The Parliamentary Financial Cycle: An Introduction

Alex Smith
Economics, Resources and International Affairs Division

One of Parliament’s fundamental roles is to review and approve the federal government’s taxation and spending plans.

While budget-setting is an executive function, the government cannot change taxation rates, impose new taxes or spend public funds without Parliament’s approval.

This document provides an introduction to the parliamentary activities associated with the business of “ways and means” and the business of “supply” – the processes by which the government sets out its economic policy through the presentation of a budget and obtains parliamentary approval to raise revenues through taxation and to spend public funds.

Parliamentary review and approval

To change taxation, the government introduces ways and means motions in the House of Commons. These motions outline the proposed changes, which are enacted by Parliament through the review and approval of legislation, such as budget implementation bills.

To spend public funds, the government must request Parliament’s authorization through the review and approval of appropriation bills. To help Parliament understand and scrutinize its spending plans, the government prepares and presents main and supplementary estimates.

Previously adopted legislation provides ongoing legislative authority for about two-thirds of federal spending. This statutory spending includes such items as Employment Insurance and the Canada Health Transfer, and does not need annual approval from Parliament.

Key elements of the financial cycle

To better understand Parliament’s role in the financial process, it can be helpful to identify activities that occur before, during and after the fiscal year, which begins on 1 April and ends on 31 March (see infographic).

Parliamentary Financial Cycle Infographic

A. Before the fiscal year

In the fall, the House of Commons Standing Committee on Finance holds pre‑budget consultations during which it seeks the views of Canadians on recommendations it should make to the Minister of Finance for the government’s upcoming budget.

Subsequently, usually in February or March, the Minister of Finance presents the budget, which outlines the government’s taxation and spending priorities for the coming fiscal year. The government may subsequently introduce budget implementation bills to legislate provisions of the budget, such as changes to taxation.

As the budget is a financial plan and does not provide authorization to spend funds, on or before 1 March, the government tables its Main Estimates for the coming fiscal year.

The Main Estimates present the government’s spending plans for each federal organization and provide items that will be included in an appropriation bill for Parliament’s approval. It is important to note that the Main Estimates are prepared in late fall, and thus generally do not include spending items announced in the budget.

The Main Estimates are best read in conjunction with departmental reports on plans and priorities, which are tabled later in March. These reports set out the results that departments intend to achieve with the resources provided to them; they also outline the human and financial resources allocated to each program and sub‑program.

Before the beginning of the fiscal year, the House of Commons approves interim supply. As full supply is not granted until June, the government needs authorization to spend funds during the first three months of the fiscal year. Thus, interim supply is usually three-twelfths of the amount outlined in the Main Estimates

B. During the fiscal year

The House of Commons has three supply periods during the fiscal year when it considers the government’s spending plans. These supply periods end on 23 June, 10 December and 26 March.

During each period, the opposition parties are allocated “supply days” on which their motions take precedence over government supply motions.

At or near the end of each period, the House of Commons votes on whether it agrees, or concurs, with the spending plans, also called estimates, and the associated appropriation bills that are before it. These are then sent to the Senate for review and approval.

Once the Main Estimates have been tabled in the House of Commons, estimates votes are referred to the relevant standing committees, which have the opportunity to review the estimates votes and to vote and report on them by 31 May. Committees can approve, reduce or reject estimates votes, but cannot increase them. The Standing Senate Committee on National Finance also reviews and prepares reports on the estimates.

In June, the House of Commons approves full supply, which is the amount laid out in the Main Estimates, less interim supply.

As the Main Estimates do not include the government’s complete spending needs for the year, such as unanticipated spending requirements or items announced in the budget, the government also presents Supplementary Estimates to Parliament.

The government tends to present Supplementary Estimates in May, November and February; each set of Supplementary Estimates receives an alphabetical designation – A, B or C. Supplementary Estimates are also referred to committees for review and receive approval through an appropriation bill at the end of the relevant supply period.

In the fall, the Minister of Finance presents an economic and fiscal update. It provides mid-year information on the country’s economic growth and the state of the government’s finances.

C. After the fiscal year

In the fall, usually in October, the government presents its public accounts, which outline the government’s actual spending and revenues during the previous fiscal year.

The public accounts also provide a snapshot of the government’s financial position at the end of the fiscal year – its liabilities, assets and net debt.

Also in the fall, the government releases performance reports for each department and agency. These reports describe achievements relative to the expectations outlined in the corresponding reports on plans and priorities.

Further reading

The elements described in this HillNote are discussed in more detail in Alex Smith, The Parliamentary Financial Cycle, Publication no. 2015-41, Parliamentary Information and Research Service, Library of Parliament, 21 July 2015.

For more detailed discussions of the procedures associated with the parliamentary financial cycle, see Audrey O’Brien and Marc Bosc, eds., “18. Financial Procedures,” in House of Commons Procedure and Practice, 2nd ed., House of Commons, Ottawa, 2009; and Senate of Canada, Senate Procedure in Practice, Ottawa, June 2015, pp. 152–158.