Canada's Housing Bubble

May 03, 2010 Kathryn May Ottawa Citizen

Ottawa -- Parliament unwittingly gave away its right to oversee billions of dollars in government borrowing, say a handful of senator who are fighting to undo a change they say was slipped by them.

The legislative change for Parliament to surrender its borrowing authority passed unnoticed by MPs and Senators in the massive 2007 budget bill.

"The government now has the unconstrained authority to borrow whatever, whenever, at whatever rate, from whomever and for whatever purpose," says Liberal Senator Tommy Banks.

A fellow senator, Conservative Lowell Murray, has tried to undo the change in a private member's bill that died twice on the order paper.

He's prepared to introduce the bill again, but first he's appealing to the Harper government to restore Parliament's borrowing authority out of its professed commitment to accountability.

Previously, when the government ran deficits, it had to bring a borrowing bill for any additional money to Parliament to explain its fiscal and economic policies along with its debt-management strategies, said Murray. That's the way it was done for 140 years.

"Now, we're cut out of the action," said Murray. "Parliament is out of the loop, and that is not where Parliament should be."

Finance officials don't see it that way, though. They argue Parliament wasn't "cut out" because it voted for the change when it passed the budget bill.

However, one longtime finance official privately conceded he was surprised it passed unopposed.

"Someone was asleep at the switch," he said.

One expert criticized the government for pushing through legislative changes that have nothing or little to do with the budget in unwieldy omnibus bills, calling the practice an "end run on the normal legislative process."

"I see something going on here that is not good for the health of parliamentary democracy," said accountability expert Ned Franks, professor emeritus at Queen's University.

The bill in question amended the Financial Administration Act so the finance minister now has authority to fund Canada's debt without going to Parliament for approval.

"With those 20 words, a parliamentary prerogative that had existed in this country for more than a century was consigned to the ashcan. No one noticed," Murray told the Senate after the slip was discovered.

"Shame on us for not noticing it. We were not doing our job; they were not doing their job in the House of Commons."

The government borrows money when it faces a shortfall between its spending and revenues. It borrows by issuing treasury bills and bonds in domestic and foreign markets.

The government recently issued an order-in-council to borrow $300 billion this year — much of it for refinancing. That's less than the $370 billion it borrowed last year largely because of the winding down of the stimulus package's "extraordinary financing framework," which provided $200 billion to help prop up lending.

The issue also raises the question of how well MPs and Senators can do their jobs when swamped with massive omnibus bills that typically introduce and amend dozens of pieces of unrelated legislation, many of which may merit debate.

The amendment to surrender borrowing authority was buried in the 2007 budget-implementation act, an omnibus bill that affected 25 pieces of legislation.

Critics called it a "sneak attack" that was "slipped in the bill to slip by" MPs and Senators while they are focused on other parts of the complex bill, such as changes to Atlantic accord and equalization.

Fed up, the Senate finance committee issued a report last year that recommended the government stop using omnibus bills, stuffed with "add-ons" when introducing budget measures.

If not, the committee concluded, the Senate would resort to one of four options:

- Divide the bill and deal with budgetary measures separately from others;

- Delete anything that's non-budgetary;

- Defeat the bill at second reading as an "affront" to Parliament; or

- Set new rules in the Senate that forbid budget bills with non-budgetary issues.

"Parliamentarians have to stand on their own hind legs and say 'Stop you can't do this anymore,' " said Banks.

Banks was the first to spot the clause when he was flipping through the bill several days after it passed and he raced to the office of Senator Murray for a second opinion.

Banks argued Canadians should be outraged because Parliament isn't doing its job.

Finance officials argue the changes were made to give the government more "flexibility and transparency" in its borrowing. A key reason was to consolidate the borrowing of the Business Development Bank of Canada, Canada Mortgage and Housing Corp. and Farm Credit with the government's own borrowing.