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Senator Day introduces bill to restore Parliamentary approval over government borrowing

Senator Day introduces bill to restore Parliamentary approval over government borrowing

Senator Day introduces bill to restore Parliamentary approval over government borrowing

Ottawa, March 1, 2018 – Senator Joseph Day, Leader of the Independent Senate Liberal Caucus, introduced Bill S-246  today to restore Parliament’s traditional and historic control over government borrowing, which was removed in the omnibus budget bill of 2007, and only partially returned by the current government.

His bill would require the government to obtain Parliament’s authorization if it wished to borrow money in any particular fiscal year, and not only if total government borrowing exceeded $1.168 trillion, as it now stands.  Bill S-246 would also require the government to provide a yearly report to Parliament on its borrowings, instead of the current reporting requirement of only every three years.

A government is truly accountable to Canadians only if Parliament has the final say on how it raises and spends money.  Bill S-246 is designed to restore that accountability.

 

Background:

Parliament’s authority over borrowing of money by the government is fundamental to our democracy.  It goes back to the very origins of the institution of Parliament itself, beginning with the Magna Carta in 1215, where King John agreed that his government would not raise revenues (through taxes) without the consent of Parliament.  And since at least 1688, there could be no borrowing of money by the King and his government without Parliament’s consent.

In Canada, this meant that when the government wanted to borrow money, it would come to Parliament and ask for that authority.  Originally, this was done as part of the Supply and Estimates process.  That made sense because the purpose of the borrowing was debated at the same time as the authority to spend the money was being requested.  But over time, as government became more complex, parliamentarians felt they needed more time to debate the actual borrowings proposed by the government.  So beginning in 1975, whenever the government ran a deficit, it introduced a separate “Borrowing Bill” into Parliament, requesting permission to borrow a specified amount of money.

This process was eventually enshrined in section 43 of the Financial Administration Act, which said that “no money shall be borrowed by or on behalf of Her Majesty… except as provided by or under… (an) Act of Parliament…”

Whenever governments ran deficits, there was at least one borrowing bill every year.  This allowed Parliament to scrutinize and debate the government’s debt-management strategy and to hold the government to account for its management of the public purse.

In 2007, however, the government slipped into the middle of a large and controversial omnibus budget bill, Bill C-52, a one sentence clause that gave away Parliament’s authority over government borrowing. It said:

                      43.1 The Governor in Council may authorize the Minister to borrow money on behalf of Her Majesty in right of Canada.

In other words, although section 43 of the Financial Administration Act said that the government could not borrow money without an Act of Parliament – without a bill – this new clause 43.1 said that the Minister of Finance could borrow whatever money he or she wanted so long as their cabinet colleagues agreed.  Cabinet, and not Parliament, would now provide the government with the necessary authority to borrow money.

In essence, when it passed Bill C-52 in 2007, Parliament gave Cabinet a blank cheque to borrow however much money it wanted, whenever it wanted.

Because this two line clause was buried in a large omnibus budget bill, it was overlooked by parliamentarians who were preoccupied with controversial provisions concerning the Atlantic Accord and their impact on equalization payments.  There was no debate in either chamber about the proposal to remove Parliament’s oversight over government borrowings.  It was not until Senator Tommy Banks raised it with his colleagues several months later, after the bill had passed, that it was noticed and properly scrutinized.

In subsequent years, Senator Lowell Murray and then Senator Wilfred Moore introduced bills in the Senate to restore the status quo. These were all opposed by the government of the day and failed to pass.

In 2015, however, the Liberal Party Platform promised: “We will … require the government to receive Parliament’s approval on borrowing plans.”  In the 2016 and 2017 Budget Implementation Bills, the new government took some important steps to restore Parliament’s control over government borrowing.

Henceforth, the government would once again need to come to Parliament for authorization to borrow money, but unfortunately only if the new borrowing would increase total outstanding federal debt beyond $1.168 trillion.  That provision can be found in Part 4, Division 2, Section 4 of Bill C-44.

The 2017 Budget Implementation Bill also provided in Part 4, Division 2, Section 8, that the government must report to Parliament about the money it has borrowed, but unfortunately only every three years.  To make matters even worse, the first report is not due until 2020, only in time for consideration by the next Parliament.

The fundamental problem that remains is that the government can continue to borrow money every year without the authorization of Parliament so long as the total outstanding federal debt does not exceed $1.168 trillion.   The 2018 Budget noted that “outstanding government and Crown corporation market debt is projected to reach $1,066 billion in 2018-19…” [p. 359].  This means that there would be room for more than $100 billion of additional government borrowing in future years without any Parliamentary approval or oversight.

5Bill S-246 would require the government to seek authority from Parliament every year it runs a deficit and needs to borrow money.   This would give Parliament the genuine opportunity to hold the government to account by returning control of the public purse and government finances to where it belongs – to Parliament.