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 (allowing the majority blocking Supply to form a government), 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 Dáil Éireann in the Republic of Ireland in 1982. FitzGerald immediately sought, and was granted, a Dáil 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 Prime Minister Gough Whitlam, until Whitlam called an election for the House of Representatives. He was subsequently dismissed by the Governor-General of Australia, Sir John Kerr, having refused either to resign or request a dissolution.

Footnotes

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

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

In tandem, Article 13.2.2. states that

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

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 Dáil Éireann", 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.