Thread by @tim4hire

(🧵) For no particular reason, a basic primer on "supply" or how the government is able to spend money.

1/

It is a constitutional requirement that Parliament approves all government spending. Moreover, bills authorizing spending (or imposing any tax) *must* originate in the House of Commons (other bills can start in the Senate; regardless, both Houses must approve).

2/

Moreover, the opposition (and backbench MPs) cannot force the government to spend money on anything; the government must also approve the spending. This is done by requiring a Recommendation by the Governor General (who acts on the Government's advice) on any money bills

3/

There are two ways that Parliament authorizes supply (appropriating funds for the government to spend). They are commonly called "appropriation Acts" and "statutory appropriations". Both involve the enactment of legislation by Parliament.

4/

Appropriation Acts follow a special parliamentary procedure, which take precedence over other parliamentary matters. As a result, they typically are enacted quickly (although sometimes after a marathon sitting day to vote on the various items).

5/

Appropriation Acts are also referred to as "Estimates". Their purpose is to authorize a maximum amount of spending that can be made in various broad categories during a fiscal year. It does *not* break proposed expenditures down to a very granular level, however.

6/

Estimates are often broken down by "vote" and by department/agency. The vote would be for things like "operating expenditures" (vote 1), "capital expenditures" (vote 5) and "grants and contributions" (vote 10). There is also be a "contingency" vote that is government-wide.

7/

An important feature of an appropriations Act is that it is normally only valid for a specific fiscal year. If the government doesn't spend the full amount appropriated by March 31 (fiscal year end), any unexpended amount "lapses" and cannot be spent in the following year.

8/

To ensure the government has funds at the start of a fiscal year, "interim estimates" are always enacted before the end of March. Interim estimates are for the first 3 months of the fiscal year.

9/

"Main Estimates" are also introduced in March (usually around the same time as the interim estimates), and cover the bulk of appropriations planned for the full fiscal year. Unlike interim estimates, Parliament takes more time with this bill, and enacts it by end of June.

10/

Usually, the main estimates are prepared before the federal Budget, and so will not take into account any changes in budgetary policy. As a result, a "supplementary estimates" is required to include those changes. This is usually called "Supp. Estimates A".

11/

While the Budget is the main vehicle for making and announcing decisions on budgetary policy, additional decisions are often taken outside of the budget cycle (sometimes because they can't wait, sometimes for political reasons).

12/

In addition, there can be spending adjustments due to unexpected events or developments. As a result, additonal appropriation Acts are generally required, a "Supp. Estimates B" (in December) and a "Supp. Estimates C" (in March).

13/

All of the above is premised on Parliament being in session during the relevant periods. There are two reasons why Parliament might not be in session: either it has been prorogued or it has been dissolved.

14/

During a prorogation, supply cannot be authorized. As a result, the government is limited to what has already been approved by Parliament.

15/

As there is no supply for 2025-26, this means a prorogation beyond the end of March would mean the government would run out of funds. As such, it would have been irresponsible, and likely a constitutional crisis, for the Governor General to prorogue that long.

16/

Dissolution (which means a general election has been called), is a different matter. The government *can* appropriate funds when Parliament has been dissolved, using "special warrants."

17/

Special warrants can only be used "where a payment is urgently required for the public good" and "there is no other appropriation pursuant to which the appropriation can be made."

Also, given that dissolution has occured, the caretaker convention applies.

18/

So, a special warrant can be used to keep the government operating and make payments that have already been committed, but cannot generally be used to fund anything new (unless doing so is consistent with the caretaker convention).

19/

The new Parliament, after it is summoned, would have to approve the special warrants. Of course the funds would likely have already been spent, so parliamentary disapproval would, in this case, just be a way of expressing non-confidence in the government.

20/

Note that Parliament could vote down supply, which, being a confidence measure, results in dissolution. Then, during the election period, the government could potentially authorize that supply by way of special warrant (subject to urgency and caretaker convention rules).

21/

The reason that special warrants are possible is because appropriation Acts aren't the only way that the government can appropriate funds (I did hint at this in tweet 4, you just forgot in the long explanation). This second way is usually called "statutory appropriations".

22/

A statutory appropriation is an appropriation that is contained in a regular statute, as opposed to an appropriations Act. This means that there are different rules to the making and the operation of the appropriation.

23/

Unlike appropriation Acts, there is no special parliamentary procedure for statutory appropriations. They must follow the same process for all other government bills, with the main exception that they must originate in the House of Commons (being a money bill).

24/

However, statutory appropriations are *not* subject to the default lapsing rule that applies to appropriation Acts. Instead, they are only limited to whatever provision is used to enact the statutory appropriation itself.

25/

It is the specific language that authorizes the statutory appropriation that prevents it from becoming a blank cheque for the government. And Parliament typically only enacts statutory appropriations when there are valid reasons for doing so.

26/

For instance, the major transfer payments to provinces (equalization, the Canada Health Transfer and the Canada Social Transfer, are authorized by statutory appropriation. The enabling legislation sets out the formula and the purpose for the appropriation.

27/

Similarly, the Old Age Security Act provides a statutory appropriation for OAS and GIS. The Act sets out how much is to be paid (and the purpose).

28/

The authority for special warrants comes from another statutory appropriation set out in the Financial Administration Act. It is that Act that sets out the rules for, and limits of, special warrants.

29/

Typically, statutory appropriations exist for defined, multi-year programs like OAS or equalization, where there is no real discretion on the amount or purpose of the appropriation. There are also statutory appropriations available in some urgent situations.

30/

However, the bulk of government spending is approved by way of appropriations Acts. Moreover, some statutory appropriations (like equalization) are subject to "sunset" clauses where Parliament has to renew (by amending the Act) the appropriation periodically.

31/

What does this all mean in the here and now?
First, Supp. Estimates B was approved in December. So, the bulk of government spending for the rest of the fiscal year has been authorized.

Since Parliament has been prorogued until March 24, Supps. Estimates C can't be introduced or enacted before then. This may limit the government's ability should new spending pressures arise before then, possibly delaying the spending on those items.

33/

However, Interim Supply for 2025-26 can (at least in theory) be enacted before the end of the fiscal year and the Main Estimates can also be introduced in March.

34/

Certain programs, like OAS and equalization, will continue regardless, as they are authorized by statutory appropriations.

35/

Should the government lose confidence when it returns for a new Session in March, Parliament would be dissolved and an election would be called. During that time, the government can still appropriate funds for urgently needed payments, subject to the caretaker convention.

36

This means we can likely avoid a risk of government being furloughed, unlike the USA where furloughs have happened on a number of occasions. Good news for those who get funding from the government.

37/

This only applies to appropriations at the federal level. There can be some differences at the provincial level. For instance, some provincial financial administration acts permit special warrants during a prorogation.

/fin