CHAPTER III

MONEY IN PARLIAMENT

IN our system of government, the executive power
is in the hands of the offices described in the first
chapter, acting under the supreme control of the
Cabinet. They it is who do the nation's financial
work of collecting the revenue and of spending it.
But before that can be done, it has to be decided
how much is to be collected and from whom, and
on what it is to be spent, and that is the work of
the Legislature. Before a penny can be extracted
by the state from the pocket of a taxpayer or a
penny spent or a pennyworth of liability incurred,
a law must be passed to authorise it, and it is only
the triple Legislature of King, Lords, and Commons
that can pass the law. The principle has the most
distinguished origin ; it is one of the few actually
rooted in Magna Carta, out of the many which
are traditionally supposed to be. "No scutage
or aid," swore King John at Runnymede, " shall
be imposed in our kingdom unless by the general
council of our kingdom ; " and what the general
council was then Parliament is now. The Bill
of Rights is another of its noble ancestors.
" Henceforth," it was declared in 1688, " shall no
man be compelled to make any gift, loan, or benevo-
lence, or tax, without common consent by Act of




MONEY IN PARLIAMENT 51

arliament," and the unlawfulness was proclaimed
of levying money " for and to the use of the Crown
by pretence of prerogative for other time and in
other manner than the same was granted by Parlia-
ment." The Crown, as will be seen, has special
privileges allowed it in the sphere of financial
legislation, but Magna Carta and the Bill of Rights
leave no room for any confused idea that the
Crown has any shred of prerogative to impose,
increase, or reduce taxation, or to alter its inci-
dence, independently of Parliament. Runnymede
was the beginning of the end of prerogative
imposts, and the Revolution was their grave. A
small private revenue is still derived by the Crown
from several landed estates ; but its public revenue
is dependent on Acts of Parliament, annual or
permanent.

LORDS AND COMMONS

Nor are the two Houses of Parliament equal in
matters of money ; the House of Commons is
paramount. There sit the representatives of the
taxpayers, and in the course of a long historical
struggle they have won for themselves exclusive
control over the raising and spending of money.
Their financial rights and privileges in their
relations with the unelected House were first de-
fined by their own resolutions. When Naseby
had settled the contest between Crown and Parlia-
ment for financial sovereignty, there began a peace-
ful conflict between the two Houses which lasted
into our own times. It soon came to a head. In
1678 the Commons resolved in the ample phrase-
ology of the times " that all aids and supplies anc|



52 NATIONAL FINANCE

aids to His Majesty in Parliament are the sole gifts
of the Commons and all bills for the granting of
any such aids or 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 con-
ditions limitations and qualifications of such grants,
which ought not to be changed or altered by the
Lords." Thereafter the attacks of the Lords upon
the rights thus claimed were more flank attacks
than frontal. No open conflict broke out again
until the dispute over the paper duties in 1860,
when, moved thereto by Gladstone, the Commons
passed a series of three resolutions which codified
their claims. They resolved, ore rotundo:

" That the right of granting aids and supplies to
the Crown is in the Commons alone, as an essen-
tial part of their constitution, and the limitation of
all such grants as to matter manner measure and
time.

"That although the Lords have exercised the
power of rejecting bills of several descriptions
relative ito taxation by negativing the whole, yet
the exercise of that power by them has not been
frequent and is justly regarded by this House
with peculiar jealousy, as affecting the right of the
Commons to grant the supplies and to provide the
ways and means for the service of the year.

" That, to guard for the future against an undue
exercise of that power by the Lords, and to secure
to the Commons their rightful control over taxation
and supply, the House has in its own hands the
power so to impose and remit taxes, and to frame
bills of supply, that the right of the Commons as



MONEY IN PARLIAMENT 53

to the matter manner measure and time may be
maintained inviolate."

If the chaff be winnowed off the grain of these
resolutions, it will be seen that they claim abso-
lutely for the House of Commons two privileges :
they claim that the Commons have the sole right
of initiative in taxation, and that they have the sole
right of determining its manner and measure. To
these claims the Lords, tacitly at least, assented,
agreeing that money bills must begin in the
Commons, and that the Lords should not amend
them. The resolutions also advanced another
theory, but scarcely made a claim of it; that the
Lords have no business to reject a money bill. To
this the Lords never agreed, and in 1909 they gave
expression to a very emphatic disagreement by
their historic act in rejecting the Budget of that
year. There followed the great conflict between
the Houses which, after two general elections, was
brought to an end by the Parliament Act of 1911.
By that the House of Lords is deprived of the
power to reject a money bill. By the first section,
" if a money bill, having been passed by the House
of Commons, and sent up to the House of Lords at
least one month before the end of the session, is
not passed by the House of Lords without amend-
ment within one month after it is so sent up to that
House, the bill shall, unless the House of Commons
direct to the contrary, be presented to His Majesty
and become an act of parliament on the royal
assent being signified, notwithstanding that the
House of Lords have not consented to the bill." 1

1 i and 2 Geo. 5, c. 15, i, ss. I. By i, ss. 2 and 3, it is
provided that "a money bill means a public bill which in the



54 NATIONAL FINANCE

Such is now the law of the matter. The Act also
contains a declaration (in Section 6) that " nothing
in this Act shall diminish or qualify the existing
rights or privileges of the House of Commons/' so
that the resolutions of 1678 and 1860 have still
such authority as a resolution of a single House can
have. To them we must refer, in particular, for a
declaration of the Commons' privilege of initiative
in taxation, a privilege which is now fully recognised
by the Lords. If it is found convenient to introduce
in the Lords a bill which imposes a charge, that
House, to avoid a breach of the Commons' privileges,
takes refuge in a very artificial device. When it is
reading the bill a third time it leaves out the
financial clauses which impose the charge, but it
prints them in a special type in the bill as it is sent
to the Commons ; and then the Commons, if they
see no objection, reinsert the excepted financial
clauses. Or the Lords leave the financial clauses
in the bill, and follow them with a formal clause
negativing the imposition of a charge, in the style
of the recommendation "Don't put hishead under the
pump ! " The Commons, if they please, then strike

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 taxa-
tion ; the imposition for the payment of debt or receipt, custody,
issue or audit or account of public money ; the raising or guarantee
of any loan or the repayment thereof ; or subordinate matters inci-
dental to these subjects or any of them. There shall be endorsed
on every money bill when it is sent up to the House of Lords and
when it is presented to His Majesty for assent the certificate of the
Speaker of the House of Commons, signed by him that it is a
money bill. Before giving his certificate, the Speaker shall consult,
if practicable, two members to be appointed from the Chairmen's
panel at the beginning of each session by the Committee of
Selection."







MONEY IN PARLIAMENT 5$

out the formal negative, and under goes the tax-
payer's head.

THE CROWN'S INITIATIVE

It is for the House of Commons alone to grant
money and to limit the uses of its grant : it is for
the House of Lords to assent to the grant, with the
limited power of criticism left to it by the Parliament
Act. The whole initiative is with the Commons, but
in the exercise of that right the House of Commons
has imposed upon itself a very important limitation.
By a self-denying ordinance it has deprived the
generality of its own members of the power of
initiative in imposing charges on the people, and has
limited that power to the Crown. By the Crown,
since ours is a constitutional and limited monarchy,
we understand the King's executive ministers who
sit in Parliament and are responsible to it. So the
limitation of initiative by the House to the Crown
is in fact a limitation to those of its own members
who are responsible for the executive government.
No grant can be proposed unless a minister demands
it. No proposal can be made that a tax be imposed
or increased unless a minister signifies the assent
of the Crown to the proceeding, and thus certifies
that the money is needed for the public service. No
member not a responsible minister can get up and
propose the imposition of a public charge on his own
initiative. The matter is regulated by a Standing
Order of the House of Commons. It is Number 66
which provides that "this House will receive no
petition for any sum relating to the public service,
or proceed upon any motion for a grant or charge



$6 NATIONAL FINANCE

upon the public revenue, whether payable out of
the consolidated fund or out of money to be provided
by Parliament, 1 unless recommended by the Crown. 1 '
The recommendation of the Crown may be com-
municated by a message under the sign manual,
or by a formal verbal statement made in the House
by a responsible minister; more commonly the
recommendation is conveyed by a minister simply
leaning forward in his place in the House, and
touching a document with his finger as it is intro-
duced.

The limitation of the financial initiative is some-
times spoken of as a prerogative of the Crown. The
word is an unsuitable one. A prerogative is a privi-
lege of the Crown that exists of its own force. The
privilege or rather duty in question exists, not by
its own force, not even by force of a statute, but by
force of a mere domestic resolution of the House of
Commons concerning its own procedure. A true
prerogative right, such as that to make treaties,
could not be affected by a resolution of the House of
Commons. But by rescinding the Standing Order
quoted above the House might to-morrow restore
the right of initiative in taxation to the generality of
its members. It is in its own wisdom that the
House has established the rule, and the wisdom is
beyond dispute. Limitation of financial initiative to
the Executive is one of the sheet-anchors of good
government. The balancing of revenue and expen-
diture is a nice and delicate operation ; only the
Executive can have the double knowledge needed

1 The words : " Or out of money to be provided by Parliament "
had to be added to the Order, because of a growing practice of
evading its spirit by moving a motion in such conditional terms.



MONEY IN PARLIAMENT 57

for it, of what is needed on the one hand and of how
much it will cost, and on the other hand of how
much the taxes are likely to yield. It is the Execu-
tive which has sole responsibility for the national
revenue and expenditure, and it is the Executive
which should have control over them. Its plans
once made must be rigidly adhered to ; were the
balance of revenue and expenditure liable to be
upset by any ill-informed, sudden, and compara-
tively irresponsible action on the part of a private
member, the nation's finances must soon fall into
wild disorder. It is easy to imagine the chaos
which would result were a fervent patriot able to
rise in his place and move the House, impromptu,
to build ten fresh battleships " out of money to be
provided." It is only too likely that in these days
of high-strung emotions Parliament might be
stampeded at times into some measure not much
less reckless, which would necessitate at a moment's
notice the immediate introduction of a fresh budget
and the review of the whole taxation for the year.
Against this we are protected by the necessity for
a recommendation from the Crown as a condition
precedent to any such proceeding.

There is another great mischief against which
the limitation protects both the House of Commons
and the taxpayer, one that was rife in the past
before the limitation became so absolute as it is
now. It protects them against the improper
appropriation of public funds by members for the
benefit of their constituencies. Formerly it was
possible and common for the member for Looton, it
might be, to move and carry the expenditure of
100,000 on a new harbour for his constituents.



$8 NATIONAL FINANCE

The present rule makes that impossible. All that
a private member can do of his own initiative is to
move a theoretical resolution that money might
profitably be spent on such an object, which
commits the House to nothing.

FINANCIAL PROCEDURE IN THE COMMONS

It is then for the Crown, represented by its
ministers, to demand such money as may be needed
for the public service, for the Commons to grant
it, and for the Lords to assent to the grant. 1
Provided with this clue, we may enter without
dismay the maze of parliamentary procedure in
matters of finance. We shall have a devious path
to tread. In the House of Commons, financial
procedure is planned upon no orderly or scientific
scheme. It has been evolved bit by bit to suit the
conditions and needs of the moment. Many of
those needs are long since past, and many of the
conditions are obsolete ; but the procedure devised
to suit them still remains, a meaningless ritual.
Hence it comes that the rules of the House
for financial business are full of fossils. Time
much needed to do the work of the twentieth
century is wasted on precautions against dangers
passed with the seventeenth. The meaning and
utility of much of the ritual is now no greater than
that of the annual search for gunpowder in the
cellarage. For this there is one change in the
course of our history that is chiefly responsible.
The years during which the procedure was being
worked out were the years of the struggle between
1 Erskine May.






MONEY IN PARLIAMENT 59

the Legislature on the one hand and the Crown on
the other. The chief care of the Commons was at
first to prevent the Crown from getting money
except through Parliament, and in later days to
prevent it from spending money on purposes
other than those for which Parliament had provided
it. Their procedure was planned to act as a check
on the Crown in the interests of themselves, the
economisers. But times have changed. The rule
of Parliament is established, and the power of the
Crown is gone. A check upon the Executive's
power over the purse is still needed by the Com-
mons as much as ever, but the Executive upon
whose power the check has to be exercised is now
not the Crown but its ministers responsible to
Parliament. Procedure planned to check the
Crown is out of date. It is a beautiful structure,
well worthy of a place in any museum ; but it
scarcely deserves the elaborate attention and praise
which it still receives, because for any practical
purpose in enforcing economy under modern con-
ditions it is misdirected. What we need in our
financial organisation in the twentieth century is
that the House of Commons should direct its atten-
tion to imposing checks upon the extravagance of
itself and its own ministers, and it is vain to allow an
undue veneration for the sacred principles of the
constitution to conceal that from us. Effective
checks are needed even more under the present
state of affairs than under that which saw the
growth of the present system in Parliament.
When the Executive was not responsible to Parlia-
ment, there was a natural antagonism between the
two which stimulated the Commons to act as keen



60 NATIONAL FINANCE

watch-dogs of economy, to guard the people's purse
against undue exactions and against waste. There
was the healthy parallelism and the division of
interests between spenders and economisers which
we have already noticed as one of the finest pre-
ventatives of extravagance. By the reduction of
the Executive to complete dependence on Parlia-
ment that parallelism has been removed. There is
no longer any antagonism to keep the Commons
on the alert, and they have drifted into becoming
themselves the great spendthrifts. It results that
much of what is of most historical interest in the
procedure of the Commons is now of least practical
value; much that was necessary while the House
was struggling to control the expenditure of the
Crown, now that the House is itself the motive
force in spending, is much needed, and is left un-
done. Obvious examples of these imperfections
will exhibit themselves unmistakably in the course
both of this and of the following chapters.

The whole structure of the nation's financial
system is not dealt with by Parliament every year.
That structure has two chief parts, revenue and
expenditure. Of these Parliament authorises
annually the whole of expenditure with a few
exceptions. The whole of the revenue system
with a few exceptions is authorised by permanent
statutes which need no annual renewal. That
those revenues are established by permanent
statutes in no wise removes them from the control
of Parliament. It is open to Parliament to repeal
any of the statutes whenever it pleases. That
part of expenditure which needs the annual and
recurring authorisation of Parliament is called



MONEY IN PARLIAMENT 61

expenditure on Supply Services, and the process
of its authorisation is called Supply. It includes
expenditure on the Army, Navy, and Civil Services.
That part of expenditure which is established by
permanent statutes is called expenditure on Con-
solidated Fund Services. It includes the charges
of the National Debt, payments to Local Taxation
Accounts, the King's Civil List, and a number of
special salaries, annuities, and pensions, including
all the expenses of the Courts of Justice.

Taxes imposed by permanent statutes include
all the principal headings of death duties, stamp
duties, customs and excise, and so on. The excep-
tions which are reserved for annual authorisation are
the income tax and the tea duty. One big direct and
one big indirect tax are thus kept within the more
immediate control of the Commons; and their
importance is so great in the annual scheme of
revenue that by controlling them the House con-
trols in practice the whole finances of the year.
By refusing to authorise them it could paralyse the
Executive. A good reason for the selection of
these two taxes in particular is that they are the
most variable; changes are made in them more
often than in others. Yet the other taxes are not
out of the control of the House. At any time it
may change or repeal the permanent statutes by
which they are established, and not seldom it does.
There is another means by which it can exercise
direct control over the whole revenue of the year.
Amongst the supply services voted annually are
the expenses of the departments which collect the
Revenue. By refusing to vote them the House
could bring those departments to a standstill and



62 NATIONAL FINANCE

prevent the Executive from collecting any revenue,
even that authorised by permanent statutes.

The annual and recurring financial business of
the House consists then of the authorisation of ex-
penditure on supply services, and of the re-imposi-
tion of the income tax and the tea duty. At the very
beginning of the annual session the ball is set roll-
ing. It is for the Crown as the head of the executive
power to demand money for the needs of the nation,
and this it does in general terms in the speech from
the throne, which is delivered as soon as ever the
House meets. After the usual observations about
the state of the Balkans, which are addressed to
both Houses, the ministers, speaking with His
Majesty's voice and in his name, inform the House
of Commons that the estimates for the expenditure
of the coming year will be laid before them in due
course. His loyal Commons address the King in
reply with their humble thanks, and so the business
begins. The House is now started on its double
task of deciding upon the expenditure of the year
and of providing funds to meet the expenditure
upon which it has decided. All expenditure, as we
have seen, has to be proposed by or with the
consent of the Executive. A proposal for expen-
diture comes to the House in the form of an
estimate, which is presented by the minister
responsible, for the department by which the
money included in the estimate is to be spent.
The manner in which the House receives and
discusses the estimate or any other proposal for
expenditure is governed in the first place by
certain Standing Orders, Nos. 67 and 69, which
provide that the House " will not proceed upon




MONEY IN PARLIAMENT 63

y petition, motion, or bill for granting any
money . . . but in a committee of the whole
House;" and that the House "will not proceed
upon any motion for an address to the Crown,
praying that any money may be issued or that
any expense may be incurred, but in a committee
of the whole House." The best reason for the
Orders is that they give the House time to realise
what it is about whilst it is getting into committee,
and so save it from being taken by surprise by
sudden proposals for expenditure. Another pre-
caution which the House has adopted for the same
purpose, to guard itself against surprise, is now
the subject of Standing Order No. 71, which pro-
vides that " if any motion be made in the House
for any aid, grant, or charge upon the public
revenue, whether payable out of the consolidated
fund or out of moneys to be provided by
Parliament, or for any charge upon the people,
the consideration and debate thereof shall not be
presently entered upon, but shall be adjourned"
to a future day, in short, and then referred to
a committee of the whole House before any
resolution or vote is passed. So whenever expen-
diture is proposed it has to be adjourned at least
once and then to be considered in committee.

COMMITTEE OF SUPPLY

After the King's speech has started the session,
the first step in financial business is the intro-
duction of the estimates, which are the executive's
demands for authority to spend the sums specified
therein on the specified purposes, Suppose that



64 NATIONAL FINANCE

the House has met in February. Then there will
be presented to it within the first fortnight or so of
the session the Army, Navy, and Civil Service
Estimates for the financial year which will begin
on the next first of April, with a memorandum
explanatory of each from the responsible minister,
and a statement of the variations on the estimate
for the current year. 1 For the Civil Service
Estimates the minister responsible is the Financial
Secretary to the Treasury ; for the Naval and Mili-
tary Estimates it is the First Lord of the Admiralty
and the Secretary of State for War respectively.
In the meantime the House has taken an important
formal step. Estimates according to the rule can
only be considered in committee ; so immediately
after the address in reply to the gracious speech
the House has resolved that on a given day it will
resolve itself into committee to consider the Supply
to be granted to His Majesty, and has ordered that
the estimates presented be referred to the committee.
Thus is the committee brought into existence in
which practically the whole of the financial business
of the session will be transacted. It is one of the
fossils in the procedure of the House that the
Committee of Supply, once stopped, cannot be
started again without a fresh message from the
Crown, a rule which necessitates some waste of
time and print in formal applications for leave to
sit again whenever the Committee has finished a
day's work.

1 It is to be observed that the comparison in these estimates
is with the sums granted in the ordinary estimates for the preced-
ing year, not including sums granted in Supplementary Estimates,
which have no been passed by the House at the time at which
these estimates are prepared.




MONEY IN PARLIAMENT 65

The Committee of Supply is a committee of the
whole house, which means that it is the House of
Commons under another name. It is presided
over by a chairman instead of the Speaker, and
members are set free happily to talk as often as
they like upon a motion, instead of only once as
at other times. Otherwise there is no material
difference between the House as House and the
House as Committee of Supply. When the day
comes round on which the House has resolved that
it will go into Committee of Supply to consider, it
may be, the Army estimates, a motion is made
"that Mr. Speaker do now leave the chair." This,
the means by which the House gets itself into
committee, at once runs the financial business out
of its forward course and aground on another fossil
embedded in procedure. It is one of the sacred
principles of the constitution that grievances pre-
cede Supply. Before money is granted to the
Crown, the Crown must listen to its subjects' com-
plaints and promise them their quid pro quo. The
rule, vital in the sixteenth century, is meaningless
now that Parliament holds the remedy for grievances
in its own hand. It serves merely to provide an
occasion for a debate of a general character on
some question of topical interest.

Members ballot for precedence for their motions
on this occasion. Only one vote is taken on the
debate : if the mover of the first motion does not
divide the House, then the next motion in order of
the ballot can be considered ; but a division ends
the discussion, and the Speaker leaves the chair.
The subject matter of the " grievance" motion
must have some relevancy to the estimates to be

F



66 NATIONAL FINANCE

considered. Thus the debate covers some of the
ground which must be covered afterwards in com-
mittee ; and its utility, now that its constitutional
purpose no longer exists, is very questionable.
The best thing that can be said for it is that it gives
a private member one of his few chances of raising
a subject and of bringing a minister to book over
an abuse, since the choice of subject depends on
the ballot and not on the whips. In any case not
so much time is now spent on these debates as of
old. Grievances no longer precede Supply when-
ever the House goes into Committee of Supply.
The debates are limited by the Standing Orders to
the three occasions on which the Speaker is first
moved out of the chair for the committee on the
Navy, Army, and Civil Service estimates respec-
tively. With the " grievance " debate safely ended,
the House is in committee and the financial business
of the year is under way.

When the Committee of Supply sits for the first
time to consider either the Navy or the Army esti-
mates, a general statement is made by the respon-
sible minister on the whole of the estimate, and a
full-dress debate is held thereof. We have already,
in the last chapter, considered in some detail the
form of the estimates presented to the Committee.
It is enough here to remind ourselves that they
are divided into Votes, each of which specifies a
service and the sum of money to be spent upon it.
These are put to the Committee, Vote by Vote, in
the form of such a motion as "that a sum not

exceeding be granted to his Majesty to defray

the expense of such and such a service, which will
come in course of payment during (the next




MONEY IN PARLIAMENT 67

financial year)." These motions the House discusses
and the dissatisfied move amendments. No private
member, it will be observed, can of his own initia-
tive move an increase in a Vote ; that would
require a recommendation from the Crown. If the
house desires to increase a Vote, the originaHesti-
mate must be withdrawn, and a revised estimate
introduced by a Minister. But a private member
may move the reduction of a vote, for such a motion
imposes no charge on the public, and that is in fact
the only form of amendment that can be made.
Any member indeed may at any time move the
reduction of any charge, tax, or proposed expendi-
ture. A motion of the sort need not be made in
Committee, because the need for the preliminary
committee stage applies, according to the Standing
Orders, to the issuing of money or the incurring of
taxation only; it applies, that is, only to the
increases of charges on the public, not to their
diminution.

The Committee of Supply can vote the grant
proposed to it, or refuse it, or reduce it. It cannot
annex a condition or alter the destination of a
grant, because that might be to propose in sub-
stance a new grant. When it has acted as seems
best to it within those limits, the Chairman reports
to the Speaker the progress which has been made,
and it is ordered that the report be received on a
future day and, to keep the Committee alive, that it
have leave to sit again. That future day having
come, probably after several adjournments, a motion
is made that the House doth agree with the Com-
mittee in the resolution to which it has come. This
is the Report stage, on which the whole matter can be



68 NATIONAL FINANCE

debated over again, when members have forgotten
most of what took place in Committee. Finally,
after that second debate, the House in due course
agrees with the Committee's resolution, and so the
work of the Committee is perfected. Thus the
House as House has to rediscuss and approve the
resolutions which it has itself made as Committee.
Certainly the process secures ample formality in
the high matter of the authorisation of expenditure :
whether it be not too ample there may be some
reason to doubt.

It is to be observed that the sum voted in Com-
mittee of Supply for each Vote of the Estimates is
a net sum : it is the gross sum required for the
service of the vote, less the sum to be appropriated
in aid of that service out of the minor receipts of
the department, as specified in the estimate. The
distinction is of some importance. Acording to a
ruling of the Speaker, a member may not in supply
move the reduction of an Appropriation in Aid.