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Speech in Senate Chamber: Appropriation Bill No. 3, 2017-18, Bill C-54, An Act for granting to Her Majesty certain sums of money for the federal public administration for the financial year ending March 31, 2018

 Bill C-54 Appropriation Act No. 3, 2017-18

Supplementary Estimates  

Honourable senators, I rise to speak to our supply Bill C-54, Appropriation Act No. 3 2017-18, An Act for granting to Her Majesty certain sums of money for the federal public administration for the fiscal year ending March 31, 2018.  In this June period of our annual supply cycle, appropriation and supply are among the high duties of governments, and the reason for the existence of parliament.  By the Appropriation Act, our House of Commons and the Senate vote the legal authority to the government to draw money on the consolidated revenue fund.  Jowitt’s 1959 Dictionary of English law, Volume 1, defines “appropriation,” at page 140:

In the primary sense of the word, to appropriate is to make a thing the property of a person. Thus, to appropriate a thing which is publici juris is to obtain a right to the exclusive enjoyment of it, so that the appropriator becomes the owner.  .  .  .                                                                      Appropriation of supplies is the mode by which Parliament regulates the manner in which the public money voted in each session is to be applied to the various objects of expenditure  .  .  . , and the Appropriation Act is an annual Act passed for the purpose (1  Bl.Comm. 335n.).

 

Colleagues, appropriation is the process by which the House of Commons agrees to the quantum of money to be charged to and drawn on the Consolidated Revenue Fund for payment for the maintenance of the government’s public administration and public service.  This is called the public finance and the public expenditure.

Honourable senators, Canada’s pre-eminent parliamentary writer was Alpheus Todd, who was born in England.  He died in 1884.  He wrote about the consolidated revenue fund and parliamentary authority for public payments out of the consolidated fund.  In the 1887 second edition of his book, On Parliamentary Government in England, its Origin, Development, and Practical Operation, Volume I, Todd said, at page 737:

.  .  .  therefore, the whole public revenue of the country, together with moneys received from loans, is placed to the account of the Consolidated Fund, out of which all public payments are made.  Such payments are twofold:  1. By authority or permanent grants, under Acts of Parliament.  2. Pursuant to annual votes in Committee of Supply, payable out of the Consolidated Fund by ways and means annually provided. The services provided for by permanent grants are .  .  .  as follows: 


Alpheus Todd then listed these services, including the salaries and allowances of certain independent officers, the courts of justice etc.  He continues, in the 1887 second edition of his book, On Parliamentary Government in England, its Origin, Development, and Practical Operation, Volume I, at page 737:

These charges are made payable out of the Consolidated Fund, by permanent statutes, from year to year, without any renewal of parliamentary authority.  The principle of not subjecting to the uncertainty of an annual vote the provision for the security of the public creditor, the dignity of the crown, annuities and pensions to royal and distinguished persons, the salaries of judges and other officers in whose official character independence is an essential element, compensations for rights surrendered, and like charges, is one the soundness of which is generally admitted, although it may have been in certain cases carried too far.

Todd is clear, the salaries of the judges, crown ministers and other high officers are provided for by permanent statutes, rather than the annual votes in the supply process.  The uncertainty of the supply process can be embarrassing and difficult.

Honourable senators, the other place, our House of Commons, has two important Committees on the public finance and the public expenditure.  They are its Committee of Supply and its Committee of Ways of Means.  These two, committees of the whole in the UK and in Canada, were legendary.  Todd, writing about the British House of Commons in his book already cited, said, at page 785:

The resolutions of the Committee of Supply are reported to the House on a future day, they are then agreed to, disagreed to, or re-committed, as the case may require.  If, on consideration of the report, it be thought necessary to increase the sum granted by the Committee of Supply, the resolutions proposed to be increased must be re-committed.  The House may indeed lessen the sum proposed to be granted without re-committal, but to increase the amount would be to impose a charge not previously sanctioned by the committee.

‘But these resolutions, although they record the sanction of the House of Commons to the expenditure submitted to them, and authorise a grant to the crown for the objects specified therein, do not enable the government to draw from the Consolidated Fund the money so appropriated.  A further authority is required, in the shape of a resolution in Committee of Ways and Means, which must be embodied in a Bill, and be passed through both Houses of Parliament, before practical effect can be given to the votes in supply, by authorising the Treasury to take out of the Consolidated Fund, or, if that fund be insufficient, to raise by exchequer bills on the security of the fund, the money required to defray the expenditures sanctioned by such votes.  The votes in Committee of Supply authorise the expenditure;  the votes in Committee of Ways and Means provide the funds to meet that expenditure.

This last sentence bears repeating:

The votes in Committee of Supply authorise the expenditure and the votes in Committee of Ways and Means provide the funds to meet that expenditure. 

Honourable senators, in matters of supply and taxation, the two houses of parliament the Senate and the House of Commons are really quite different.  Alpheus Todd, in his book already cited, wrote about the British House of Commons, at page 806, that:

In proceedings in Parliament upon matters of supply and taxation, the two Houses do not stand on precisely the same footing.  Although the consent of both Houses is indispensable to give legal effect and validity thereto, yet, from a very early period, the Commons have succeeded in maintaining their exclusive right to originate all measures of this description.  They have gone further, and have claimed that such measures should be simply affirmed or rejected by the Lords, and should not be amended by that House in the slightest particular.  The Lords have practically acquiesced in this restriction, although they have never formally consented to it.

 A similar question has been frequently raised as to whether Legislative Councils in the colonies, whether elected or nominated, can claim the right to amend Money Bills.  This claim has been sometimes, though rarely, admitted by the Houses of Assembly, who generally insist upon the strictest limitation of the powers of the Upper Chamber, in conformity with the prevailing practice of the imperial Parliament.

 

Honourable senators, the public finance and the public expenditure is worthy of every senator’s study.  In Britain, these difficult questions were well-studied in the famous British House of Commons Public Accounts Committee, in 1865.  This was not long before the 1866 British Exchequer and Audit Departments Act, on which Canadians founded their 1878 statute called an Act to Provide for the Better Auditing of the Public Accounts.  In Britain, their House of Commons Public Accounts Committee was the powerful engine that drove their power of the control of the public purse.  On March 11, 1862, the Great Commoner, William Gladstone, then Chancellor of the Exchequer, and a great master of the public finance and the power of control of the public purse, had moved his motion to establish the famous British Public Accounts Committee as a permanent standing committee of the House of Commons.  This Committee’s renowned 1865 Report clarified the role of audit and auditors, in the public finance and the public expenditure.  This Report also led the way to the British 1866 statute, called the Exchequer and Audit Departments Act. This Report of the legendary British Public Accounts Committee questioned the erroneous idea held by many that audit and auditors’ role was a control over the public expenditure.  Quoting Mr. Gladstone, and upholding the proper role of audit in the public finance, the Report said, at paragraph 46, page 130:

The true mission of Appropriation Auditors is admirably described in the few observations which were made by Mr. Gladstone during the debate already adverted to on Lord Robert Montague’s Resolution (para. 35).     “The Noble Lord,” he said, “and some other Honourable Members would seem to have got an idea of the possible powers of the Board of Audit, which is quite erroneous.  They appear to think that that Board can become an efficient control over the public expenditure.  But that is not the function of a Board of Audit.  That Board is to ensure truth and accuracy in the public expenditure.  In point of fact, it may be called, in one word, a Board of verification.  But it would be perfect presumption in the Board of Audit, if it were for a moment to attempt to exercise a judgment as to any degree either of parsimony or of extravagance, which the Government might be thought to be adopting under the sanction of this House.  As to the proposal of the Honourable  and learned Member for Dundalk (Sir G. Bowyer), I confess I think it entirely impracticable and out of the question.  He proposes to arm the Board of Audit with coercive powers of committal for contempt, powers of commanding the departments of the Government as to what is to be done, and what not to be done there.  I venture to say that such a conception of a Board of Audit is wholly without precedent.  Besides, the objection to it is, that it would be transferring to the Board of Audit what is really the function of this House. It is in the Committee of Public Accounts,  .  .  . , it is in that Committee, and in its investigations, that the House will have the best security for the due, speedy, and effectual examining and rendering of the Public Accounts.  To the principles which have been declared by the Committee of Public Monies respecting the Board of Audit, I cordially adhere.”

 Honourable senators, this British Public Accounts Committee Report, having cited Gladstone, the Chancellor of the Exchequer, on the profound difference between the audit function and the Commons House function in the public finance, continued on the great principles that found the public finance and expenditure enterprise, which were adopted in Canada. The Report said, at paragraph 47:

These are wise words.  Considering the high administrative position of Mr. Gladstone, it might at first sight be supposed that his views on the matter in question would indicate a clearer perception of what is due to the Government, than of what is due to the Board of Audit.  But the Auditors themselves, it is believed, will not think so.  By them the speech of the Chancellor of the Exchequer cannot but be regarded as bearing powerful testimony to the virtue of a principle which they have for many years maintained, though in some cases unsuccessfully, against the disposition of the Executive to charge them with various kinds of administrative functions, the functions of controllers, of accountants, and of regulators of accounts.  .  .  .  In the elaborate Memorandum, which was laid before the Committee on Public Moneys by Sir G.C. Lewis, then Chancellor of the Exchequer, it was proposed that the Exchequer Office should be abolished, and that some of the more important functions of the Comptroller of the Exchequer should be transferred to the Audit Office.  This Memorandum was referred by the Committee to Mr. Romilly, the Chairman of the Board of Audit;  and Mr. Romilly, in a letter which will be found in the Appendix to the Committee's Report, after pointing out, in nearly the same words as those used by Mr. Gladstone, what the special duties of an auditor are, goes on to show the incompatibility between such duties and those of a comptroller.  “In the event,” he says, “of its being desirable that this direct Executive control should be maintained over the advisers of the Crown, it should not be exercised by those who are charged with the duty of auditing accounts.” And again, “I cannot entertain any doubt that provided the Legislature come to the determination to be promptly and accurately informed as to the mode in which the grants of public money have been dealt with by the Executive, provided the Executive will cordially co-operate in instituting an effectual and permanent check upon its own proceedings, and provided the separation of the duties of the Audit Office, and the functions of the Executive is strictly preserved, there can be no insurmountable difficulty in practically carrying their wishes into effect.”

Colleagues, I shall repeat these critical words:

In the event . . . of its being desirable that this direct Executive control should be maintained over the advisers of the Crown, it should not be exercised by those who are charged with the duty of auditing accounts.

And also I repeat:

. . . and provided the separation of the duties of the Audit Office, and the functions of the Executive is strictly preserved there can be no insurmountable difficulty in practically carrying their wishes into effect.

Honourable senators, I note that this British House of Commons Public Accounts Committee Report was the year before their new independent Auditor General was created in 1866.  In this seminal 1865 British House of Commons Public Accounts Committee Report, the auditors themselves spoke to the role of audit, at paragraph 48:

If, then, Parliament should ever be asked to confer upon the Auditors any Executive functions, or the right in any case of interrupting or questioning the free action of the Executive, it will be easy to show that though such proposals have been occasionally recommended by the doctrine and practice of the Executive Departments, and have been sometimes even sanctioned by Parliament itself, they have been repeatedly condemned by the Commissioners of Audit.  If it is allowable to assume that the Auditors still adhere to the evidence which, during the last six or seven years has been laid before Parliament on behalf of the Audit Office, they may be represented as saying: — "The whole of our experience as Appropriation Auditors tends to satisfy us that we ought to have no further communication with the Executive Departments than may be necessary for the purpose of obtaining information. Whatever tends to associate us, either directly or indirectly, with the pecuniary transactions of the Government, cannot but tend to damage the credit of the reports in which we are required to submit those transactions to the judgment of Parliament. We conceive, therefore, that we should never be required to advise, to control, or to remonstrate."

These auditors gave evidence that they “should never be required to advise, to control or to remonstrate.”  The auditor’s opinions are no part of financial audit, and no part of the auditor general’s role in the public accounts, which role is to verify and certify the public accounts.  In Canada, these principles were adopted in the 1878 Canadian statute called Act to Provide for the Better Auditing of the Public Accounts.

Honourable senators, this seminal 1865 British Public Accounts Committee’s Report continues, at paragraph 48:

We ought not to be invited to discuss questionable points with the Departments, or to aid them in the conduct of their business.  Our functions should be neither preventive nor corrective, but simply detective.  We should be instructed to try the accounts and vouchers of the several Departments, by the requirements of the Legislature, and to bring under the notice of Parliament any expenditure that might in our opinion be opposed to those requirements.  It may no doubt sometimes appear to us that the expenditure which it will  .  .  .  be our duty to report is justifiable, or even commendable;  but we should keep all such opinions to ourselves.  It should be no part of our business to acquit or to condemn, but simply to report to Parliament every infraction of the law relating to the appropriation of the public money, leaving it for the Executive Departments to give such explanations as they might think fit, and for the House of Commons to pronounce the sentence.

 

Honourable senators, our Canadian Auditor General Act sections 7.(2) and 7.(2)(d) say:

7.(2) Each report of the Auditor General under subsection (1) shall call attention to anything that he considers to be of significance and of a nature that should be brought to the attention of the House of Commons, including any cases in which he has observed that . . .   (d) money has been expended without due regard to economy or efficiency;

Colleagues, in 1977, Canada enacted a new Auditor General Act. Our Canadian Auditor General Act section 7.(2) (d) is often called the value for money clause, because in 1977, the then new Auditor General Act gave Canada’s auditor general a non-audit power to judge the government and its programs and whether money was spent without due regard to economy and efficiently.  Many public administration scholars at the time asserted that section 7.(2) (d)  took the auditor out of the financial audit stream, and put him into the public policy stream.  As we know, public policy is value laden and qualitative, and is no part of the traditional quantitative bean-counting role of audit and auditors. Colleagues, I do believe that the current Auditor General Act needs a full review and improvement.  The large constitutional questions posed by Canada’s current auditor general’s role, now more qualitative than under the previous auditor general statute, demand that it is time for us to study the office of the auditor general. Perhaps our Standing Senate Committee on National Finance could undertake such a study.

Honourable senators, I come now to the fine work of our own Standing Senate Committee on National Finance and our Committee’s examination of the Government’s spending plan, which is the Supplementary Estimates (A) 2017-18, which was presented to the Senate on February 28, 2017 and referred to our Committee for study on March 1, 2017.  In these Supplementary Estimates, our Government, in the person of Scott Brison, the Treasury Board Minister, has requested that Parliament authorize an additional $3.72 billion in voted expenditures.  Our Committee heard witnesses on these Supplementary Estimates.  I shall share some of our Government departments’ demands for monies that are the Supplementary Estimates 2017-18 and this Bill C-54 Appropriation Act  No. 3.  The department Employment and Social Development Canada sought voted appropriations of $584.6 million.  Our Committee’s June, Report on the Supplementary Estimates 2017-18 observes, quote, at page 5:

Our Committee believes that the Department must ensure that its labour market access programs, such as the Youth Employment Strategy, are cost-effective, and that its funding is used to create new employment opportunities and not to subsidize existing jobs.

Honourable senators, now to Canada Mortgage and Housing Corporation’s request for voted appropriations of $36.8 million for their program, Affordable Rental Housing Financing Initiative.  An additional $625 million in non-budgetary spending would also go toward this initiative, which will finance the construction of affordable rental housing.  CMHC expects this program to provide for the construction of 10,000 new rental housing units across Canada.  Our Committee Report observes, at page 6, that:

Our Committee is concerned about the impact that household indebtedness and rising house prices could have on CMHC’s mortgage loan insurance program and, consequently, on the government’s fiscal framework.       Our Committee encourages Canada Mortgage and Housing Corporation to take all necessary measures to minimize the risks borne by the Government of Canada as a result of its mortgage insurance activities.

Honourable senators, our Senate National Finance Committee heard from the Treasury Board of Canada Secretariat, on the Phoenix System and payroll problems which have been in the news.  Our Committee Report, section 4.4 is headed Compensation Requirements.  It says, at page 8, that:

The Treasury Board of Canada Secretariat is asking for $625 million to meet pay requirements.  The witnesses reported that this is the forecast for the costs resulting from the negotiation of collective agreements in the federal public service.  The appropriation would enable the government to make retroactive payments dating back to 2013-2014 once the new collective agreements come into force.

According to our witnesses, the government and the unions have discussed the Phoenix pay system and ways to ensure that retroactive payments are made without interruption or difficulties.  The witnesses said three collective agreements have been ratified and processed by the Phoenix system.  They reported that over 90% of the payments have been processed successfully.

Honourable senators, in closing, I once again thank the Committee members and the Committee staff for their efforts on behalf of the Senate and the Government of Canada’s need to finance the public service and the public expenditure. I thank senators for their attention.