Immigration New Zealand hands employers the bill for its own IT failure

A deficit built on a project that delivered nothing

Immigration New Zealand is carrying a $90 million deficit in its visa accounts this financial year, and a fresh fee review is due to begin late in 2026, just two years after the last major hike. For any business that recruits internationally, that sequence is not academic. It is a bill.

The deficit has two engines. One is ongoing spend on the $336 million Our Future Services automation programme. The other is the wreckage of the cancelled Biometric Capability Update (BCU), a project that ran from 2018 to November 2025, delivered no measurable benefits, and burned at least $35 to $40 million.

The bill keeps growing after the project is dead

The 2026 Budget wrote off $31.2 million. Then in July 2026, MBIE chief executive Nic Blakeley disclosed a further $6 million in ‘associated project costs’ that nobody had identified before, and could not guarantee even that was the final number. By 3 September 2026, the NZ Herald reported the known sunk cost sitting at almost $40 million, with the ministry still unable to confirm it had stopped counting.

The exposure does not end there. The government faces a potential $12 million liability to BCU vendor NEC, which can also claim at least $4 million in sunk losses and could charge up to $750,000 a month for missing a 2025 deadline. Ministers are staying quiet pending the Michael Heron KC inquiry.

How a project runs seven years and ships nothing

An independent report by Greg James found INZ launched the BCU in 2018 without detailed analysis, skipped due diligence when rescoping in 2020, set up governance late, and let escalations happen outside formal channels. More damning, 1News reported the review raised questions about whether MBIE used ‘creative accounting’ to keep the project under the $35 million whole-of-life threshold that would have triggered Cabinet scrutiny.

The optimism held right to the end. On 19 March 2024 a project update called the approach ‘sound and robust’ and ‘achievable’. Nine days later, independent quality assurance said it would likely not deliver at all. At the Privileges Committee in July 2026, Blakeley conceded the point: “I agree. We got it wrong.” Finance Minister Chris Bishop was blunter, calling it “a disaster”.

The replacement is already wobbling

Our Future Services, the eight-year replacement, is only 18 months in and has surfaced its own problems. Stanford confirmed errors in the business case: savings forecasts baked in cuts of 118 full-time equivalents plus overhead reductions in ICT, property and corporate services, but those overheads are largely fixed and do not fall with headcount. Predicted productivity gains of 30% have not materialised, with student visa productivity only 7 to 20% above the prior six-month average. Treasury has rated the programme’s own risk profile as ‘high’.

Why this lands on employers

Here is the part that matters for anyone running a payroll. Following the 2024 fee and levy review, the funding model tilted hard toward users. As Turner Hopkins Immigration noted in August 2026, the 2024/25 mix was roughly 50% fees, 40% levies and about 9% Crown funding, meaning around 91 cents in every dollar comes from migrants and employers, not general taxation. The firm put it plainly: if the government recovers the great majority of costs from users, “those users are entitled to expect the money to be managed properly.”

The 2024 hikes were already steep, with skilled residence up from $4,290 to $6,450 and student visas doubling to $750. The 2024 Cabinet paper projected ICT costs rising from $13.3 million in 2024/25 to $58.2 million by 2027/28, a fourfold jump driven partly by the legacy systems the BCU never replaced.

National campaigned on a largely user-pays visa system, framing the 2024 increases as ending a taxpayer subsidy. Fair enough. But the deficit that reopened two years later is not a policy choice. It is the compounding of a failed project, overstated savings and unresolved vendor liabilities. MBIE’s own briefing says returning the account to surplus will need “expenditure management and revenue recovery measures”. Revenue recovery means higher fees. Employers who did nothing wrong are about to pay for a bureaucracy that did.

Sources

• How much did Immigration NZ’s ill-fated IT project really cost? (2026-09-04)
• Minister Erica Stanford reveals $6m more wasted on immigration IT project (2026-09-03)
• Immigration NZ faces audit after bungled tech upgrade (2026-07-29)
• Immigration officials ‘deliberately withheld’ information on failed technology upgrade (2026-06-17)
• From ‘achievable’ to ‘unlikely’ in nine days: Immigration NZ’s botched $35m project (2026-07-22)
• MBIE chief denies attempt to mislead Parliament over failed $35m project (2026-07-28)
• ‘More and more unravels’ in botched MBIE project (2026-07-29)
• Can You Trust The System? — Turner Hopkins Immigration (2026-08-21)