Section 54 of the Constitution Act, 1867

Section 54 has its origins in British constitutional principles relating to public finances. After the English Civil War and the passage of the Bill of Rights, it was firmly established that legislation enacted by Parliament was needed for all taxes and all appropriations of public funds. The English House of Commons took the lead on this point, and gradually acquired primary control over public finances. Bills to impose taxes or appropriate public funds from the treasury, commonly called "money bills", had to originate in the House of Commons, and the monarch could not personally impose taxes or appropriate funds.[20][21][22]

However, if every member of the House of Commons had an equal opportunity to introduce money bills, there would not be firm budgetary controls. In order to address this issue, the House of Commons passed a rule in 1713 stating that the House would not consider any money bill unless it came with a monarch's recommendation that the bill was essential for the public finances.[12][13] The effect of the rule was to give joint control over money bills to the executive and legislative branches. This procedural rule is continued today as part of the Standing Orders of the British House of Commons.[14]

Lord Durham, who proposed that the royal recommendation for money bills be implemented in British North America

Control over the public finances became a major point of contention in the British North American colonies in the 19th century, particularly in Lower Canada and Upper Canada. Disputes between the elected legislative assemblies and the governors, appointed by the British government, became a routine aspect of public life.[20][23][24][25] Following the Rebellions of 1837–1838 in Lower Canada and Upper Canada, Lord Durham in his Report on British North America recommended that the same principle be adopted in the colonies as in the British Parliament: money bills were to be approved by the elected Assemblies, but only on recommendation from the governor.[26] This policy was established in the Union Act, 1840, which merged the two Canadian provinces into the single Province of Canada. The Union Act provided that money bills had to originate in the elected Legislative Assembly of the new province, but only on a recommendation from the governor.[16] Control of the finances by the Cabinet was an essential component in the development of responsible government.[20]

Fathers of Confederation at the Quebec Conference, 1864

When Canada was created in 1867, this principle of joint control over the public finances was well-established in both the United Kingdom and the British North American provinces. Following the example of the Union Act, the requirement for a royal recommendation was set out in Section 54 as a constitutional requirement, not simply as a parliamentary rule. The recommendation to the House of Commons is made by the Governor General, not the monarch.[11][27]

Under the principle of responsible government, the recommendation is authorised by the federal Cabinet. A Cabinet member passes the Governor General's recommendation to the Commons, now usually by means of a written notice accompanying a bill at any stage before third reading, the final vote on a bill in the Commons. The recommendation must be given for any new financial legislation, and again for any proposal to change an existing tax or appropriation bill in any significant fashion.[20][22]

There is uncertainty regarding how far Section 54 may limit the authority of the Senate and private members with regard to money bills because no court action has clarified its precise scope.[21]

The precedents from the Commons are ambiguous, and it is unclear whether the Senate can change a money bill that the Commons has passed to increase spending or taxation. In some cases, if the Senate has amended a money bill passed by the Commons, the Speaker of the House of Commons has ruled the amended bill out of order and refused to allow it to be considered. On other occasions, the Speaker has simply pointed out the issue in debate to allow the members of the House of Commons to decide. In some cases, the Commons has rejected Senate amendments, as a breach of the powers of the House of Commons, but in other cases, the Commons has proceeded to consider the amendments.[20]

It is clear that the Senate can amend a money bill to decrease spending or taxation.[20]

The effect of Section 54 on private member's bills has changed over the years. Formerly, if it appeared to the Speaker of the Commons that a private member's bill would require the spending of public money or an increase in taxes, the Speaker would rule the bill out of order when it was first introduced. However, changes to the procedural rules regarding private member bills in 2003 have increased the possibility that a private member's bill will come to a vote. That change, in turn, has resulted in a change in approach to the royal recommendation. Now, the Speaker will recognise that the sponsor of the private member's bill has the right to have it debated, but will urge the sponsor to seek the royal recommendation. If the royal recommendation has not been given by the time the bill is ready for final debate on third reading, the Speaker will rule it out of order.[20][21]