The House of Commons holds ultimate control over all matters of public finance, including taxation and government spending. This constitutional supremacy is maintained through two distinct but related mechanisms: the formal statutory procedure for certified Money Bills and the powerful constitutional convention of financial privilege.

These procedures ensure that the unelected House of Lords cannot amend or block the financial decisions of the government that are supported by the elected House of Commons.

Money Bills: what are they and how do they work?

A Money Bill is a specific and technical category of legislation defined by the Parliament Act 1911. To qualify as a Money Bill, a bill must contain only provisions dealing with a narrow range of financial matters, such as central government taxation, public spending or loans.

Bills that fall into this category are typically those that authorise the government’s access to public funds. These are essential pieces of legislation required to keep government services running.

The speaker of the House of Commons has the sole and unchallengeable authority to certify that a Bill meets the strict definition of a Money Bill. They may be expected to take advice on this, however, including from two members of the panel of chairs. (The panel of chairs is made up of MPs chosen by the House of Commons speaker, typically at the beginning of every parliament, to chair public bill committees and other commons general committees.)

This certificate is endorsed on the bill before it is sent to the House of Lords.

The Parliament Act 1911 places severe restrictions on the ability of the House of Lords to scrutinise a certified Money Bill.

Erskine May, the authoritative account of parliamentary procedure, outlines that a Money Bill that has been “passed by the House of Commons and sent up to the House of Lords at least one month before the end of the session, but is not passed by the House of Lords without amendment within one month after it is so sent up, is, unless the House of Commons direct to the contrary, to be presented for the royal assent.”

As such, the Parliament Act 1911 provides a complete block on any potential interference by the Lords in the core financial authorisations required by the government.

Financial privilege and the Finance Bill

The annual Finance Bill, which enacts the tax changes announced in the chancellor’s budget, is the most important piece of financial legislation each year. Because it often contains wider regulatory changes alongside tax measures, it is usually too broad to be certified as a Money Bill.

Erskine May explains: “A ‘Money bill’ within the meaning of the Parliament Act 1911 is not the same as a Bill of Aids and Supplies. For instance, a bill which has the exclusive purpose of creating or extending the scope of a charge on public expenditure is likely to be held to be a ‘Money bill’, but it is not a Bill of Aids and Supplies. On the other hand, a Bill of Aids and Supplies, such as a Finance Bill, is not necessarily a ‘Money bill’, for it may and often does include provisions dealing with other subjects than those enumerated in the definition of a ‘Money bill’.”

The House of Commons’ control over the Finance Bill is maintained by the long-standing convention of financial privilege. This convention operates as follows:

• The Finance Bill passes the House of Commons and is sent to the House of Lords.
• The House of Lords scrutinises the Bill and, unlike with a certified Money Bill, it can pass amendments to it.
• The bill, with any Lords’ amendments, returns to the House of Commons.
• If the government objects to a Lords’ amendment on the grounds that it relates to taxation or spending, the commons will vote to disagree with the amendment, formally citing its financial privilege as its reason.
• The bill then returns to the Lords. By a long-established constitutional convention, the House of Lords will then not insist on its amendment and will accept the view taken by MPs.

This convention, while not a statutory block, is in effect politically binding and ensures that the House of Lords does not, in practice, interfere with the UK’s core financial and taxation policies.

In 2006, a report by the parliamentary joint committee on conventions stated that, in a case where the commons rejects a Lords amendment on grounds of privilege, it is “contrary to convention to send back an amendment which clearly invites the same response”.

The commons can also choose to waive its financial privilege and accept amendments agreed in the upper chamber.

Money Bills and financial privilege: a short history

The financial supremacy of the House of Commons has its roots in centuries of constitutional struggle.

In 1671, the commons resolved “that in all aids given to the king by the commons, the rate or tax ought not to be altered by the Lords”. A broader resolution in 1678 asserted the “undoubted and sole right of the commons” with respect to financial legislation.

Financial privilege thereby became an established convention. It was widely recognised that to reject a budget meant denying the government the supply necessary to govern – effectively forcing a dissolution of parliament.

By the early 1900s, it had been a constitutional convention for some centuries that the House of Lords did not amend Money Bills. This principle, however, was definitively established by the Parliament Act 1911.

This act was a direct response to the 1909 constitutional crisis, when the Conservative-dominated House of Lords rejected the People’s Budget proposed by the Liberal government.

David Lloyd George, the chancellor of the exchequer, introduced the People’s Budget to the House of Commons on 29 April 1909. It was a radical fiscal package designed to fund naval expansion with the construction of new Dreadnought battleships, as well as sweeping new social welfare programmes.

In his budget statement, Lloyd George recognised the observation that no chancellor had ever imposed such “heavy taxes in a time of peace”. But he described his proposals as a “war budget” that would raise “money to wage implacable warfare against poverty and squalidness”.

In total, the Finance Bill was subjected to 70 days of debate and 554 divisions in the commons.

On 22 November 1909, the Marquess of Lansdowne, the leader of the Conservative/Unionists in the Lords, broke with precedent. He moved a reasoned amendment to the Finance Bill at its second reading. He posited that the Lords was “not justified in giving its consent to this bill until it has been submitted to the judgment of the country.”

Lansdowne argued that the government was abusing the privileges of the commons by “tacking” non-financial legislation onto a Finance Bill.

He argued that the insistence of the prime minister, H.H. Asquith, that the budget has “far-reaching political and social results”, amounted to proof that the Finance Bill moved beyond dealing solely with merely financial matters.

On 30 November, after a week of debate, peers in the Conservative-dominated chamber divided. They rejected the bill by a decisive margin of 350 votes to 75.

This move precipitated a protracted constitutional crisis, defined two general election campaigns and culminated in the overhaul of the relationship between the two Houses of Parliament.

The ultimate result was the Parliament Act 1911.

This landmark piece of legislation introduced two key changes. It established a new legal category of bills called money bills. Secondly, for other public bills, it replaced the Lords’ absolute veto with a power to delay legislation for a maximum of two years, spread over three parliamentary sessions.

The act also reduced the maximum duration of a parliament from seven years to five.

Additional resources

• GOV.UK – Money Bills: https://www.gov.uk/government/publications/money-bills/money-bills
• House of Commons Library – The Budget and the annual Finance Bill: https://commonslibrary.parliament.uk/research-briefings/sn00813/