The Liberals in power: IV the 'People's Budget' and the fight with the Lords

This was the title Lloyd George gave his 1909 budget and it sprang from his temperance, Nonconformist background. It was in part the product of the government’s greatly increased need for income: the Dreadnought building programme and the increased social security costs. Because it was also extremely redistributivist, it was not a traditional Liberal budget (Gladstone would have regarded it with horror).

Income tax was increased from a shilling to 1. 2d on every £ over £3000
Supertax was introduced for incomes over £5000 pa at a rate of 6d on every £ over £3000
Death duties on estates over £5,000 were increased
There were heavier duties on tobacco and spirits, and the liquor licence duties were raised
Special taxes on petrol and motor-car licences
Stamp duties were increased
A 20 % tax on the unearned increment of land values

Lloyd George also announced the impending introduction of a great measure of National Insurance, based on compulsory contributions.

The Conservatives launched a furious attack, not only in the Commons but also in the country, and resolved to mobilize their majority in the Lords against it, though this was clearly unconstitutional. Lloyd George retaliated in his Limehouse speech of 30 July.

‘I knock at the door of these great landlords and say to them: - “Here, you know these poor fellows have been digging up royalties at the risk of their lives ... they are broken ... won’t you give them something to keep them out of the workhouse ...” They scowl at you and then turn their dogs onto us, and every day you can hear them bark.’

The duke of Beaufort then played into Lloyd George’s hands when he stated that he would

‘like to see Churchill and Lloyd George in the middle of twenty couple of dog hounds’.

But by August most of the Conservative press was coming out in favour of rejection of the budget. Balfour, vulnerable and outmanoeuvred, accepted that defeat would have to come at the hands of the Lords. While the budget was being debated (with the Irish Nationalists hostile to the liquor taxes) Lloyd George declared in Newcastle:

‘The Lords may decree a revolution, but the people will decide it. ... The question will be asked whether 500 men, ordinary men chosen accidentally from among the unemployed, should over-ride the judgment ... of millions of people who are engaged in the industry which makes the wealth of the country. Who made 10,000 people owners of the soil, and the rest of us trespassers in the land of our birth?’

In November 1909 the budget passed the Commons. The Lords promptly rejected it.

The Battle with the Lords
The subsequent general election of January 1910 was fought on a range of issues: the budget, tariff reform, and the Unionist accusation that the Liberals had allowed Britain to lose naval supremacy. The election result left the Liberals and Conservatives nearly level: Liberals 275, Conservatives 273. There were also 40 Labour members and 82 Irish Nationalists. The Nationalists thus held the balance of power.

The new Parliament opened with the Liberals in a depressed mood. Asquith frequently used the phrase ‘wait and see’ - though he meant it as a threat rather than procrastination. Over the next few weeks the government drew three resolutions which would form the basis of a Parliament Bill:

the Lords would not be able to amend or reject a money bill;
an ordinary bill, if passed three times in successive sessions by the Commons could be presented for the royal assent without the agreement of the Lords, provided at least two years had elapsed between the bill’s introduction and final approval in the Commons;
the maximum duration of a Parliament was to be reduced from seven to five years.

The cabinet also decided that if the three resolutions were passed by the Commons and the Lords then threw out the bill, they would seek an election with prior guarantees from the king about the creation of peers. The king gave a secret (and reluctant) agreement to create the required number of peers.

In April the Commons passed the three resolutions and the People’s Budget got a second reading. On 7 May Edward VII died. Unwilling to embroil the new king, George V, in party controversy, it was agreed to set up a Constitutional Conference of four leaders from the two major parties. This conference held 21 sessions between June and November but the shadow of Irish Home Rule loomed over the meetings. The Liberals could not accept any scheme that would allow a veto on Home Rule, but the Conservatives insisted that this was special constitutional legislation and should be treated differently. On 10 November the Conference broke down. The government asked the king for a dissolution, and in December a second election was held.

This election was fought not on the People’s Budget but on the problem of the second chamber. The result showed little change, with the two parties still almost exactly balanced. But it was traumatic for the Unionists, who had now lost three general elections in a row. In these circumstances a ‘last ditch’ mentality developed among many of them: they would oppose the Liberals at whatever cost. The all-out resisters were soon called the ‘ditchers’; those who wanted a compromise the ‘hedgers’.

In the spring of 1911 the Parliament Bill reached the Lords, where it was amended out of recognition. In July the government made public the king’s undertaking to create peers if necessary. Asquith had agreed to postpone the actual creation of peers until the Lords were given a final chance. But when he rose to announce the government’s intentions in the Commons on 24 July he was shouted down for half an hour by supporters of the ‘ditchers’ in the Lords: these were Lord Hugh Cecil and F. E. Smith. Balfour disapproved but did nothing to stop them.

On 9-11 August during a blazing heat wave, the Lords passed the Parliament Bill: 114 ditchers voted against, but 81 Liberal peers were joined in the government lobby by 37 Unionists led by Curzon and by 13 bishops.

In the autumn of 1911 a humiliated Balfour resigned the leadership of the Unionist party. In an unusual step the party balloted the candidates for his succession and the winner was the unknown Glasgow businessman, Andrew Bonar Law (1858-1923). It was a sharp break with the House of Cecil.