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]
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]
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.
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.
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]
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]
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.
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.
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.
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.
[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 Actwas 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).
[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.
[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).
[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.
[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.
[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.
[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.
[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”.