Mr. Speaker, on October 7, 2010, you raised concerns about four private members' bills, which, in your view, appeared to impinge on the financial prerogative of the Crown and you invited members to comment. One of the bills you mentioned was Bill C-507, An Act to amend the Financial Administration Act (federal spending power). I am rising today on a very lengthy point of order regarding that bill.
Bill C-507 would amend section 26 of the Financial Administration Act, which states:
Subject to the Constitution Acts, 1867 to 1982, no payments shall be made out of the Consolidated Revenue Fund without the authority of Parliament.
In other words, section 26 does not provide authority to make payments out of the Consolidated Revenue Fund but establishes that payments out of the fund can only be made with the authority of Parliament.
Clause 2 of Bill C-507 would add a series of subsections to section 26. A new subsection 26.1(1) would provide that no payment from the consolidated revenue fund shall be made for matters listed in section 92 and paragraph 92A(1) of the Constitution Act, 1867, that are under provincial jurisdiction.
A new subsection 26.1(2) would enable payments to be made from the consolidated revenue fund to provinces which have delegated to the government the power to incur expenditures referred to in subsection 26.1(1) or the responsibility to administer programs associated with those expenditures, or both.
A new subsection 26.1(3) would set out the duration and nature of the delegation referred to in subclause 2(2). A new subsection 26.1(4) would enable the federal government to make a payment out of the consolidated revenue fund to a province where the federal government proposes incurring expenditures or administering a program. A new subsection 26.1(5) specifies that such a payment may be made in the form of a transfer of a taxation field.
The provisions of Bill C-507 have two impacts related to the need for a royal recommendation. The first impact is to alter the terms and conditions of original royal recommendations authorizing existing payments out of the consolidated revenue fund for grants or direct payments to provinces and municipalities.
In the case of grants, under existing statutes, federal grants to the provinces can be either conditional or unconditional. Two examples of conditional grants to provinces are the Canadian health transfer, also known as the CHT, and the Canadian social transfer, also known as the CST.
In order to receive the CHT, provinces must meet federal standards and comply with the requirements of the Canada Health Act in sections 7 to 12. In order for the provinces to receive the CST, grants are subject to a prohibition on minimum residency requirements for social assistance. Bill C-507 would change the terms and conditions of these existing grants or transfer of grants to the provinces by making them unconditional, thereby waiving the conditions related to these transfers.
In the case of direct spending, under existing statutes direct spending in the areas of provincial jurisdiction occurs when the federal government allocates money directly to individuals, agencies or municipalities. An example is the transfer of federal gas revenues to municipalities and the universal child care benefit. Bill C-507 would no longer allow these transfers for direct spending to be made to municipalities but, rather, would only allow the federal government to transfer money directly to the provinces.
This would change the manner in which existing direct payments are made since these payments would no longer be made to the currently authorized recipients but to the provinces. Precedents indicate that changes to the terms and conditions of a royal recommendation require a new royal recommendation.
On June 21, 1972, the Speaker ruled in the case of Bill C-220, respecting regional incentives development data:
...it is not only the amount approved or recommended by the royal recommendation that cannot be changed but there is also a prohibition against a redirection of the amount that is approved or recommended to the House in the royal recommendation.
The second impact of Bill C-507 relates to how its provisions would authorize payments out of the consolidated revenue fund to provinces that choose to opt out of federal programs in areas of provincial jurisdiction.
I would note that on April 14, 2010, the member for Saint-Lambert introduced Bill C-507 and stated that the bill would:
...introduce an automatic and unconditional right to opt out with full financial compensation and would establish permanent compensation in the form of the transfer of tax room.
In other words, the bill would provide for the authorization of payments out of the consolidated revenue fund to provinces for purposes not currently authorized in statute. Page 834 of House of Commons Procedure and Practice, second edition, states:
A royal recommendation not only fixes the allowable charge, but also its objects, purposes, conditions and qualifications. For this reason, a royal recommendation is required not only in the case where money is being appropriated, but also in the case where the authorization to spend for a specific purpose is significantly altered.
Precedents demonstrate that the Crown alone institutes all public expenditure and Parliament may only authorize spending that has been recommended by the Governor General.
On October 13, 1983, the Speaker ruled certain motions in an amendment at report stage that would have directed the government to establish a system of payments to agricultural producers inadmissible because they imposed a charge upon the treasury.
On May 28, 1990, the Speaker ruled motions in amendment at report stage, which would have substituted a different escalator clause for fiscal arrangements, inadmissible because they infringe upon the financial initiative of the Crown.
On June 13, 2005, the Speaker ruled on Bill C-280, An Act to amend the Employment Insurance Act (Employment Insurance Account and premium rate setting) and another Act in consequence that:
...Bill C-280 effects an appropriation by spending or authorizing the spending of public funds by transfer of the funds from the Consolidated Revenue Fund to a separate EI Fund with the result that these monies are no longer available for other appropriations Parliament may make. ... Such a transfer...constitutes an appropriation within the meaning of section 54 of the Constitution Act, 1867 and for this reason a royal recommendation is required....
The precedents have parallels to the impacts of provisions in Bill C-507 for authorizing a new and distinct spending in that Bill C-507 proposes a new scheme for making payments out of the consolidated revenue fund in matters and for purposes not currently authorized by Parliament.
I submit that Bill C-507 would change the authorization for grants and direct payments, as well as payments to provinces that choose to opt out of federal programs in areas of provincial jurisdiction. These changes, in our view, would therefore require a royal recommendation.