The ways in which the Government raises money on the one hand, and spends it on the other, are governed by a very specific set of procedures having their roots in Canada's constitutional and parliamentary heritage. The processes are complex but the fundamental principles involved are straightforward. This chapter will outline these basic principles, provide a brief review of their historical origins, and describe the various stages of the process by which the Government obtains and spends money.
Parliament's financial proceedings can be separated into two distinct categories: ways and means proceedings, which is the process that allows the Government to raise revenues (usually by the collection of taxes) and the business of supply, which is the means of authorizing expenditures for various programs and services. All taxes and expenditures must be sanctioned by legislation, and all such bills must originate in the House of Commons.
The principles underlying Canadian financial procedures have their roots in the evolution of the parliamentary system of government in Great Britain and in the history of the financial relationship between the Crown and Parliament. In medieval England, the King was expected to meet all public expenses out of his own revenues. As the operation of government grew and the ability of the Crown to meet these expenses diminished, the Sovereign was obliged to seek funds by summoning a council to discuss what aids should be given to the Crown. In 1295, the writ of summons for one of these councils (which was later known as the "Model Parliament") declared: "What touches all should be approved by all". The role of Parliament was beginning to take form.
The concept of the Crown requesting funds and Parliament granting them is central to understanding how the whole system of revenue and expenditure in government works. In simple terms, requests for funds must originate with the Crown, which acts on the advice of its Cabinet. In Canada, the request is made in the form of a recommendation by the Governor General to the House of Commons which may grant or deny it. Revenue is generated through taxation measures initiated by a Minister of the Crown in the House of Commons.
The Constitution Act, 1867 sets out many of the basic provisions for the financing of the Government's activities. The Act provides for the creation of a Consolidated Revenue Fund. The Fund is modelled after the one created in Britain in 1787, which abolished the necessity of matching a particular expenditure with a specific revenue. Revenues and expenditures can thus be seen as deposits and withdrawals from this central fund.
The Act also establishes the Crown's initiative in matters of expenditure, and stipulates that all legislation introducing or raising taxes must originate in the House of Commons. The House of Commons reiterates its authority over charges on both the Fund and the taxpayer in its Standing Orders.
13.(a) Business of Supply
In the Speech from the Throne, delivered by the Governor General at the beginning of each session, the Members of the House of Commons are informed that they will be asked to appropriate the funds required to carry on the services and expenditures authorized by Parliament. The process involved in this appropriation operates on a fairly rigid schedule centred on a fiscal year that runs from April 1 to March 31 of the following year. The fiscal year is divided into three "supply periods", ending June 23, December 10 and March 26. Deadlines for the consideration of various items of business are associated with each of the three supply periods.
The basic components of supply can be divided generally into a legislative phase (involving the estimates and appropriation bills) and a general debate phase (consisting of opposition supply motions).
13.(a)(i) Supply: The Legislative Phase
The Government's expenditure plan for the fiscal year is contained in documents known collectively as "the estimates" or "the Blue Books". The estimates for the coming fiscal year are tabled in the House of Commons, with a Royal Recommendation, on or before March 1 of the expiring fiscal year. They are presented in three parts: the Government Expenditure Plan (Part I) which gives an overview of the Government's total expenditures; the Main Estimates (Part II) which provide a list by government department of expenditure items; and the Departmental Expenditure Plans (Part III) which is a collection of individual books offering detailed information on all the programs within each department or agency of the Government. Part II of the estimates --the Main Estimates --becomes the focus of the House's consideration. The expenditures listed here are of two distinct types: statutory and budgetary. The former are included for information purposes only, since the expenditures have previously been approved in legislation, on a continuing basis. An example of this sort of expenditure would be the salaries provided for judges. Budgetary items, on the other hand, are expenditures proposed by the Government, for which the approval of Parliament is being sought.
The Main Estimates are studied in committee, and returned to the House for concurrence. A bill based on the estimates, known as an appropriation bill, is considered first by the House, and then in the Senate, and finally receives Royal Assent. A more detailed explanation of this process follows.
Main Estimates: Committee Consideration
The Main Estimates are referred by the House to standing committees for consideration. Each committee is asked to study the portion of the estimates which relates to its mandate (e.g., the estimates for the Justice Department are sent to the Standing Committee on Justice and Legal Affairs). A committee considers each of the budgetary items, referred to as "Votes", individually. Each Vote becomes the subject of a distinct motion, which can be agreed to (approving the expenditure), amended (reducing the amount provided) or negatived (eliminating the expenditure). A committee may not increase the amount of a Vote, as that would infringe on the financial initiative of the Crown. Committees do not consider statutory items, since these have already been approved in legislation.
Committee consideration of the Main Estimates can involve inviting witnesses to appear before the committee. These may include the appropriate Minister, officials of the department or agency involved, and interested individuals or groups. Amendments made to the Standing Orders in 1994 also empowered committees, as part of their review of Estimates, to examine and report on the expenditure plans and priorities in future fiscal years of the departments and agencies whose Estimates are under study.
Once consideration is complete, committees report the Estimates back to the House. The reports may not contain substantive recommendations; Votes in the Estimates may only be concurred in, reduced or negatived. Committees that have not reported by May 31 are deemed to have done so.
One exception to the May 31 reporting deadline is provided for in Standing Order 81(4), which allows the Leader of the Opposition to move a motion to extend the time for committee consideration of the Main Estimates for one department or agency. This motion is deemed adopted on the last sitting day prior to May 31, and allows the affected committee to delay the presentation of its report for ten sitting days, or until the day immediately preceding the final supply day in the period. Committees reporting on departmental plans and priorities may submit their reports up to and including the last normal sitting day in June.
Main Estimates: Concurrence
After the standing committee reports have been tabled, there is an opportunity for all Members of the House to review the decisions reached in committee before motions for concurrence in the estimates are introduced.
The Government must give at least 48 hours' notice of a motion or motions to concur in the estimates. If the Government wishes to restore any items that were reduced or reinstate items that were eliminated in committee, it must provide 48 hours' notice of these motions as well. At the same time, Members are given an opportunity to table notices of motions to oppose any item in the estimates. In the supply period ending June 23, 48 hours' notice is required of these motions to oppose.
On the last day given over to consideration of supply in the period ending June 23, all motions of opposition and concurrence in the Main Estimates are considered by the House. Debate is permitted, but the Standing Orders provide that at no later than 10:00 p.m., the Speaker must put all questions necessary to dispose of the motions.
Appropriation Bill
Once the Main Estimates have been concurred in, the next step in the process of financing the Government's programs is the passage of an appropriation bill. It authorizes the actual withdrawal of funds from the Consolidated Revenue Fund, and because it is based on the provisions of the estimates, the amounts specified in the bill must not exceed the limits established by the estimates.
On the last supply day in the June 23 period, and immediately following the concurrence motion, the appropriation bill is read a first time, without a motion for leave to introduce, and thereafter follows the usual stages in the legislative process, with referral to a Committee of the Whole after second reading. Special provision is made in the Standing Orders for the bill to be passed in a single day. Due to this time limit, the bill is usually considered without debate or amendment.
Interim Supply
The steps just described for dealing with the Main Estimates and the resulting appropriation bill have an obvious shortcoming. Since the fiscal year begins on April 1, and the appropriation bill is adopted on the last supply day in the period ending June 23, the Crown would appear to be left without funds for the interim three months.
This situation is resolved with a request for an advance on the funds set out in the Main Estimates, known as Interim Supply. Normally, a motion for interim supply is adopted on the last supply day in the period ending March 26. The Government gives notice of a motion setting out in detail the sums of money it will require. The figures are expressed in twelfths of the amounts given in the Main Estimates. Most are three-twelfths, corresponding to the three months' lag until the passage of the Main Estimates. Concurrence in the interim supply motion is followed with an appropriation bill, which is proceeded with in the manner set out above.
Although the House may grant a request for interim supply, this does not constitute approval for the various programs thus funded. Standing committees consider the Votes for programs which received interim supply in the usual manner. However, they cannot reduce the Votes for these items beyond the amounts already approved in interim supply.
Supplementary Estimates
Since the Main Estimates are prepared well in advance of the beginning of the fiscal year in which they will apply, it happens from time to time during the course of the year that the amounts calculated for various programs prove inadequate, or that unforeseen needs arise. Supplementary Estimates permit these requirements to be met.
Supplementary Estimates may also include budgetary amounts often called "dollar items". This term refers primarily to requests for the transfer of existing funds, rather than for new or additional amounts.
Like the Main Estimates, Supplementary Estimates are sent to the appropriate standing committees once they are tabled. The committees consider them and report them back to the House, or are deemed to have reported them, not later than three sitting days before the last supply day in the period in which they were tabled.
Concurrence in the Supplementary Estimates follows the same procedure as set out for the Main Estimates: Members may give notice of motion to oppose particular items (only 24 hours' notice for these motions is required, instead of 48), and the Government may give notice of motion to restore or reinstate particular items.
Once Supplementary Estimates are concurred in, an appropriation bill is immediately read a first time and disposed of at the end of the last allotted day in the supply period.
Governor General's Special Warrants
When Parliament is not in session and there is some urgent requirement for funds not otherwise provided for, the Governor in Council may by order direct the preparation of a special warrant, to be signed by the Governor General, authorizing a payment to be made out of the Consolidated Revenue Fund. This provision makes it possible for the work of government to continue, even though Parliament is not sitting.
The Financial Administration Act requires that every special warrant be published in the Canada Gazette within 30 days of its issue. Within 15 days of the commencement of the next meeting of Parliament, the Government must table a statement of warrants issued, and the amounts have to be included in the next request for supply.
13.(a)(ii) Supply: The General Debate Phase
A fundamental element of the principle underlying the financial procedures of Parliament is the idea that Parliament does not grant supply until the opposition has had the opportunity to demonstrate why it should be refused. This opportunity takes the form of debate on designated supply days.
Under normal circumstances, a total of 20 days per fiscal year are devoted to the consideration of the business of supply: eight days for the period ending June 23, five days for the period ending December 10 and seven for the period ending March 26. The last supply day of the June 23 period is reserved for the consideration of the motion to concur in the Main Estimates and the appropriation bill, leaving 19 days for debate. These days are variously referred to as "allotted days", "supply days" or "opposition days" and are given over to debate on motions moved by the
opposition.
According to amendments made to the Standing Orders in April 1991, if the House does not sit on days designated as sitting days in the parliamentary calendar, the total number of allotted days in that supply period will be reduced by a number of days proportionate to the number of sitting days on which the House stood adjourned. Likewise, if the House sits on days not designated as sitting days, the total number of allotted days in that supply period shall be increased by one day for every five days during which the House sits. Further amendments to the rules in 1994 provided that in a calendar year, no more than one-fifth of all allotted days may fall on a Wednesday and no more than one-fifth may fall on a Friday. It is up to the Government to designate supply days. Normally, the Government House Leader rises in his or her place after Question Period to announce that the House will consider a supply motion on the following day. However, the choice of topic on supply days is entirely up to the opposition parties. The subject of the motions may centre on any matter falling within the jurisdiction of the Parliament of Canada. The Standing Orders provide that in any one supply period, a maximum of three of these motions (but not more than eight over the whole year) may be designated as "votable", meaning that the House will come to a decision on those motions at the end of the debate. Again, it is up to the opposition to decide which motions may come to a vote.
If there is disagreement among the opposition parties as to the allocation of the supply days, the Speaker will decide which of the motions submitted will be debated. In doing so, the Chair takes into consideration the parties' representation in the House, the number of days already allotted to each party, and whether or not the proposed motions have been designated as votable.
Supply - An Overview
A brief overview of the arrangement of the business of supply for each supply period follows:
Period ending June 23:
Eight allotted days (seven for consideration of opposition
motions)
Main Estimates -- concurrence and adoption of related
appropriation bill
Supplementary Estimates (if any) -- concurrence and adoption
of related appropriation bill
Period ending December 10:
Five allotted days
Supplementary estimates (if any) -- concurrence and adoption
of related appropriation bill
Period ending March 26:
Seven allotted days
Supplementary Estimates (if any) -- concurrence and adoption
of related appropriation bill
Interim Supply -- concurrence and adoption of related
appropriation bill
13.(b) Ways and Means Proceedings
Ways and Means is a parliamentary term used to describe the process by which the Government obtains the necessary resources to meet its expenses, and by which it influences the nation's economy. The business of Ways and Means has two essential elements: one enables the Minister of Finance to present an economic statement known as a Budget; the other is the prerequisite for the introduction of taxation bills.
13.(b)(i) The Budget
A Budget is one of the primary tools used by the Government to enunciate its fiscal, economic and social policies. It is the major statement of the economic direction which the Government intends to follow.
There is no requirement for a Budget to be presented at a particular time of year, or even on an annual basis. However, the practice has been to deliver a Budget speech at least once a year, and recently it has tended to precede the tabling of the Main Estimates, i.e., before the first of March.
The Minister of Finance sets the process for the Budget in motion by rising in the House to ask that an Order of the Day be designated for a Budget presentation on a specific sitting day at a specific time. The Standing Orders deem that the day and time shall be so designated simply on the Minister's request and without a decision of the House. At the specified time, the Speaker will interrupt the business then before the House and such proceedings will be deemed adjourned.
It is customary for the Minister of Finance to deliver the Budget speech after the stock markets have closed for the day. He or she moves the motion "That this House approves in general the budgetary policy of the Government" and proceeds to outline the provisions of the Budget. The Minister may table one or more notices of Ways and Means motions at this time, proposing increased charges on the taxpayer. These motions will be concurred in at some future date, after the Budget debate is complete. The Standing Orders do not permit the moving of concurrence in these motions during the Budget debate. (Ways and Means motions are discussed more fully in the next section.)
Following the delivery of the Budget speech, the Speaker recognizes a member of the Official Opposition who usually makes a brief speech and then moves the adjournment of the debate, thus reserving the right to speak first when debate is resumed.
The rules of the House provide for four days of resumed debate on the Budget (i.e., four days in addition to the day on which the Budget was presented), and permit only one amendment and one subamendment to the Minister of Finance's motion. The Official Opposition finance critic usually moves the amendment on the first day of resumed debate, and later, the first Member to speak on behalf of the next largest opposition party will move a subamendment.
There are no time limits set for the speeches given by the Minister of Finance, the first speaker from the Official Opposition, the Prime Minister and the Leader of the Opposition. Other Members participating in the Budget debate are allowed up to 20 minutes each to address the House. Following each of their speeches there is a ten minute questions and comments period. Due to the broad scope of a Budget, the Chair tends to relax the rules of relevance during the Budget debate.
The disposal of business relating to the consideration of the Budget follows a precise schedule set down in the Standing Orders. On the second day of resumed debate, the Speaker will interrupt the proceedings at 15 minutes before the end of the proceedings and put the question on the subamendment. On the third day, the Speaker will interrupt the proceedings in the same way and put the question on the amendment. Finally, at the end of the fourth day of resumed debate, the question on the main motion is put to the House.
Consideration of budgetary measures was extended to committees of the House in 1994 when amendments adopted to the Standing Orders empowered the Standing Committee on Finance to consider and report on the government's budgetary proposals. The Committee's study of these proposals may begin on the first sitting day in September and any report(s) by the Committee must be made no later than the tenth sitting day before the last sitting day in December.
The implementation of the measures set out in the Budget follows a particular convention that merits explanation. It is well known that the tax changes proposed in the Budget are put into effect immediately. However, these changes have not, at this point, actually been enacted into law, since the Minister tables only the notices of Ways and Means motions with the Budget --the legislation flowing from these motions has not yet reached even first reading stage. Until such legislation is passed (and this can take many months, or even years), with a provision for retroactive application, the collection of these taxes is actually voluntary, and legally cannot be enforced.
13.(b)(ii) Ways and Means Bills
Ways and Means bills may originate with taxation proposals outlined in a Budget, but they can also be the result of separate government initiatives designed to deal with a particular economic situation.
This type of legislation changes taxation levels in one of four specific ways:
imposition of new taxes;
continuation of expiring taxes;
increase in the rate of an existing tax; and
extension of the incidence of taxes to include, for example,
persons not already deemed payers.
In Canada, unlike Great Britain, the basic tax statutes continue from year to year, with no need for renewal. The principal Acts which replenish the Consolidated Revenue Fund are the Income Tax Act, the Excise Tax Act, the Excise Act, and the Customs Tariff Act. Unless the Government wishes to increase the charges in the taxation law, no Ways and Means legislation need be introduced.
The introduction of a Ways and Means bill must be preceded by an extra legislative step: the adoption of the Ways and Means motion on which the bill is to be based. The motion sets out the limits on all provisions of the bill. These limits cannot be exceeded during the legislative process without the introduction of another Ways and Means motion.
Notice of a Ways and Means motion may be given at any time and only by a Minister of the Crown. The Minister may choose to table the notice during a Budget presentation (as mentioned previously) or, if the taxation measure is an independent initiative, the notice may be tabled on a point of order, during debate, etc.
A day for the consideration of a Ways and Means motion is designated by a Minister rising in his or her place in the House. The motion may not be moved on the same day that the notice is tabled, nor may it be considered during the Budget debate. When the Order of the Day is called for concurrence in a Ways and Means motion, it is decided without debate or amendment. Once adopted, it may become either an Order of the House to bring in a Ways and Means bill based on the provisions of the motion, in which case the first reading of the bill will usually follow immediately, or it becomes an order to propose an amendment or amendments to a bill before the House, provided that the amendment or amendments are otherwise procedurally acceptable.
From this point on, a Ways and Means bill follows the same steps in the legislative process as do other bills.
The introduction of Ways and Means legislation can, however, be somewhat complicated if a bill contains provisions for the spending of money as well as the raising of revenue. Such a bill would have to be accompanied by a Royal Recommendation, which requires 48 hours' notice. On June 8, 1988, Speaker Fraser was called upon to rule in such a situation: "Such a case triggers a double procedure ... when the House [is] in fact asked twice to proceed with the introduction of the Bill, once through the acceptance of a Ways and Means motion ... and a second time ... through the regular motion requesting leave to introduce the Bill."
13.(c) Other Elements of Financial Responsibilities
As already described, the procedures of the House of Commons in relation to financial matters are complex. There are three other activities of the House in this field which should be briefly touched upon, namely the borrowing authority process, the Auditor General's reports, and the Public Accounts of Canada.
13.(c)(i) Borrowing Authority
Borrowing powers are needed by the Government to make up any shortfall between revenues and expenditures. The Government may acquire the means of covering this shortfall by issuing treasury bills, marketable bonds, and Canada Savings Bonds on domestic and foreign markets. However, before any borrowing may be sought, the Government must obtain parliamentary approval. Section 43 of the Financial Administration Act states: "No money shall be borrowed or security issued by or on behalf of Her Majesty without the authority of Parliament".
A general pattern has evolved whereby the Government normally presents a Budget at some point in February, tables the Main Estimates before March 1, and introduces borrowing authority legislation shortly afterwards. The rationale behind this is to present Parliament with all the relevant details relating to the financial requirements of the Government before seeking borrowing authority. As mentioned, borrowing authority is obtained through the adoption of a bill which is subject to the normal rules of debate and amendment of the House of Commons (with the exception that a maximum of two sitting days are set aside for the consideration of the bill at second reading).
13.(c)(ii) "Closing the Loop"
The role of the House of Commons in the expenditure plans of the Government does not end with the adoption of appropriation bills. There is another function which the House fulfils and that is as "watchdog" ensuring that the monies voted by the House are properly spent. This function is delegated to the Standing Committee on Public Accounts which reviews and reports on the Public Accounts of Canada and the annual report of the Auditor General of Canada. This monitoring function is described as "closing the loop" because it completes the financial cycle whereby funds are approved, spent and accounted for.
The Public Accounts of Canada is a report prepared by the Receiver General under section 64 of the Financial Administration Act. Succinctly described, it is a detailed report of the financial transactions of all government departments and agencies. The report is published in three volumes giving an overview of the financial operations of the Government as well as detailed statements of financial records.
The Auditor General is an officer of the House and presents an annual report to the Speaker outlining the examination performed by his or her office as auditor of the Public Accounts as required by the Auditor General Act. Under amendments made to the Auditor General Act in 1994, the Auditor General is also authorized to present to the House up to three additional reports per year. Normally, each report develops one major theme relating to financial accountability as well as presenting detailed audits of selected government departments and agencies. The Standing Committee on Public Accounts studies these audits over the year and reports its observations and comments to the House.
