Power of the purse

The power of the purse is the ability of one group to manipulate and control the actions of another group by withholding funding, or putting stipulations on the use of funds. The power of the purse can be used positively (e.g. awarding extra funding to programs that reach certain benchmarks) or negatively (e.g. removing funding for a department or program, effectively eliminating it). The power of the purse is most often utilized by forces within a government that do not have direct executive power, but have control over budgets and taxation.

In colonial Canada, the fight for "responsible government" in the 1840s centered on question of whether elected parliaments or appointed governors would have control over the purse strings, mirroring earlier fights between Parliament and the Crown in Britain.

After confederation, the phrase "power of the purse" took on a particular meaning. It now primarily refers to the federal government's superior tax-raising abilities compared to the provinces, and the consequent ability of the federal government to compel provincial governments to adopt certain policies in exchange for transfer payments. Most famously, the Canada Health Act sets rules that provinces adhere to receive health transfers (the largest such transfers). Opponents of this arrangement refer to this situation as the "fiscal imbalance", while others argue for the federal government's role in setting minimum standards for social programs in Canada.

The power of the purse's earliest examples in a modern sense occurred in the English Parliament, which gained the exclusive power to authorise taxes and thus could control the nation's cash flow. Through this power, Parliament slowly subverted the executive strength of the crown; King Charles II was limited in his powers to engage in various war efforts by a refusal by Parliament to authorise further taxes and by his inability to secure loans from foreign nations, making him much less powerful.

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