Loss of Supply

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Loss of Supply occurs where a government in a parliamentary democracy is by parliamentary vote denied a supply of treasury or exchequer funds, by whichever house or houses of parliament is constitutionally entitled to grant and deny supply. A defeat on a budgetary vote is one such way by which supply can be denied.

When a Loss of Supply occurs, a prime minister is generally required either by constitutional convention or by explicit constitutional instruction to:

• immediately resign (so, allowing someone else to attempt to gain Supply), or
• seek a parliamentary dissolution (so allowing the electorate to pass judgment on the issue).

Some constitutions however do not allow the option of dissolution, instead requiring a resignation.

A similar deadlock can occur within presidential systems where it is known as a budget crisis. In contrast to parliamentary systems, the failure of the legislature to authorize spending does not result in new elections because legislatures in such systems operate to fixed terms and so cannot be dissolved ahead of schedule, which can result in a prolonged crisis.

Examples of Loss of Supply

• The defeat of Garret FitzGerald's government in a budget vote in Dail Eireann in the Republic of Ireland in 1982. FitzGerald immediately sought, and was granted, a Dail dissolution.¹
• In the Australian Constitutional Crisis of 1975, the Australian Senate refused to vote on a bill which authorized supply for the government of Gough Whitlam. He was subsequently dismissed by the Governor-General of Australia, having failed either to resign or request a dissolution. This dismissal was extremely controversial in that Whitlam argued that the upper house acted against convention in refusal to pass a bill which the lower house had passed and again in refusing to put the bill to a vote, where it would have likely passed, while it argued that its breach of convention was in response to alleged breaches of convention by Whitlam.

Footnotes

¹ Article 28.2.2. of Bunreacht na hEireann (the 1937 Irish constitution) states that

The Taoiseach shall resign from office upon his ceasing to retain the support of a majority in Dail Eireann unless on his advice the President dissolves Dail Eireann and on the reassembly of Dail Eireann after the dissolution the Taoiseach secures the support of a majority in Dail Eireann.

In tandem, Article 13.2.2. states that

The President may in absolute discretion refuse to dissolve Dail Eireann on the advice of a Taoiseach who has ceased to retain the support of a majority in Dail Eireann.

In such an eventuality the Taoiseach, in accordance with Article 28.2.2., must resign. Loss of Supply is taken as unambiguous evidence that a Taoiseach has "ceased to retain the support of a majority in Dail Eireann", as is defeat of a Motion of Confidence, passage of a Motion of No Confidence, defeat of a major Bill or any measure a prime minister declares to be of such importance as to in effect amount to a confidence issue.