Struggle for Parliamentary Control of Taxation

The struggle to ensure consent to taxation was a central battlefield in the evolution of parliament in medieval England. To guard against despotic royal rule, parliament sought to limit the kings’ powers to impose taxes so as to curtail their ability to maintain a standing army beyond times of war and immediate external threat (Harriss 1975). The principle of parliamentary consent to taxation gained constitutional recognition when it was enshrined in the Magna Carta – a list of concessions to the barons that King John signed at Runnymede in 1215. But this agreement did not resolve the conflict over the power to impose taxes, which continued to simmer throughout the following centuries.

Bitter contests between kings and parliaments in the seventeenth century precipitated procedural innovations that advanced parliamentary control of state finance. In particular parliament’s increasing use of a committee of the whole House brought several advantages, due to the fact that the procedures of committees applied for such deliberations, rather than the standard rules. This allowed the Commons to appoint their own chairperson, which reduced the influence of the Speaker, who at the time was generally regarded as aligned with the monarch. The committee procedure also allowed each member to speak more than once and thus facilitated much freer debate. It became easier for the Commons to delay passing the bill to grant subsidies to the crown until the end of a session, a tactic that afforded time to extract concessions from the monarch. But clever procedural devices were not enough to establish parliamentary supremacy over taxation.

A crucial shortcoming of parliamentary control was that it did not extend to royal borrowing on the monarch’s personal credit. After Charles II claimed the throne in 1660 parliament started to demand estimations of cost before voting money to be granted to the king, who claimed to get short shrift. To evade expenditure control, a popular royal tactic was to resort to borrowing and hope that parliament would later consent to the raising of funds to repay such loans. But this practice was not sustainable when parliament refused to oblige. In 1672 the government in effect declared the only state bankruptcy in British history when payments on loans from City bankers were suspended initially for twelve months, which was later renewed repeatedly. Only after 1688 was executive borrowing tied to parliamentary consent, which restored trust with lenders and ensured large-scale access to finance over the following centuries.

The Glorious Revolution of 1688 brought a decisive victory for parliament, and it is a landmark in the evolution of its financial role. The 1689 Bill of Rights captures the outcome of the struggle. Most importantly, it firmly established the principle that only parliament could authorize taxation by proclaiming ‘That levying money for or to the use of the Crown by pretence of prerogative, without grant of Parliament, for longer time, or in other manner than the same is or shall be granted, is illegal.’ Still, at this stage there was still no such thing as an annual budget, and there was no comprehensive control of expenditures.

Before the revolution the royals freely mingled public and private income. Following the revolution parliament made a life-long grant to the king to cover expenditures on the civil list and the monarch in turn relinquished control over most of his hereditary revenues. Originally, the list was intended to cover the financial requirements of the king and his household as well as the expenditure of the central civil government excluding debt charges. Expenditure items for civil administration were gradually transferred from the list to the supply services and, later, the consolidated fund, in a process that lasted until 1830. The creation of this list was the first step towards the separation of public and royal expenditures.

Paradoxically, in these early days of growing financial control by the Commons one can also find the origin of limitations on parliament’s budgetary powers. Given the political dynamics of the time, it made little sense for parliament to volunteer money to the crown. The Commons proceeded to resolve 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.’ The financial initiative of the crown has been enshrined in the standing orders since 1713 and this limitation on parliament’s power of the purse is considered an essential constitutional principle to this day. Therefore, while the British Parliament was at the forefront of claiming budgetary rights, it was also the first parliament to voluntarily restrict its powers to introduce and amend financial legislation (Inter-Parliamentary Union 1986, p. 1093):

Parliament still respects this long-standing custom and practice and, as a result, it may not vote sums in excess of the Government’s estimates. Consequently, the only amendments that are in order are those which aim to reduce the sums requested and have as their purpose the chance for Members to raise explanations before the sums in question are approved.

After the Glorious Revolution, it was not long before parliamentary control over taxation spread beyond Britain. Parliament proved to have a short memory for the passions that could be incited by unilateral imposition of fiscal measures. As imperial finances were exceedingly stretched by the task of protecting vast colonial territories, parliament sought to force the inhabitants of the empire’s North American possessions to contribute towards the defense of the territory. In 1765 it ordered the imposition of a tax on a stamp affixed to a range of documents including newspapers and playing cards. This gave rise to great discontent in the colonies, and led to a boycott of British goods by the colonialists. Despite a partial retreat by parliament, which abolished the ‘stamp tax’ and several other duties, the continued imposition of a duty on tea was sufficient to provoke unrest and ultimately led to the war of independence. At the First Continental Congress in 1774 delegates from the colonies rejected ‘every idea of taxation, internal or external, for raising a revenue on the subjects in America, without their consent.’