The evolution of parliament’s power of the purse

1. The evolution of parliament’s power of the purse

2. Overview • Parliamentary control of taxation • The rise of modern budgeting • More recent developments

3. Control of taxation 1: Medieval England’s Parliament • Guards against despotic royal rule. • Limit kings’ powers to impose taxes • Limit standing army beyond times of war. • 1689 Bill of Rights established principle that only Parliament could authorize taxation: ‘… levying money for or to the use of the Crown by pretence of prerogative, without grant of Parliament … is illegal.’ • No annual budget, no control of expenditures.

4. Control of taxation 2 • Parliament did not volunteer money to the Crown. • Resolved in 1706 ‘That this House will receive no Petition for any sum of Money relating to public Service, but what is recommended from the Crown.’ • This ‘financial initiative’ of the Crown has been enshrined in the Standing Orders of the Commons since 1713. • This limitation is considered an essential constitutional principle to this day in many countries.

5. The rise of modern budgeting 1 • Parliamentary control is incomplete as long as governments were discrete public spending. • Requests for funds could not be properly evaluated, without knowing needs. • Beginning of 19th Century, the US Congress used detailed line item appropriations prescribing exact use of authorized funds. • France was first in modern European spending control mechanisms (1830s). • In UK, the Gladstonian Reforms in the 1860s introduced annual and comprehensive estimates. • UK and French systems provided influential blueprints for budgeting.

6. The rise of modern budgeting 2 • Spending control achieved through detailed appropriations, i.e. legal authority granted to executive to spend public funds. • The nature and detail of appropriation legislation varies. • Some countries, many appropriation laws passed each year. • Other countries have a single appropriation act. • Legislation typically provides spending authority for a single fiscal year. • Supplemental or adjustment appropriations can be granted if additional funds are required.

7. More recent developments 1 • Developments reduce budgetary activism of parliaments in OECD countries, in particular: • Emergence of disciplined political parties led to cohesive voting behavior, and more executive control. • Expansion of entitlement spending, e.g. social security, made budgets more rigid, and more difficult to amend. • Growth of public spending means that the executive budget proposal became the standard for legislative action. • Initiatives in OECD countries reinvigorate legislative control • France National Assembly recently passed budget reform legislation requiring better information and growing Parliamentary powers to shift money between programs.

8. More recent developments 2 • Trend in non-OECD countries less clear. • Democratisation and constitutional reform can open previously closed systems. • International financial institutions and donors supportive of legislative budget involvement. • Participation of legislature & accountability linked to debate on budget transparency.

9. Concluding remarks • Historically, struggle for parliaments in Western Europe was for a say in taxation. • Expenditure control followed later, through use of modern budgets and appropriations. • Now renewed appreciation for parliamentary scrutiny of public finances as a tool in making governments more accountable and effective.