Check your privilege

by Nick

Another post where I bemoan the fact that it’s been too long since I’ve written anything for this blog. But I thought I would spend the next few posts looking at the procedures of Parliament during the seventeenth century, and how they have influenced Parliamentary procedures today. This first post is about the roles of the House of Commons and the House of Lords in matters of spending and taxation.

Most bills that pass through Parliament involve some sort of public expenditure of one kind of another. They might require Government to fund a service to the public or a particular group, for example, or to finance a regulatory framework that applies to business or charities. For this sort of bill, the Commons will agree a “money resolution”. These tend to follow a standard format along the following lines:

That, for the purposes of any Act resulting from the bill, it is expedient to authorise—

(1) the payment out of money provided by Parliament of any expenditure incurred by a Minister of the Crown by virtue of the Act, and

(2) any increase attributable to the Act in the sums payable under any other Act out of money so provided.

Some bills are so-called “money bills”, which deal solely with national taxes or loans. Some are “supply bills”, dealing with changes to taxation or public spending. In practice these two categories can overlap, but for Bills that fall into either category, the Commons will agree a “ways and means resolution”, which authorises any charges or taxes made on the public as a result of the Bill, and the payment of any sums into the Consolidated Fund (the Consolidated Fund is essentially the Government’s current account, managed by the Treasury).

For bills that start in the Lords and then transfer to the Commons, rather than the other way round, this causes a potential difficulty. A bill that is passed from the Lords to the Commons may well involve matters relevant to financial privilege, and in constitutional terms it will have been the Lords which has agreed them and suggested them to the Commons. The Lords get round this difficulty by agreeing a “privilege amendment” to a bill just after it has had its Third Reading – the point just before it is taken to the Commons. These follow a standard format:

Nothing in this Act shall impose any charge on the people or on public funds, or vary the amount or incidence of or otherwise alter any such charge in any manner, or affect the assessment, levying, administration or application of any money raised by any such charge.

For most bills this will very likely not be the case, but it is a convenient fiction that allows the Commons to pretend its privilege has not been infringed. The Commons then removes the amendment from the Bill at Committee stage – the first point at which the bill can be amended – which means that in theory they are the first and only House to agree provisions that relate to public expenditure or taxation.

In part the financial privilege of the Commons is enshrined in statute: section 1 of the Parliament Act 1911 provides that if a money bill having been agreed by the Commons is not passed by the Lords within a month, the bill receives Royal Assent regardless. In practice the Lords has never tried to amend a money bill, so this has not been put to the test. But the concept of financial privilege goes back a lot further than a hundred years. It has its origin in two resolutions made by the Commons in the 1670s.

The first was in April 1671, in the context of amendment made by the House of Lords to the Foreign Commodities Bill. The Bill sought to increase duties on tobacco and sugar imports. Owners of Barbados sugar plantations persuaded a number of peers that it would not be desirable to have duties on refined sugar, as otherwise they would have to export unrefined sugar and lose any profits they made from refining it before export. The Commons responded as follows to the amendment made by the Lords:

The House then proceeded to the Reading the Amendments and Clauses, sent from the Lords, to the Bill for an Imposition on foreign Commodities: Which were once read:And the first Amendments, sent from the Lords, being for changing the Proportion of the Impositions on white Sugars from One Peny per Pound, to Halfpeny half Farthing, was read the Second time; and debated.Resolution against Lords altering Tax Bills.

Resolved, &c. Nemine contradicente, That, in all Aids given to the King, by the Commons, the Rate or Tax ought not to be altered by the Lords.

Commons Journal, 13 April 1667.

The second was in July 1678, in a supply bill to pay off soldiers recruited by Charles II for a potential war with France that ended before it had really started, as a result of other European states (which had been at war much longer) beginning negotiations for peace treaty with Louis XIV. Twists and turns in the negotiations resulted in the Dutch asking Charles to put his plans for disbanding his troops on hold, and the Lords amended the dates in the bill accordingly.  The Commons responded as follows:

Mr. Solicitor General reports from the Committee to whom it was, amongst other things, referred, to prepare and draw up a State of the Rights of the Commons, in Granting of Money, a Vote agreed by the Committee: Which he read in his Place; and afterwards delivered the same in at the Clerk’s Table: Where the same was read; and, upon the Question, agreed; and is as followeth; viz.

Resolved, &c. That all Aids and Supplies, and Aids to his Majesty in Parliament, are the sole Gift of the Commons: And all Bills for the Granting of any such Aids and Supplies ought to begin with the Commons: And that it is the undoubted and sole Right of the Commons, to direct, limit, and appoint, in such Bills, the Ends, Purposes, Considerations, Conditions, Limitations, and Qualifications of such Grants; which ought not to be changed, or altered by the House of Lords.

Commons Journal, 3 July 1678.

It’s worth noting that the two scenarios had very different outcomes. In the second, the Commons solved the problem of its privilege being infringed by incorporating the Lords amendments into a new Bill. In the first, the bill fell because neither House could agree it. Both issues came up during the process of what is nowadays known informally as “ping pong” – or in technical terms, as Lords Consideration of Commons’ amendments (where the bill has started in the Lords then moved to the Commons) and Commons consideration of Lords’ amendments (where the bill has started in the Commons then moved to the Lords). Amendments made in one House can be batted back and forth to the other House, until the point both Houses are content.

Financial privilege can still cause issues at ping pong. There is a convention that if the same amendment is insisted upon twice by one House, and the other House rejects it, the entire bill falls. This is the case even if the disagreement is about a single clause. Financial privilege can be used by the Commons as a means of rejecting Lords amendments, although it’s also open to the Commons to waive their privilege if they choose to do so. Most recently, financial privilege caused issues for the passage of the Welfare Reform Act 2012. When the relevant bill passed from the Commons to the Lords, the Lords made over 100 amendments. These then passed to the Commons to consider in the first stage of ping pong.

46 of these engaged financial privilege. The Commons agreed to 35 of them, but voted against 11 of them and passed the Bill back to the Lords without them. The reason they gave for rejecting them was that they:

would alter the financial arrangements made by the Commons, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

Commons Reasons and Amendment, January 2012.

It is the convention that where the Commons disagrees with an amendment made by the Lords, and that amendment invokes financial privilege, that this is the reason given in response – even if it is not in fact the actual reason that the Commons has disagreed. It is the Commons – in practice, its clerks – which decides whether an amendment invokes financial privilege, not the Government.

It is also the convention that the Lords will not insist on an amendment that is rejected for reasons of financial privilege: in other words, that they will not pursue “double insistence”, which results in the bill falling. But it is open to the Lords to send back a different amendment in lieu of the first, in the hope that the Commons will agree this instead.

When the Welfare Reform Bill was returned from the Commons citing financial privilege as the reason for rejecting the 11 Lords amendments, it caused some controversy and suggestions that the Commons was defining financial privilege extremely widely, and that the Goverment was able as a result to use its majority in the Commons to impose the will of one House. The debate in the Lords on this matter on 14 February 2012 is worth reading in this respect. The Lords ended up suggesting variations on the amendments, some of which were Government suggestions but two of which were not – the latter dealing with the “bedroom tax” reducing housing benefit for claimants considered to have a spare room.

The Commons then disagreed with these two further amendments when they were sent back to them by the Lords. The Lords in turn suggested another amendment in lieu, requiring the Government to review the provisions six months after implementation. The Commons accepted this, and the bill as a result was able to receive Royal Assent.

So 350 years or so on, the issues that were exercising MPs and peers during the reign of Charles II are still of significant constitutional importance to MPs and peers today. The comparisons with the 1670s were not lost on peers debating the bedroom tax, but nor was the potential to disagree about the extent to which there was a smooth line connecting one to the other. Here for example is Lord Strathclyde speaking for the Government in the debate on 14 February:

Even for a Conservative, the financial privilege of the House of Commons cannot be considered new. Its origins lie in the constitutional settlement that followed our civil war. The Commons agreed its first resolution on the subject in 1671, and in 1678 resolved that:

“All aids and supplies, and aids to his Majesty in Parliament, are the sole gift of the Commons; and all bills for the granting of any such aids and supplies ought to begin with the Commons; and that it is the undoubted and sole right of the Commons to direct, limit and appoint in such bills the ends, purposes, considerations, limitations, and qualifications of such grants, which ought not to be changed or altered by the House of Lords”.

And here is the response in the same debate from the Labour peer Lord Morgan, who is also (as will become clear) a historian:

Lord Morgan: My Lords, I will just say that I am afraid I do not agree with my noble friend Lord Tyler on this.

Noble Lords: He is not your noble friend.

Lord Morgan: Well, sometimes he is-but the view that we heard is historically flawed. The idea that there has been a seamless web since 1671 is quite unsound. As we know, the Parliament Act defined money Bills very precisely. It did so in the spirit of the resolutions of the 1670s. Distinctions were drawn between where the money came from, which was spelt out very clearly, the intended objective and the issues governing its expenditure. It was confirmed in 1911 by the great Prime Minister Mr Asquith that the money Bills provision applied to what he called “all matters of pure finance”. There was agreement across the House that it would not be applied to financial privilege more generally, particularly where issues of social policy were concerned. This is why very often House of Lords amendments had waivers in the House of Commons on many things-including, recently, university tuition fees, the savings gateway and child trust funds, all issues that I discussed myself. The principle that this should now be extended to any implications for public expenditure is far wider than the Parliament Act 1911, and adds a new and unwelcome principle to our unfortunately unwritten constitution.

Incidentally the exchange at the start of this last extract is because Lord Morgan got his forms of address wrong. In the Lords peers refer to each other in the third person as “noble Lords”. Members of the same political party call each other “my noble friend”. Lord Tyler, whom Lord Morgan was addressing, is a Liberal Democrat and so not – at least in the context of the Lords chamber – a noble friend to Labour peers.