Labour MPs have identified a $12 million black hole in legal aid funding.
From July 1, $7 million will be cut from the budget for criminal cases and $5m from family and civil cases.
The gap came to light when Labour MPs questioned Justice Minister Judith Collins and senior ministry officials at the parliamentary justice and electoral select committee today.
Justice Secretary Andrew Bridgeman said underspending last year saw the money transferred to the Justice Sector Fund. The pool of money was established in 2012 to fight crime and "deliver results".
Officials expect a decline in demand for legal aid because of family justice reforms and fewer court cases.
The ministry will produce fresh projections in September to see whether they need more money to fund legal aid. If so, it will make a bid to the fund to get the money back.
"If we have got our estimates wrong [and] we do need money to fund legal aid, then we will go to the Justice Sector Fund for that," Bridgeman said.
Labour justice spokesman Andrew Little said officials were "taking a big risk" in assuming demand for family legal aid services would decrease.
He said an application to the fund introduced more red tape to the process.
National embarked on an overhaul of the legal aid system in 2012 in a bid to curb a Budget blowout.
A shake-up of the Family Court system, also designed to cut costs and the number of cases ending up in court, was introduced this year.
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