The Online Library of Liberty

A project of Liberty Fund, Inc.

• Pubusher's Note
• Foreword
• Preface to the First Edition
• Preface to the Eighth Edition
• Introduction
• Outline of Subject: the True Nature of Constitutional Law
• Part I: The Sovereignty of Parliament
• Chapter I: The Nature of Parliamentary Sovereignty
• Chapter II: Parliament and Non-sovereign Law-making Bodies
• Chapter III: Parliamentary Sovereignty and Federalism
• Part II: The Rule of Law
• Chapter IV: The Rule of Law: Its Nature and General Applications
• Chapter V: The Right to Personal Freedom
• Chapter VI: The Right to Freedom of Discussion
• Chapter VII: The Right of Public Meeting 1
• Chapter VIII: Martial Law
• Chapter IX: The Army 1
• Chapter X: The Revenue 1
• Chapter XI: The Responsibility of Ministers
• Chapter XII: Rule of Law Compared With Droit Administratif 1
• Chapter XIII: Relation Between Parliamentary Sovereignty and the Rule of Law
• Part III: The Connection Between the Law of the Constitution and the Conventions of the Constitution
• Chapter XIV: Nature of Conventions of Constitution
• Chapter XV: The Sanction By Which the Conventions of the Constitution Are Enforced
• Appendix
• Note I: Rigidity of French Constitutions
• Note II: Division of Powers In Federal States
• Note III: Distinction Between a Paruamentary Executive and a Non-parliamentary Executive
• Note IV: The Right of Self-defence
• Note V: Questions Connected With the Right of Public Meeting
• Note VI: Duty of Soldiers Called Upon to Disperse an Unlawful Assembly
• Note VII: The Meaning of an “unconstitutional” Law
• Note VIII: Swiss Federalism 89
• Note IX: Australian Federalism 101
• Note X: Martial Law In England During Time of War Or Insurrection 121
• Note XI: Constitution of the Tribunal Des Conflits 159
• Note XII: Proceedings Against the Crown
• Note XIII: Parliament Act, 1911 [i & 2 Geo. 5. Ch. Ch. 13.]

Chapter X

THE REVENUE1

RevenueAs in treating of the army my aim was simply to point out what were the principles determining the relation of the armed forces of the country to the law on the land, so in treating forces of the revenue my aim is not to give even a sketch of the matters connected with the raising, the collection, and the expenditure of the national income, but simply to show that the collection and expenditure of the revenue, and all things appertaining thereto, are governed by strict rules of law. Attention should be fixed upon three points,— the source of the public revenue—the authority for expending the public revenue—and the securities provided by law for the due appropriation of the public revenue, that is, for its being expended in the exact manner which the law directs.

SOURCE OF PUBLIC REVENUE

Source It is laid down by Blackstone and other authorities that the revenue consists of the hereditary or “ordinary” revenue of the Crown and of the “extraordinary” revenue depending upon taxes imposed by Parliament. Historically this distinction is of interest. But for our purpose we need hardly trouble ourselves at all with the hereditary revenue of the Crown, arising from Crown lands, droits of admiralty, and the like. It forms an insignificant portion of the national resources, amounting to not much more than £500,000 a year. It does not, moreover, at the present moment belong specially to the Crown, for it was commuted at the beginning of the reign of the present King,2 as it was at the beginning of the reign of William iv. and of the reign of Queen Victoria, for a fixed “civil list,”3 or sum payable yearly for the support of the dignity of the Crown. The whole then of the hereditary revenue is now paid into the national exchequer and forms part of the income of the nation. We may, therefore, putting the hereditary revenue out of our minds, direct our whole attention to what is oddly enough called the “extraordinary,” but is in reality the ordinary, or Parliamentary, revenue of the nation.

The whole of the national revenue had come to amount in a normal year to somewhere about £144,000,000.4 It is (if we put out of sight the small hereditary revenue of the Crown) raised wholly by taxes imposed by law. The national revenue, therefore, depends wholly upon law and upon statute-law; it is the creation of Acts of Parliament.

While no one can nowadays fancy that taxes can be raised otherwise than in virtue of an Act of Parliament, there prevails, it may be suspected, with many of us a good deal of confusion of mind as to the exact relation between the raising of the revenue and the sitting of Parliament. People often talk as though, if Parliament did not meet, no taxes would be legally payable, and the assembling of Parliament were therefore secured by the necessity of filling the national exchequer. This idea is encouraged by the study of periods, such as the reign of Charles I., during which the Crown could not legally obtain necessary supplies without the constant intervention of Parliament. But the notion that at the present day no money could legally be levied if Parliament ceased to meet is unfounded. Millions of money would come into the Exchequer even though Parliament did not sit at all. For though all taxation depends upon Act of Parliament, it is far from being the case that all taxation now depends upon annual or temporary Acts.

Taxes are made payable in two different ways, i.e. either by permanent or by yearly Acts.

Taxes, the proceeds of which amounted in the year 1906–7 to at least three-fourths of the whole yearly revenue, are imposed by permanent Acts; such taxes are the land tax,5 the excise,6 the stamp duties,7 and by far the greater number of existing taxes. These taxes would continue to be payable even though Parliament should not be convened for years. We should all, to take an example which comes home to every one, be legally compellable to buy the stamps for our letters even though Parliament did not meet again till (say) a. d. 1910.

Other taxes—and notably the income tax—the proceeds of which make up the remainder of the national income, are imposed by yearly Acts.8 If by any chance Parliament should not be convened for a year, no one would be under any legal obligation to pay income tax.

This distinction between revenue depending upon permanent Acts and revenue depending upon temporary Acts is worth attention, but the main point, of course, to be borne in mind is that all taxes are imposed by statute, and that no one can be forced to pay a single shilling by way of taxation which cannot be shown to the satisfaction of the judges to be due from him under Act of Parliament.

AUTHORITY FOR EXPENDING REVENUE

Authority for expenditure. At one time revenue once raised by taxation was in truth and in reality a grant or gift by the Houses of Parliament to the Crown. Such grants as were made to Charles the First or James the First were moneys truly given to the King. He was, as a matter of moral duty, bound, out of the grants made to him, as out of the hereditary revenue, to defray the expenses of government;, and the gifts made to the King by Parliament were never intended to be “money to put into his own pocket,” as the expression goes. Still it was in truth money of which the King or his Ministers could and did regulate the distribution. One of the singularities which mark the English constitution is the survival of mediæval notions, which more or less identified the Kings's property with the national revenue, after the passing away of the state of society to which such ideas naturally belonged; in the time of George the Third many public expenses, as, for example, the salaries of the judges, were charged upon the civil list, and thus were mixed up with the King's private expenditure. At the present day, however, the whole public revenue is treated, not as the King's property, but as public income; and as to this two matters deserve special observation.

First, the whole revenue of the nation is paid into the Bank of England9 to the “account of his Majesty's Exchequer,”10 mainly through the Inland Revenue Office. That office is a mere place for the receipt of taxes; it is a huge money-box into which day by day moneys paid as taxes are dropped, and whence such moneys are taken daily to the Bank. What, I am told, takes place is this. Each day large amounts are received at the Inland Revenue Office; two gentlemen come there each afternoon in a cab from the Bank; they go through the accounts for the day with the proper officials; they do not leave till every item is made perfectly dear; they then take all the money received, and drive off with it and pay it into the Bank of England.

Secondly, not a penny of revenue can be legally expended except under the authority of some Act of Parliament.

This authority may be given by a permanent Act, as, for example, by the Civil List Act, 1 & 2 Vict. c. 2, or by the National Debt and Local Loans Act, 1887; or it may be given by the Appropriation Act, that is, the annual Act by which Parliament “appropriates” or fixes the sums payable to objects (the chief of which is the support of the army and navy) which are not provided for, as is the payment of the National Debt, by permanent Acts of Parliament.

The whole thing, to express it in general terms, stands thus.

There is paid into the Bank of England in a normal year11 a national income raised by different taxes amounting to nearly £144,000,000 per annum. This £144,000,000 constitutes the revenue or “consolidated fund.”

Every penny of it is, unless the law is broken, paid away in accordance with Act of Parliament. The authority to make payments from it is given in many cases by permanent Acts; thus the whole of the interest on the National Debt is payable out of the Consolidated Fund under the National Debt and Local Loans Act, 1887. The order or authority to make payments out of it is in other cases given by a yearly Act, namely, the Appropriation Act, which determines the mode in which the supplies granted by Parliament (and not otherwise appropriated by permanent Acts) are to be spent. In either case, and this is the point to bear in mind, payments made out of the national revenue are made by and under the authority of the law, namely, under the directions of some special Act of Parliament.

The details of the method according to which supplies are annually voted and appropriated by Parliament are amply treated of in works which deal with Parliamentary practice.12 The matter which requires our attention is the fact that each item of expenditure (such, for example, as the wages paid to the army and navy) which is not directed and authorised by some permanent Act is ultimately authorised by the Appropriation Act for the year, or by special Acts which for convenience are passed prior to the Appropriation Act and are enumerated therein. The expenditure, therefore, no less than the raising of taxation, depends wholly and solely upon Parliamentary enactment.

SECURITY FOR THE PROPER
APPROPRIATION OF THE REVENUE

Security for proper expenditure. What, it may be asked, is the real security that moneys paid by the taxpayers are expended by the government in accordance with the intention of Parliament?

The answer is that this security is provided by an elaborate scheme of control and audit. Under this system not a penny of public money can be obtained by the government without the authority or sanction of persons (quite independent, be it remarked, of the Cabinet) whose duty it is to see that no money is paid out of the Exchequer except under legal authority. To the same official ultimately comes the knowledge of the way in which money thus paid out is actually expended, and they are bound to report to Parliament upon any expenditure which is or may appear to be not authorised by law.

The centre of this system of Parliamentary control is the Comptroller and Auditor General.13

He is a high official, absolutely independent of the Cabinet; he can take no part in politics, for he cannot be either a member of the House of Commons, or a peer of Parliament. He in common with his subordinate—the Assistant Comptroller and Auditor General—is appointed by a patent under the Great Seal, holds his office during good behaviour, and can be removed only on an address from both Houses of Parliament.14 He is head of the Exchequer and Audit Department. He thus combines in his own person two characters which formerly belonged to different officials. He is controller of the issue of public money; he is auditor of public accounts. He is called upon, therefore, to perform two different functions, which the reader ought, in his own mind, to keep carefully distinct from each other.

In exercise of his duty of control the Comptroller General is bound, with the aid of the officials under him, to see that the whole of the national revenue, which, it will be remembered, is lodged in the Bank of England to the account of the Exchequer, is paid out under legal authority, that is, under the provisions of some Act of Parliament.

The Comptroller General is enabled to do this because, whenever the Treasury (through which office alone the public moneys are drawn out from the Bank) needs to draw out money for the public service, the Treasury must make a requisition to the Comptroller General authorising the payment from the public moneys at the Bank of the definite sum required.15

The payments made by the Treasury are, as already pointed out, made either under some permanent Act, for what are technically called “Consolidated Fund services,” as, for example, to meet the interest on the National Debt, or under the yearly Appropriation Act, for what are technically called “'supply services,” as, for example, to meet the expenses of the army or the navy.

In either case the Comptroller General must, before granting the necessary credit, satisfy himself that he is authorised in doing so by the terms of the Act under which it is demanded. He must also satisfy himself that every legal formality, necessary for obtaining public money from the Bank, has been duly complied with. Unless, and until, he is satisfied he ought not to grant, and will not grant, a credit for the amount required; and until this credit is obtained, the money required cannot be drawn out of the Bank.

The obtaining from the Comptroller General of a grant of credit may appear to many readers a mere formality, and we may suppose that it is in most cases given as a matter of course. It is, however, a formality which gives an opportunity to an official, who has no interest in deviating from the law, for preventing the least irregularity on the part of the government in the drawing out of public money.

The Comptroller's power of putting a check on government expenditure has, oddly enough, been pushed to its extreme length in comparatively modem times. In 1811 England was in the midst of the great war with France; the King was a lunatic, a Regency Bill was not yet passed, and a million pounds were required for the payment of the navy. Lord Grenville, the then Auditor of the Exchequer, whose office corresponded to a certain extent with that of the present Comptroller and Auditor General, refused to draw the necessary order on the Bank, and thus prevented the million, though granted by Parliament, from being drawn out. The ground of his lordship's refusal was that he had received no authority under the Great Seal or the Privy Seal, and the reason why there was no authority under the Privy Seal was that the King was incapable of affixing the Sign Manual, and that the Sign Manual not being affixed, the clerks of the Privy Seal felt, or said they felt, that they could not consistently with their oaths allow the issue of letters of Privy Seal upon which the warrant under the Privy Seal was then prepared. All the world knew the true state of the case. The money was granted by Parliament, and the irregularity in the issue of the warrants was purely technical, yet the law officers–members themselves of the Ministry–advised that Lord Grenville and the clerks of the Privy Seal were in the right. This inconvenient and, as it seems to modern readers, unreasonable display of legal scrupulosity masked, it may be suspected, a good deal of political byplay. If Lord Grenville and his friends had not been anxious that the Ministry should press on the Regency Bill, the officials of the Exchequer would perhaps have seen their way through the technical difficulties which, as it was, appeared insurmountable, and it is impossible not to suspect that Lord Grenville acted rather as a party leader than as Auditor of the Exchequer. But be this as it may, the debates of 181116 prove to demonstration that a Comptroller General can, if he chooses, put an immediate check on any irregular dealings with public moneys.

In exercise of his duty as Auditor the Comptroller General audits all the public accounts;17 he reports annually to Parliament upon the accounts of the past year. Accounts of the expenditure under the Appropriation Act are submitted by him at the beginning of every session to the Public Accounts Committee of the House of Commons—a Committee appointed for the examination of the accounts—showing the appropriation of the sums granted by Parliament to meet the public expenditure. This examination is no mere formal or perfunctory supervision; a glance at the reports of the Committee shows that the smallest expenses which bear the least appearance of irregularity, even if amounting only to a pound or two, are gone into and discussed by the Committee. The results of their discussions are published in reports submitted to Parliament.

The general result of this system of control and audit is, that in England we possess accounts of the national expenditure of an accuracy which cannot be rivalled by the public accounts of other countries, and that every penny of the national income is expended under the authority and in accordance with the provisions of some Act of Parliament.18

How, a foreign critic might ask, is the authority of the Comptroller General compatible with the orderly transaction of public business; how, in short, does it happen that difficulties like those which arose in 1811 are not of constant recurrence?

The general answer of course is, that high English officials, and especially officials removed from the sphere of politics, have no wish or temptation to hinder the progress of public business; the Auditor of the Exchequer was in 1811, be it noted, a peer and a statesman. The more technical reply is, that the law provides two means of overcoming the perversity or factiousness of any Comptroller who should without due reason refuse his sanction to the issue of public money. He can be removed from office on an address of the two Houses, and he probably might, it has been suggested, be coerced into the proper fulfilment of his duties by a mandamus19 from the High Court of Justice. The worth of this suggestion, made by a competent lawyer, has never been, and probably never will be tested. But the possibility that the executive might have to seek the aid of the Courts in order to get hold of moneys granted by Parliament, is itself a curious proof of the extent to which the expenditure of the revenue is governed by law, or, what is the same thing, may become dependent on the decision of the judges upon the meaning of an Act of Parliament.

[1]Stephen, Commentaries, ii. bk. iv. chap. vii.; Heam, Government of England (2nd ed.), c. 13, pp. 351–388; May, Parliamentary Practice, chap. xxi.; see Exchequer and Audit Act, 1866, 19 & 30 Vict. c. 39, and 1 & 2 Vict. c. 2, s. 2.

[2]Civil List Act, 1901, 1 Ed. VII. c. 4

[3]See as to civil list, May, Constitutional Hist. i. chap. iv.

[4]The Chancellor of the Exchequer, in his Budget speech of 18th April 1907 (172 Hansard (4th ser.), col. 1180), gave the total revenue for the year (Exchequer receipts) 1906–7 at £144,814,000. [See as to the burden of taxes and rates in later years, Law and Opinion (2nd ed.), pp. lxxxiv.-lxxxvii.]

[5]38 George III c. 5.

[6]See Stephen, Commentaries, ii. pp. 552, 553.

[7]Stamp Act, 1891, 54 & 55 Vict. c. 39.

[8]The only taxes imposed annually or by yearly Acts are the customs duty on tea, which for the year ending 31st March 1907 amounted to £5,888,288, and the income tax, which for the same year amounted to £31,891,949, giving a total of annual taxation raised by annual grant of £37,780,237.

[9]Or into the Bank of Ireland. See Exchequer and Audit Departments Act, 1866 (29 & 30 Vict. c. 39), s. 10.

[10]Ibid. and Control and Audit of Public Receipts and Expenditure, pp. 7, 8. But a system of appropriations in aid has been introduced during the last few years under which certain moneys which before were treated as extra receipts, and paid into the Exchequer, are not paid into the Exchequer, but are applied by the department where they are received in reduction of the money voted by Parliament.

[11]Seep. 201,ante (3).

[12]See especially May, Parliamentary Practice, chap. xxi.

[13]Control and Audit of Public Receipts and Expenditure, 1885.

[14]The Exchequer and Audit Departments Act, 1886 (29 & 30 Vict. c. 39), sec. 3.

[15]See Control and Audit of Public Receipts and Expenditure, 1885, pp. 61–64, and Forms, No. 8 to No. 12.

[16]Cobbett's Parl. Debates, xviii, pp. 678, 734, 787.

[17]In auditing the accounts he inquires into the legality of the purposes for which public money has been spent, and in his report to Parliament calls attention to any expenditure of doubtful legality.

[18]The main features of the system for the control and audit of national expenditure have been authoritatively summarised as follows:

“The gross revenue collected is paid into the Exchequer.

“Issues from the Exchequer can only be made to meet expenditure which has been sanctioned by Parliament, and to an amount not exceeding the sums authorised.

“The issues from the Exchequer and the audit of Accounts are under the control of the Comptroller and Auditor General, who is an independent officer responsible to the House of Commons, and who can only be removed by vote of both Houses of Parliament.

“Such payments only can be charged against the vote of a year as actually came in course of payment within the year.

“The correct appropriation of each item of Receipt and Expenditure is ensured.

“All unexpended balances of the grants of a year are surrendered to the Exchequer, as also are all extra Receipts and the amount of Appropriations-in-Aid received in excess of the sum estimated to be taken in aid of the vote.

“The accounts of each year are finally reviewed by the House of Commons, through the Committee of Public Accounts, and any excess of expenditure over the amount voted by Parliament for any service must receive legislative sanction.”—Control and Audit of Public Receipts and Expenditure, 1885, pp. 24, 25.

[19]See Bowyer, Commentaries on Constitutional Law, p. 210; Hearn, Government of England (2nd ed.), p. 375.