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Home -> E. Hilton Young -> The System Of National Finance -> IIIa

The System Of National Finance - IIIa

1. Preface

2. I

3. Ia

4. II

5. IIa

6. III

7. IIIa

8. IIIb

9. IV

10. IVa

11. V

12. Va

13. VI

14. VIa

15. VIb

16. VII

17. VIII

18. VIIIa

19. VIIIb

20. IX

21. IXa

22. X

23. Xa

24. Xb

25. XI

26. XIa

27. XII

Any good reason for this state of affairs it is difficult
to see, when a member may move the reduction of
the grant itself; but so it is. The effect of the rule
is wholly to remove the gross sum estimated, for a
Vote from the control of Parliament. All that
Parliament controls is the net expenditure.
Legally the rule is based upon the wording of the
Public Accounts and Charges Act of 1891, by which
the system of appropriations in aid was established.
According to the wording of the Act it is for the
Treasury to appropriate the receipts in aid of the
votes, and that is considered to remove the matter
from the sphere of influence of the Committee.
Such a result, it may be suspected, was never


contemplated when the Act was passed. It has
been argued that a motion to reduce the net amount
to be granted out of the Exchequer for a Vote
serves the same purpose as a motion to reduce the
Appropriation in Aid. In most cases the argument
holds good, because the Appropriation in Aid is a
small affair in comparison with the total amount of
the Vote ; but in theory the argument is certainly
unsound. Suppose that an Appropriation in Aid is
big enough to cover the whole amount of a Vote ;
then the Committee of Supply, which cannot move
to reduce the Appropriation, has no means of
controlling the Vote at all. Cases of the sort do
exist : one is to be found in the Vote for the Army
Ordnance Factories. The factories are run as if
they were a commercial business : they supply
goods to the Army and Navy and receive payment
for them from the departments. Payments re-
ceived are treated as Appropriations in Aid, and
equal the expenditure included in the Estimates for
the factories. To bring the estimate before Parlia-
ment, a nominal sum of 100 is added to the esti-
mated expenditure in excess of the Appropriations
in Aid, and that is voted as an Exchequer Grant.
But if those responsible for the estimate were to
present it to the Committee of Supply without that
nominal addition and with Appropriations in Aid
equal to expenditure, the Committee would be de-
prived of all control over the estimate of any sort.
Appropriations in Aid may be a small affair in
practice, but in theory the inability of the Com-
mittee of Supply to deal with them makes a breach
in the rotundity of its control of finance. There is
much to be said for their abolition and for the


payment of all sums so received straight into the
Exchequer Account in the same manner as a part
of them are now. It would close a breach in the
Commons' defences : it would do away with an
exception to the admirable rule that all receipts
are to be paid into a single account, the Exchequer
Account, and to be paid out only under authority
of Parliament. It would thus promote simplicity,
both in the form of estimates and in that of accounts.
Against this it is commonly argued that to pay the
receipts in question into the Exchequer Account
and out again would swell the apparent revenue
and expenditure for the year by cross entries of an
artificial sort, and so give a false idea of the nation's
actual incomings and outgoings. It is not easy to
see the force of this argument. Minor receipts of
the departments are as much revenue as the big
collections of the Revenue Departments proper.
It is true that they are not strictly speaking taxes,
although a great part of them are fees, which are
much the same thing. No doubt it is desirable that
the taxpayer should be able to see at a glance in the
annual accounts just how much he is paying in
taxes ; but that purpose would be adequately served
by a footnote to the annual Exchequer Account,
stating the deduction to be made from the total
receipts on account of minor receipts by the
departments not in the nature of taxation. It is
also argued that, unless allowed to appropriate
their minor receipts in aid of their expenses the
departments would have no inducement to realise
them. But the great revenue departments have no
such inducement to be diligent in the collection of
revenue, and nobody suggests that, lacking it,



ey neglect their duties. The contention merely
underrates the efficiency of the Civil Service.
To the external critic the arguments against
appropriation in aid must seem to have the best
of it : to the minds of those engaged upon the
work of administration there must appear great
advantages in a system which leaves these sums
in the hands of the departments and at their

Such is the history of a single vote in Com-
mittee of Supply. There are some 150 Votes in
the estimates to go through the process, so that
an alert Opposition has plenty of scope for its
activities. It is the object of the Opposition in
the party game to see that the Government makes
as little progress as possible with its legislative
programme, and a good way to hinder it is to
spend as much time as possible on the routine
financial business of the session. Were unlimited
discussion of every Vote to be allowed, an obstruc-
tive Opposition could take up the whole session
very contentedly with Supply. To prevent that the
time to be spent upon Supply l is limited by the
rules of the House to twenty days. For eighteen
days the House may discuss away, but the nine-
teenth is a day of judgment. On that day all
outstanding votes have to be passed in Committee.
On the twentieth day all remaining Report stages
have to be worked off. However little progress
has been made in the eighteen days, on the nine-
teenth the matter must be brought to a conclusion.

1 Including Votes on Account and procedure in Committee of
Ways and Means and on Reports, but not including " grievance "
debates and supplementary estimates.


In practice the employment of the allotted days is
not left altogether to chance. The whips arrange
that certain votes shall be selected for discussion
which will give each party an opportunity to raise
matters of special interest to it. If matters of
special importance turn up in the course of the
Session which can best be discussed in Committee
of Supply, the ministry can increase the number
of allotted days by three. Under modern con-
ditions small progress is commonly made with the
detailed consideration of the estimates before the
axe falls on the last day but one of the allotted
days. Between a third and a half of the total
expenditure for the year is often voted then in an
hour or so, without any sort or kind of debate or
criticism. A more unsatisfactory state of affairs
could hardly be imagined. It reduces the whole
laborious process of the control of expenditure by
the House to something of a farce. In particular
the elaborate arrangement for the reconsideration
of every vote on Report is exhibited as mere waste
of time. It is obviously absurd to consider some
votes twice over, when so many are not discussed
at all. The time spent upon the Report stages of
Supply resolutions (which is not, however, much)
might well be saved for the discussion of one or
two of those Votes which are now passed undis-
cussed under the closure ; and the same may be
said of much of the time spent on other formal
business in connection with finance which remains
to be described.



In the Committee of Supply the House considers
a part of the programme of expenditure for the
following year and authorises it all. But it has not
discharged thereby the whole of its financial
functions. It has decided that the sums asked for
shall be granted, but it has not decided how they
are to be provided. There is, indeed, only one way
in which they can be provided, and that is by
issuing them out of the Consolidated Fund, which
is the fund into which the whole public revenue is
paid ; so that the distinction may seem a subtle
one. But it is important enough, according to the
procedure of Parliament, to necessitate a distinct
and parallel series of resolutions. They are dealt
with in another committee, the Committee of Ways
and Means, which is the House under yet another
name. At the same time as the Committee of
Supply is originated, immediately after the Gracious
Speech, and in the same way, the Committee of
Ways and Means is brought into being " for raising
the Supply to be granted to his Majesty," and
thereafter its procedure in the whole elaborate
process of renewals and Report stages is the same.
The work of the Committee is to provide money to
meet the grants which have been authorised. The
Committee of Supply is concerned with expendi-
ture; this other committee is concerned with
revenue. Its first business, and its only real
business, is to hear and discuss the proposals of
the Chancellor of the Exchequer for the provision
of funds to meet the grants voted in Supply and


to take action thereon. Accordingly as soon as
the Committee of Supply has voted a grant for the
ensuing year the Committee of Ways and means
meets, and the Chancellor proceeds to unfold to it
his scheme for meeting the whole expenditure to
be granted. That is the Budget, the pith and
centre of the year's finance. It estimates the
revenue to be received from existing taxes. If the
estimated revenue exceeds the estimated expendi-
ture, the Chancellor may propose a reduction in
taxation or indicate new services on which the
Government proposes to spend the surplus. If the
estimated revenue shows no surplus but a deficit,
he must suggest new taxes or the increase of old
ones to provide the additional revenue needed. His
scheme for the adjustment of revenue to expendi-
ture is of course the scheme of the Ministry and
its party, and its rejection in any matter of funda-
mental principle would cause the Ministry to fall.
But as regards its detailed provisions there is a
wise understanding in the party game that the
Government is to have a certain freedom to accept
criticism, and even defeat, without considering the
question of its existence involved. The matter
may.best be summarised in the words of Lord John
Russell, that " questions of taxation are questions
upon which the House of Commons, represent-
ing the country, have peculiar claims to have their
opinion listened to, and upon which the executive
government may very fairly, without any loss of
dignity -provided that they maintain a sufficient
revenue for the credit of the country and for its
establishments reconsider any particular measure
of finance they have proposed." The liberty


applies to questions of taxation only, not to
questions of expenditure. A direct defeat of the
Government in the Committee of Supply must
involve its fall. The reason is clear: if the
Government be refused leave to get money in one
way, it can make some alternative proposals ; but
if it be refused leave to spend money on some
service which, by the fact that it has proposed it,
it has guaranteed to be essential, there is no
alternative and the matter is irremediable.

As already mentioned, authority for collecting
the greater part of the taxes is derived from
permanent statutes and needs no annual re-enact-
ment. The tea duty and income tax alone need
that; so unless the Chancellor has increases,
reductions, or alterations in permanent taxes to
propose, when the Committee has heard and
discussed his Budget statement in a full-dress
debate about the burning questions of high financial
policy, all it has to do is to re-enact the tea duty
and income tax, and the revenue system for the
coming year is then complete. Resolutions are
proposed to it re-enacting them, and if any amend-
ment is needed in the existing law of taxation that
is also embodied in a resolution. It is the meeting
of the Committee of Ways and Means to consider
the first of these resolutions that, technically speak-
ing, is the occasion of the Budget statement. The
resolutions may be discussed and amendments
moved, but a private member cannot propose an
increase of taxation or move an amendment that
would have the effect of upsetting the whole
balance of the year's finance. When the Committee
of Ways and Means has dealt with the resolutions


and they have been reported, its practical work is

But not its formal work. It is the function of
the Committee not only to authorise such taxes as
need authorisation but to say also how the credits
granted in the Committee of Supply are to be met.
To cover the Supply resolutions which grant sums
to defray expenses in the ensuing year Ways and
Means resolutions must be passed saying how
those sums are to be provided. When the Com-
mittee of Supply has got the estimates voted, the
House transforms itself into a Committee of Ways
and Means and authorises the issue of money to
meet the supply. The votes in the Committee of
Supply have their echo in the Committee of Ways
and Means, in the form of motions by a minister
" that towards making good the supply granted to
his Majesty for the service of the financial year, the

sum of [corresponding to the sums voted in

Supply], be granted out of the Consolidated Fund
of the United Kingdom."

The Consolidated Fund, as has been explained,
is the fund into which the proceeds of all taxation
must be paid. It is the Committee of Ways and
Means that controls it, providing for its refreshment
by new taxation and for its employment by the
motions authorising issues therefrom. Since, as
already mentioned, the income of the Fund from
permanent taxation is inadequate to meet the
annual charges, the Ways and Means Committee
by its control of the income tax and tea duty
makes itself responsible for the whole scheme of
annual finance.

The sums voted in the Committee must never


exceed the sums previously voted in Supply, and
therefore the final authorisation of the Ways and
Means resolution in the Report stage must not
precede the Report stage of any of the Supply
resolutions on which it is based. Theoretically
there may be discussion on the motions in the
Committee of Ways and Means, and amendments
may be moved to reduce the amount to be issued,
but not to increase it, because that, as an increase
of the charges on the public, can come only from
the Crown. Actually the proceedings are almost
always purely formal. What then is the value of
this step in financial procedure? Historical
interest it may have, as a relic of the.time when the
House was concerned to put every possible check
upon an independent Executive. Practical value,
now that the responsibility of the Executive to
Parliament is secured, it would seem to have none.
Once the income tax and tea duty have been
voted, the procedure in Ways and Means adds
nothing to what has been done in Supply. It
secures no additional consideration for the Votes :
the practical content of the two series of resolutions
in Supply and in Ways and Means is exactly the
same. The control exercised by the Committee of
Ways and Means over the Consolidated Fund
might be exercised with equal efficiency by the
Committee of Supply through its own ordinary
resolutions. The two series of resolutions might
readily be combined into one, and their reduplica-
tion is now nothing but a waste of time. The
procedure, moreover, is a little absurd. As it has
been said by a sufferer from the delays which it
entails, it is as if a man were to make it a habit,


when he has 'drawn 'a cheque upon his bankers,
always to call a family meeting to decide whether
the cheque ought to be honoured or not.


At the point at which we have arrived in the
procedure of the House, the estimated expenditure
has been approved in Committee of Supply, and
re-approved on the Report of Supply, and approved
a third time in Committee of Ways and Means, and
a fourth time on the Report of Ways and Means,
and yet it has still a long road to travel before it
is out of the wood. So far it has received the
approval of the House of Commons only; and the
House of Commons, for all its exclusive privileges
in matters of finance, cannot give a financial
proposal the force of law by means of its own
resolution alone. Every financial resolution of
the House of Commons before it becomes law
must be presented to the Lords for their assent
and to the Crown ; and for that purpose it must be
embodied in a bill and pass through all the regular
stages of first reading, second reading, committee,
report if necessary, and third reading, both in the
House of Commons and in the House of Lords,
and lastly it must be presented for the Royal
assent. Money bills the purpose of which is to
give the force of law to financial resolutions of the
House of Commons are based upon the resolutions
in Committee of Ways and Means. Since the
Committee passes two sorts of resolutions there
are two sorts of bills. There is first of all a bill
based upon the resolutions re-imposing the tea


duty and income tax. This is the Annual Finance
Bill. Auxiliary to that there is a bill called the
Revenue Bill, giving legal authority to any resolu-
tions passed for the amendment of the revenue
laws. These two are passed through all their
stages as soon as may be in the Session. They
are the statutory basis for that part of the
revenue system which needs annual re-enactment.
Secondly there is a bill based upon the Ways
and Means resolutions, which authorise the issue
of sums out of the Consolidated Fund to meet
the grants in Supply. This is called the Ap-
propriation Bill, 1 and it is passed towards the
end of the session, when all the business of the
financial committees has been got through. It
is the keystone of the financial arch. It gives
statutory authority to the resolutions for the issue
of money out of the Consolidated Fund, and it
confers certain powers upon the Treasury to
borrow in anticipation of revenue. But it does
more. The Ways and Means resolutions are
general : they authorise the issue in a lump sum of
the amounts granted in Supply. The Appro-
priation Act takes the lump sum and splits it up
as voted in Supply, appropriating the sum granted
for each Vote of the estimates to the services of
that Vote, and thus making it illegal to spend it on
any of the services of any Vote other than that to
which it is appropriated. Schedules are appended
to the Act in which the Votes of the Estimates are
set out in detail, with the sum granted for each and
the amount of the minor sums to be received by
the departments which may be appropriated in
1 Earlier Consolidated Fund bills are dealt with later,


aid of the expenditure on each Vote, and it is
enacted that "all sums granted by the Act as
appears by the schedules are appropriated for the
services and purposes therein expressed." The
amount the expenditure of which is thus authorised
and appropriated by the Bill must not of course
exceed the total supply granted, and it is the
business of the Speaker, acting through the Public
Bill Office of the House of Commons, to see that it
does not. The second reading of the Bill provides
one of the rare opportunities still left to the House
for a debate in which it is in order to raise
practically any matter in heaven or earth or the
waters under the earth. Before this very general
discussion begins, the party whips give private
notice what matters are likely to be raised, and the
ministers concerned attend. When the discussion
is well over and the bill has been presented by the
Speaker for the Royal assent, and has received it,
the financial legislation of the year as far as
Parliament is concerned is complete.

So far we have dealt with the financial
procedure of Parliament in its essentials only ;
and it will have been seen that there is no lack
of formality about it. And yet for all the formality
year by year the greater part of the year's
expenditure is passed uncriticised and undiscussed.
Something has already been said of the inutility of
the Report stages and of the whole procedure of
the Committee of Ways and Means, except that
which is needed for the discussion of the Budget
and the renewal of the income tax and tea duties.
Much the same criticism may be directed also


against the formal business of confirming the
Commons' resolutions by acts of Parliament.
While the Lords had a right, however disputable,
to reject money bills, those bills could no doubt
not be dispensed with.

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