While the media and most of the public are immersed in the spending irregularities of four Senators, the Senate is actually doing some important work, which is going completely unnoticed. A case in point is Senator Wilfred Moore’s Bill S-217 “An Act to amend the Financial Administration Act”, which would require Parliamentary approval for any new borrowings by the federal government in financial markets.

Most people probably believe that the government has to get the approval of Parliament to borrow money. This was true up until 2007 when, in the 2007 Budget, the government eliminated the requirement through its first budget omnibus bill. The success of this omnibus bill in reducing Parliament’s authority no doubt contributed to the government’s proclivity to use ever expanding omnibus bills in future budgets.

Prior to 2007, authority to borrow in financial markets was provided in the Financial Administration Act (FAA).  Under the FAA, the Minister of Finance had standing authority to refinance the government’s existing market debt.  However, the Minister had to seek authority from Parliament to issue any new debt beyond an existing $4 billion of non-lapsing borrowing authority.  A Borrowing Authority Bill was viewed as a “money bill” and therefore regarded as a “vote of confidence”, and would result in the defeat of the government if not approved by Parliament.

The need to obtain Parliamentary authority for new borrowings increased Parliament’s oversight over government’s finances and improved the transparency of government finances to Parliament and the public at large.  Why would a government, who got elected by promising greater accountability and transparency, want to get rid of the borrowing requirement provision in the FAA and why would it do so in a completely non-transparent manner? The answer to that question is pretty obvious.

In Budget 2007, the Minister of Finance proposed “to amend the FAA to provide for greater transparency and accountability regarding the government’s borrowing activities and increase flexibility to meet future borrowings needs, especially with respect to the consolidation of Crown corporations” .  Minister Flaherty  went on to say, “With this enhanced transparency and accountability, the Government proposes removing the existing statutory limit on borrowings”. The same wording was repeated in Annex 3 “Debt Management Strategy 2007-08”, with no further details.

Few people knew what this meant and those who thought they did, were on the mistaken belief that the changes related solely to the consolidation of borrowings for three Crown corporations (Business Development Bank, Canada Mortgage and Housing Corporation and the Farm Credit Corporation).   At the time of the 2007 Budget, none of the opposition parties in the House of Commons or the Senate realized what these proposed changes really entailed.

However, it became somewhat clearer when the Minister of Finance tabled the Budget Implementation Act 2007 Bill C-52 – the first of the current Government’s many omnibus budget bills.  The Act proposed replacing the requirement for the government to obtain Parliamentary approval for new borrowings and giving that authority to the Governor-in-Council.  However, no issues with respect to this change were raised in the House of Commons or the Senate. It was only after Bill C-52 received Royal Assent that Senator Tommy Banks discovered that Parliament no longer had the  authority to approve the government’s incremental borrowing requirements.   Since then, Liberal members of Senate have attempted to restore Parliament’s control over new borrowing authority by introducing amendments to the FAA.  In a debate in the Senate on June 10, 2008 on Bill S-236 (An Act to amend the Financial Administration Act – borrowing of money), Senator Lowell Murray stated “whenever one hears the words transparency, flexibility, simplified, or streamlining from a government official, one knows that they are arrogating themselves more authority and discretion and that they are cutting someone out of the action. In most cases, the body they are cutting out of the action is Parliament and that is the case with this bill”.  . 

Vagueness and obtuseness have continued in successive budgets, with details provided in the omnibus budget bills.  The real budget has now become the budget omnibus bill.  This undermines the credibility and transparency of the budget and requires much more due diligence in assessing budget proposals. 

Bill S-236 died on the order paper with the election of October 2008.  Senator Moore, however, has taken up the cause with Bill S-217. His bill would restore the requirement that Parliamentary approval is necessary for any new borrowing needs.

The Senate should vote to send this bill to the House of Commons for debate. The chances, however, that this Bill will receive approval from the Senate, let alone the House of Commons, are non-existent.  The Conservatives control both chambers and will thwart any attempt to restore the old provisions of the FAA.  However, it is hard to understand why Parliamentarians would not want to restore their authority over government finances.

Some would argue that the government needs flexibility in its borrowing needs to react to sudden changes in the economic environment and the consequential impact on the government’s finances.  They argue that the government needed this flexibility to introduce the stimulus action plan proposed in Budget 2009. However, at the time of the 2007 Budget, no one foresaw the oncoming of the 2008 financial crisis, certainly not Minister Flaherty, who denied the existence of an economic slowdown as late as the November 2008 Economic and Fiscal Update. 

Since Confederation, successive governments have always been able to obtain Parliamentary approval of borrowings in time to meet their increased borrowing requirements. The Budget was tabled on January 27, 2009, two full months before the end of the fiscal year. This would have allowed for more than enough time to introduce and pass a Borrowing Authority Act prior to the beginning of the new fiscal year, as well as any unanticipated requirements for 2008-09.  Increased borrowing approval of over $100 billion for 2009-10 was provided through a Governor-in-Council order. There was no debate on this record requirement in Parliament. 

The Government argued that it needs this flexibility to provide for the borrowings of the Crown corporations.  However, Crown corporations are required to submit their corporate plans to the Government for approval before the start of the fiscal year.  Therefore, the government has the required information well in advance and could include these requests in a Borrowing Authority Bill.

Others argue that a Borrowing Authority Bill is only required when the government needs incremental borrowings, over-and-above the $4 billion statutory limit.  Prior to 2007-08, no Borrowing Authority Act has been presented to Parliament since 1996-97, given the long period of successive surpluses.  During this period, Parliament only debated and approved the Budget and related bills.  So what is the big deal with having no Borrowing Authority Act now?  The FAA states that no new spending can be undertaken without Parliamentary approval.   It was a major accountability document to Parliament and set out new financing requirements in an extremely transparent manner.

This change to the FAA now allows the government to obtain incremental borrowing authority without a budget.  No economic or fiscal context is required. The government can obtain incremental borrowing authority by Governor-in-Council any time during the course of the year, without going to Parliament to explain why or to seek authority.  In the United States, approval from Congress is required to increase the debt ceiling.  

The elimination of the borrowing provision in the FAA has also allowed the government to delay the timing of a budget.  Without the requirement to go to Parliament to seek incremental borrowing authority before the start of a new fiscal year, the budget can be delayed as long as possible.  The Borrowing Authority Act required, through convention, a current economic and fiscal update, which was provided in the budget.  This required that a budget be tabled in early to mid-February in order to allow sufficient time to pass the Borrowing Authority Act before the start of the new fiscal year.

In 1985, the Senate Standing Committee on National Finance delayed the passage of the Borrowing Authority Bill for fiscal year 1985-86, arguing that there was no current economic and fiscal context for that Bill, as no budget for 1985-86 had been tabled.  With no requirement to table a Borrowing Authority Act, budgets are being tabled later, leaving less time for Parliament to debate the budget and budget bills.  It has also meant that there is no direct link between the budget and the Main Estimates, which must be tabled on or before March 1st, according to current “supply” rules.  Main Estimates are currently being linked to the last Economic and Fiscal Update and not the budget for the upcoming fiscal year.  This results in a mismatch between the budget and Main Estimates.  Parliamentarians are being asked to approve Main Estimates without knowing the full impact of the budget measures on these Estimates.  Parliamentarians and Canadians are missing important pieces of information when reviewing Main Estimates. 

The Government has argued that the changes were primarily made for greater transparency and accountability.  It did neither.   Instead, it removed an obstacle for the Government and removed an important accountability tool from Parliament.

Parliament is worse off and so are Canadians.