be sure it had not breached visa or employment laws.

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"If they are truly volunteers that would be fine, but what I'm aware of is that similar schemes to this have been investigated very closely by the Labour Inspectorate because it is work masquerading as volunteer work."

Labour leader Andrew Little has admitted the scheme was "embarrassing" for Labour and General Secretary Andrew Kirton took over the programme earlier this week after concerns about its organisation. He said the students he had spoken to were on Working Holiday Visas but he was still checking.

Woodhouse said the Working Holiday Visa scheme would allow the students to undertake such activities, but the Labour Inspectorate has made it clear that providing services for food and board was still considered "work" and employment rules had to be met.

"I have seen ads by the Labour Party on university websites overseas that are requiring these people to be available for 30-40 hours a week and I think there are questions to be asked about whether that is a breach of visa conditions.

Even if they are on valid visas, there are also important questions to be asked about whether there were breaches of employment law."

A spokeswoman for the Ministry of Business, Employment and Innovation said neither the Labour Inspectorate or Immigration NZ were currently investigating. The Labour Inspectorate had not received any complaints.

"Immigration New Zealand is not currently investigating due to the fact we are unaware of the identity of the people concerned."

Labour has sought to distance itself from the programme, saying while it had known of the programme and stepped after the problems became obvious, it had been McCarten's initiative rather than part of Labour's own campaign.

McCarten set it up while he was still with the Labour Party as its Auckland director. His contract ended in May and McCarten set up his own campaign group, which he claimed was non-partisan, and continued to run the programme.

An advertisement in February - before McCarten left Labour's employment - at the University of Michigan described it as a "Labour Party Campaign Fellowship" and the application address was a Labour Party email. A similar ad at Tilburg University in the Netherlands also described it as a fellowship set up by the Labour Party.

That ad said it would be for a minimum of six weeks and there would be no financial compensation but free housing and "basic groceries" would be provided. "It should prove an interesting experience and be good for your CV."

It said travel costs would be covered within New Zealand.

The controversy has put the spotlight on Labour the morning after National MP Todd Barclay announced he would step down over secret recording allegations.

The Act Party earlier called on Immigration NZ to investigate the scheme, which it called a Labour campaign "sweat shop". And National's campaign chair Steven Joyce said the behaviour was appalling "both for its lack of human decency and industrial strength hypocrisy".

"If the allegations are correct, Labour has brought international students to New Zealand on false pretences, failed to look after them, and failed to meet their obligations to the students in the most basic way, while at the same time campaigning against exploitation of migrants."

Maori Party co-leader Marama Fox also criticised Labour, saying Labour had known of the programme and should have kept a closer eye on it.

"They should never have been put in that situation in the first place. This is not free labour, it is slave labour. Those young people have been duped - they have been sold a pup."

Labour's general secretary Andrew Kirton told the Herald a number of "issues" has seen the party officially take over the "Campaign for Change NZ" programme from Matt McCarten.

Some of the roughly 85 overseas student volunteers who had been staying at Auckland's Awataha Marae will be flown home early. Others will be billeted with Labour supporters and work on the campaign before going home.

Politik reported accommodation issues include crowded dormitories, a broken shower, cupboard doors hanging off hinges, and construction material piled beside beds.

The students had been in New Zealand for about three weeks. Asked if the scheme was a mess, Kirton said it was "a bit of a distraction for our campaign".

"I'm aware of a few issues that have arisen, that's why we have stepped in and taken Matt McCarten's programme over. My focus is to take this over and sort it out."

Little told Newstalk ZB that it looked like the scheme got "totally out of control" in terms of numbers and how that was managed.

"The party became aware earlier this week of just how things were, and they have stepped in to take over, to basically clean it all up.

"I can't deny it - it is embarrassing, it is the wrong thing to do. I have said to the party the only thing that matters is the welfare of those people. So we sort that out and we look after people, and that is what the party is in the process of doing."

Steven Joyce said Little and other Labour figures needed to explain their personal involvement, and "can't pretend McCarten has nothing to do with Labour".

Kirton said Labour could pay for changed airfares, but that was being worked through. He understood the volunteers were on work visas but that was being checked. On the prospect of an Immigration NZ inquiry, Kirton said Labour was figuring out the details.

"Obviously it's important that we comply - or that Matt complied - with all the rules and we're just working through that at the moment."

He said he wasn't sure if students had been asked to sign non-disclosure forms: "we are working through that at the moment".

McCarten was Labour leader Andrew Little's chief of staff, but left last year to open a new Labour office in Auckland.

He set up Campaign for Change while still employed by Labour, but recently left Labour employment to expand it. Auckland Labour Party organisations were involved in the scheme, as were unions.

The campaign promotes itself as non-partisan, and aimed to have one-on-one interviews with 100,000 New Zealanders who aren't enrolled to vote or did not do so at the last election.

Kirton is in Auckland sorting through the problems associated with the campaign, and said they stemmed from "capacity issues". Lectures from Labour figures including Little and Helen Clark were promised, but Kirton said those might not be possible now.

McCarten in a statement said the programme was extremely popular and quickly became oversubscribed.

"The scale of the programme is now greater than I can manage, and I am aware of issues that this has caused.

"Earlier this week the Labour Party Head Office contacted me about these issues and requested to take the programme over so that it could resolve them. I have agreed to this and am no longer involved in the programme."

Act Party leader David Seymour said Immigration New Zealand needed to investigate Labour's "sweat shop".

"Who would believe in Labour's promised crackdown on cheap student labour when Labour are one of the worst offenders in the country?"

From tomorrow until September 23, parties can spend up to $1,115,000 on election advertising, plus $26,200 per electorate contested. Spending limits cover advertising, but not other campaign expenses like travel and staff.

Taxpayer money is also divvied out to parties to spend on television, radio and internet promotions.

Kirton said he wasn't sure how any costs would be handled now Labour had officially taken over the programme.

Electoral law expert Graeme Edgeler said, as a general rule, "get out the vote" expenses don't count towards the election spending cap, which covers the costs of advertising.

"Even if they're actual campaign workers, which might include things like door-knocking, their work would probably not be covered."

A spokeswoman for the Electoral Commission said it was not involved in the Campaign for Change, and has received no information about it.