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Minister of Finance Bill Morneau delivers the federal budget in the House of Commons on Parliament Hill in Ottawa, Wednesday, March 22, 2017.Sean Kilpatrick/The Canadian Press

Furious senators refused to pass the Liberal budget Wednesday evening, leaving the government's agenda in limbo as members of Parliament left Ottawa for the summer recess.

A flurry of events Wednesday pitted the Senate against the House of Commons over whether or not unelected senators can make decisions that have financial consequences.

The Senate will return to the issue Thursday, but it was not clear Wednesday evening whether or not they will approve the budget before also breaking for a summer recess. If they send the bill back to the House, it would not be dealt with until MPs return on Sept. 18, unless the House is recalled earlier.

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The day began with the Senate adopting Bill C-44, the budget bill, but sending it back to the House with amendments approved earlier in the week. The amendments eliminated a section that would set automatic tax increases on beer, wine and spirits based on inflation.

In the afternoon, the House of Commons unanimously approved a motion to reject the amendments. The motion also adjourned the House for the summer. Some senators said they were prepared to defer to the House and approve the budget. However, the House also sent a clear message to the Senate that it shouldn't "infringe on the privileges of the House" by amending financial legislation, which infuriated senators.

As a result, the Senate voted 79 to 2 not to deal with the budget bill until Thursday.

"The reason why the senators are angry and the reason why they didn't conclude the debate [on the budget], was because of this statement by the House of Commons … that the Senate does not have the right to alter a finance bill, or even make a suggestion, because the Senate doesn't have the jurisdiction," sad Liberal Senator George Baker.

Mr. Baker said the the written statement from the House to the Senate is at odds with the fact that the Senate has already amended two financial bills since Prime Minister Justin Trudeau's government was elected in 2015.

Mr. Trudeau has only appointed independent senators since forming government, and senators who sit as Liberals are not considered part of the Liberal caucus with MPs.

Liberal Senator Jim Munson said Mr. Trudeau's approach should lead to more respect of the Senate's work.

"We are a major part of Parliament. We have every right to amend any bill, to propose amendments at any time, whether it's a budget bill or not," he said. "The Prime Minister has created this new Senate, and this new Senate is quite feisty and is quite forceful in its opinions on anything that happens, that comes before us."

The latest twist adds another day to a long-running political drama over the budget legislation. When Finance Minister Bill Morneau first introduced his more than 300-page budget bill on April 11, its size and breadth immediately attracted concern and criticism that the Liberals had broken a campaign pledge to end the use of "undemocratic" omnibus legislation.

The immediate points of concern centred around changes to the Office of the Parliamentary Budget Officer and a section creating a new law called the Canada Infrastructure Bank that would launch a $35-billion agency aimed at attracting private investment in infrastructure.

The sections related to the PBO were amended in the House of Commons in a way that largely satisfied critics of the initial provisions.

The opposition Conservatives also focused on a section that would raise the excise tax on beer, wine and spirits by 2 per cent and then set future annual increases in line with inflation.

A coalition of lobby groups – including the Canadian Vintners Association, Beer Canada, Spirits Canada and Restaurants Canada – mounted an effective campaign called "cork the tax," which convinced many opposition MPs and senators that the inflation aspect of the tax change would hurt the industry and was undemocratic.

Mr. Morneau disputed those claims when he appeared last week before the Senate national finance committee.

"You will find that the impact is negligible. That's the best I can say," he said. "That's the reality, because it's flat over time. Unless you think inflation isn't a real thing, that's the only conclusion you can get to."

Conservative Senator Elizabeth Marshall moved the amendment Tuesday in the Senate national finance committee to remove the so-called escalator clause from the bill. The full Senate endorsed the change in a 46-32 vote later that night.

The Senate made no other amendments. A motion by Independent Senator André Pratte to remove the infrastructure bank provisions from the budget bill for further study was defeated Monday evening by the narrowest of margins: a 38-38 vote.

Ms. Marshall, a former auditor-general in Newfoundland and Labrador, said she moved the amendments on the alcohol tax because she felt the government should have to ask Parliament each year if it wishes to raise taxes.

"What this does is it imposes taxes into the future, really into eternity," she said. "I feel very strongly that if any government wants to impose taxes or increase taxes, they should come back to Parliament and have it debated. I don't think something should be buried in legislation that imposes taxes from now into infinity."

Finance Minister Bill Morneau says keeping taxes on legal marijuana low is key to squeezing out criminal enterprises. Morneau met with provincial counterparts Monday to discuss how cannabis will be taxed after its slated legalization next July.

The Canadian Press

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