Lloyd George’s “People’s Budget,” and the Parliamentary Act of 1911, Part 1

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David Lloyd George

In December 1905, James Balfour, the Conservative prime minister (PM), suddenly resigned. (1) King Edward VII called upon Sir Henry Campbell-Bannerman, the Leader of the Liberal Party, to form the next Government. He did this and then immediately called a general election, which resulted in the greatest partisan landslide (2) in the 20th century save for current PM Tony Blair’s victory last May. (3)

Emboldened by the mandate given by the electorate, the Liberal Government set out on an ambitious program to build what would become the first foundations of the British welfare state. Much of this reform was delayed until 1908, however, when Bannerman resigned and his chancellor of the exchequer, Herbert Henry Asquith, took over. Asquith instantly promoted two dynamic figures of the old Cabinet to prominent domestic positions: David Lloyd George, the fiery Welsh populist, was promoted from president of the Board of Trade to chancellor of the exchequer, and Winston Churchill, the restless, “young man in a hurry,” was promoted from being under-secretary at the Colonial Office to Lloyd George’s former position. (4) In one fell swoop, Asquith, a leader more known for his “wait and see” than for forceful actions (5) injected a dynanism into his Cabinet that his predecessors lacked. (6)

Yet as the Liberal Government passed more and more pieces of legislation, a much more lethargic and reactionary body, the Conservative-dominated House of Lords, vetoed these reforms. This body, which had not rejected a single piece of legislation during the Conservative governments of 1895-1905, was now used as a pliant tool of the Conservatives. (7) They did allow some reforms to go through, however, and one of the more notable was the 1908 Old Age Pensions Act. This notable act, established, for the first time, non-contributory pensions for all citizens over the age of 70 with a weekly income of under 10 shillings (or US $2.50 in 1908 dollars). (8) Even though there were several restrictions placed on the program, the costs were greater than anticipated. Thus, Lloyd George’s first tasks after becoming Chancellor of the Exchequer was to draft a budget which would cover the shortfall (9) and provide for additional defense expenditures. (10) He also saw it as an ideal opportunity to reform the tax system and, in so doing, capture the attention of the electorate. (11)

The budget, known as the “People’s Budget of 1909,” included a direct income tax with a surcharge on higher incomes (which established the concept of progressive taxation), car and gas levies to pay for road construction, increased inheritance taxes, and a 20 percent tax on the capital gain of land when it changed hands. (12) Most disturbing to the well-off, however, was a provision which called for a small levy on all land and minerals that were undeveloped. This provision required an evaluation of all property in Great Britain that was undeveloped, which would have opened the door for further taxation. (13) It was a budget designed to strike hard at the peers, and to create real social reform.

The budget passed through all the motions in the House of Commons, despite bitter debate, and passed in November 1909 by a vote of 379 to 149. Then it went to the House of Lords, which had never before vetoed a Budget Bill. Only three weeks later, however, it did just that, and in so doing, created a constitutional crisis. (14)

Footnotes:

  1. (1) Walter L. Arnstein, Britain Yesterday and Today: 1830 to the Present, 6th ed., (Lexington, MA: D.C. Heath and Company, 1992), pp. 209-10.
  2. (2) The two greatest landslides of the 20th Century, the “Coupon Election of 1918” and the “Save the Pound Election of 1931,” were both won by Coalition Governments instead of political parties, and thus, are not traditionally counted when comparing political results in the 20th Century.
  3. (3) Peter Clarke, Hope and Glory: Britain, 1900-1990, 2nd ed., (New York: Penguin, 1995), p. 405.
  4. (4) Arnstein, p. 216.
  5. (5) Clarke, p. 54.
  6. (6) Ibid.
  7. (7) Arnstein, pp. 213-14.
  8. (8) Ibid., p. 215.
  9. (9) Clarke, p. 56.
  10. (10) By this time, Germany was actively building its navy. Thus, one of the prodominant cries was “We want eight, and we won’t wait!” a slogan referring to the new Dreadnought battleships.
  11. (11) Arnstein, p. 218.
  12. (12) Ibid.
  13. (13) Ibid.
  14. (14) Clarke, p. 60.
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