Vol. 151, No. 25 — December 13, 2017
SI/2017-73 December 13, 2017
BUDGET IMPLEMENTATION ACT, 2016, NO. 1
Order Fixing the Day on which this Order is made as the Day on which Division 8 of Part 4 of the Act Comes into Force
P.C. 2017-1435 November 23, 2017
Her Excellency the Governor General in Council, on the recommendation of the Minister of Finance, pursuant to section 187 of the Budget Implementation Act, 2016, No. 1, chapter 7 of the Statutes of Canada, 2016, fixes the day on which this Order is made as the day on which Division 8 of Part 4 of that Act comes into force.
(This note is not part of the Order.)
Pursuant to section 187 of the Budget Implementation Act, 2016, No. 1 (the Act), this Order in Council brings sections 182 to 185 of the Act into force on the day on which the Order is made. These sections of the Act amend Part IV (Public Debt) of the Financial Administration Act (the FAA). The coming into force of section 183 of the Act will automatically bring into force the Borrowing Authority Act, pursuant to section 107 of the Budget Implementation Act, 2017, No. 1.
The objective of this Order is to bring legislative amendments to the FAA into force, which will simultaneously bring the Borrowing Authority Act into force, and return the authority to approve the borrowing of funds on behalf of Her Majesty in right of Canada to Parliament. To enhance the transparency and accountability to Parliament, the Government committed to restoring parliamentary approval for its borrowing plans and activities, and passed legislation that requires Parliament to set and approve the maximum amount that can be borrowed.
Until 2007, Parliament set a limit on total annual market borrowing by the Government, through borrowing authority bills sponsored by the Minister of Finance. These bills set out the incremental debt — net of refinancing maturing debt — that could be issued within a fiscal year. In 2007, a simplified borrowing approval framework was introduced that consolidated the borrowing authority into one general provision in the FAA, under the authority of the Governor in Council (GIC), and the Parliamentary approval requirement was removed.
In the Minister of Finance’s mandate letter, a commitment to restore parliamentary approval of the Government’s borrowing plans was made a priority. The Minister took steps to meet this commitment in Budget 2016 and introduced amendments to the FAA in Budget Implementation Act 2016, No. 1 (the Act) to repeal the general power of the Governor in Council to authorize the Government’s borrowings, and restore Parliament’s authority to approve the borrowings. The Act received royal assent on June 22, 2016. The amendments specify more limited circumstances in which the Governor in Council may approve borrowings, (see footnote 1) and that these amendments were to come into force on a day to be fixed by the Governor in Council.
To ensure a smooth transition to the new framework, the implementation of the amendments to the FAA was delayed until the details of the new authority were presented in a new borrowing authority bill. The Borrowing Authority Act was introduced as part of the Budget Implementation Act 2017, No. 1, which received royal assent on June 22, 2017. By design, and as required by section 107 of the Budget Implementation Act 2017, No. 1, the Borrowing Authority Act will come into force automatically on the day the amendments to the FAA come into force.
The Borrowing Authority Act includes parliamentary approval of the total amount of money that may be borrowed by the Minister of Finance and by all agent corporations — including money borrowed by way of the issuance of Canada Mortgage Bonds guaranteed by the Canada Mortgage and Housing Corporation. This amount must at no time exceed $1,168 billion. This amount is based on the maximum amount of borrowings projected for the next three fiscal years, as projected in Budget 2017. The Minister will also be required to report to Parliament on the amounts borrowed and on whether the maximum amount should be increased or decreased within three years after the Borrowing Authority Act comes into force.
See Annex I for details on calculating the maximum amount that may be borrowed.
Under the new framework, the Minister of Finance is required to seek parliamentary approval of borrowing. The Minister fulfilled this obligation when Parliament approved the Borrowing Authority Act as part of the Budget Implementation Act, 2017, No. 1.
To calculate the maximum amount that may be borrowed in the Borrowing Authority Act, the Minister factored in all borrowing under the Government’s control, including that of agent Crown corporations, but excluded liabilities not associated with borrowing activities, such as pension obligations. The Minister of Finance has standing authority to fund the Government’s financial requirements as long as the borrowings are no larger than the legislated maximum amount. The Minister is also required to table a triennial report in both houses of Parliament to report on the total amount of money borrowed and assess whether the maximum amount should be increased or decreased.
While the Borrowing Authority Act authorizes the borrowing by the Minister and sets the maximum amount of borrowings, the Minister is required to obtain authority from the Governor in Council, on an annual basis, for the maximum amount that may be borrowed in a fiscal year, under section 44 of the FAA.
Under section 46.1 of the FAA, as amended by the Budget Implementation Act 2017, No. 1, the Governor in Council will also have the authority to authorize any borrowings for amounts required to be paid in that fiscal year in respect of any money borrowed or to reduce any liability of Canada. The Governor in Council could also authorize any amounts the Minister needed to borrow for extraordinary circumstances (e.g. in the event of a natural disaster or to promote the stability or maintain the efficiency of the financial system in Canada), under paragraph 46.1(c) of the FAA, as amended.
The provisions being brought into force were reviewed through the Parliamentary process. Given that this matter is internal to government, no consultations were undertaken in association with this Order.
For more information, please contact
Funds Management Division
Department of Finance Canada
90 Elgin Street
Annex I — Calculating maximum amount of borrowings
The maximum amount that may be borrowed of $1,168 billion includes the maximum projected level of outstanding debt for the Government and agent Crown corporations over the next 3 fiscal years, as projected in Budget 2017, as well as a contingency margin of 5%. See Figure 1 for a summary on calculating the amount.
Figure 1 — Maximum amount of borrowings calculated
- Footnote 1
The GIC may approve borrowings to refinance existing debt, to address unanticipated contingent liabilities, or for exigent circumstances, such as in response to a natural disaster or a financial crisis. Under section 44 of the FAA, the Governor in Council will continue to authorize borrowings by the Minister of Finance, in accordance with any Act providing for the borrowing of money by the Minister (e.g. the FAA or the Borrowing Authority Act). The Governor in Council sets the terms and conditions for the borrowings, including approving gross borrowings (i.e. including refinancing) for the fiscal year.