Borrowing Authority

The government exercises its borrowing authority 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, the projected levels of which are also approved by Parliament. The government borrows principally by issuing treasury bills, marketable bonds and Canada Savings Bonds on domestic and foreign markets. The Financial Administration Act states that the authority of Parliament is required for the borrowing of money on behalf of Her Majesty in right of Canada361 and the issuing of securities.362 The Act outlines very specific circumstances under which a Minister may request the permission of the Governor in Council to exercise borrowing authority without the consent of Parliament, while the Borrowing Authority Act provides the Minister of Finance with borrowing authority and provides for a maximum amount of certain borrowings.363

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.364 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 almost automatically, given that both the shortfall and the borrowing requirements were a consequence of actions already approved by Parliament. Where circumstances necessitated increasing the level of borrowing authority, the increases were sought by way of subsequent appropriation bills, such as those enacting supplementary estimates or interim supply.

The 1968 changes to supply procedures made the inclusion of borrowing authority in appropriation bills problematic. The revised process usually offered no opportunity for Members to debate the borrowing provisions; the borrowing clauses were not part of the estimates, which were discussed in standing committees, and the supply bills containing the borrowing clauses were generally passed without debate.365 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.366 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.367

Though borrowing authority bills could occasionally be dealt with expeditiously, other times debate became prolonged and the government resorted to time allocation.368 The Standing Orders were amended in April 1991 to limit debate at second reading on borrowing bills to two sitting days.369 Though the limitation applied only to second reading, on two occasions since 1991, the House has agreed to refer the bill to a Committee of the Whole in order to expedite its passage.370 The most recent borrowing authority legislation was introduced either when the budget was presented or shortly thereafter.371

Prior to 2007, the Financial Administration Act gave the government standing authority to refinance its market debt, while specific authority was to be granted by Parliament to undertake additional borrowing beyond an existing $4 billion of non-lapsing borrowing authority. The Act also required the Minister of Finance to table annually in Parliament a report on the plan for managing the public debt for the upcoming fiscal year (the “Debt Management Strategy”),372 and a separate report on actual results for the fiscal year recently ended (the “Debt Management Report”).373

Following a proposal in Budget 2007, the government amended the Financial Administration Act to change Crown borrowing authorities and increase flexibility to meet future borrowing needs, particularly with respect to the consolidation of Crown borrowings.374 Notably, the previously existing $4-billion statutory non-lapsing limit on borrowing authority was replaced with a more flexible framework that consolidated the borrowing authority into one general provision, under the authority of the Governor in Council.375 The amendments also provided for enhanced disclosure on anticipated borrowing and planned uses of funds through: the “Debt Management Strategy”; enhanced disclosure requirements on actual borrowing and uses of funds compared to those forecast through the “Debt Management Report”; and detailed information on outcomes provided in the Public Accounts of Canada.376 In 2015, in response to the changes in 2007 to eliminate the provision for how borrowing authority is managed, the Standing Orders of the House of Commons were changed to delete the maximum of two sitting days for the consideration of bills respecting borrowing authority at second reading.377

In June 2016, the Financial Administration Act was modified to once again require Parliament to grant the authority to borrow money through legislation and in 2017, the Borrowing Authority Act was enacted to provide a framework for such borrowing.378 The right of the Governor in Council to approve borrowing on the advice of a minister was preserved in very specific circumstances,379 and any borrowing approved under these circumstances must be reported to Parliament.380