H. H. Asquith became prime minister on 5th April, 1908, and the following day he appointed David Lloyd George as his Chancellor of the Exchequer. Asquith took a gamble when he appointed Lloyd George to such a senior position as he was seen as a left-wing extremist. However, Asquith reasoned that a disgruntled Lloyd George would be less of a problem inside the government as out. Asquith was also aware that Lloyd George was very popular with the general public: "The offer which I make is a well-deserved tribute to your long and eminent service to our party and to the splendid capacity which you have shown in your administration of the Board of Trade." (1)
Lloyd George, who was the first Chancellor of the Exchequer who had not been to a private school, was considered to be a "man of the people". in one speech had warned that if the Liberal Party did not pass radical legislation, at the next election, the working-class would vote for the Labour Party: "If at the end of our term of office it were found that the present Parliament had done nothing to cope seriously with the social condition of the people, to remove the national degradation of slums and widespread poverty and destitution in a land glittering with wealth, if they do not provide an honourable sustenance for deserving old age, if they tamely allow the House of Lords to extract all virtue out of their bills, so that when the Liberal statute book is produced it is simply a bundle of sapless legislative faggots fit only for the fire - then a new cry will arise for a land with a new party, and many of us will join in that cry." (2)
Lloyd George had been a long opponent of the Poor Law in Britain. He was determined to take action that in his words would "lift the shadow of the workhouse from the homes of the poor". He believed the best way of doing this was to guarantee an income to people who were to old to work. Based on the ideas of Tom Paine that first appeared in his book Rights of Man, Lloyd George's proposed the Old Age Pensions Act in his first budget.
In a speech on 15th June 1908, Lloyd George pointed out: "You have never had a scheme of this kind tried in a great country like ours, with its thronging millions, with its rooted complexities... This is, therefore, a great experiment... We do not say that it deals with all the problem of unmerited destitution in this country. We do not even contend that it deals with the worst part of that problem. It might be held that many an old man dependent on the charity of the parish was better off than many a young man, broken down in health, or who cannot find a market for his labour." (3)
However, the Labour Party was disappointed by the proposal. Along with the Trade Union Congress they had demanded a pension of at least five shillings a week for everybody of sixty or over, Lloyd George's scheme gave five shillings a week to individuals over seventy; and for couples the pension was to be 7s. 6d. Moreover, even among the seventy-year-olds not everyone was to qualify; as well as criminals and lunatics, people with incomes of more than £26 a year (or £39 a year in the case of couples) and people who would have received poor relief during the year prior to the scheme's coming into effect, were also disqualified." (4)
To pay for these old age pensions Lloyd George had to raise government revenues by an additional £16 million a year. In 1909 Lloyd George announced what became known as the People's Budget. This included increases in taxation. Whereas people on lower incomes were to pay 9d. in the pound, those on annual incomes of over £3,000 had to pay 1s. 2d. in the pound. Lloyd George also introduced a new super-tax of 6d. in the pound for those earning £5,000 a year. Other measures included an increase in death duties on the estates of the rich and heavy taxes on profits gained from the ownership and sale of property. Other innovations in Lloyd George's budget included labour exchanges and a children's allowance on income tax. (5)
David Lloyd George had based his ideas on the reforms introduced by Otto von Bismarck in the 1880s. As The Contemporary Review reported: "English progressives have decided to take a leaf out of the book of Bismarck who dealt the heaviest blow against German socialism not by laws of oppression... but by the great system of state insurance which now safeguards the German workmen at almost every point of his industrial career." (5a)
Archibald Primrose, Lord Rosebery, the former Liberal Party leader, stated that: "The Budget, was not a Budget, but a revolution: a social and political revolution of the first magnitude... To say this is not to judge it, still less to condemn it, for there have been several beneficent revolutions." However, he opposed the Budget because it was "pure socialism... and the end of all, the negation of faith, of family, of property, of Monarchy, of Empire." (6)
Ramsay MacDonald argued that the Labour Party should fully support the budget. "Mr. Lloyd George's Budget, classified property into individual and social, incomes into earned and unearned, and followers more closely the theoretical contentions of Socialism and sound economics than any previous Budget has done." MacDonald went on to argue that the House of Lords should not attempt to block this measure. "The aristocracy... do not command the moral respect which tones down class hatreds, nor the intellectual respect which preserves a sense of equality under a regime of considerable social differences." (7)
David Lloyd George admitted that he would never have got his proposals through the Cabinet without the strong support of Asquith. He told his brother: "Budgeting all day... the Cabinet was very divided... Prime Minister decided in my favour to my delight". He told a friend: "The Prime Minister has backed me up through thick and thin with splendid loyalty. I have the deepest respect for him and he has real sympathy for the ordinary and the poor." (8)
His other main supporter in the Cabinet was Winston Churchill. He spoke at a large number of public meetings of the pressure group he formed, the Budget League. Churchill rarely missed a debate on the issue and one newspaper report suggested that he had attended one late night debate in the House of Commons in his pajamas. Some historians have claimed that both men were using the measure to further their political careers.
Robert Lloyd George, the author of David & Winston: How a Friendship Changed History (2005) has suggested that their main motive was to prevent socialism in Britain: "Churchill and Lloyd George intuitively saw the real danger of socialism in the global situation of that time, when economic classes were so divided. In other European countries, revolution would indeed sweep away monarchs and landlords within the next ten years. But thanks to the reforming programme of the pre-war Liberal government, Britain evolved peacefully towards a more egalitarian society. It is arguable that the peaceful revolution of the People's Budget prevented a much more bloody revolution." (9)
The Conservatives, who had a large majority in the House of Lords, objected to this attempt to redistribute wealth, and made it clear that they intended to block these proposals. Lloyd George reacted by touring the country making speeches in working-class areas on behalf of the budget and portraying the nobility as men who were using their privileged position to stop the poor from receiving their old age pensions. The historian, George Dangerfield, has argued that Lloyd George had created a budget that would destroy the House of Lords if they tried to block the legislation: "It was like a kid, which sportsmen tie up to a tree in order to persuade a tiger to its death." (10)
Asquith's strategy was to offer the peers the minimum of provocation and hope to finesse them into passing the legislation. David Lloyd George had a different style and in a speech on 30th July, 1909, in the working-class district of Limehouse in London on the selfishness of rich men unwilling "to provide for the sick and the widows and orphans". He concluded his speech with the threat that if the peers resisted, they would be brushed aside "like chaff before us". (11)
Edward VII was furious and suggested to Asquith that Lloyd George was a "revolutionary" and a "socialist". Asquith explained that the support of the King was vital if the House of Lords was to be outmanoeuvred. Asquith explained to Lloyd George that the King "sees in the general tone, and especially in the concluding parts, of your speech, a menace to property and a Socialistic spirit". He added it was important "to avoid alienating the King's goodwill... and... what is needed is reasoned appeal to moderate and reasonable men" and not to "rouse the suspicions and fears of the middle class". (12)
David Lloyd George made another speech attacking the House of Lords on 9th October, 1909: "Let them realize what they are doing. They are forcing a Revolution. The Peers may decree a Revolution, but the People will direct it. If they begin, issues will be raised that they little dream of. Questions will be asked which are now whispered in humble voice, and answers will be demanded with authority. It will be asked why 500 ordinary men, chosen accidentally from among the unemployed, should override the judgment - the deliberate judgment - of millions of people who are engaged in the industry which makes the wealth of the country. It will be asked who ordained a few should have the land of Britain as a perquisite? Who made ten thousand people owners of the soil, and the rest of us trespassers in the land of our birth? Where did that Table of the law come from? Whose finger inscribed it? These are questions that will be asked. The answers are charged with peril for the order of things that the Peers represent. But they are fraught with rare and refreshing fruit for the parched lips of the multitude, who have been treading along the dusty road which the People have marked through the Dark Ages, that are now emerging into the light." (13)
It was now clear that the House of Lords would block the budget. H. H. Asquith asked the King to create a large number of Peers that would give the Liberals a majority. Edward VII refused and his private secretary, Francis Knollys, wrote to Asquith that "to create 570 new Peers, which I am told would be the number required... would practically be almost an impossibility, and if asked for would place the King in an awkward position". (14)
On 30th November, 1909, the Peers rejected the Finance Bill by 350 votes to 75. Asquith had no option but to call a general election. In January 1910, the Liberals lost votes and was forced to rely on the support of the 42 Labour Party MPs to govern. Asquith increased his own majority in East Fife but he was prevented from delivering his acceptance speech by members of the Women Social & Political Union who were demanding "Votes for Women". (15)
John Grigg, the author of The People's Champion (1978) argues that the reason why the "people failed to give a sweeping, massive endorsement to the People's Budget" was that the electorate in 1910 was "by no means representative of the whole British nation". He points out that "only 58 per cent of adult males had the vote, and it is a fair assumption that the remaining 42 per cent would, if enfranchised, have voted in very large numbers for Liberal or Labour candidates. In what was still a disproportionately middle-class electorate the fear of Socialism was strong, and many voters were susceptible to the argument that the Budget was a first installment of Socialism." (16)
Some of his critics on the left of the party believed that Asquith had not mounted a more aggressive campaign against the House of Lords. It was argued that instead of threatening its power to veto legislation, he should have advocated making it a directly elected second chamber. Asquith felt this was a step to far and was more interested in a negotiated settlement. However, to Colin Clifford, this made Asquith look "weak and indecisive". (17)
In a speech on 21st February, 1910, Asquith outlined his plans for reform: "Recent experience has disclosed serious difficulties due to recurring differences of strong opinion between the two branches of the Legislature. Proposals will be laid before you, with convenient speed, to define the relations between the Houses of Parliament, so as to secure the undivided authority of the House of Commons over finance and its predominance in legislation." (18)
The Parliament Bill was introduced later that month. "Any measure passed three times by the House of Commons would be treated as if it had been passed by both Houses, and would receive the Royal Assent... The House of Lords was to be shorn absolutely of power to delay the passage of any measure certified by the Speaker of the House of Commons as a money bill, but was to retain the power to delay any other measure for a period of not less than two years." (19)
Edward VII died in his sleep on 6th May 1910. His son, George V, now had the responsibility of dealing with this difficult constitutional question. David Lloyd George had a meeting with the new king and had an "exceedingly frank and satisfactory talk about the political crisis". He told his wife that he was not very intelligent as "there's not much in his head". However, he "expressed the desire to try his hand at conciliation... whether he will succeed is somewhat doubtful." (20)
James Garvin, the editor of The Observer, argued it was time that the government reached a negotiated settlement with the House of Lords: "If King Edward upon his deathbed could have sent a last message to his people, he would have asked us to lay party passion aside, to sign a truce of God over his grave, to seek... some fair means of making a common effort for our common country... Let conference take place before conflict is irrevocably joined." (21)
A Constitutional Conference was established with eight members, four cabinet ministers and four representatives from the Conservative Party. Over the next six months the men met on twenty-one occasions. However, they never came close to an agreement and the last meeting took place in November. George Barnes, the Labour Party MP, called for an immediate creation of left-wing peers. However, when a by-election at Walthamstow suggested a slight swing to the Liberals, Asquith decided to call another General Election. (22)
David Lloyd George called on the British people to vote for a change in the parliamentary system: "How could anyone defend the Constitution in its present form? No country in the world would look at our system - no free country, I mean... France has a Senate, the United States has a Senate, the Colonies have Senates, but they are all chosen either directly or indirectly by the people." (23)
The general election of December, 1910, produced a House of Commons which was almost identical to the one that had been elected in January. The Liberals won 272 seats and the Conservatives 271, but the Labour Party (42) and the Irish (a combined total of 84) ensured the government's survival as long as it proceeded with constitutional reform and Home Rule. (24)
The Parliament Bill, which removed the peers' right to amend or defeat finance bills and reduced their powers from the defeat to the delay of other legislation, was introduced into the House of Commons on 21st February 1911. It completed its passage through the Commons on 15th May. A committee of the House of Lords then amended the bill out of all recognition. (25)
According to Lucy Masterman, the wife of Charles Masterman, the Liberal MP for West Ham North, that David Lloyd George had a secret meeting with Arthur Balfour, the leader of the Conservative Party. Lloyd George had bluffed Balfour into believing that George V had agreed to create enough Liberal supporting peers to pass a new Parliament Bill. (26)
Although a list of 249 candidates for ennoblement, including Thomas Hardy, Bertrand Russell, Gilbert Murray and J. M. Barrie, had been drawn up, they had not yet been presented to the King. After the meeting Balfour told Conservative peers that to prevent the Liberals having a permanent majority in the House of Lords, they must pass the bill. On 10th August 1911, the Parliament Act was passed by 131 votes to 114 in the Lords. (27)
You have never had a scheme of this kind tried in a great country like ours, with its thronging millions, with its rooted complexities... This is, therefore, a great experiment... We do not say that it deals with all the problem of unmerited destitution in this country. We do not even contend that it deals with the worst part of that problem. It might be held that many an old man dependent on the charity of the parish was better off than many a young man, broken down in health, or who cannot find a market for his labour.
This is a war Budget. It is for raising money to wage implacable warfare against poverty and squalidness. I cannot help hoping and believing that before this generation has passed away, we shall have advanced a great step towards that good time, when poverty, and the wretchedness and human degradation which always follows in its camp, will be as remote to the people of this country as the wolves which once infested its forests.
Let them realize what they are doing. They are forcing a Revolution. The Peers may decree a Revolution, but the People will direct it. If they begin, issues will be raised that they little dream of. Questions will be asked which are now whispered in humble voice, and answers will be demanded with authority. It will be asked why 500 ordinary men, chosen accidentally from among the unemployed, should override the judgment - the deliberate judgment - of millions of people who are engaged in the industry which makes the wealth of the country. It will be asked who ordained a few should have the land of Britain as a perquisite? Who made ten thousand people owners of the soil, and the rest of us trespassers in the land of our birth? Where did that Table of the law come from? Whose finger inscribed it?
These are questions that will be asked. The answers are charged with peril for the order of things that the Peers represent. But they are fraught with rare and refreshing fruit for the parched lips of the multitude, who have been treading along the dusty road which the People have marked through the Dark Ages, that are now emerging into the light."