The Government has been forced to abandon plans to force foreign buyers of land adjoining waterways to surrender 20m marginal strips to the Crown, after failing to gain political support.
The provision was included in an amendment to the Overseas Investment Bill when it was reported back from a select
committee last month.
But the Government's refusal to pay compensation for the seizure of land was a sticking point for United Future and it yesterday said it would not support the bill in its current form.
The Government was forced to drop the plans in order to get the party's support to pass the rest of the bill, which aims to toughen controls of overseas residents' purchases of special heritage or environmental values. The marginal strips proposal was designed to ensure continued public access to the country's coast, lakes and rivers - effectively extending the Queen's Chain.
The select committee said it had "clear evidence" that foreign ownership of large rural properties was concentrated around water bodies "in our most scenic areas".
"This lends weight to the submissions we received that foreign owners from jurisdictions with low tax regimes or higher concentrations of wealth can and do outbid New Zealanders and obtain access to some of our waterways."
Sometimes the ethics of foreign buyers around public access to waterways was "more restrictive than has been the historical norm", the committee said. It proposed foreign buyers would hand over the marginal strips, which would be vested in the Crown, where sizeable sales were involved.
But Deputy Prime Minister Michael Cullen conceded yesterday the amendment would be removed from the bill "to ensure a parliamentary majority for the legislation".
United Future MP Gordon Copeland, also deputy chair of the committee which considered the bill, said the refusal to pay compensation was a "clear breach of property rights".
The proposal would have created a precedent, setting aside an important common law principle, which United Future could not abide.
