Editorial Monday 6 February 2012: Financial privilege may give Speaker Bercow power of life or death over Health Bill

I am very grateful to a longstanding reader for sending in the following analysis of a potential way through this week for the Coalition Government over the Health And Social Care Bill (which I believe we can now officially designate as "in trouble").

[I have added links and explanations where I hope they are helpful to illustrate the situation, and the short conclusion at the end is also mine.]


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On 1 February 2012, the Government resorted to an unusual Parliamentary tactic to overcome resistance by the House of Lords to key provisions in the Welfare Reform Bill. The relevant section in Hansard can be found here.

This raises the possibility that the same tactic could be used to force through the Health and Social Care Bill in a form that is unacceptable to the Lords.

The provision invoked over the Welfare Reform Bill is that of "financial privilege" ("privilege" in this context meaning a fundamental power of the House of Commons). This dates back to resolutions of the Commons in the 1670s, asserting the House's right to raise and spend money without interference from the House of Lords. This has meant that any financial Bill passed by the Commons has been (by custom and precedent) immune from the power of the Lords to veto (up to 1911) or delay (since 1911) legislation.

The Welfare Reform Bill is being designated as a money bill, which the Parliament website defines as "a Bill that deals with national taxation, public money or loans and their management. It is only considered to be a Money Bill if the Speaker of the House of Commons agrees that it is. The Speaker signs a certificate to indicate this".

Such a move would, as analysis by the Constitution Unit at University College London (whose Provost is the NHS Commissioning Board's Chairman Mal) shows, not be uncontroversial.

In 1909 a constitutional crisis was caused by the upper House defying the lower House's financial privilege by vetoing a Finance Bill (the "People's Budget") -- on the grounds that it wasn't primarily a revenue-raising measure (to fund the then Liberal government's welfare programme) but a political attack on the landowning classes (who would be substantially footing the bill for the welfare measures). The Finance Bill was only passed by the Lords, in 1910, following a General Election, called to renew the government's popular mandate.

The Commons then took revenge on the Lords by passing the Parliament Bill, which replaced their veto with a delaying power and set down in statute that "Money Bills" were immune from this power. This was only pushed through the Lords, in 1911 (after yet another General Election), by the Government obtaining an assurance from the King that he would pack the
Lords with enough new Liberal peers to ensure it was passed; faced with this threat, the Tory-dominated Lords backed down.

More information can be found here on the Parliament website.

The Coalition Government last week argued that the provisions in the Welfare Reform Bill to which the Lords object are covered by financial privilege as they relate to Government expenditure.

Rich historical irony
There is, of course, a rich historical irony here. In 1909 the Lords defied financial privilege by arguing that a Finance Bill wasn't really a financial measure as it was actually a political attack on the rich.

Now we have a government arguing that a Bill which is effectively a political attack on the poor is covered by financial privilege because it's really a financial measure (although this is apparently at odds with the Government's claim up to now that the Bill isn't primarily about saving money but about addressing "welfare dependency" and "unfairness" to people on low incomes who don't receive benefits).

This sort of catch-all use of financial privilege to force through a Bill that isn't actually a financial one has happened several times in recent years (it seems to have begun under the New Labour government), but it does look like an abuse of privilege.

An argument along these lines might be further reinforced by reference to the fact that financial privilege does not apply to measures regarding payments from the National Insurance fund (another legacy of the Edwardian Liberal government), which it can be argued is the case with the Welfare Reform Bill.

If, when the Bill returns to the House of Lords in due course, that House takes the view that the Commons is abusing its financial privilege, it may just register an objection and let the Bill pass -- but it does also have a "nuclear option" of rejecting the Bill in its entirety.

In that situation, the Government would then have to resort to the provisions of the Parliament Act 1911, as amended by the Parliament Act 1949.

The Government could try to have the Bill in its entirety certified by the Speaker of the Commons as a "Money Bill", in which case the Lords would have no delaying power and the Bill would pass. However, the 1911 Act defines a Money Bill so tightly that the Welfare Reform Bill is unlikely to fall under that definition. Were that to turn out to be the case, the Bill would fall at the end of the current session (when prorogation occurs, around the beginning of May).

For the Bill then to be passed, it would have to be reintroduced in the next session (after the State Opening of Parliament on 9 May) and go through all its Commons stages again; if the Lords then still rejected it (wholly or in part), it would nevertheless become law, under the 1911 and 1949 Acts, provided that the statutory conditions were met regarding the form of the reintroduced Bill and the timetable for its progress through Parliament.

If the Government invokes financial privilege again in respect of the Health and Social Care Bill when it returns from the Lords, exactly the same considerations will apply as in respect of the Welfare Reform Bill (not least the point about financial privilege not covering measures concerning payments from the National Insurance fund, out of which the NHS is partly financed).

What could this mean for the Health And Social Care Bill?
Last week was one of almost unmitigated bad news for the Health Bill. Ironically given that its author infamously considers his critics to be "completely wrong", the Bill's future is marinaded in uncertainty.

The Government's main options are as follows:
a) amend the Bill yet further in response to concerns - there is no sign that they want to do this. Their latest amendments have not used the Lords Constitution Committee wording on the Secretary of state's duties, and more significantly, show no willingness to move on the areas in Section 3 of the Bill over Monitor and competition.
b) try to get the Bill through the Lords without significant further amendment - this is possible. As Professor Paul Corrigan pointed out recently, if the Coalition genuinely fear losing Lords votes, they can simply pack the Lords with line-toeing Coalition peers if they want to win there.
c) try to have sections of the Health And Social Care Bill designated as a 'money bill' - possible, but tenuous. The above analysis by a long-time reader makes it clear that designating the whole Bill would be very hard if not impossible. With the Coalition Government having made so much of their commitment to protect NHS expenditure in real terms, the politics of this would also be very tricky. The Nicholson Challenge dates back to the last couple of years of the previous government. (However, if Section 3 on competition and Monitor remains the key sticking point, the Coalition might try to argue that the benefits of competition give them grounds.)
d) withdraw the Bill - they do not want to do this at all. Not only would it be an epic U-turn, the Conservatives in particular do not want to accept the significant loss of face and political capital gain for Labour that this would involve.

Option b) is by far the most likely, although they will also be looking hard at option c).

There is a not-too-slight problem with option c), however, which is that many Conservative MPs hate Speaker Bercow, regarding him as too Labour-friendly. This can be well-judged by scanning the stories about him on the Conservative Home website.

The Prime Minister is likewise known not to be an uber-fan of Speaker Bercow, and as this report from a Lobby lunch in the Telegraph notes, Mr Cameron enjoyed re-telling political journalists the legendary Simon Burns' dwarf joke about the Speaker.

Long-time Health Policy Insight readers and Simon Burns fans - surely a homogeneous group - will recall that we first noted in June 2010 Minister Burns' ability to add to the gaiety of the health policy nation when recycling this dwarf-baiting comic line in the Commons.

The Coalition Government was then scarcely a month old. It can scarcely have seemed possible to either Mr Cameron or to Simon Burns that the Health Bill might need the Speaker's support if it is to become law.