The Search and Surveillance Bill completed its second reading by 61 to 59 with National, ACT and United Future supporting.
The bill arose out of a 2007 Law Commission report that said legislation relating to the search and surveillance powers of authorities was in need of an overhaul.
A bill introduced in 2008 was discharged and in 2009 another bill was introduced, but made slow progress.
Then in August 2011 the Supreme Court ruled the police had illegally used hidden cameras to gather evidence in the Operation 8 case which centred around the 2007 Urewera raids.
Following this National and Labour could not agree on a permanent legislative response and instead agreed on an interim law which the Government said was necessary to ensure ongoing police investigations could continue.
This law expires in April and the House debated today the bill which replaces that legislation as well as covering wider issues.
Charles Chauvel said in Parliament he had been in talks with Justice Minister Judith Collins to see if Labour and National could find a cross party accord on the issue.
However, the Government had yet to finalise amendments and Labour still had serious reservations about the bill in its current form.
As a result Labour opposed the bill progressing, despite agreeing that the bill was far improved on original one sent to select committee.
The Government has indicated it will move the bill to its committee stage next week, where amendments would be made.
MPs began the first reading debate on the Game Animal Council Bill.
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