Do governments have to pay out on their contracts?

October 31st, 2013 by Laura Bowman

In light of debates about the real cost of government contracts, including the $14-billion fighter jets and the $1-billion Ontario gas plant cancellation, it is worth noting what the principles are that govern government contracts.

In principle, the legislatures of each province and territory (Parliament federally) have to approve all appropriations to or payments from the government’s big “one size fits all” bank account, the consolidated revenue fund. This is because of the provisions in the Canadian Constitution, and because of standing orders dealing with money bills in each jurisdiction. In practice, over time the legislative oversight of budgetary matters has weakened (mostly through changes to those same standing orders). These are dealt with through budgets presented first through the speech from the throne to maintain the fiction that all budgets are recommended by the Crown.

This raises an interesting constitutional question: Can the government of the day bind future legislatures to spend money through entering into contracts, whether they be collective agreements, or ordinary contracts to expend money over multiple years? The simple answer to this question is they should not be able to. The principle underlying this is that the government of the day should not, at least in theory, have the power to tell future elected representatives what budgets to pass or not pass or to bind them to do so.

The real answer is more complicated.


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