EARLY ROOTS OF THE BRITISH WELFARE STATE: LLOYD GEORGE “PEOPLE’S BUDGET” 1909

January 19, 2011 at 3:37 am | Posted in Economics, Financial, History, United Kingdom | Leave a comment

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Lloyd George

People’s Budget, 1909

Although old-age pensions had already been introduced by Asquith as Chancellor, Lloyd George was largely responsible for the introduction of state financial support for the sick and infirm (known colloquially as “going on the Lloyd George” for decades afterwards) — legislation often referred to as the Liberal reforms.

In 1909 he introduced his famous budget imposing increased taxes on luxuries, liquor, tobacco, incomes, and land, so that money could be made available for the new welfare programs as well as new battleships. The nation’s landowners (well represented in the House of Lords) were intensely angry at the new taxes.

In the House of Commons Lloyd George gave a brilliant defense of the budget, which was attacked by the Conservatives. On the stump, most famously in his Limehouse speech, he denounced the Conservatives and the wealthy classes with all his very considerable oratorical power. The budget passed the Commons, but was defeated by the Conservative majority in the House of Lords. The elections of 1910 upheld the Liberal government and the budget finally passed the Lords. Subsequently, the Parliament Bill for social reform and Irish Home Rule, which Lloyd George strongly supported, was passed and the veto power of the House of Lords was greatly curtailed.

In 1911 Lloyd George succeeded in putting through Parliament his National Insurance Act, making provision for sickness and invalidism, and this was followed by his Unemployment Insurance Act.

He was helped in his endeavors by forty or so backbenchers who regularly pushed for new social measures, and often voted with the Labour Party on them.[2] These social reforms began in Britain the creation of a welfare state and fulfilled the aim of dampening down the demands of the growing working class for rather more radical solutions to their impoverishment.[3]

1. Martin Pugh, “Lloyd George,” in John Cannon, ed. The Oxford Companion to British History, (2002) 583–5

2. Whigs, Radicals, and Liberals, 1815-1914, by Duncan Watts

3. Gilbert, “David Lloyd George: Land, The Budget, and Social Reform,” The American Historical Review Vol. 81, No. 5 (Dec., 1976), pp. 1058–1066

The 1909 People’s Budget was a product of then–British Prime Minister H. H. Asquith‘s Liberal government, introducing many unprecedented taxes on the wealthy and radical social welfare programmes to Britain’s political life. It was championed by Chancellor of the Exchequer David Lloyd George and his strong ally Winston Churchill, who was then President of the Board of Trade; the duo was called the “Terrible Twins” by contemporaries.[1]

Churchill’s biographer, William Manchester, called the People’s Budget “a revolutionary concept” because it was the first budget in British history with the expressed intent of redistributing wealth among the British public. It was a key issue of contention between the Liberal government and the Conservative-dominated House of Lords, ultimately leading to two general elections in 1910 and the enactment of the Parliament Act 1911.

Overview

The Budget was introduced in the British Parliament by David Lloyd George on 29 April 1909.[2] Lloyd George argued that the People’s Budget would eliminate poverty, and commended it thus:

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”.[3]

The budget included several proposed tax increases to fund the Liberal government’s welfare reforms. Income tax was held at nine old pence in the pound (9d, or 3.75%) for incomes less than £2,000, which was equivalent to £154,524 in today’s money[4]—but a higher rate of one shilling (12d, or 5%) was proposed for incomes greater than £2,000, and an additional surcharge or “super tax” of 6d (a further 2.5%) was proposed on the amount by which incomes of £5,000 (£386,309 today[4]) or more exceeded £3,000 (£231,786 today[4]). An increase was also proposed in inheritance tax and naval rearmament.

More controversially, the Budget also included a proposal for the introduction of a land tax based on the ideas of the American tax reformer Henry George. This would have had a major effect on large landowners, and the Conservative-Unionist opposition, which consisted mostly of large landowners, had a large majority in the Lords. Furthermore, the Conservatives believed that money should be raised through the introduction of tariffs on imports, which was claimed to benefit British industry and to raise revenue for social reforms at the same time (protectionism). Interestingly, according to economic theory, such tariffs would have been very beneficial for land owners, especially in agricultural produce (see Corn Laws).

Constitutional stand-off

The House of Lords vetoed the new budget—the first time since the 17th century that it had challenged the House of Commons‘ power of the purse—on 30 November 1909,[5] setting the stage for a tremendous showdown, which Churchill relished. The Liberals countered by making their proposals to reduce the power of the Lords the main issue of the general election in January 1910. The Unionists won more votes than the Liberals but not more seats, and the outcome was a hung parliament, with the Liberals relying on Labour and the Irish Nationalists for their majority. The Lords accepted the Budget on 29 April 1910—a year to the day after its introduction[6]—when the land tax proposal was dropped, but contention between the government and the Lords continued until the second general election in December 1910, which resulted again in the Unionists gaining more votes than the Liberals but producing another hung parliament, with the Liberals again relying on coalition partners for a majority. Nonetheless, the Lords passed the Parliament Act 1911.

References

1. Geoffrey Lee – The People’s Budget: An Edwardian Tragedy

2. Raymond, E. T. (1922). Mr. Lloyd George. George H. Doran company. p. 118. http://books.google.ie/books?ei=kmdsTJHmJoWUjAfj1cjjAQ&ct=result&id=i2nSAAAAMAAJ&dq=people%27s+budget+introduced&q=april+29.

3. “The National Archives Learning Curve | Britain 1906-18 | Achievements of Liberal Welfare Reforms: Gallery 2”. Learningcurve.gov.uk. http://www.learningcurve.gov.uk/britain1906to1918/g2/gallery2.htm. Retrieved 2010-01-24.

4. a b c UK CPI inflation numbers based on data available from Lawrence H. Officer (2010) “What Were the UK Earnings and Prices Then?” MeasuringWorth.

5. Palmer, Alan; Veronica (1992). The Chronology of British History. London: Century Ltd. pp. 342–343. ISBN 0-7126-5616-2.

6. Raymond, E. T. (1922). Mr. Lloyd George. George H. Doran company. p. 136. http://books.google.ie/books?ei=kmdsTJHmJoWUjAfj1cjjAQ&ct=result&id=i2nSAAAAMAAJ&dq=people%27s+budget+introduced&q=april+29.

Bibliography

· William Manchester, The Last Lion: Winston Spencer Churchill, Visions of Glory 1874-1932, pp. 408-409 (1st Edition); 1983; ISBN 0-316-54503-1;

In 1911 Lloyd George succeeded in putting through Parliament his National Insurance Act, making provision for sickness and invalidism, and this was followed by his Unemployment Insurance Act.

He was helped in his endeavours by forty or so backbenchers who regularly pushed for new social measures, and often voted with the Labour Party on them.[2] These social reforms began in Britain the creation of a welfare state and fulfilled the aim of dampening down the demands of the growing working class for rather more radical solutions to their impoverishment.[3]

Lloyd George People’s Budget, 1909

Presented 29 April 1909

Passed 29 April 1910

Parliament 28th/29th

Party Liberal Party

Chancellor David Lloyd George

Lloyd George

People’s Budget, 1909

Although old-age pensions had already been introduced by Asquith as Chancellor, Lloyd George was largely responsible for the introduction of state financial support for the sick and infirm (known colloquially as “going on the Lloyd George” for decades afterwards) — legislation often referred to as the Liberal reforms.

In 1909 he introduced his famous budget imposing increased taxes on luxuries, liquor, tobacco, incomes, and land, so that money could be made available for the new welfare programs as well as new battleships. The nation’s landowners (well represented in the House of Lords) were intensely angry at the new taxes.

In the House of Commons Lloyd George gave a brilliant defense of the budget, which was attacked by the Conservatives. On the stump, most famously in his Limehouse speech, he denounced the Conservatives and the wealthy classes with all his very considerable oratorical power. The budget passed the Commons, but was defeated by the Conservative majority in the House of Lords. The elections of 1910 upheld the Liberal government and the budget finally passed the Lords. Subsequently, the Parliament Bill for social reform and Irish Home Rule, which Lloyd George strongly supported, was passed and the veto power of the House of Lords was greatly curtailed.

In 1911 Lloyd George succeeded in putting through Parliament his National Insurance Act, making provision for sickness and invalidism, and this was followed by his Unemployment Insurance Act.

He was helped in his endeavors by forty or so backbenchers who regularly pushed for new social measures, and often voted with the Labour Party on them.[2] These social reforms began in Britain the creation of a welfare state and fulfilled the aim of dampening down the demands of the growing working class for rather more radical solutions to their impoverishment.[3]

1. Martin Pugh, “Lloyd George,” in John Cannon, ed. The Oxford Companion to British History, (2002) 583–5

2. Whigs, Radicals, and Liberals, 1815-1914, by Duncan Watts

3. Gilbert, “David Lloyd George: Land, The Budget, and Social Reform,” The American Historical Review Vol. 81, No. 5 (Dec., 1976), pp. 1058–1066

The 1909 People’s Budget was a product of then–British Prime Minister H. H. Asquith‘s Liberal government, introducing many unprecedented taxes on the wealthy and radical social welfare programmes to Britain’s political life. It was championed by Chancellor of the Exchequer David Lloyd George and his strong ally Winston Churchill, who was then President of the Board of Trade; the duo was called the “Terrible Twins” by contemporaries.[1]

Churchill’s biographer, William Manchester, called the People’s Budget “a revolutionary concept” because it was the first budget in British history with the expressed intent of redistributing wealth among the British public. It was a key issue of contention between the Liberal government and the Conservative-dominated House of Lords, ultimately leading to two general elections in 1910 and the enactment of the Parliament Act 1911.

Overview

The Budget was introduced in the British Parliament by David Lloyd George on 29 April 1909.[2] Lloyd George argued that the People’s Budget would eliminate poverty, and commended it thus:

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”.[3]

The budget included several proposed tax increases to fund the Liberal government’s welfare reforms. Income tax was held at nine old pence in the pound (9d, or 3.75%) for incomes less than £2,000, which was equivalent to £154,524 in today’s money[4]—but a higher rate of one shilling (12d, or 5%) was proposed for incomes greater than £2,000, and an additional surcharge or “super tax” of 6d (a further 2.5%) was proposed on the amount by which incomes of £5,000 (£386,309 today[4]) or more exceeded £3,000 (£231,786 today[4]). An increase was also proposed in inheritance tax and naval rearmament.

More controversially, the Budget also included a proposal for the introduction of a land tax based on the ideas of the American tax reformer Henry George. This would have had a major effect on large landowners, and the Conservative-Unionist opposition, which consisted mostly of large landowners, had a large majority in the Lords. Furthermore, the Conservatives believed that money should be raised through the introduction of tariffs on imports, which was claimed to benefit British industry and to raise revenue for social reforms at the same time (protectionism). Interestingly, according to economic theory, such tariffs would have been very beneficial for land owners, especially in agricultural produce (see Corn Laws).

Constitutional stand-off

The House of Lords vetoed the new budget—the first time since the 17th century that it had challenged the House of Commons‘ power of the purse—on 30 November 1909,[5] setting the stage for a tremendous showdown, which Churchill relished. The Liberals countered by making their proposals to reduce the power of the Lords the main issue of the general election in January 1910. The Unionists won more votes than the Liberals but not more seats, and the outcome was a hung parliament, with the Liberals relying on Labour and the Irish Nationalists for their majority. The Lords accepted the Budget on 29 April 1910—a year to the day after its introduction[6]—when the land tax proposal was dropped, but contention between the government and the Lords continued until the second general election in December 1910, which resulted again in the Unionists gaining more votes than the Liberals but producing another hung parliament, with the Liberals again relying on coalition partners for a majority. Nonetheless, the Lords passed the Parliament Act 1911.

References

1. Geoffrey Lee – The People’s Budget: An Edwardian Tragedy

2. Raymond, E. T. (1922). Mr. Lloyd George. George H. Doran company. p. 118. http://books.google.ie/books?ei=kmdsTJHmJoWUjAfj1cjjAQ&ct=result&id=i2nSAAAAMAAJ&dq=people%27s+budget+introduced&q=april+29.

3. “The National Archives Learning Curve | Britain 1906-18 | Achievements of Liberal Welfare Reforms: Gallery 2”. Learningcurve.gov.uk. http://www.learningcurve.gov.uk/britain1906to1918/g2/gallery2.htm. Retrieved 2010-01-24.

4. a b c UK CPI inflation numbers based on data available from Lawrence H. Officer (2010) “What Were the UK Earnings and Prices Then?” MeasuringWorth.

5. Palmer, Alan; Veronica (1992). The Chronology of British History. London: Century Ltd. pp. 342–343. ISBN 0-7126-5616-2.

6. Raymond, E. T. (1922). Mr. Lloyd George. George H. Doran company. p. 136. http://books.google.ie/books?ei=kmdsTJHmJoWUjAfj1cjjAQ&ct=result&id=i2nSAAAAMAAJ&dq=people%27s+budget+introduced&q=april+29.

Bibliography

· William Manchester, The Last Lion: Winston Spencer Churchill, Visions of Glory 1874-1932, pp. 408-409 (1st Edition); 1983; ISBN 0-316-54503-1;

In 1911 Lloyd George succeeded in putting through Parliament his National Insurance Act, making provision for sickness and invalidism, and this was followed by his Unemployment Insurance Act.

He was helped in his endeavours by forty or so backbenchers who regularly pushed for new social measures, and often voted with the Labour Party on them.[2] These social reforms began in Britain the creation of a welfare state and fulfilled the aim of dampening down the demands of the growing working class for rather more radical solutions to their impoverishment.[3]

Lloyd George People’s Budget, 1909

Presented 29 April 1909

Passed 29 April 1910

Parliament 28th/29th

Party Liberal Party

Chancellor David Lloyd George

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