Proceedings of the Standing Senate Committee on National Finance
Issue 19 - Evidence
OTTAWA, Wednesday, February 12, 1997
The Standing Senate Committee on National Finance, to which was referred Bill C-270, to amend the Financial Administration Act (session of Parliament), met this day at 5:15 pm to give consideration to the bill.
Senator De Bané (Deputy Chairman) in the Chair.
[Translation]
The Deputy Chairman: Honourable Senators, we are here today to consider Bill C-270, an Act to amend the Financial Administration Act (session of Parliament). The sponsor of this bill in the House of Commons was MP Milliken who is here with us today. We are also honoured to have with us Mr. Greenberg, a senior official with the Office of the Auditor General of Canada.
As you know, Mr. Greenberg served as our committee's research director from 1982 to 1989. Obviously during this time, he dealt with Governor General's special warrants.
Also with us is Mike Joyce, Director, Estimates Division, Expenditure Management Sector, Treasury Board. After Mr. Greenberg has concluded his presentation, you are invited to direct your questions either to him, to Mr. Milliken or to Mr. Joyce. Welcome, Mr. Greenberg. Please proceed.
[English]
Mr. Jeff Greenberg: This is unusual position for me. For many years, I sat beside the clerk. I wondered how it would feel to sit here, and now I have the opportunity to find out.
As you know, I am with the Auditor General's office, but I am not speaking on behalf of that office. However, if there are questions with regard to warrants, I will answer them to the best of my ability.
My task here today is to describe the concept of special warrants, to give you an outline of the history and the usage of warrants in Canada, and to describe the role that this committee played, especially in the hearings of May 1989.
Governor General warrants are a device which allow the executive to spend money without the authority of Parliament, assuming three conditions are meant. The first condition is that a payment is urgently required for the public good, the second is that Parliament is not in session, and the third is that there is no other source of funds, such as Vote 5, the contingency vote which the Treasury Board has for providing funds in special circumstances.
The process is that the Governor in Council may direct the preparation of a special warrant to be signed by the Governor General authorizing the payment to be made out of the Consolidated Revenue Fund. The Governor General does that on the report of the President of the Treasury Board that there is no other source of funds and a report by the appropriate minister that the payment is urgently required for the public good.
The concept of Parliament not being in session means that it is under adjournment with no specific return date or, if the date is known, it is no more than two weeks before the date that the warrant is issued.
Special warrants such as we are talking about today are uniquely Canadian. As far as I know, they do not exist in any other country of the Westminster model. Australia, the U.K., and New Zealand do not use them.
We developed this uniquely Canadian thing in 1864. The notion was that there was a need for some vehicle for providing funds for the unforeseen necessity of repair of public buildings. The words "public buildings" were always included. However, in 1866, there was the threat of the Fenian raids. There was a need to build up the militia, and there was no source of funds. The government illegally attached funds from the Consolidated Revenue Fund to build up the militia. In 1867, with the passage of the first Audit Act, the clause was expanded to include the element of unforeseen and urgent uses of the funds. We now have public buildings and unforeseen and urgent requirements -- again, uniquely Canadian.
From 1867 through to 1896, Governor General's warrants were used rather sparingly; however, as governments became accustomed to them, they began to use them more frequently. The tradition was that whenever a warrant was issued, the government would come back to Parliament with a form of Supplementary Estimates to obtain formal approval to indemnify the government. However, because of the common usage of them, that practice slipped for a while in the 1880s. In fact, there was a period when the government came back with three years of warrants in one supply bill.
In 1896, there was a rather difficult period in the political history of Canada with the move from the Conservative government to the Liberal government. When the Laurier government took over, there was no supply bill. There was a debate on supply in April of 1896. The bill was not passed, and an important point was made: The expenditures that were required were known, but there was no supply bill.
When the government took office in 1896, it was a rather difficult time. Remember that there were no supply periods in 1896, so the ability of government to obtain supply required a rather lengthy exercise of convening its committee of supply and then getting the bill passed out of committee of supply and back into committee of the whole.
The government was not defeated, but neither could it get supply. There was a constant to and fro from session to session with the sessions being terminated and the government resorting to warrants, each time coming back with a Supplementary Estimate. The principle was established that it was an election issue which caused this continuing pressure on the use of supply.
From 1896 to 1951, there were several changes. In 1931 it was renamed the Financial Administration Act, and in 1951 the Financial Administration Act was amended again with respect to special warrants.
Throughout the Second World War, Parliament was adjourned, but the session was not prorogued, the idea being that if it was not prorogued, you could call Parliament back and deal with issues without the usual attachments that go with prorogation, such as a Speech from the Throne and the debate which goes with it. There was need to act quickly, so the Parliament was not prorogued; it was simply adjourned.
The notion was to somehow legitimize that concept in the Financial Administration Act. That is when the principle arose that we now see in the current legislation and the wording of the Financial Administration Act was changed to include the phrase sine die. In other words, warrants could be used when the Parliament was adjourned sine die and there was no specified date for its recall.
The 1951 changes also included the requirement that warrants would be printed in the Canada Gazette no later than 30 days after the issue.
The year 1958 brought about more changes. It was an interesting period as well. One of the ideas introduced into the Financial Administration Act was that warrants could not be used within two weeks of the date of recall of the same session.
However, there were some interesting sidebars which also occurred. The notion of going back to Parliament to seek authority for spending that has already taken place was considered superfluous by the government of the day, so it was decided that they would not be required to go back to Parliament. While the opposition accepted the legality of the spending, they did not accept the provision that, somehow or other, the government did not have to be transparent, so the government recanted on that and left the provision that it would continue to go back for supply.
As well, Mr. Fleming, the Minister of Finance at the time, conceded that the concept of public buildings being destroyed and somehow having to be rebuilt was not necessary any longer, so the only thing left in the bill was the concept of an urgent need and the specific reference to buildings was removed.
When Mr. Fleming was asked what he thought an urgent requirement was, the example he used was to the ability to feed and clothe the Hungarian refugees from the 1956 situation. That was something he considered urgent because the government did not have adequate money to provide food and clothing for the Hungarian refugees.
Since the 1958 amendments to the Financial Administration Act, there have been no subsequent amendments. There have been proposals, certainly some along the lines of Mr. Milliken's bill today, but this is as far as a bill of this nature has ever gone. This particular committee had a number of hearings on this issue in May of 1989.
This issue arose because of the election of 1988 and the Conservative government getting back into office. On December 12, they recalled Parliament for the first session. They introduced one particular bill. As many of you will recall, it was the free trade bill. The free trade bill received passage.
On December 16, the government tabled Supplementary Estimates.
On December 30, without introducing the supply bill to deal with Supplementary Estimates, the government adjourned Parliament to March 6.
There were no supplementary estimates. Vote 5 had become expired. There were no funds left in Vote 5.
On January 19, Governor General's warrants for $80 million were issued. The convention of Governor General's warrants is that they last no longer than 30 days. There is usually a time limit associated with them. They had from approximately December 12 to January 19, a period of around 30 days.
On February 16, Governor General's warrants for $500 million were issued, another approximate 30-day period. With Parliament being recalled on March 6, Governor General's warrants could not be used after February 20. That was the two-week period.
On February 28, Parliament was prorogued, which meant that now Governor Generals' warrants could again be used.
On March 23, another warrant was issued for $890 million, and on April 1, the beginning of the next fiscal year, a warrant lasting 45 days was issued for $6.2 billion.
On April 3, the second session of that particular Parliament began and a supply bill was introduced.
On May 3, this committee began its reviews of Main Estimates and heard the supply bill on May 10.
The special warrants issue surrounding those hearings centred around the timing of those warrants in the context of the urgency of expenditures. The combination of timing and urgency led the committee to explore two things -- the legitimacy of the government action and the precedent set by the government action. Using the timing of the starting point, the committee considered various adjournment possibilities in the context of legality and precedent.
With respect to dissolution, there was unanimous agreement that, if there was dissolution, urgent need of money was a reasonable request. As Senator Forsey pointed out at the time, if supply is not voted, an urgency is immediately created. In 1896, the special law officer of Parliament agreed that payment of salaries of civil servants and the militia was considered urgent. The normal upkeep of government was considered urgent, and there was no debate or discussion about the importance of providing warrants during dissolution.
Prorogation was a little more difficult to sort out. At one time during prorogation, of course, Parliament was difficult to get back, and it was more difficult to deal with regular business because of the procedures you must go through when starting a new session. Today it is common practice that, at the end of one session, you immediately begin the next session. Furthermore, in 1989, when that event occurred, urgency could have been used for warrants, but the spending was known.
The final issue was adjournment. Today it is relatively easy to get Parliament back, and urgency is more difficult to argue. This opens up the question of legality, which is a theme that Senator Stewart and Senator Frith pursued rather vigorously.
There was agreement as to when warrants could be used during dissolution; there was some debate about prorogation; but there was no debate amongst the committee about adjournment.
Two reports were issued. The first report amended the supply bill and sent it back to the House. It contained a clause which indicated that payments made by all special warrants shall be deemed legal. The House rejected that amendment on the basis that the implication was that the payments were illegal before that.
A second report was issued without amendment, but it contained a rather lengthy second part which took up the issue of urgency, legality, and precedents.
That ends my presentation, and I am certainly willing to answer your questions.
[Translation]
Senator Bolduc: I am pleased to see you again after the valuable services you provided to us when you were our committee's senior research officer. You mentioned the legislative changes which explained in the past the use of this measure which dates back to 1864 and which is unique to Canada.
You spoke of changes. However, the main reason why we have this measure today is that up until 1960, there was no rapid means of transportation in Canada. Before the jet age, railways were the preferred mode of transportation and it was quite an adventure to travel from Vancouver or Newfoundland to Ottawa.
Given the size of the country, time was a constraint. Now, we have jet aircraft. We also have instantaneous modes of communication. In today's world, do we still need an instrument which dates back to 1860 and which was initially introduced because of the size of Canada and communication constraints?
Parliament is in session between eight and nine months of the year. As a rule, it recesses during the summer months. The government may call us back and the session can be reconvened the next day. Excluding the 36-day electoral period, are such warrants still really necessary?
I basically agree with Mr. Milliken's proposal. It imposes some restrictions. That is the least we can do because with the former legislation which had not been amended since 1958, seemingly inappropriate action was taken during the 1980s following major political debates on free trade and changes to electoral campaigns. The government acted somewhat boldly.
Apparently, the administration accepted this. It seems reasonable to me to want to avoid this type of abuse. Parliament, in particular the House of Commons because it is elected, must keep a tight rein on public expenditures. This is a long-standing principle of our system, one that must be borne in mind.
To what extent are warrants useful? No such procedure is in place in England and things run smoothly. The British parliamentary system is our model. Australia, a vast country, does not use warrants either.
Under our British parliamentary system, the executive branch wields considerable power. At the outset, the system favours the government, which rules because it has won the majority of seats. This is not the case in the United States. The president holds office, but the Congress also governs and there is a kind of interplay between the two. Here in Canada, it is clear that the system favours the government.
The executive enjoys at the outset an overwhelming amount of authority. If we want to maintain a democratic system of government, what we need to do is introduce some restrictions to prevent the executive from abusing its position. I wonder if we should not take things one step further and eliminate altogether the provision which allows for special warrants.
Our distinguished chairman with his vast parliamentary experience will be interested in your views on this subject. I am also interested in hearing the viewpoint of an official who once worked for this committee and who now works for the Auditor General of Canada.
The Deputy Chairman: I am relieved to hear Senator Bolduc say that he supports the bill. It was unanimously endorsed by all parties in the House of Commons. It raises a fundamental question. Do we really still need special Governor General warrants? Under the proposed legislation, from the moment Parliament is dissolved, up to 60 days before the elections and up until the time Parliament is reconvened, only then can Cabinet spend money without the authorization of the House of Commons. Senator Bolduc asks if we still need these warrants today. If prior to calling elections, the government had asked Parliament to vote supply, there would be no problem. We could ask Mr. Greenberg his opinion and seek that of MP Milliken as well, as he represents the government and is the sponsor of this bill, and we could also hear from Mr. Joyce of the Treasury Board.
[English]
If you would like, Mr. Joyce and Mr. Milliken, you may join our witness and give your opinion on the fundamental issue put forward by Senator Bolduc.
Mr. Greenberg: Mr. Chairman, I must agree with everything that Senator Bolduc has said. I would add that there is clearly a need for something which provides a way for a newly elected government to be able to fund programs when they have used up supply.
As you know, in Australia and the U.K., there is a different procedure. The honourable chairman has alluded to that procedure. Before dissolution, the last thing the Australian Parliament and the United Kingdom Parliament engage in is passage of supply. There is no debate on the issue; it is simply a necessary requirement. Of course, they also return more expeditiously.
We have here an alternative procedure, a uniquely Canadian one. In my mind, it amounts to virtually the same thing. It does not require passage by Parliament, admittedly, but it does mean that a newly elected government has the power to engage in activities before it recalls Parliament.
It does not give it an unlimited time because, as I indicated before, there is a convention that warrants be used only for 30 days. Of course, in 1989, they were used for 45 days. After receiving the writs, which is somewhere between seven and ten days after an election, a government could have up to 90 or, perhaps, 105 days. If it were 90 days and an election were called mid-June, then Parliament must come back by the mid to end of September. The first thing it would deal with is some sort of supply issue, without a guillotine period and without the Opposition Day cut-off point of the end of December.
There would clearly have to be some sort of an agreement with a newly elected Parliament to sit down and deal with the issues of supply, which amounts to what Australia and the U.K. does.
[Translation]
Senator Bolduc: Could I comment on this, Mr. Deputy Chairman?
The Deputy Chairman: Certainly.
Senator Bolduc: You say that the situation is the same in Australia, but that is not entirely the case. Australia recognizes the principle that expenditures are controlled by the people's elected representatives. Here in Canada, we maintain that the government is wise and does not do anything foolish. Parliamentarians subsequently acquiesce to the government's demands. There is a difference. It takes a strong executive, perhaps stronger than in England.
Contrary to what many others believe, I think there is a great deal of wisdom in restricting the natural authority of the executive. It is not that I am opposed to the government. However, it is a matter of principle in a democratic system. That is the only comment I wanted to make.
[English]
Mr. Greenberg: I could only agree with you, senator, but it is always interesting to have a uniquely Canadian approach to things, rather than following the world around.
[Translation]
Mr. Milliken: I answered the same question the last time I was here. I indicated that the change I am proposing is acceptable to the government. The bill was unanimously adopted in the House of Commons.
If we were to propose the kind of change that Senator Bolduc is suggesting, I think this would be unacceptable to the government. It would involve changing the way supply is voted prior to the dissolution or prorogation of a session or of a Parliament. Unless we change our method of operation, we cannot do away with special mandates. We can, however, continue to employ this mechanism within the time frame set out in the bill. This would be more acceptable than before. Perhaps in a few years' time, we could proceed to make this kind of change and it would be acceptable. However, at this point in time, I believe this is the best approach.
Senator Bolduc: There is no question that it is an improvement. You will get no argument from me.
[English]
Mr. Mike Joyce, Director, Estimates Division, Treasury Board: Mr. Chairman, I could only add to what Mr. Greenberg and Mr. Milliken have said.
With the current supply process, if we are in a position of only having passed interim supply, which in a normal supply cycle gives the government three month's worth of spending, and if for any reason the house is dissolved before we are at the end of the supply period where we would normally grant full supply, the government would literally run out of money. Therefore, we need some mechanism by which to fulfil the normal needs of government in terms of supplying money for paying public servants like myself.
That is the situation in which special Governor General warrants would be used. If we did not have special Governor General warrants, we would need some other mechanism that prevented that situation in an interim supply period. This is simply a mechanical requirement.
[Translation]
Senator Bolduc: That struck me. Under urgent and unforeseeable expenses, that is the list of situations giving rise to special mandates, there were some items that were foreseeable and not in the nature of a national emergency. I do not know how people came to this interpretation.
Senator Rizzuto: Having heard all of the testimony, the questions and answers of all the witnesses as well as the summary presented by our colleague, I have no further questions. Therefore, if there are no other witnesses, we should report to the Senate.
The Deputy Chairman: Senator Rizzuto has tabled a motion. Are the committee members in agreement to adopt the bill and report back to the Senate?
Senator Mercier: Yes.
The Deputy Chairman: We thank the witnesses. This bill is deemed to have been adopted unanimously by the committee and reported back to the Senate.
[English]
The committee adjourned.