Chapter XIV · THE LORDS AND MONEY BILLS

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Among the securities provided by the Constitution against the imposition of taxes unauthorized by the representatives of the people, and the corrupt or extravagant administration of the revenue, are the passing of three separate Acts of Parliament. The first is the Finance Act, which, as I have already explained, sets out the taxes and duties contained in the Budget and sanctioned by the House of Commons. The second is the Consolidated Fund Act, empowering the Treasury to receive such sums of money out of the Consolidated Fund as are necessary for the services of the Departments. The draft on the Consolidated Fund, authorized by this statute, must not exceed the amount of Supply which has been previously granted by the House of Commons. But should the Government run short of money because the necessary Supply has yet to be voted, they can get it by asking the House of Commons to pass a Vote of Credit or a Vote on Account. For reasons of financial convenience Consolidated Fund Bills are passed at intervals during the session. The passing of the third measure, the Appropriation Act, at the end of each session is the consummation of the control which Parliament exercises over expenditure. The purpose of this Act, in which are embodied all the votes agreed to in Committee of Supply, is to ensure that the money is applied strictly to the purposes for which it has been granted. These Acts have to go through all the required stages in both Houses, the Lords as well as the Commons, before they become law. This long and elaborate procedure also gives opportunities for the discussion of grievances and complaints over and over and over again.

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According to all writers of authority on Government and Parliament, it has long been an established principle of the Constitution that the House of Lords is precluded from originating and even from amending a Money Bill. The Lords, however, have never formally, or in set terms, agreed to this principle. At first the Lords exercised, co-ordinately with the Commons, the little power that was vested in the Parliament over the national revenue in the days of absolute Monarchy. But with the growing control of the Parliament over taxation and expenditure, the Commons began to regard the interference of the Lords in money matters with increasing jealousy and resentment. The struggles between the two Houses for the control of finance reached a crisis in 1677 over a Supply Bill—by which money was to be raised for the building of ships of war—in the first Parliament of Charles II which was elected in 1661, after the Restoration. The peers made amendments in the Bill, and with these the Commons disagreed, upon the ground “that the grant of all aids to the King is by the Commons, and that the terms, conditions, limitations, and qualifications of such grants have been made by the Commons only.” The Lords, on the plea of the necessities of the public service, gave way, but they passed a resolution declaring that their right to amend Money Bills was just, and could not constitutionally be questioned. The next year, when another Supply Bill was sent up by the Commons, the Lord Chancellor declared that if the Lords were to yield their right to amend it they would “give up the greatest share of the Legislature to the Commons, and, by consequences, the chief power of judging what laws are best for the Kingdom.” The Lords accordingly amended the Supply Bill, and as they resolutely refused to yield to the protests of the Commons, the measure had to be dropped for the session. It was at this juncture that the Commons passed on July 3, 1678, the following historic resolution:

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 for such Grants, which ought not to be changed or altered by the House of Lords.

The House of Lords for a long time stubbornly opposed these claims of the Commons. More than a quarter of a century later, in the reign of Queen Anne, they protested that the Commons were constantly trying to “break in upon the Lords’ share in the Legislature,” and affirmed “that neither House of Parliament hath any power, by any Vote or Declaration, to create to themselves, any new privilege that is not warranted by the known Laws and Customs of Parliament.” But the growing power of the Commons enabled them to assert their exclusive right to determine the matter, the measure and the time of every tax imposed upon the people. This right, however, has never been established by legislation. As I have said, it has never even been agreed to by the Lords. It is based on the axiom now universally acknowledged that taxation and representation should go together, and as all classes of the Commonwealth are represented in the Commons by election, therefore only the Commons have power to tax the people. The Lords have bowed to it, at least to the extent of giving to the denial by the Commons of any right in them to initiate or alter proposals of taxation or expenditure, a tacit admission, or the acquiescence of silence—except, as I shall show later, when there is a question of principle involved. Yet it is a curious fact that until 1911 the Commons were unable to grant a farthing of these “aids and supplies” to the Crown, which, they say, is their “sole and entire gift,” without the concurrence of the peers. All proposals involving the raising or spending of public money can originate only with the Commons. That is fully admitted even by the Lords. Should a Bill which entails a charge on the Public Purse be first introduced in the Lords, the financial clause appears, like a pale shadow, in italics, to convey that it forms no integral part of the Bill as it passed the Lords, but is offered merely as a suggestion for the acceptance of the representative Chamber, whose assent alone can give it vitality. But the taxing or expending proposals of the Commons must, nevertheless, be clothed with the form of law. Accordingly, when the Finance Bill in which these proposals are embodied, has passed through the House of Commons, it is sent, like all other legislative measures, to the House of Lords. This Money Bill the Lords, according to the Commons, had never any power to alter or amend. But the Lords, no more than the Commons, could be taxed without their consent. The Lords might, consequently as the Commons admitted—reject the Finance Bill until 1911.

The first serious collision between the hereditary and the elective Chambers on the subject of a Money Bill in recent times occurred in 1860. Gladstone was Chancellor of the Exchequer, and Palmerston was Prime Minister. Part of the Budget proposals was the abolition of the duty on paper, which yielded the Revenue £1,200,000 a year, and made the morning newspaper a luxury at sixpenny a copy. The repeal of the paper duty was not, however, included in the Finance Bill, but was embodied in a separate measure, and so strong was the feeling in the Commons against it, because the loss to the revenue would have to be met by the imposition of other taxes, that the third reading of the Bill was carried only by the narrow majority of nine. The strange fact that the Prime Minister was personally opposed to this Bill, introduced by his own Chancellor of the Exchequer, was subsequently disclosed. Palmerston in his letter sent as Leader of the House to Queen Victoria that night dwelt on the small majority by which the Bill had been passed, and went on to say: “This may probably encourage the House of Lords to throw out the Bill when it comes to their House, and Viscount Palmerston is bound to say that if they do so they will perform a good public service. Circumstances have greatly changed since the measure was agreed to by the Cabinet, and although it would undoubtedly have been difficult for the Government to have given up the Bill, yet if Parliament were to reject it the Government might well submit to so welcome a defeat.” The Lords did exactly as Palmerston anticipated and evidently desired. They threw out the Bill by a majority of eighty-nine. Palmerston subsequently proposed in the House of Commons three resolutions to the effect that, although the Lords had on occasions, few and far between, rejected Bills relating to taxation, the Commons were determined to maintain the supreme control in all financial matters; and these resolutions were agreed to, but in moving them Palmerston went so far as to admit that the Lords had not exceeded their strict rights. In the following year, however, Gladstone adopted a method by which the Lords were practically compelled to accept the repeal of the paper duties. As I have said, the Lords, in the opinion of the Commons, have no power of amending a Money Bill. All they can do is to reject it. In 1861 Gladstone combined the repeal of the paper duties with all the other taxing proposals in the Finance Bill, and, although the Finance Bill was carried in the Commons only by a majority of fifteen in a full House, the Lords did not care to face the responsibility of throwing out the whole Budget on account of a single obnoxious provision. This expedient of embracing all the financial provisions of the year in one Finance Bill has since been regularly followed.

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The next great conflict between the two Houses on this issue, and the final and conclusive one, perhaps, arose on the memorable Lloyd George Budget of 1909. The Finance Bill embodying the proposals of the Budget to tax land values and undeveloped land was thrown out by the Lords on the ground that it was confiscatory of property in land. An appeal to the country resulted in the return of the Liberal Government to power again. Not only was the Finance Bill carried in the session of 1910, but in 1911 the Parliament Act was passed for regulating the relations between the two Houses. This Act provides, among other things, that if a Money Bill, which has been passed by the House of Commons, and sent to the House of Lords at least one month before the end of the session, “is not passed by the House of Lords without amendment within one month after it is so sent up to that House,” it is to be presented to the King, and becomes an Act of Parliament on the Royal Assent being signified, “notwithstanding that the House of Lords have not consented to the Bill.” A Money Bill as defined in the Parliament Act is a Bill relating to the imposition, repeal, remission, alteration or regulation of taxation. Such a Bill must have an endorsement by the Speaker that it is a Money Bill within the meaning of the Parliament Act when it is presented to the King for his Assent. Thus were the Lords deprived of the power to reject, as well as to amend, a Money Bill. Or, rather, if they reject it, it is passed over their heads.

The procedure in regard to Money Bills at the giving of the Royal Assent in the House of Lords differs from that in regard to other Bills by long custom and usage. All Bills, except Money Bills, passed by the House of Lords remain in the custody of the Clerk of the Parliaments. A Money Bill, after it is passed by the House of Lords, is at once sent back to the House of Commons and remains in the possession of the Clerk of the House until such time as the Royal Assent is to be signified to it. The Clerk of the Parliaments draws up the list of Bills to which the King’s Assent is to be signified, Money Bills being placed first in the list, and on the day appointed he has all the Bills in his custody except the Money Bill. When the Commons are summoned to the House of Lords to hear the Royal Assent given to Acts that have passed both Houses, the Clerk of the House of Commons brings the Money Bill with him. When they are come to the Bar of the House of Lords, he hands it to the Speaker. The Clerk of the Parliaments goes to the Bar of the House and receives the Bill from the hands of the Speaker and brings it to the Table. The Royal Assent is signified to each Money Bill in these words:—“Le Roi remercie ses bons sujets, accepte leur benevolence, et ainsi le veult,” instead of, in the shorter form, “Le Roi le veult,” which are the words signifying the Assent to other Public Bills. It is a matter of some doubt to whom the words “ses bons sujets” apply, but high authorities hold that they apply both to Lords and Commons. In fact, the preamble to each Money Bill declares that it is passed “by and with the consent of Lords and Commons in Parliament assembled,” unless it has been carried under the Parliament Act.

The spending authority of each Department is limited during the financial year to the amount voted for its service by Parliament. If the money should prove insufficient, owing to careless calculations, or developments of policy, the Treasury can raise the sum necessary to cover the deficit by the issue of bills on the security of the Exchequer, and these bills are subsequently redeemed by means of Supplementary Estimates, which must be presented to the House of Commons and approved of before the close of the financial year, on March 31st. On the other hand, should a Department spend less than the amount voted for its service, the unexpended balance has to be returned to the Exchequer at the close of the financial year, as well as any money it may have received from any other source, though sometimes these proceeds are used to help to pay the expenses of the Department, and when so applied are called “appropriations in aid.” As the amount of taxation imposed each year is calculated to provide for the expenditure of that year, and no more, it may be asked how new and unforeseen demands on the Public Purse are met. Has the Executive to wait for another year to get the money from Parliament? The “Civil Contingencies Fund,” consisting of £120,000, is placed permanently at the disposal of the Government to meet unexpected public services at home and abroad.

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Supply is voted by the House of Commons as a grant to the King. “Gentlemen of the House of Commons,” says his Majesty, in the Speech from the Throne at the end of each session, “I thank you for the liberality with which you have made provision for the services of the year.” The King then places Supply at the disposal of the Exchequer by warrant under the Sign Manual. The money, as we know, is in the custody of the Bank of England. Under the authority of the “Supply resolutions” of the House of Commons, the Comptroller and Auditor-General grants to the Treasury a general credit on the Exchequer Account at the Bank of England. But the Treasury does not pay over to the Departments the sums voted for their services by Parliament. In fact, the money does not reach the Departments at all through the Treasury. Armed with the warrants issued by the Comptroller and Auditor-General, the Treasury, according as the money is required, directs the Bank of England to place the sums to the account of the Paymaster-General, a member of the Administration, who acts as the banker of the Departments, and these transfers are immediately communicated to the Comptroller and Auditor-General. Payments are made by the Paymaster-General only against orders issued upon him by the Departments. These orders are somewhat like bank cheques. Indeed, the books of the Paymaster-General are kept in the same manner as those of a banker—that is, each Department is credited with the amounts received on its account from the Treasury, and is debited with the various sums paid on the orders or cheques it issues.

It all seems a very elaborate procedure from start to finish. Yet it can hardly be said that there is a thoroughly searching supervision by the House of Commons itself of public expenditure. Indeed, that would perhaps be impossible, having regard to the nature and circumstances of parliamentary procedure. Criticism of the Estimates in Committee of Supply is, I repeat, directed, not so much to effecting economy as to ventilation of general public grievances or to opposing the political policy of the Government, so far as that policy finds expression in administration. Beyond this, Members are content with asking for fuller information with respect to items of expenditure than is given in the Estimates. That vigilant control and scrutiny which are necessary to prevent the misapplication of public funds, once the money gets into the possession of the Departments, are supplied by means extra-parliamentary. The ultimate guardianship of the spending of the money in the Public Purse strictly to the purposes sanctioned by the Commons may be said to repose in the Comptroller of the Issues and Auditor-General. He is a permanent official appointed by Letters Patent, and is independent of the Executive Government. His salary is paid direct out of the Consolidated Fund; he cannot be a Member of either the House of Lords or the House of Commons, and he can be removed from office only by a joint address from both Houses. He is represented on each of the spending departments by an Accounting Officer with supervising powers. By the creation of this office, under the Exchequer and Audit Department Act, 1866—one of Gladstone’s great financial measures—Parliament set up an authority, outside itself, and beyond the influence of the Government, to look after the right disposal of the money it votes annually for the public services.

The chief duty of the Comptroller and Auditor-General is to take care that nothing is paid out of the National Exchequer except under proper authority. He also examines the vouchers and audits the accounts of the expenditure of each Department and reports upon them annually to Parliament in three big volumes of figures and comment, dealing separately with the Army, the Navy, and the Civil Service. Lest this supervision of the Exchequer and Audit Department over expenditure should not be sufficient, the House of Commons appoints every session a Public Accounts Committee composed of members of business experience whose duty it is, so to speak, to give moral support to the audit of the auditor. If the Comptroller and Auditor-General has a complaint to make of any abuses or irregularity in the accounts of any Department, he makes it to the Public Accounts Committee, and they, in turn, call the attention of the House of Commons to it. Moreover, the Committee passes in review the annual volumes of the Comptroller and Auditor-General called “Appropriation Accounts,” containing the accounts which are supplied to him by each of the Departments, showing what it has done with the money voted for its services, and his own comments upon these accounts, and they disallow any expenditure which the supervision shows to have been unlawfully or unduly made. The reports of the Committee to the House of Commons are noted for independence of view and criticism uninfluenced by Party considerations. It is a sort of watch-dog of the Departments, which, by its insistent and minatory barks, draws public attention to any irregularity or extravagance in expenditure. Thus, the Public Accounts Committee helps to maintain parliamentary control over expenditure to the extent, at least, of seeing that the Departments fulfil their statutory obligation to expend the moneys voted to them strictly in conformity with the resolutions of Parliament.

The disposal of the public revenue is, indeed, beyond suspicion. Mistakes are occasionally made. But the officials are absolutely clean-handed. Peculation is unknown in the public service. Equally unknown is expenditure purely for the purposes of political bribery. Every penny of the people’s money is accounted for. Every penny of the people’s money is spent on the purpose for which it is voted by Parliament. The point of importance, after all—the vital point for the community—so far as expenditure is concerned, is the purpose or the policy. Where parliamentary control is weak is in the supervision of the Estimates as they are being prepared by the Departments. The prevention of extravagance by the Departments is left to the Treasury. According to the Constitution, it is the function of the Treasury to see that the Departments enter into no unnecessary commitments, and do not ask Parliament for more money than they properly need.

As I have pointed out, in Committee of Supply the policy of a Department is scarcely ever considered in relation to its cost. It is criticized, usually, because it goes too far or because it does not go far enough, politically. Yet the policy embodied in Government Bills is, almost invariably, scrutinized from the point of view of expenditure. Before any Bill which involves a charge upon the Exchequer can be proceeded with, what is called “the money resolution,” authorizing the charge, must be passed in Committee of Ways and Means. Then the cry, “economy, economy,” is heard in the House. But why not also in regard to policy as expressed in the Estimates?