The Edwardians

by Roy Hattersley

  *For a full account of the Taff Vale Judgement, its reversal and consequences, see Chapter 11, ‘United We Stand’.

  *The WLGS encouraged women’s involvement in the institutions to which they could be elected in the years before they obtained the parliamentary franchise.

  *For a detailed description of the 1902 Education Act, see Chapter 12, ‘Useful Members of the Community’.

  *See Chapter 8, ‘Who Shall Rule?’

  *See Chapter 11, ‘United We Stand’.

  CHAPTER 8

  Who Shall Rule?

  Henry Campbell-Bannerman resigned from the office of Prime Minister on 3 April 1908. The Cabinet, part impatient and part apprehensive, had realised since the New Year that the resignation could not be long delayed. So had the King. He had asked the sick incumbent to remain at his post at least until the royal holiday in Biarritz was over. Doctors advised otherwise and the seals of office were surrendered. However, the holiday had to be completed. So Herbert Asquith, the unchallenged successor, was required to travel to France to kiss hands and receive the King’s commission to form a government. He left London on the overnight boat train alone with ‘cap pulled well down over his eyes to preserve his anonymity’.1 Initially the King proposed to summon all the new Cabinet to Paris where, according to his plan, he would hand them their seals of office in the Hôtel Crillon. Wiser counsel, in the urbane form of Lord Knollys, prevailed and the King returned to England two weeks later.

  Asquith had been a cautious Chancellor of the Exchequer. Between 1906 and 1908 he had reduced the national debt by £45 million and kept the budget in permanent surplus. He was deeply reluctant to increase public expenditure. It may have been the fear that his successor would be less prudent which, at first, inclined him to fill the double role of Chancellor and Prime Minister. The King endorsed the idea after he had been assured that a precedent had been set by Mr Gladstone in 1873. On reflection, Asquith decided that, in the intervening twenty-five years, government had grown too complex for the two jobs to be successfully combined. David Lloyd George was promoted to the Treasury and was succeeded at the Board of Trade by Winston Churchill – only thirty-three years of age and a Liberal since he had crossed the floor of the House of Commons in 1904.

  News of the promotions was published in the Daily Chronicle before the official announcement was made. The culprit was assumed to be Lloyd George. His letter of denial to the Prime Minister ended with a reproof which revealed the class consciousness that was to inform much of his policy. ‘Men whose promotion is not sustained by birth or other favouring conditions are always liable to be assailed with unkind suspicions of this sort. I would ask it, therefore, as a favour that you should not entertain them without satisfying yourself that they had some basis in truth.’2 The raw nerve which the allegation exposed never quite healed over.

  The budget of 1908 was, with Lloyd George’s agreement, presented to the House of Commons by the Prime Minister, who had prepared it before his elevation. Asquith therefore takes his place in history as the true begetter of the old-age pension. For the previous two years the radical wing of the Liberal Party had tried, without success, to persuade him to implement what they regarded as an essential element of social policy. But he had refused to advance into what he called, in his budget speech, ‘the still unconquered territory of social reform’. Where arguments of principle failed, political necessity succeeded. In 1907, the Liberal Party was beaten in two by-elections it expected to win. The Labour candidate was returned in Jarrow, and Victor Grayson, the romantic and mysterious independent socialist, secured an even more unlikely victory in the Colne Valley. At the TUC Annual Conference in Bath, a resolution demanding the introduction of the old-age pension was carried unanimously.

  The government responded by announcing its intention to present a pension bill to the House of Commons in time for the scheme to be in operation by 1 January 1909 – the date which the TUC resolution had identified as the essential starting point. The Bill’s provisions were, however, far more modest than the trade unions had demanded. At Bath the proposal had been five shillings a week for every man aged sixty or over. Asquith offered five shillings a week at seventy (seven and sixpence for a couple) with the proviso that it should be withheld from criminals, lunatics, vagrants and anyone with an income of more than ten shillings a week. The TUC, always happy to accept half a loaf, was delighted. Its pleasure was increased by the knowledge that Lloyd George would be the responsible minister. During his election campaign in 1895 he had argued in favour of establishing an old-age pension and proposed that it should be financed by increased death duties and land taxes. His heart, the trade unions knew, was in the right place. But it was Asquith’s good fortune to make the announcement. He also made provision for financing the first three months of the scheme’s implementation. Reasonably enough, he left the long-term financial arrangements to the budget of 1909.

  Lloyd George, despite his enthusiasm for social legislation, was, in general, what he liked to call ‘an economist’ – not an expert on the works of Alfred Marshall but a chancellor who chose to economise. Winston Churchill held the same view. So the two great war leaders – each of whom was to become Prime Minister at a moment of national crisis and then lead the country to victory – were allies in a campaign to hold down military and naval spending. The argument about how much the nation could afford had survived Campbell-Bannerman. After much argument, Asquith’s Cabinet agreed to an extended naval building programme with an estimated cost of £10 million in the fiscal year 1909–10. Added to the cost of financing a full year’s old-age pension, that meant that Lloyd George had to finance £15 million of new expenditure.

  The need to raise extra revenue did not quite amount to a financial crisis, but the behaviour of the Opposition did put the government’s whole programme in jeopardy. The Tory Party, which had always regarded the two Houses of Parliament as separate entities, decided, after the 1906 defeat, to co-ordinate its strategy in the Lords and the Commons. The Conservative leadership suspected that radicals within the government longed for an opportunity to emasculate the Upper House. It was therefore agreed between Balfour (who after his defeat in Manchester had returned as Member for the City of London) and Lansdowne (the Tory Leader in the Lords) that, ‘while tactics would have to be left flexible’, the basic plan would be to ‘fight all points of principle very stiffly in the Commons and make the House of Lords the theatre of compromise’.3

  For a time, the scheme worked well. The (Nonconformist) Education Bill of 1906, which aimed to restrict denominational teaching of religious instruction in state schools, was amended by the Lords to a point at which the government, although unable to claim that it had been rejected, decided that it was no longer worth the expenditure of parliamentary time. On the other hand, the Trades Disputes Bill (which re-established Trade Union immunities and, in effect, negated the Taff Vale Judgement*) was regarded as too politically popular a measure to be rejected by an unelected House. Their Lordships were content to denounce it as offering one section of society ‘privileges fraught with danger to the community as a whole’. They then allowed it to pass into law. But the back-bench Tory extremists, who never regarded any other party as capable of forming a legitimate government, grew impatient. In 1906 the Lords rejected outright the Plural Voting Bill. Five government bills were lost in 1907 and five more early in 1908. Then (at the insistence of the brewers and their tenants but against the advice of the Church of England bishops) the Lords defeated the Licensing Bill. Nonconformists were scandalised by the rejection of the notion that the number of licensed premises in any one area should, in part, be governed by the size of the community they served. Lloyd George threatened to retaliate by increasing excise duties, and there was much discussion about incorporating the lost legislation into the Finance Bill. According to the parliamentary convention, the Lords never defeated, and rarely obstructed, ‘supply’ – the raising of taxes.

  Some historians have suggested – and
there was a time when the Tories actually feared – that Asquith and Lloyd George planned to use a controversial budget as a means of first challenging and then breaking the Lords’ authority. It is far more likely that the Liberal leadership never even considered the possibility of the Upper House emasculating the Finance Bill – although they undoubtedly enjoyed the prospect of the peers being humiliated by being forced grudgingly to endorse legislation with which they passionately disagreed. Balfour had argued strenuously against the Old Age Pensions Bill, largely on the slightly tenuous grounds that it would be impossible to check the age of applicants. But he accepted that, because it was a money bill, the Lords would let it through. To the government, that seemed confirmation that they would do the same with the Finance Bill which followed.

  Almost a century later, it is impossible to imagine that the Lords would ever have accepted the 1909 Finance Bill without a fight. It interfered with a part of the nation’s life which the peers believed was theirs to have and to hold in perpetuity – the ownership of the land. That was only one of the radical ingredients in a budget which was so controversial that it took the Chancellor some time to convince his own colleagues of its wisdom. Roy Jenkins, in his biography of Asquith, suggests that ‘he had some difficulty with the Treasury as well’.4 Sir George Murray, the Permanent Secretary, notified the Prime Minister on 7 April 1909 (less than three weeks before Budget Day) that ‘only two blots’ remained in a fiscal package which was ‘more or less shipshape’. The Cabinet, examining the budget item by item at a specially convened meeting, was not so sure.

  When the package was finally completed, Lloyd George, resentful that he had been forced to endure such detailed scrutiny, told his half-brother, ‘Asquith alone was helpful’.5 Later he was more generous. ‘I should say that I have Winston Churchill with me and above all the Prime Minister has backed me up through thick and thin with splendid loyalty.’6 Other members of the Cabinet had been less supportive. Harcourt had been particularly difficult, ‘obstructing [the proposals] while posing all the time as a Radical.’7 Crewe and Runciman had demonstrated their reservations by studied silence.

  The Cabinet met fourteen times during the six weeks before Budget Day. Asquith’s letters to the King reported the Chancellor’s defeats. ‘Cabinet rejected a proposal … to tax the ground rent of lands built upon … and the provision for the additional taxation of land values was carefully revised.’ Both changes were made to protect the sanctity of contracts.

  That demonstration of respect for the unfettered rights of property was not altogether consistent with Gladstone’s Second Irish Land Act, which had stipulated a limit on the requirements that landlords could legally impose on their tenants. But if, in that particular, the Cabinet was more conventionally respectable than its nineteenth-century Liberal predecessor, in other ways it broke new ideological ground. Asquith, said Lloyd George, ‘had real sympathy for the ordinary and the poor’8 – not a characteristic which is always associated with the Balliol Brahmin. It may well be that, as well as accepting ‘the abandonment of the old limitations attaching to the raising of revenue’, he positively welcomed what amounted to a revolution in the ways in which budgets were prepared. For the first time in British history a Chancellor of the Exchequer approached his task in the belief ‘that taxation should be used for the purposes of social regeneration’.9 Lloyd George held that view with an absolute sincerity born out of a combination of compassion and admiration for the virtues of the working class. His speech during the Second Reading debate on the Pensions Bill set out his philosophy exactly.

  The provision which has been made for the sick and the unemployed is grossly inadequate in this country, yet the working classes have done their best during fifty years to make provision without the aid of the state … These problems of the sick, of the infirm, of the men who cannot find the means of earning a livelihood … are problems with which it is the business of the state to deal.

  Thus, in the words of historian John Grigg, ‘Lloyd George utterly repudiated the Victorian view of poverty and the Gladstonian concept of government’.

  In these cynical times, Lloyd George is often regarded as an opportunist who, in the words of his severest critic, ‘did not mind in which direction the taxi was travelling as long as he was the driver’. But during his years at the Treasury he was a real believer in providing ‘assistance’ to the old, poor and sick. He was a supreme politician. So when he realised that the forces ranged against widows’ and orphans’ benefits were invincible, he retreated. But he advanced, often against great odds, wherever and whenever progress was possible. And he advanced for the right reasons. When he turned to medical insurance in 1911, he told his civil servants that ‘most illnesses are due to the abuse of some prudent rule of nature’, but homespun Welsh philosophy did not obscure his determination to apply his basic rule: help should be provided on the basis of need and need alone. The 1911 Insurance Act contained, on his explicit instruction, a clause which provided ‘that medical treatment shall be given without regard to cause or nature of disease’.10 Contributors to the scheme earned a universal entitlement. There was to be no distinction between the deserving and the undeserving poor.

  Lloyd George’s proposals for raising revenue in his 1909 budget were, by any standards, controversial. Income tax was increased from a shilling to one and twopence in the pound on unearned income and on incomes of more than three thousand pounds a year. A ‘supertax’ of sixpence in the pound was to be levied on the amount by which incomes of £50,000 or more exceeded £3,000. Petrol was taxed at threepence on the gallon and motor car ownership was taxed according to a sliding scale based on engine horsepower.* Excise duties on tobacco and spirits, stamp duty and estate duty were all increased. A general tax on liquor licences was accompanied by the reform of the licensing system which had been proposed in the lost bill. The one major relaxation was the exclusion of ten pounds a year from the income tax assessment of men with children.

  But the most controversial proposals – in a budget which raised an additional thirteen and a half million pounds and met the rest of the increased expenditure by a transfer of three million pounds from the sinking fund – were the package of land taxes. A tax of 20 per cent was to be levied on the unearned increment of land values, payable when land changed hands by sale, gift or inheritance. There was also to be a capital tax of one halfpenny in the pound on the value of undeveloped land and minerals. A 10 per cent ‘reversion duty’ was to be charged on the financial recompense which came to a lessee at the end of a lease.

  The land tax proposals were modified during the Committee Stage of the Finance Bill, but the changes did little to assuage the anger of the landowning classes. The Chancellor himself, predicting tax rises even before he made his budget statement, seemed more anxious to provoke than to placate his enemies. Lloyd George embodied all that the landowners feared and hated. Most of them took it for granted that his budget was motivated by malice and envy: for on questions concerning the land, Lloyd George had ‘form’.

  The Agricultural Land Bill of 1897, which had proposed a 50 per cent reduction in the rating of farmland, had been based on the recommendations of a Royal Commission that had been set up by Gladstone. Implementing the report was probably essential to the economic welfare of British farming. But the young Lloyd George had regarded it as a gift to the Tory landlords and, by personalising its benefit to ministers, behaved in a way which was inconsistent with the gentlemanly traditions of the Victorian House of Commons. He had calculated that, thanks to the Bill, the Tory Cabinet as a whole would be better off by about £67,000. Salisbury, the Prime Minister, would pay £2,000 less in rates, Balfour (his nephew and political heir apparent) would have his rates reduced by £1,450. The Duke of Devonshire would be the greatest beneficiary of all. His annual payment to the numerous local authorities in whose areas he owned land would fall by £10,000. Men, and the descendants of men, who had been deeply offended by the suggestion that they were motivated by persona
l greed rather than by public spirit – and the implication that they could be corrupted by comparatively small sums of money – took it for granted that the Chancellor was still pursuing a vendetta. Vested interest combined with resentment at what they believed to be a policy which was both vindictive and punitive. When it was discovered that Philip Snowden – one day to become Chancellor of the Exchequer himself and to abandon the Labour Party to serve in Ramsay MacDonald’s national government – had proposed a similar pattern of land taxes to the Independent Labour Party, they were convinced that Lloyd George was a not-very-secret socialist.

  Lord Hardinge – about to become Viceroy of India and still, theoretically, a public servant rather than a politician – announced that the budget was ‘cunningly devised as a vehicle for the socialist revolution’ and that it contained ‘all the doctrines of the extreme Socialist Party while it provides, at the same time, all the machinery that is necessary for carrying these doctrines into effect at any time hereafter’.11 Rosebery – like most apostates, extreme in the denunciation of his old friends – spoke of ‘ships crossing the Atlantic carrying stocks and bonds as ballast in order that they might be got away from the jurisdiction of His Majesty’s Government’.12 Lord Northcliffe – always looking for sensational reports – led the Tory newspapers’ claim that the budget of 1909 was so alien to the spirit of England that it represented a sort of treason against all that the country stood for. The Conservative Party eagerly echoed the claim that the new taxes were treason. It was a tactic the Tory Party was to employ time and time again in an attempt to obstruct the work of elected governments. Lloyd George, the object of their fear and hatred, encouraged (and probably enjoyed) the Establishment’s animosity. His explanation of the need to raise extra taxes to finance the old-age pension was calculated to excite apprehension. ‘I have no nest eggs at all. I have got to rob somebody’s hen roost next year. I am on the look-out for which will be the easiest to get and where I shall be least punished and where I shall get the most eggs and not only that, but where they can be most easily spared.’13 The rhetoric with which the idea of a redistributive budget was supported and the reputation of its author combined with its contents to create what George Dangerfield in his 1935 book The Strange Death of Liberal England called ‘a Budget crying out to be vetoed’.14