Financial procedure in the British parliament

Part of a series of posts on financial procedure:
British Parliament
Federal Canadian Parliament
Australian Commonwealth Parliament
New Zealand Parliament

In the British Parliament, financial procedure has recently been reformed to make it (slightly) clearer what is being voted on, and since it’s budget day in the UK I thought I’d go over some of the finance basics in the UK. In any given session, parliament will have to produce budgets for each financial year. But this isn’t the only thing, nor where the process starts. This process is incredibly complex and at any one time estimates can be considered for three financial years because of large amount of overlap.

In preparation for a typical financial year, six months before it begins the Chancellor of the Exchequer makes an Autumn statement on the state of the economy to MPs. This is an opportunity for the government to have a mini-budget where the government makes certain proposals on budgetary policy that don’t get implemented until the finance bill in March. It’s also a good opportunity for MPs to discuss the economic situation.

The first bill to be passed in the finance procedure will be the Supply and Appropriations (Anticipation and Adjustments) Bill. The ‘anticipation’ part of this bill authorises the so-called Vote on Account for the next financial year – this basically allows the House of Commons to vote to allocate to the government an amount of money up to a certain limit for the early months of the financial year until the Supply and Appropriation (Main Estimates) Bill is passed, setting a new limit. This bill goes through on the nod. No debate on it is held either in the Commons or the Lords.

Next, the Chancellor of the Exchequer will make a Budget Statement to the House of Commons, setting out his plans for how to spend the money that will be authorised by the Commons in the coming financial year. This will be debated for four days, each day covering a different wide-ranging topic. The day after the Budget Statement, the House of Lords will have a one-day debate on the budget.

At the end of the Commons debate, any annual tax measures (for example, not VAT or excise duties which are provided for in acts of parliament*) in the budget will be approved as Budget Resolutions encapsulated in one Provisional Collection of Taxes motion and come into effect when the motion states they will (though they expire on the fifth of August unless confirmed by a Finance Act) and within ten sitting days the individual Ways and Means resolutions, one for each tax provision, must be approved by the Commons. The Finance Bill will then be introduced. Within thirty days, the Finance Bill must have its second reading, and will then be committed in part to a public bill committee (for the non-controversial measures) and the rest to the Committee of the Whole House (for anything the opposition will want to challenge the government on).

The Commons Treasury Select Committee and the a sub-committee of the Lords Economic Affairs Select Committee will be rushing through reports, consulting independent economists and tax experts. The Finance bill will then go to Report stage and then Third reading, on the same day. The bill’s passage through the Commons will take perhaps three months, and now the bill must have a carry-over motion so that it can survive prorogation in May.

Around the time the Finance Bill comes out of committee, there will be an Estimates day debate on the main estimates. Usually published around the same time as the budget, this is a document where each department sets out what it will spend in the coming year. It specifies the spending in pounds for each department and any non-departmental public bodies under and separates it into departmental expenditure limits – which the department has some control over, like salaries and administration – and annually managed expenditure – which is generally legally mandated and untouchable by departments, like pensions, benefits and debt interest. Also published is the change in funding compared to the previous financial year.

The supply resolutions authorising the main estimates are voted through at the end of the day, but during the day parliament usually debates Select Committee reports. While the government sends memorandums to Select Committees about the estimates and the policies behind them in their department, committees do not write reports on estimates.

When the bill goes to the Lords, usually in July, it is given a second reading debate and then is passed without a vote and without further debate on the same day. Around the same time, the Supply and Appropriations (Main Estimates) Bill is introduced and passed without debate or going through committee which authorises the government to spend the amount as decided in the main estimates that the Commons voted through (taking into account the fact that quite a lot of the main estimates were already voted through in the Anticipation and Adjustments version of the bill).

Throughout the year, parliament will pass bills that require the government to spend money (that’s the money called annually managed expenditure in the estimates) or tax people or organisations in one way or another. These bills must have ways and means motions (in the case of tax) or money resolutions (in the case of spending) before second reading in the UK. Any bill that only contains financial measures is known as a money bill and thanks to the Parliament Act 1911 cannot be amended by the House of Lords. They have a normal parliamentary passage through the House of Commons, but the House of Lords passes them without much debate, usually having the second reading debate and then passing it straight to third reading and being passed. In the case of more general bills that contain spending or tax, the Commons asserts that any amendment by the Lords that affects the amounts spent/raised is contrary to the financial privilege of the House of Commons and is automatically negatived unless the Commons votes to ‘waive’ its privilege and accept the amendment.

Various supplementary estimates are published and voted on, amongst other things, in January Estimates Days (again, the debates are mostly on unrelated Select Committee reports) where government has overspent. Again, while the government sends a memorandum to each departmental select committee, they do not report on these supplementary estimates. These are then legislated for in the Supply and Appropriations (Anticipation and Adjustments) Bill as the ‘adjustments’ part and is again passed on the nod without debate.

If the government overspent and didn’t have time to submit it in the Supplementary Estimates for that year, the government will publish Statements of Excesses a year later. The Public Accounts committee and the National Audit Office will investigate the causes of an overspend. If the Public Accounts Committee has no objection to the extra spending, it will be voted through without debate and will be funded by the next year’s Supply and Appropriations (Anticipation and Adjustments) Bill.

I’ll be doing an examination of financial procedure in other parliaments over the next few weeks – I know Canada has a budget coming out soon, and Australia will have one in May, so it seems like a good time.

*Britain has a history of ‘sunsetting’ important government powers, which I’d like to do a post on. It’s incredibly interesting, I promise. Well, relative to this stuff anyway…
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