Money Bills and Commons Financial Privileges - Constitution Committee Contents


Money Bills and Commons Financial Privilege


Introduction

1.   The Constitution Committee is appointed "to examine the constitutional implications of all public Bills coming before the House; and to keep under review the operation of the constitution." We consider that the latter function includes examining issues relating to the powers of the House of Lords and the relationship of this House with the House of Commons.

2.   On 23 November 2010 the Savings Accounts and Health in Pregnancy Grant Bill was introduced into this House, having completed its Commons stages. The Bill had been certified as a money bill. This gave rise to debate on the floor of the House concerning the definition of money bills and the process of certification.[1] In the light of these debates, we decided to produce this short report for the information of Members of the House.

3.   We publish as Appendix 2 a paper on Commons financial privilege deposited in the Library of the House by the Clerk of the Parliaments in February 2009. This paper was produced in response to concerns raised during the debates on the Planning Bill in the 2008-2009 session. We believe that this paper should be drawn to the wider attention of Members. Appendix 3 provides some useful statistics relating to the certification of bills as money bills over the last ten years.

Financial privilege

4.   The House of Commons has a special role in financial matters, based on a resolution of 1671 which states "That in all aids given to the King by the Commons, the rate of tax ought not to be altered by the Lords" and on a further resolution of 1678 which restates the "undoubted and sole right of the Commons" to deal with all bills of aids and supplies. Erskine May's Treaties on the Law, Privileges, Proceedings and Usage of Parliament states:

"The Commons' claim to sole rights in respect of financial legislation applies indivisibly to public expenditure and to the raising of revenue to meet that expenditure. ... The Commons treat as a breach of privilege by the Lords not merely the imposition or increase of such a charge but also any alteration, whether by increase or reduction, of its amount or of its duration, mode of assessment, levy, collection, appropriation or management ..."[2]

5.   The Commons may choose to waive their financial privileges, except in relation to bills of aids and supplies. 'Aids' refers to taxation and comprises the annual Finance Bill; 'supplies' refers to government spending and comprises the Consolidated Fund Bills.[3] Such bills must originate in the Commons and are readily identifiable by a special enactment formula. They may not be amended by the Lords and committee stage in the House of Lords is invariably negatived.[4] Erskine May states that "though rejection of [a supply bill which is not a certified money bill] is permissible, it has virtually ceased to be practical".[5]

6.   Bills originating in the Lords, and amendments made by the Lords to bills originating in the Commons, may include provisions which might be deemed to infringe Commons' financial privileges. It is for the Commons to determine whether to waive its privileges in such cases.[6]

7.   When amendments from the Lords are received, a judgement is made as to which, if any, engage financial privilege. The Speaker lists those amendments at the outset of consideration of Lords amendments. Where the House agrees to such amendments, the Commons Journal records that the House of Commons has waived its privilege in relation to those amendments. Where it disagrees to an amendment which engages financial privilege, it is the practice to give that as the reason, rather than the merits.

8.   The most recent example of such a reason being given was in relation to the Identity Documents Bill.[7] An amendment to the Bill was agreed in the House of Lords which would have led to expenditure on reimbursing those who had purchased identity cards. No Money Resolution had been passed in the Commons in relation to the Bill, since the provisions of the Bill as presented did not lead to any additional expenditure. Ministers did not wish to table a Resolution to cover the expenditure which would have arisen under the amendment. In these circumstances, which are infrequent, House of Commons Standing Order No 78(3) obliges the Speaker to declare that the amendment is deemed to have been disagreed to. Otherwise the House of Commons would be debating an amendment which, if agreed to, would lead to expenditure which it had not sanctioned. The Reason given, referring to "a charge on the public revenue", reflected the wording of SO No 78.[8]

Money bills

9.   In addition to the conventions which govern much of financial privilege and which are set out in detail in Appendix 2, specific statutory rules apply to money bills which are certified as such by the Speaker of the House of Commons. The definition of a money bill provided by section 1(2) of the Parliament Act 1911 is:

"A Money Bill means a Public Bill which in the opinion of the Speaker of the House of Commons contains only provisions dealing with all or any of the following subjects, namely, the imposition, repeal, remission, alteration, or regulation of taxation; the imposition for the payment of debt or other financial purposes of charges on the Consolidated Fund, the National Loans Fund or on money provided by Parliament, or the variation or repeal of any such charges; supply; the appropriation, receipt, custody, issue or audit of accounts of public money; the raising or guarantee of any loan or the repayment thereof; or subordinate matters incidental to those subjects or any of them. In this subsection the expressions "taxation", "public money", and "loan" respectively do not include any taxation, money, or loan raised by local authorities or bodies for local purposes."[9]

The Speaker must certify any bill which in his opinion falls within this definition. Any bill containing provisions outside this definition would not be certified as a money bill.

10.   It is necessary to distinguish between money bills and supply bills. The two categories of bills are separate, but there is some overlap. Supply bills are not subject to the Parliament Act 1911 unless they are also money bills. Finance Bills, which may contain administrative provisions in addition to the matters specified in section 1(2) of the 1911 Act, are quite frequently not certified as money bills.

11.   Under section 3 of the Parliament Act 1911 the Speaker's certificate is "conclusive for all purposes". Under section 1(3) of the Act, the Speaker has a duty to "consult, if practicable, two members to be appointed from the Chairmen's Panel": i.e. two senior backbenchers, usually one from either side of the House, appointed by the Committee of Selection from amongst those senior MPs who chair general committees. The Speaker is under no statutory duty to consult further, but the Speaker takes the advice of the clerks of the House of Commons when deciding whether to certify a bill.

12.   The Speaker does not certify a bill until it has reached the form in which it will leave the House of Commons, i.e. at the end of its Commons stages. The Speaker can only decide whether or not to certify a bill once it has passed the House. It is possible that amendments made in committee or on report could have a bearing on his decision, either way.

13.   The Companion to the Standing Orders and Guide to the Proceedings of the House of Lords states that certification of a bill as a money bill "does not debar the Lords from amending such bills provided they are passed within the month, but the Commons are not obliged to consider the amendments. On a few occasions minor amendments have been made by the Lords to such bills and have been accepted by the Commons."[10] The normal practice of the Lords is that money bills are not committed.[11]

14.   Over the last 20 years, there have been between two and seven bills certified as money bills each session (most commonly four or five). The majority of these bills are Consolidated Fund Bills. Appendix 3 lists the other bills to have been certified as money bills over the last ten years.

15.   The only money bill to have been committed in the House of Lords in the last 20 years was the European Union (Finance) Bill (1994-1995). The Bill gave legal effect to the main elements of the complex financial settlement reached at the Edinburgh European Council. Concluding the second reading debate for the Government, Lord Henley said:

"It may be worth reminding your Lordships that the Bill we are debating this evening ... has been certified by Madam Speaker as a Money Bill. This means after Thursday of this week the Bill may be presented for Royal Assent under the terms of the Parliament Acts with or without the agreement of your Lordships and there is no need for the Bill to be considered further in another place whether or not this House should happen to amend it.

"That being so, and in view of what the noble Lord, Lord Richard, said about the element of unreality about the debate, it just may be asked why we are debating the Bill at all. The answer is that the 'usual channels' recognised the very strong interest in the Bill which has been expressed in various quarters of your Lordships' House and the importance of the matters at issue. I think we are all agreed they are matters of fundamental importance. The number of speakers and the quality of the speakers who have taken part in the debate this afternoon indicates the wish of this House to consider these matters.

"Most unusually for a Money Bill it has further been agreed that there should be a separate Committee stage which will take place tomorrow and for which amendments have been tabled. That might give me the opportunity to deal with some of the more detailed points that I am unable to deal with in the time available this evening. That debate, as I said, will take place tomorrow; but I would strongly urge your Lordships that there is no practical purpose to be served by further prolonging the proceedings or by, for that matter, any amendment of the Bill. I trust therefore that the House will not in fact seek to obstruct the passage of the Bill."[12]

The Bill was not amended in Committee.

Conclusion

16.   We have made this short report to bring to the attention of Members of the House issues relating to financial privilege and, in particular, the certification of money bills.

17.   We note that during the debates on the Savings Accounts and Health in Pregnancy Grant Bill the specific question was raised whether it was worthwhile committing the Bill given that it was a money bill.[13] In the light of the fact that money bills may be committed, this issue is one for the House itself to resolve in relation to each bill.

18.   We draw the House's attention to one particular difficulty with money bills. The fact that money bills are certified only upon completion of all their Commons' stages means that there is likely to be a minimal length of time between such certification and introduction of a bill into this House. There is therefore a risk that a certification which was not anticipated by Members of the Commons or Lords may give rise to concerns that a bill may not, as a result, receive appropriate parliamentary scrutiny. For example, MPs scrutinising a bill in the Commons might select some aspects on which to concentrate in the expectation that Members of the Lords would focus on others.

19.   It is expected that a draft bill containing proposals for reform of the membership of the House of Lords will be published in the next few months. Issues of the relative powers of the two Houses will likely arise in the context of discussions of these proposals and we may choose to return to this matter in the context of that debate.


1   HL Deb 23 November 2010 col 1008; HL Deb 29 November 20109 cols 1271-1280; HL Deb 7 December 2010 cols 128-173. Back

2   23rd ed. pp 919-920. Back

3   From time to time, other bills are presented which have the characteristics of bills of aids and supplies: for further details see Erskine May pp 923-924.  Back

4   Erskine May p 923; Companion para 8.198. Back

5   p 930.  Back

6   See further Appendix 1, Erskine May pp 920-928 and Companion paras 8.151-8.152 and 8.180-8.183. Back

7   HL Deb 21 December 2010 cols 998-1020. Back

8   See Companion 8.180-8.181 and Joint Committee on Conventions, Report (2005-06): Conventions of the UK Parliament (HL Paper 265-1), paras 250-252. Back

9   The full text of section 1 is set out in Appendix 1.  Back

10   para 8.196.  Back

11   Companion para 8.48. Back

12   HL Deb 9 January 1995 cols 77-78. Back

13   HL Deb 29 November 2010 cols 1270 and 1279.  Back


 
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