The government has removed the ability of the Royal Commission into Abuse in Care to investigate modern care providers and recent cases of abuse.
It has also rejected a request from the inquiry to extend their investigation by another two and a half years.
The high-level investigation is examining abuse that occurred in state and faith-based care between 1950 and 1999.
It was also given discretion to look outside of that time period when the inquiry was established in 2018.
But Minister of Internal Affairs Jan Tinetti has now removed this power to ensure the Royal Commission completes its work by 2023.
This is because in December last year, the inquiry estimated it would need another three years to complete its work - taking the total investigation period to seven years.
"Their explanation was... the work was a lot more complex and larger than what they anticipated. To be able to hear all of the evidence in-depth, they felt that a three year extension was needed," Tinetti said.
If the Royal Commission's scope wasn't changed, it would risk being "overly drawn out and legalistic" Tinetti said.
The government is comfortable revising the scope, she said, because of the other investigations into modern day care providers - like Oranga Tamariki.
"Since the inquiry was set up, we've actually as a government initiated a number of other inquiries including a current day look into Oranga Tamariki settings, we've had Waitangi Tribunals look at current care settings.
"What we were very conscious of is that we have got an overlap in this area... we felt that this was a way that we could support the Commission but ensure the work was happening in other areas as well."
Cabinet has agreed to give the Royal Commission a five month extension, meaning it will hand in its final report by June 2023.
That extension will be the last, Tinetti said.
Tinetti has also moved forward the due date for the Royal Commission's report on redress and how the redress process can be improved.
That was because the government was keen to progress redress for survivors and wanted take the inquiry's report into Budget 2022 negotiations, Tinetti said.
"We don't know what that's going to look like yet but we want to start acting on it as soon as we possibly can."
A spokesperson for the Commission said they were advised yesterday of Cabinet's decision to narrow its scope.
The Royal Commission will speak to the Minster of Internal Affairs to clarify the nature and extent of this change and the implications for survivors and those currently in care, they said.
"This independent commission still has a lot of work to do in revealing the full extent of the abuse, neglect and injustices suffered by survivors in the past and this important work will continue throughout the Inquiry's duration. We are hearing from survivors that this abuse is still happening," it said.
The Commission also welcomed the extension to 30 June 2023 to ensure the work could be completed.
"The Commission advised the minister earlier this year that a full redress report will be completed by November 2021 and public consultation on this will commence shortly."
"The Royal Commission encourages survivors particularly from the disproportionally represented Māori, Pacific and disabled communities continue to come forward to engage with us as we know that the force of our work - informed by survivors' experiences - will make a difference."
Survivors' law firm calls for decision to be revoked
Law firm Cooper Legal, which represents survivors in the Royal Commission as well as about 1400 people in civil claims for historical abuse in care, said it was disappointed at Cabinet's decision to narrow the inquiry's scope.
Cooper Legal principal Sonja Cooper said the move was inconsistent with the wishes of survivors, would silence survivors in care after 1999, and place children in care at risk.
She called on Cabinet to revisit its decision.
"If we are not prepared to listen to those with the most recent care experiences, we have to question the commitment of this Government to change" Cooper said in a statement.
She said many survivors and stakeholders had agreed to participate in the Royal Commission to prevent further abuse being perpetrated against tamariki in care today, and the government was ignoring their wishes.
Cooper Law partner Amanda Hill said the firm also disagreed that current inquiries would overlap with the Royal Commission's efforts.
"The Royal Commission is looking at Residential Schools, State Schools, corrections institutions and psychiatric hospitals - none of these are the subject of current investigations. Those investigations are also problem-focused - a key role of the Royal Commission is to propose solutions to break the cycle of abuse in State institutions" Hill said.
"This decision also means there will be no independent investigation into the contracting-out of care to other organisations and the systemic problems with the oversight and management of those organisations."
"We understand there are concerns about the cost of the Royal Commission. This is the biggest Royal Commission in Aotearoa's history and it was always going to be expensive. This needs to be accommodated because the cost of ignoring this vital part of the inquiry is that nothing will change at all."
Cooper noted the Australian Royal Commission was not constrained in this way, and heard from survivors as young as seven years old.
The changes also come in the wake of sky-rocketing spending at the Royal Commission.
RNZ has revealed the inquiry's operational spending has increased by more than 80 percent in this financial year.
It has had to ask for three emergency funding top-ups because it had blown the $56 million budget - meant to last another two years.
Minister of Finance Grant Robertson rejected all of them and instead allocated an unknown amount from an $8m contingency fund.
Those requests were made around the time the Royal Commission told the government it would need a two and a half year extension.
Robertson also roped in Treasury to look at the Royal Commission's spending and to improve its financial management.