House of Commons Procedure and Practice

Second Edition, 2009

House of Commons Procedure and Practice - 18. Financial Procedures - Historical Perspective

*   Historical Perspective

The manner in which Canada deals with public finance derives from British parliamentary procedure, as practised at the time of Confederation.[14] The financial procedures adopted by the Canadian House of Commons in 1867 were formed by the following principles:

*       that although Parliament alone might impose taxes and authorize the use of public money, funds can be appropriated to Parliament only on the recommendation of the Crown (royal recommendation), in Canada represented by the Governor General;

*       that the House of Commons has the right to have its grievances addressed before it considers and approves the financial requirements of the Crown;

*       that the House of Commons has exclusive control over the business of public finance (taxing and spending) and all such business is to be initiated in the lower house;[15] and

*       that all legislation sanctioning expenditure or initiating taxation is to be given the fullest possible discussion, both in the House and in committee.[16]

British Precedents

The whole law of finance, and consequently the whole British constitution, is grounded upon one fundamental principle, laid down at the very outset of English parliamentary history and secured by three hundred years of mingled conflict with the Crown and peaceful growth. All taxes and public burdens imposed upon the nation for purposes of state, whatsoever their nature, must be granted by the representatives of the citizens and taxpayers, i.e., by Parliament.[17]

The requirement that legislation sanction all public spending and taxation has a long constitutional history.[18] In medieval England, the King was expected to meet most public expenses (the court, the clergy and the military) out of his personal revenues. Where this was not possible, he was obliged to seek funds by summoning the common council of the realm, or Parliament, to discuss what aids (taxes and tariffs) should be supplied to support the Crown. Even in the earliest days of these assemblies, it was generally recognized that, when “aids” or “supplies” were required, the King should seek consent not only to impose a tax, but also for the manner in which the revenues from that tax might be spent. In 1295, the writ of summons for one of these councils, later known as the “Model Parliament”, proclaimed: “What touches all should be approved by all”.

Early British Parliaments were not legislative bodies as we understand them today, but petitioning bodies. They presented petitions to the King and agreed to taxes (i.e., money granted to the Crown), on the condition that certain problems (or grievances) outlined in the petitions would be addressed or concessions made. By 1400, the Commons insisted that the King respond to their petitions before any grant of money was made. When the King refused, they adopted the practice of delaying the grant until the last day of the session.

The “councils” subsequently divided into two “Houses” based on their communities of interest: the House of Lords and the House of Commons. In principle, each House taxed itself independently; for this reason it was not considered appropriate that the Lords determine what the Commons should contribute. Moreover, because the greater part of the tax burden fell to the Commoners, grants to the Monarch came to be made by the Commons “with the advice and consent” of the Lords. The dominant position of the Commons in terms of deciding matters of taxation was firmly established early in the fifteenth century when Henry IV conceded that any grant to the Sovereign must be agreed upon by both the Lords and the Commons and must be communicated to the Crown by the Speaker of the House of Commons.[19]

Initially, the Commons were content simply to have grants of supply originate in their House. However, over time the Lords began “tacking on” additional legislative provisions to Commons “money bills”, by way of amendments. This was viewed by the House as a breach of its prerogative to originate all legislation which imposed a charge either on the public or the public purse, and led the Commons, in 1678, to resolve that:

All aids and supplies, and aids to his Majesty in Parliament, are the sole gift of the Commons; and all Bills for the granting of any such aids and supplies ought to begin with the Commons: and that it is the undoubted and sole right of the Commons to direct, limit, and appoint, in such Bills, the ends, purposes, considerations, conditions, limitations, and qualifications of such grants; which ought not to be changed or altered by the House of Lords.[20]

By the end of the seventeenth century, the principles of modern financial procedure—most particularly the annual treatment of finance by the House of Commons and the notion of effective and permanent House control over all public expenditure—were well established. Their evolution had taken several centuries and was related to the rise and gradual abolition of the Civil List, the creation of the Consolidated Fund and the growth of the “estimates” system, whereby the government receives annual operating grants from Parliament.

*   The Civil List

The Civil List[21] was initially a list of all non‑military personnel in the service of the Crown for whom remuneration was paid for by Parliament.[22] These included individuals in the personal employ of the Sovereign, such as domestic servants, people in the diplomatic service and various public officials and civil servants. Previously, the Crown had covered these expenses out of the Sovereign’s hereditary revenues and certain taxes voted to the Sovereign for life by Parliament.

Initially, Parliament did not concern itself with how the funds were spent. In general, it was felt that, while the Crown was not entitled to increase its revenue without the Parliament’s consent, it was perfectly free to dispose, as it pleased, of any funds properly in its possession. However, the amounts voted by Parliament were frequently insufficient and the House was increasingly asked for additional grants to discharge debts which the Sovereign had incurred to cover the shortfall. So emerged the practice of allocating to the Crown funds for specific purposes.

With the accession of Queen Victoria to the throne in 1837, Civil List expenditures were reduced to those required solely to meet the personal needs of the Sovereign and her family. All other civil expenses were taken over by the national treasury and paid out of the Consolidated Fund.

*   The Consolidated Fund

During the seventeenth and eighteenth centuries, the raising and spending of public money were intimately connected. Requests from the Crown for money, in estimated amounts for specified purposes, were considered and approved by a Committee of the Whole House. This phase concluded, a second Committee of the Whole considered the recommended “ways and means” for raising the money required to cover the amounts approved. The work of the first committee, which came to be known as the Committee of Supply, led directly to the work of the second, the Committee of Ways and Means. Only when the latter came to a decision, would a bill be introduced which empowered the Crown to raise money in the amount of and in the manner approved by the Committee of Ways and Means and to spend up to the amount approved, and only for the purposes designated, by the Committee of Supply.

The close coupling of taxing and spending continued until 1786 when the establishment of the Consolidated Fund[23] abolished the need to match a particular outlay with a specified revenue.[24] Once the Committee of Supply had agreed to the expenditure of certain sums, the Ways and Means Committee would look to the Consolidated Fund to pay for the approved expenditures. The concept of an appropriation bill was introduced to set aside from the Fund the amounts required for the purposes designated. Appropriation bills merely set aside funds; they do not require the Crown to spend all or any of the money which has been appropriated. Furthermore, appropriations are always made with a time limit; the spending authorization provided under an appropriation act expires at the end of the fiscal year to which the Act applies.[25]

Thus, two distinct kinds of government financial business emerged: the business of supply, which approved expenditures and their purposes, and resulted in the passing of appropriation bills; and the business of ways and means, which resulted in the taxation bills used to raise the monies needed to replenish the Consolidated Fund.

Since the institution of the Consolidated Fund, all expenses of the state have been authorized either by specific statute (ongoing and permanent) or by way of an annual appropriation. It is the annual appropriations, or supply grants, which come before the House for discussion each year.

*   The Estimates

As the seventeenth century drew to a close, England’s continuing colonial disputes with France and Spain and the recent experience of two civil wars made evident the need to maintain a national standing army under the control of Parliament. Previously, the Monarch had simply raised armies to fight wars, as required.

The institution of a permanent military establishment carried with it the requirement for grants to cover the cost of personnel, wars and fortifications.[26] In 1689, the British Parliament passed the Mutiny Act, legislation which had to be renewed yearly. The Act restricted the use of martial law and gave authorization for a definite number of military personnel. The Act also authorized a grant of funds sufficient to cover military wages, ordnance and shipbuilding for that year. This, then, was the means by which Parliament undertook the regular annual charge of supply for the army and navy, and from which emerged the parliamentary practice of granting annual appropriations for the operations of government. The principles governing that practice hold that the government may spend on public administration no more than the amounts (estimates) approved by Parliament and is similarly prohibited from using funds voted for one purpose to pay for another (engaging in virement).[27] As the scope of civil government expanded, civil expenditure came to comprise a number of expenses funded solely by annual parliamentary grants.[28]

Financial Procedure in Colonial Canada

By the end of the eighteenth century, most of the British North American colonies had acquired representative political institutions.[29] For many years, colonial governance was fraught with dissension as a result of the often irreconcilable interests of appointed governors and elected representatives. Much of that conflict arose over the issue of who should control the public purse.[30] However, by the time of Confederation, the popular assemblies of British North America had asserted their right to decide what taxes should be raised and where they would be spent, thus fulfilling the principle of responsible government, which holds that the executive may only govern while it enjoys the confidence or support of the House of Commons. Parliament’s rights and role in the processes of taxing and spending may be found in the various rules and procedures of the legislatures from which they derive.[31] In 1867, the Canadian House of Commons adopted the rules of the former Legislative Assembly of the Province of Canada, including those covering the process of taxing and spending.[32]

*   Upper Canada

Initially, the colonial administration of Upper Canada was paid for entirely by the British Parliament. However, in 1817, the Executive asked the Assembly for a grant of money to cover certain administrative costs which exceeded the amount authorized by Westminster. Previously, Britain had covered any excesses; but, in view of the growing wealth and relative prosperity of the colony, the local community was asked to subsidize these expenditures. Not surprisingly, the elected representatives demanded a say in how the money would be spent. Moreover, they asked that the Governor and his Executive Council not spend money which the Assembly had not authorized, nor for purposes other than those it had designated.

Supply (the authority to spend) was rarely withheld.[33] Even when it was withheld (in 1818, 1825 and 1836), it was inconsequential. In fact, the Crown appeared relatively indifferent to the sums voted by the House. Nonetheless, the House continued to take the supply process seriously, resolving that the misapplication of parliamentary appropriations was a “high crime” and affirming the undoubted right of the elected House to determine how, and how much, public money was spent.

By 1840, supply proceedings in the Assembly had become relatively formalized. Estimates were referred upon presentation to a permanent Select Committee on Finance. The committee’s report would be referred to a Committee of Supply (a Committee of the Whole House)[34] which, in turn, would report back to the House a number of resolutions, each of which recommending that money be appropriated for some item. Once adopted, these resolutions would be referred to a special committee of two members charged with drafting the bills based thereon. A number of bills would then be presented.

*   Lower Canada

Prior to 1818, the Executive Council requested no funds from the House of Assembly of Lower Canada, with the result that no estimates were tabled. Nevertheless, the House attempted to exert some financial control by way of its annual review of the public accounts. Until 1812, the accounts were examined in a Committee of the Whole, after which they were referred to a special committee of five members. Beginning in 1818, estimates were also referred to this committee. The committee’s frequent criticisms of the administration for appropriating money without the consent of the House of Assembly prompted the House to resolve that the appropriation of the public revenue without legislation was “a breach of the privileges of this House, and subversive of the Government of this Province, as established by Law”. The House further warned that it would hold the Receiver General responsible for all monies levied.[35]

The House of Assembly used various other procedures in its efforts to control the administration, including refusing supply, refusing to deal with all legislation until basic grievances were met and tacking on clauses to bills appropriating revenue for which there was no existing statute, a practice which forced the executive to choose between enacting the additional clauses or losing supply.

*   The Province of Canada

In 1840, the British Parliament passed the Union Act uniting Upper and Lower Canada.[36] With its enactment came the acknowledgement that a government should enjoy the confidence of the people’s representatives.[37] It is also by the Union Act that the royal prerogative in right of financial legislation was first introduced into Canadian parliamentary law. Prior to 1840, any elected member in the legislatures of Canada could introduce a bill with financial implications for consideration of the assembly. This practice was much frowned upon by governors on the grounds that it interfered with the efficient operation of government.[38] Lord Durham felt strongly that “The prerogative of the Crown which is constantly exercised in Great Britain for the real protection of the people, ought never to have been waived in the Colonies; and [that if] introduced … it might be wisely employed in protecting the public interests, now frequently sacrificed in that scramble for local appropriations, which chiefly serves to give an undue influence to particular individuals or parties.”[39]

Provision was made for a Consolidated Revenue Fund against which would be charged all expenses related to the collection, management and receipt of revenue, all interest on the public debt and remuneration of the clergy and officials included on the Civil List.[40] Any surplus remaining in the fund after these charges had been deducted could be used for the service of the public, as the legislature thought fit.[41] All votes, resolutions or bills involving expenditure of public funds were to be first recommended by the Governor General.[42]

There were still disputes over the control of money. However, no administration was defeated over an appropriation act; in fact, even when governments changed, a supply bill was often taken over and carried through by the succeeding administration.[43] By 1867, the vote of confidence had virtually replaced withholding supply as the preferred mechanism by which the Assembly sought control over the administration of government.

Financial Procedure in the Canadian House of Commons

The Constitution Act, 1867 provided that any bill appropriating any part of the public revenue or imposing a tax or duty must originate in the House of Commons.[44] Furthermore, the Act made it unlawful for the House to pass any measure to appropriate any part of the public revenue, or of any tax or duty, which had not first been recommended by the Governor General in the session in which the measure was proposed.[45] Additional clauses provided for the creation and use of a Consolidated Revenue Fund by the Parliament of Canada for the public service.[46]

*   Standing Orders (1867-1968)

The first Standing Orders of the House of Commons codified long‑established rules of parliamentary practice and procedure which were rooted in British parliamentary history and, subsequently, also in the rules and procedures of the different colonial legislatures.

The cardinal principle governing Parliament’s treatment of financial measures was that they be given the fullest possible consideration in committee and in the House. This was to ensure that “parliament may not, by sudden and hasty votes, incur any expenses, or be induced to approve of measures, which may entail heavy and lasting burthens upon the country”.[47] To satisfy the requirement for debate, the 1867 rules required that financial business be considered first in a Committee of the Whole before being debated in the House.[48] In 1874, the House agreed to appoint, henceforth, at the beginning of each session, a Committee of Supply and a Committee of Ways and Means.[49] The Committee of Supply approved the annual estimates of government expenditure, while the Committee of Ways and Means considered the government’s proposals to raise revenue and approved necessary withdrawals from the Consolidated Revenue Fund for the measures in the estimates. Yet another measure safeguarding the House from hasty financial decisions was the rule that the debate on any motion proposed “for any public Aid or Charge upon the people” would not proceed immediately, but would be adjourned to a subsequent sitting day.[50] This was done so that “no member may be forced to come to a hasty decision, but that every one may have abundant opportunities afforded him of stating his reasons for supporting or opposing the proposed grant”.[51]

The first Standing Orders also included, directly under the heading “Aid and Supply”, a note in reference to the Constitution Act, 1867, which required that any measure seeking to raise or spend public money be initiated by the Crown. The rules provided further that all legislation respecting charges upon the public revenue (expenditure) or on the public (taxation) be introduced first in the House of Commons, that is, the Commons alone grants supply.[52]

In general, the financial procedures set out under these rules remained the same for the next hundred years.[53] However, financial procedures came to be used by successive oppositions as a means of obstructing, delaying, and even preventing the government from passing financial business. As a consequence, beginning in the late 1960s, financial procedures, which had remained virtually unchanged for a century, were drastically revised and streamlined. These revisions had to recognize and protect two contradictory principles: that the government is entitled to get its financial legislation through Parliament; and that the opposition is entitled to identify, draw attention to, delay, and debate, items that it feels need attention and discussion.

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[14] See the Preamble to the British North America Act, which decreed that Canada was to have a constitution similar in principle to that of the United Kingdom. Consequently, the rules of parliamentary procedure as practiced in Britain at that time would serve also to guide proceedings in the Canadian Houses of Parliament. The Act was renamed the Constitution Act, 1867 in 1982. For further information, see Chapter 1, “Parliamentary Institutions”.

[15] Since 1625, the British Commons’ exclusive right to grant monies has been fully recognized and, since 1678, the Commons have also claimed the sole right to direct how those monies will be spent (Redlich, Vol. III, pp. 115‑6). This fundamental principle was firmly established in 1860 when the British Commons refused to acquiesce in the Lords’ rejection of one of its money bills. The House subsequently adopted a resolution affirming its sole right to grant aids and supplies (Redlich, Vol. III, pp. 116‑9). See the section in this chapter entitled “The Commons’ Claim to Predominance in Financial Matters”.

[16] A Commons rule that all legislation sanctioning expenditure or initiating taxation must be based on resolutions passed in a committee of the Whole House was introduced in the British Parliament in 1667. During the civil wars, these discussions had been undertaken in select committees to escape pressure and management by the Speakers, acting on the King’s behalf. The House of Commons again reverted to committees of the Whole House because select committees were seen to be too easily swayed by privy councillors and other prominent Members. The 1667 rule actually read: “If any motion be made in the House for any public aid or charge upon the people, the consideration and debate thereon ought not presently to be entered upon but adjourned to such further day as the House shall think fit to appoint; and then it ought to be referred to the Committee of the whole House and their opinion to be reported thereupon, before any resolution or vote of the House do pass therein” (Stewart, J.B., The Canadian House of Commons: Procedure and Reform, Montreal and London: McGill-Queen’s University Press, 1977, p. 99).

At Confederation, the rule had been revised to read: “If any motion be made in the house for any aid, grant, or charge upon the public revenue, whether payable out of the consolidated fund, or out of monies to be provided by Parliament, or for any charge upon the people …” (May, 6th ed., p. 549).

[17] Redlich, Vol. III, p. 114.

[18] Most of the historical background has been summarized from an article by Driedger, E.A., entitled “Money Bills and the Senate”, Ottawa Law Review, Vol. 3, No. 1, Fall 1968, pp. 25‑46. See also May, 6th ed.

[19] Ordinance of 1407 on “The Indemnity of the Lords and Commons” (quoted in Driedger, p. 31).

[20] Hatsell, J., Precedents of Proceedings in the House of Commons, Vol. III, South Hackensack, New Jersey: Rothman Reprints Inc., 1971 (reprint of 4th ed., 1818), pp. 122‑3. This is the origin of the Canadian House of Commons’ Standing Order 80(1) which reads: “All aids and supplies granted to the Sovereign by the Parliament of Canada are the sole gift of the House of Commons, and all bills for granting such aids and supplies ought to begin with the House, as it is the undoubted right of the House to direct, limit, and appoint in all such bills, the ends, purposes, considerations, conditions, limitations and qualifications of such grants, which are not alterable by the Senate”.

[21] The term “Civil List” was used also in the Canadian colonies.

[22] Redlich, Vol. III, pp. 161‑2.

[23] In Canada, this fund is known as the Consolidated Revenue Fund.

[24] In 1715, an Aggregate Fund, which was to be fed by definite sources of income and to bear definite charges of a permanent nature, was instituted under George I. However, it was only with the creation of the Consolidated Fund, in 1786, that the whole revenue of the state would flow into one receptacle from which all expenditures of the state would be discharged (Redlich, Vol. III, pp. 163‑4).

[25] Stewart, p. 109.

[26] Redlich, Vol. III, p. 165.

[27] Redlich, Vol. III, pp. 167‑8.

[28] Redlich, Vol. III, p. 165.

[29] See Chapter 1, “Parliamentary Institutions”.

[30] Bourinot, Sir J.G., Parliamentary Procedure and Practice in the Dominion of Canada, 4th ed., edited by T.B. Flint, Toronto: Canada Law Book Company, 1916, p. 8.

[31] O’Brien, G., “Pre-Confederation Parliamentary Procedure: The Evolution of Legislative Practice in the Lower Houses of Central Canada 1792‑1866”, Ph.D. thesis, Carleton University, 1988, pp. 89‑93, 175‑80, 286‑92, 361‑3. See also Bourinot, 4th ed., pp. 9‑11.

[32] Journals, November 7, 1867, p. 5.

[33] O’Brien, pp. 92‑3.

[34] The Assembly sitting as a committee. For further information, see Chapter 19, “Committees of the Whole House”.

[35] O’Brien, p. 176.

[36] Union Act, 1840, R.S. 1985, Appendix II, No. 4.

[37] Bourinot, 4th ed., p. 12. Bourinot goes on to recount how, in 1849, Nova Scotia Governor Sir John Harvey was instructed by the Colonial Office that it was “neither possible nor desirable to carry on the government of any of the British provinces in North America in opposition to the opinions of the inhabitants”.

[38] Bourinot, South Hackensack, New Jersey: Rothman Reprints Inc., 1971 (reprint of 1st ed., 1884), p. 463.

[39] Craig, G.M., (ed.), Lord Durham’s Report: An Abridgement, Ottawa: Carleton University Press, 1992, pp. 144‑5.

[40] Union Act, 1840, R.S. 1985, Appendix II, No. 4, Arts. L‑LVI.

[41] Union Act, 1840, R.S. 1985, Appendix II, No. 4, Art. LVII.

[42] Union Act, 1840, R.S. 1985, Appendix II, No. 4, Art. LVII.

[43] O’Brien, p. 361.

[44] R.S. 1985, Appendix II, No. 5, s. 53. The language of section 53 was first written into Canada’s constitutional documents in the Union Act, 1840, R.S. 1985, Appendix II, No. 4, Art. LVII.

[45] Constitution Act, 1867, R.S. 1985, Appendix II, No. 5, s. 54.

[46] Constitution Act, 1867, R.S. 1985, Appendix II, No. 5, ss. 102 to 106. A similar system was in use in the Province of Canada at the time of Confederation.

[47] Bourinot, 4th ed., pp. 404‑5.

[48] Rules, Orders and Forms of Proceeding of the House of Commons of Canada, 1868, Rule 88.

[49] Journals, March 31, 1874, p. 10; Rules, Orders and Forms of Proceeding of the House of Commons of Canada, 1876, Rule 87. Until 1874, the House was first required to agree to a motion, “That supply be granted to Her Majesty”. That motion, proposed immediately following the order to begin debate on the Throne Speech, was the mechanism used to designate a Committee of Supply and to place the business of supply on the House agenda. See also Bourinot, 1st ed., p. 477.

[50] Rules, Orders and Forms of Proceeding of the House of Commons of Canada, 1868, Rule 88.

[51] Bourinot, 1st ed., pp. 462‑3.

[52] Rules, Orders and Forms of Proceeding of the House of Commons of Canada, 1868, Rule 89.

[53] In 1968, the House modified its Standing Orders to incorporate a fixed, annual schedule for the consideration of the business of supply. See the section in this chapter entitled “The Business of Supply”.

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