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Loss of supply occurs where a government in a parliamentary democracy using the Westminster System or a system derived from it is denied a supply of treasury or exchequer funds, by whichever house or houses of parliament or head of state is constitutionally entitled to grant and deny supply. A defeat on a budgetary vote is one such way by which supply can be denied. Loss of supply is typically interpreted as indicating a loss of confidence in the government. Not all "money bills" are necessarily supply bills. For instance, in Australia, supply bills are defined as "bills which are required by the Government to carry on its day-to-day business".
When a loss of supply occurs, a prime minister is generally required either by constitutional convention or by explicit constitutional instruction to either resign immediately or seek a parliamentary dissolution.
Some constitutions, however, do not allow the option of parliamentary dissolution but rather require the government to be dissolved or to resign.
A similar deadlock can occur within a presidential system, where it is also known as a budget crisis. In contrast to parliamentary systems, the failure of the legislature to authorize spending may not in all circumstances result in an election, because some such legislatures enjoy fixed terms and so cannot be dissolved before a date of termination, which can result in a prolonged crisis.
A deadlock between a head of state and the legislative body can give rise and cause for a head of state to prematurely dismiss the elected government, requiring it to seek re-election. If a government maintains the support of a majority of legislators or the elected parliamentary representatives, the blocking of supply by a head of state would be seen as an abuse of authority and power. Many western countries have removed or restricted the right of a head of state to block supply or veto a government budget unless there is overwhelming justification and cause for such action.
Examples of the threat and/or loss of supply
- In 1909, the UK House of Lords voted against the "People's Budget", precipitating two general elections and the Parliament Act 1911, which limited the power of the Lords.
- In the 1975 Australian constitutional crisis, the elected Senate delayed voting on a bill to authorize supply for the government until the Prime Minister, Gough Whitlam, called an election for the House of Representatives. Whitlam was dismissed by the Governor-General, Sir John Kerr, on the basis of his refusal to either resign or request a dissolution. Whitlam's proposed course of action, as Kerr knew, was to call a half-Senate election which was then due and for which he and the Governor-General had already agreed on the date and on the wording of the necessary documentation when Kerr instead dismissed Whitlam without warning.
- The defeat of Garret FitzGerald's government in a budget vote in Dáil Éireann in the Republic of Ireland in 1982. FitzGerald immediately sought and was granted a Dáil dissolution.
- On 9 March 2011, the Legislative Council of Hong Kong blocked a resolution for provisional appropriations, which, before 2011, had always been a matter of formality. Resolutions for provisional appropriations had never been voted by division until 2011. The government decided, on the following day, to table another resolution with a minor change being made merely for the sake of circumventing procedural requirements that a negatived question cannot be tabled again.