Government moves to restrict the activities of local councils are based on false information, Labour says.
Local government spokeswoman Annette King says ministers are imposing their own "irrational" agenda without accurate evidence to back their claims about rates and debt levels.
The government has a bill in parliament that will limit councils to core services like roading, rubbish collection and libraries.
It believes they've have been moving into business projects which are outside their remit, and the bill is a bid to curb rates rises.
Ms King has released a letter she's received from Local Government Minister David Carter in which he admits website tables of council debt levels were removed because they were incorrect.
"This was because there were issues with the data both in terms of its accuracy and in terms of the picture that was being given for some councils," he said.
"However, the reported figure of an average of seven per cent increases in rates nationally since 2002 is correct."
Ms King says that shows the government has been "fear mongering".
Councils don't like the bill and voted unanimously to oppose it at the Local Government NZ conference in Queenstown at the weekend.