Canada: Understanding The 2005 Budget Enactment Process

Events in recent months have increased the profile of the federal budget enactment process and raised questions among taxpayers about how, in fact, legislators implement budget day announcements. In this Perspective, we provide a step-wise outline of the budget enactment process and describe where and how the process can be accelerated or delayed. We also comment specifically on the 2005 federal budget, which was announced on February 23, 2005 by Finance Minister Goodale, including the proposed repeal of the foreign property rules.

Budget measures are typically announced in a speech in the House of Commons ("Commons") by the Minister of Finance. A typical budget includes both spending measures and tax measures. The budget speech is almost invariably accompanied by a Notice of Ways and Means Motion in respect of tax measures. Tax measures can also be announced in the Commons outside of the budget speech or outside of the Commons by way of press release. Spending measures are usually tabled in a separate Ways and Means Motion. Ways and Means Motions are now merely a formality required in respect of taxing and spending legislation and are not debated.

The budget measures are incorporated into draft legislation in one (or more) bills. The bill(s) set out precisely the proposed statutory language that, if enacted, will become law. Bills must be given three readings to be passed by the House of Commons.

The formal legislative process for the budget is initiated by introducing a bill implementing the budget measures into the Commons. The bill is given first reading without debate after adopting the Notice of Ways and Means Motion. The 2005 budget measures are (or will be) contained in three separate bills:

(a) Main Budget Bill (C-43) – This includes the spending measures announced in the February budget and the foreign property changes (as well as certain other significant tax changes) and was introduced into the Commons on March 24. It received second reading approval (as discussed below) by a substantial majority of the Commons (including the Conservatives) on May 19.

(b) NDP Spending Bill (C-48) – The NDP spending measures, which were not part of the February budget, were included in a separate bill that also received second reading on May 19. It is this bill that was passed only as a result of the vote cast by the Speaker.

(c) Tax Measures Bill – The tax measures not included in the main budget bill will be included in a separate bill. No announcement has been made regarding when this bill will be introduced into the House of Commons.

Second reading is approval in principle of the bill, without detailed consideration of its specific provisions. If a bill receives second reading approval, it is referred to committee for review.

The normal committee for the review of both spending and tax measures is the House Standing Committee on Finance. Alternatively, such measures could be referred to the Committee of the Whole, which is comprised of all members of the House of Commons sitting in committee. Bills C-43 and C-48 have been referred to the House Standing Committee.

The House Standing Committee is required to review a bill in its entirety. Thus, the size and complexity of a bill will be a significant factor in the length of time of the review process. A bill can be approved by the House Standing Committee and referred back to the House of Commons with or without amendments. Bill C-43 was approved by the House Standing Committee on June 7 with amendments and referred back to the Commons on June 8.

Third reading is the stage at which the Commons formally approves a bill. At this point, there is no obvious reason why Bill C-43 will not receive third reading before the House of Commons recesses.

The Senate follows the same Commons process of first, second and third reading plus separate committee review by the Senate Committee on Finance. There are three significant observations to be made about the Senate review process:

(a) Length of Process - As in the Commons, the length of time required to move a bill through the three readings in the Senate will depend to a significant extent on the size and complexity of the bill.

(b) Amendments - Where the Senate Standing Committee on Finance refers a bill back to the Senate with amendments and the Senate approves those amendments, the bill must go back to the Commons. The House of Commons must concur with the amendments, if the bill is to be enacted. This occurred, for example, to the bill to enact the GST.

(c) Liberal Majority - The Liberals have a majority in the Senate and also in the Senate Standing Committee on Finance. The Liberal majority means that there is a reasonable possibility that the Senate will deal with Bill C-43 expeditiously and without proposing amendments. It is more likely that the Senate will engage in procedural wrangling over the NDP spending bill.

Once passed by both houses of Parliament, a bill must receive Royal Assent to become law. Royal Assent is approval of the Crown, which in practice is never refused. It is given by a Supreme Court Justice, acting as Deputy Governor General. A law typically comes into force upon Royal Assent. However, specific provisions may have retroactive effective dates (and tax measures frequently do). Some bills or provisions thereof are specified by their terms to come into effect after Royal Assent, upon proclamation. Proclamation is an act of the Governor-in-Council, who is the Governor General acting upon the advice of the Cabinet.

A Parliament is constituted in a general election and it sits in one or more sessions during the term of that Parliament (i.e., between general elections). A session commences with a Speech from the Throne and ends when it is prorogued, both of which are prerogatives of the government. There are several points to note about sessions:

(a) A session can be interrupted in either the Senate or the House of Commons by a recess. A recess of either of the Houses of Parliament can occur at any time. The 2005 summer recess normally would commence June 23. However, a recess date for a House can be changed by a decision of that House, and the recess advanced or delayed. One House can recess while the other continues to sit.

(b) A session is ended when an election is called. It can also be ended by being prorogued by the Governor General, acting on the advice of the government.

(c) Where a session is prorogued, any pending bill (customarily referred to as being "on the order paper") that has not received the approval of both Houses dies. If the same bill is reintroduced in the next session, the full process of three readings in both the Commons and the Senate commences from the beginning, absent agreement of all parties to reinstate a bill at the stage it was at when prorogation occurred.

(d) If a bill which has received the approval of both the Commons and the Senate in a session does not receive Royal Assent before the session is prorogued, the bill also dies. However, this is an unlikely event. Where a session is about to be prorogued, Royal Assent can normally be expected to be given to any bills approved at the last minute by the House of Commons and the Senate.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.