Publications / Guides

The Finance Bill

3 Mar 2021
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Chancellor of the Exchequer Rishi Sunak MP at the Despatch Box in the House of Commons, 8 July 2020. UK Parliament / Jessica Taylor

The Finance Bill enacts the government's Budget provisions – its income-raising proposals and detailed tax changes. Parliament's scrutiny and authorisation of these taxation plans are crucial in holding the government to account – between elections – for the money it raises and spends.

The government’s taxation plans, as set out in the Budget, require statutory (that is, legislative) authority. The Finance Bill provides this.

Once the Budget resolutions have been agreed by the House of Commons at the end of the Budget debate, these ‘charging’ or ‘founding’ resolutions form the basis of the Finance Bill. The Finance Bill cannot be introduced until these resolutions (also known as 'Ways and Means' resolutions) have been agreed.

The Finance Bill is a 'Bill of aids and supplies'. These are Bills the primary purpose of which is to levy taxes or authorise expenditure.

A 'Bill of aids and supplies' must:

  1. originate in the House of Commons;

  2. be based on ‘founding’ resolutions; and

  3. adopt particular terminology in both the passage of the Bill and the signification of Royal Assent.

The Finance Bill can only include provisions that relate to the imposition or alteration of taxes or duties for central government, and it cannot include charges for any specific form of expenditure (for example, hypothecation – a dedicated tax – for the NHS).

The Finance Bill is the fourth and final stage of the Budget process in Parliament. The first three parliamentary stages of the Budget process – encompassing the Financial Statement, the Budget debate, and the Budget resolutions – are covered in a separate Guide.

On the fourth and final day of the Budget debate, the Ways and Means motions are agreed (and thus become resolutions) and then the government immediately presents the Finance Bill to the House, based on those resolutions.

As is the case for other Bills, the First Reading of the Finance Bill is a formality. The Bill’s long title is read out and a day for its Second Reading is named. This day is often given as ‘tomorrow’.

However, 'tomorrow' does not mean that the Second Reading will actually take place the following day – ‘tomorrow’ is a procedural device to list the Bill on the Future Business of the House.

In practice, the Second Reading of the Finance Bill may not be held until some weeks after the conclusion of the Budget debate.

Standing Order No.15(1)(a) states that proceedings on any stage of the Finance Bill are exempt from interruption and may be proceeded with until any hour, though opposed – that is, debate may continue indefinitely on any day. In practice, however, this provision rarely has to be relied on, because immediately after Second Reading a Programme motion is usually introduced setting out how much time will be spent on the remaining stages of the Bill.

At Committee stage of the Finance Bill:

  • the most controversial clauses in the Bill will be dealt with in a Committee of the Whole House for a couple of days – that is, all MPs can take part in the debate in the Commons Chamber;

  • the rest of the Bill will be referred to a Public Bill Committee (PBC), comprising up to 40 Members (the PBC for a Finance Bill is about twice the size of that used for other Bills).

The rules governing amendments in Committee which apply generally to Bills also apply to the Finance Bill. However, the Finance Bill is also subject to additional rules, derived from the fact that the Bill is founded on the Budget resolutions.

  • if the Finance Bill is founded on an ‘Amendment of the Law’ resolution, "no instruction is needed to enable the committee to receive new clauses for the remission of taxes in force which are not dealt with by the bill";

  • if there is no ‘Amendment of the Law’ resolution, then "no amendment to the Finance Bill may be moved unless the relief proposed is covered by one of the Ways and Means resolutions", nor may an amendment "exceed any figure prescribed in the relevant resolution";

  • if MPs wish to move new clauses or amendments which exceed the terms of the relevant Ways and Means resolution(s), then further resolutions must be passed with instructions to the Committee before such new clauses or amendments can be considered."

When a Bill has been introduced on the basis of Ways and Means resolutions, like the Finance Bill, the usual practice is that no more than one stage of the Bill can be taken on the same day.

This reflects the principle, set out in Erskine May, that the House’s agreement to the imposition of taxation or to expenditure plans "should be conditional upon there being a number of distinct opportunities for discussion".

However, this rule was relaxed in 2011 when it was agreed that the Third Reading of the Finance Bill – a stage which in the House of Commons is largely a formality – could immediately follow Report stage, on the same day.

If the House wishes, the rule can now be set aside, following the 2011 precedent. This often occurs in advance of a general election, when there is a desire to accelerate the progress of the Finance Bill in advance of dissolution.

As Erskine May sets out, the financial powers of the Upper House are limited by:

  • the ancient ‘rights and privileges’ of the House of Commons; and

  • the terms of the Parliament Acts 1911 and 1949.

Control of taxation can be exercised only by the House of Commons. The role of the House of Lords in respect of finance is “to agree, and not to initiate or amend.”

There is a Second Reading stage on the Finance Bill in the House of Lords, but there is no Committee stage (in procedural terms the stage is 'negatived'). Report stage and Third Reading are thus formalities. (Substantive proceedings cannot be held at these stages if there have been no amendments in Committee.)

As Peers do not have the right to amend the Finance Bill, it is constitutionally important that the government does not add measures to it that do not concern the nation’s finances (a process known as ‘tacking’).

As Erskine May explains, Lords Standing Order No. 51 embodies the resolution of the House of 9 December 1702 that “The annexing of any clause or clauses to a bill of aid or supply, the matter of which is foreign to and different from the matter of the said bill of aid or supply, is unparliamentary, and tends to the destruction of constitutional government.”

During each House of Lords ceremony in which Royal Assent is signified, Bills granting 'aids and supplies' to the Crown receive Royal Assent before all other public bills.

For most public bills, the Clerk of the Parliaments declares ‘La Reyne le veult’ - ‘The Queen wills it’ - to signify the granting of Royal Assent.

For 'bills of aids and supplies' such as the Finance Bill, the declaration of Royal Assent is different. It runs: ‘La Reyne remercie ses bons sujets, accepte leur benevolence, et ainsi le veult’ - ‘The Queen thanks her good subjects, accepts their bounty, and wills it so’.

Hansard Society Procedural Guide, The Finance Bill [available at: https://www.hansardsociety.org.uk/publications/guides/the-finance-bill]