PARLIAMENT of CANADA
House of Commons Procedure and Practice
Edited by Robert Marleau and Camille Montpetit
2000 EditionMore information …
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18. Financial Procedures

Borrowing Authority

Borrowing powers are needed by the government to cover any shortfall between its revenues and its expenditures. The government borrows principally by issuing treasury bills, marketable bonds and Canada Savings Bonds, on domestic and foreign markets. The Financial Administration Act states: “No money shall be borrowed or security issued by or on behalf of Her Majesty without the authority of Parliament”, [292]  and the authority to borrow sufficient new money to cover estimated financial requirements, together with a margin for contingencies, is normally sought and granted early on in the financial cycle for each new fiscal year. [293]  These requests refer to new authority to borrow, since the Financial Administration Act already authorizes borrowing for the purpose of refinancing maturing debt. [294]  Unused borrowing authority lapses at the end of a fiscal year and must be replaced by new authority.

The government borrows when there is a shortfall between its expenditures, as authorized by Parliament in the Main and Supplementary Estimates and in Interim Supply, and its revenues, whose projected levels are also approved by Parliament. Prior to 1975, it was the custom to include requests for borrowing authority in one of the first appropriation or Supply bills of a new fiscal year. Where circumstances necessitated increasing the level of borrowing authority, the increases were sought by way of subsequent appropriation bills, such as appropriation bills enacting Supplementary Estimates or Interim Supply. The primary justification for including new borrowing authority in an appropriation act was the contention that borrowing powers to cover any shortfall between revenues and expenditures should be authorized relatively automatically, given that both the shortfall and the borrowing requirements were a consequence of actions already approved by Parliament.

The 1968 changes to Supply procedures made the inclusion of borrowing authority in appropriation bills problematic. [295]  The revised process usually offered no opportunity for Members to debate the borrowing provisions; the borrowing clause was not part of the Estimates, which were discussed in standing committees, and the Supply bills containing the borrowing clauses were generally passed without debate. In 1975, the Speaker ordered a borrowing clause struck from a Supply bill related to Supplementary Estimates on the grounds that, under the rules, its inclusion in a Supply bill based on Supplementary Estimates virtually precluded discussion of the borrowing provisions. [296]  Later, in 1981, the Speaker found no objection to including a request for borrowing authority in a tax bill based on a Ways and Means motion, provided that the government also gave the regular 48 hours’ notice for the introduction of a bill in order to cover the borrowing provisions. [297] 

Borrowing authority is now sought by way of a bill which follows the normal legislative process, with the exception that debate at second reading is limited to a maximum of two sitting days. [298]  The recent practice has been for the government to introduce borrowing authority legislation, if required, either when the Budget is presented or shortly thereafter. [299]  In theory, if additional borrowing requirements are needed to deal with unforeseen circumstances, then a Supplementary Borrowing Authority Bill would be introduced.


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