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Finance Act Debacle - Bill Watch 52/2010
Veritas
December 16, 2010

The Finance (No. 2) Bill: How Not to Pass Budget Legislation

The passage of the Finance Bill violated constitutional procedures Paragraph 6 of Schedule 4 to the Constitution, dealing with money Bills, restricts the right of the House of Assembly to make changes to a money Bill that it has passed and then received back from the Senate with recommended amendments – all it can do is endorse or reject the Senate recommendations. But the House contravened this provision on 14th December when it made substantial changes to the Finance (No. 2) Bill that had not been recommended by the Senate. In doing so the House’s Standing Order 153 was also contravened. This should not have been permitted by the Speaker – it is his job to see that both the provisions in the Constitution on the passage of Bills, and the House’s standing orders, are adhered to.

What are money Bills?

After a Budget has been presented to the House of Assembly, two “money Bills” have to be passed by Parliament:

  • an Appropriation Bill, which gives legal force to the Estimates of Expenditure
  • a Finance Bill, which makes legal provision for changes in collection of revenue such as taxes, custom duties, etc. for the following year

Bad precedent The habit of fast-tracking Budget legislation seems to have become established. Fast-tracking any important Bill is wrong, because it leaves Parliamentarians with insufficient time to think through the Bill’s implications, consult with the electorate and subject the Bill to proper scrutiny and debate. This year it caused problems with the money Bills. MP’s had to be more or less strong-armed by respective party heavyweights into passing the Appropriation Bill. And the Finance Bill came off the rails.

Finance Bill Debacle

Initial passage through both Houses relatively smooth:

Through the House of Assembly The Finance (No 2) Bill, was tabled on 25th November after Minister Biti’s Budget Statement in the House of Assembly. On 8th December it was fast-tracked and passed with the support of ZANU-PF members; there was no debate and no amendments during its passage. The Bill was then transmitted to the Senate.

Through the Senate On 10th December the Senate passed the Bill but recommended three amendments, all to do with the membership of certain statutory boards. According to paragraph 6 of Schedule 4 to the Constitution, the Senate has no power to amend a money Bill but it can recommend amendments. If it does so, the Bill is returned to the House of Assembly, which considers the recommendations and can either reject or accept them. The Senate then adjourned until 8 February next year.

There was no discussion of clause 21 in either House Clause 21, amending the Exchange Control Act, was approved without comment by both Houses.

Ensuing storm of state media accusations According to state media reports on 12th December, ZANU-PF members suddenly repented their earlier support and the Minister of Finance was accused of using a money bill to clandestinely try to usurp Presidential powers. Their objections focused on clause 21 of the Bill, which would have amended the Exchange Control Act so as to transfer regulation-making powers from the President to the Minister of Finance. [Comment: The clause was hardly “clandestine” – it was in the Bill tabled by the Minister on 25th November and its effect was clearly stated in the explanatory memorandum accompanying the Bill]

The Bill was then wrongfully altered by the House of Assembly When the Bill was returned to the House of Assembly on 14th December for consideration of the Senate’s recommendations, the House accepted the three amendments recommended by the Senate. But it went a step too far and also, on the motion of the Minister of Finance, altered the Bill as originally passed by the House of Assembly by deleting two clauses which both the House and the Senate had approved without qualification – clause 21, the Exchange Control Act provision castigated in the Sunday media reports, and also clause 24, which would have required parastatals to pay their surplus revenues into the State’s Consolidated Revenue Fund. No explanation was offered to the House for the removal of these two clauses, and there was no debate. The House simply rubber-stamped the changes [presumably bowing to pressure raised by one party and the state media].

The House had no power to remove clauses 21 and 24 from the Bill. All it should have done was to consider the Senate’s recommended amendments and reject or endorse them. The House, in other words, does not have a free hand to tinker with a money Bill that has been returned from the Senate. In the case of the Finance (No. 2) Bill, therefore, the House could not legally delete clauses 21 and 24 because the Senate had not made any recommendations regarding those clauses.

The Senate has been recalled to consider the deletion of clause 21 and 24 from the Finance Bill at a special sitting this afternoon. But, because the deletions by the House were unconstitutional, the Bill will not be properly passed by Parliament whatever the Senate agrees to.

If signed and gazetted as an Act it will be open to court challenges a Bill that has not been properly passed is not a law and its provisions have no legal effect. So if the Finance Bill in its present form is signed by the President and gazetted as an Act, that Act will not be a valid law and its provisions for such matters as collecting taxes could be struck down by the courts. The Minister of Finance, of all people, should be aware of this, because the Supreme Court made the point in the case of Biti v Minister of Justice 2002 (1) ZLR 177, when Mr Biti got the General Laws Amendment Act of 2002, which had been passed unprocedurally, invalidated.

A Succession of Mis-steps

The passage of the Finance Bill has raised a great deal of unnecessary acrimony – some of the articles in the state media were vituperative – and it has required the Senate to be recalled, entailing needless expense and trouble. What went wrong?

  • The offending clauses should not have been included in the Finance Bill. Most government legislation is vetted by the Cabinet Committee on Legislation and the Cabinet before it is presented in Parliament. Money Bills are an exception. They are intended to give effect to the Budget and are presented to the House of Assembly without having been approved by the Cabinet or any Cabinet committee. There is however a necessary corollary to this: money Bills should be restricted to implementing the budget. They should not go further than that. They should not, for example, deal with the composition and procedures of the Board of ZIMRA, the size of exclusive prospecting reservations under the Mines and Minerals Act, the qualifications for members of the State Procurement Board or other parastatal bodies, nor should they transfer responsibility for the making of regulations under the Exchange Control Act — all of which the current Bill Finance (No. 2) Bill did.

If the Minister of Finance is allowed to present such far-ranging provisions in a Finance Bill that has not gone through Cabinet, then Cabinet solidarity, one of the lynch-pins of Cabinet government, is threatened. It should be noted that for many years past, Ministers of Finance have included far-reaching provisions in their Finance Bills which had little or nothing to do with the budgets they presented to Parliament. ZANU-PF members of Parliament did not object then, presumably because the Ministers belonged to their own party. Minister Biti is merely continuing a well-established, albeit undesirable, practice.

  • The objection raised to clause 21 of the Bill was misdirected according to the press reports, ZANU-PF objected to clause 21 of the Finance Bill on the ground that it would transfer to the Minister of Finance powers that should properly vest in the President. This misses the most important point: the regulation-making powers conferred by the Exchange Control Act, which the Bill would have transferred to the Minister, are far too broad to be given to any one member of the Executive, whether President or Minister. Under the Exchange Control Act, in its present form, these regulations can be made for all or any of the following matters: gold, currency and securities; imports and exports; transfers of property of all kinds; payments; the compulsory acquisition of property, other than land; the search and entry of premises, thus, potentially ccontrolling virtually all commercial activity in Zimbabwe. In a democratic State, such powers should be exercised, if at all, only by detailed Acts of Parliament and should never be delegated to a member of the Executive. The amendment sought to be made by clause 21 of the Bill would not have affected this: indeed it would have made it worse because when the President makes regulations under section 2 of the Exchange Control Act he must, at least in theory, get the Cabinet to agree to them; the Minister of Finance would not have been subject to this restriction.

Whatever the Minister’s motives for the amendment — and they were probably entirely honourable — the amendment should have been rejected on the ground that it was inimical to democracy. What is needed is a complete replacement of the Exchange Control Act with a new statute setting out precisely and transparently the rules for transactions which affect Zimbabwe’s balance of payments.

  • Why did it take so long to spot the offending clauses 21 and 24? Both clauses were in the Bill tabled along with the Budget Statement on 25th November and made available to all Parliamentarians. Both clauses should have been dealt with when first before either of the Houses, thereby avoiding both present and potential future complications.

Some Lessons to be Drawn:

  • Ministers of Finance should ensure that their budget legislation deals only with budgetary matters — primarily the rates and incidence of taxation and the appropriation of funds between the Ministries and Departments of the State - and not with matters that have only an indirect effect on taxation and appropriation. If they want to make other amendments to their legislation, they should follow normal Cabinet procedures like any other Minister.
  • Members of Parliament should study Bills before they vote for or against them.
  • For taxes to be valid, the legislation by which they are enacted must be properly passed by Parliament in accordance with the provisions of the Constitution.

A Question

If Members of Parliament, for whatever reason, ignore or override the provisions of the present Constitution, what hope have we that they be able to produce a sensible, democratic and durable draft to replace it? And what hope have we of establishing a culture of constitutionalism in Zimbabwe?

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