"Labour will be watching closely to make sure it doesn't lead to less services."
Tertiary education, skills and employment Minister Steven Joyce said Mr Cunliffe had "completely got the wrong end of the stick".
He said Bay of Plenty Polytechnic and Waiariki had decided themselves to explore a merger to be better able to serve the people of the Bay and the proposal had a lot of support across the region.
"The merger plan has nothing to do with funding and it wasn't sought by me as minister. Both current organisations are profitable. At this stage this is just a proposal, but I look forward to receiving the business case. I will be assessing it based on providing the best possible service for students."
Dr Neil Barns, the Government-appointed deputy council chair of both institutions, said both councils agreed combining the institutions was the best path to achieving educational outcomes to support a stronger future regional economy.
The new institution could be established as early as January.