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Lloyd George _ The People's Budget


									Lloyd George & The People‟s Budget

Related Reading:
• McLean, Ch. 5 & 6 introduce you to Chamberlain, Lloyd George, and
  broad politics of period.
• Jenkins, Roy. 1954. Mr. Balfour’ Poodle. London: Heineman
• Blewett, Norman. 1972. The Peers, the Parties and the People. Toronto:
  U of T Press.
Lloyd George & The People‟s Budget

The Re-alignment of 1885 -86

• Salisbury‟s gamble pays off: the „villa vote‟ is more Conservative than the
  politicians realized

• Chamberlain‟s populist rhetoric makes middle-class Liberals jittery (“Three
  acres & a cow!”)

• Gladstone‟s policies are either unwelcome or rejected outright:
    – Tee-totaling
    – Irish Home Rule

• Home Rule is the clincher: 1886 election sees Liberals wiped out in Ireland
  and lose 143 seats in Great Britain

• Liberals split; Liberal-Unionists (led by Chamberlain) fuse with
  Conservatives into the Unionist Party
The Parties‟ Predicaments

 •       Twenty years of Conservative / Unionist domination end in 1905-6
     –      Education Bill debacle
     –      Mismanagement of Boer War
     –      „The cheap loaf‟ – re-imposition of Corn Duty in 1902 to provide war revenue
     –      Chamberlain‟s agitation „inside‟ party for Imperial Preference

 •       Liberals‟ landslide victory of 1906:
                              Seats        Votes
         Liberal               400         49%
         Labour                30           5%
         Nationalist           83            ?
         Conservative          157         44%

 •       Victory masks fundamental weakness of Liberal‟s position
The Liberal‟s Predicament

 •    Alliance with Irish Nationalists is constraining

 •    The Irish Question internally divisive (Home Rule Crisis, 1886)

 •    Reliance on vagaries of SMP electoral system

 •    Class dividing the Liberal‟s urban social base

 •    Liberals challenged on left by Labour; an unstable bargain:

         “…the greatest danger to the Liberals will arise from a split between
         Liberalism and Labour, such as destroyed liberalism in Germany and
         elsewhere.” (McLean, 1999, 158)
The Strategic Prescription

  •    Similar to King‟s situation in Canada in 1925

  •    Liberal‟s need to:

      1.   Widen party‟s social & intellectual base

      2.   Incorporate Labour position and support

      3.   Get rid of Irish Question (i.e., make politics uni-dimensional)

      4.   Curb House of Lords

  •    Note 1-3 are closely related strategies.
The Conservative Blockade

•   The difficulty: the Conservatives use the Lords to undermine the Liberal

       “When the Conservative Party is in power there is practically no House
       of Lords: it takes whatever the Conservative Government brings it from
       the House of Commons without question or dispute ; but the moment a
       Liberal Government is formed, this harmless body assumes an active
       life, and its activity is entirely exercised in opposition to the

       (Lord Rosebery, quoted in Jenkins 1954, 17)
The Conservative Blockade

•       Thus, failure to curb Lords undercuts attempts to deal with Ireland or
        outflank Labour:

    –      Education Bill

    –      Licensing Bill

    –      Old Age Pensions

    –      Budget of 1909, “The People‟s Budget”
The Education Bill

•    Lords votes 132 – 52 insisting on amendments gutting the bill

•    However, “…the great majority [of Liberal MPs] thought that the education
     issue was not big enough to afford favourable ground from which to force
     the issue.”

     (Jenkins 1954, 25)
    Threatening Talk

•      Liberals use 1907 Throne speech to sabre-rattle:

       “…serious questions affecting the working of our parliamentary system

       have arisen from unfortunate differences between the two houses,”…and,
       “His Majesty‟s Ministers have this important subject under consideration
       with a view to a solution of this difficulty.”

       (Jenkins 1954, 28)
    … But Little Action

•      Liberals actually oppose a proposal to create a nominated or elected Second

       “A Liberal Government would be extremely ill-advised to touch the
       composition of the Second Chamber until it had settled its powers. To set
       up a nominated Second Chamber composed of grave and reverend [i.e.,
       legitimate] but necessarily conservative-minded individuals would, if such a
       Chamber succeeded to the powers of the present House, both increase the
       evil and abolish the remedy which the present system provided…”
       (Jenkins 1954, 29-30)
The Licensing Bill: “A First-Class Funeral”

•       Bill to regulate public houses and liquor; reduce licenses by 1/3

•       Resented by Irish (whiskey industry)

•       Brewers fund popular campaign against it; Hyde Park riot

•       Tories bitterly (opportunistically?) opposed:
    –      Bill takes 8 months to get through Commons

•       Tories kill it in the Lords: 272-96.
    Old Age Pensions

•      Lords is opposed: “…so prodigal of expenditure as likely to undermine the
       whole fabric of the Empire,” and “destructive of all thrift.” (Jenkins 1954,

•      But Lansdowne convinces Tory Lords to defer to Commons: The bill is
       primarily financial in nature, and finance is by constitutional principle the
       Commons‟ preserve.

•       Session of 1908 ends with Liberals in retreat:

    –      A string of by-election losses

    –      Lack of legislation sparks an internal revolt in Commons

    –      Only financial matters pass through Lords

    –      Financial needs critical: Pensions and German military build-up

    –      Lord Carrington: „The session is spoilt and... Balfour & the Lords are
           masters of the situation‟ (Blewett 1972, 48)
Constitutional Chicken

•       Can we think of this as a „Chicken‟ game?

    –      Liberals can continue to issue populist legislation to provoke Lords

    –      Lords can continue to use veto to frustrate the Liberal Government

    –      Are both actors willing to risk the damage to the political elite – a social
           not a just a political revolution (Goschen) – that a Peer‟s vs. People
           constitutional crisis might spark?

    –      Still, both actors have incentives to take advantage of the other‟s loss of
Constitutional Chicken


                                      Veto           Accept

                     Populist Bills   0,0             3,1
Liberal Government
                     Moderate Bills   1, 3            2,2
Constitutional Chicken


                                                         Veto           Accept

                          Populist Bills                  0,0            3,1
Liberal Government
                          Moderate Bills                 1, 3            2,2

 • If Liberal Gov‟t submits populist bills, the Lords accept
 • But if Lords can commit to veto, Liberals submit moderate bills
Constitutional Chicken


                                                         Veto            Accept

                          Populist Bills                  0,0              3,1
Liberal Government
                          Moderate Bills                 1, 3              2,2

 • If Liberal Gov‟t submits populist bills, the Lords accept
 • But if Lords can commit to veto, Liberals submit moderate bills
 • Thus, there are 2 Nash equilbria, and neither is the reasonable compromise nor the
 disastrously irrational one.
Constitutional Chicken

                                         • The normal form does not
                                  0, 0     capture true legislative sequence

          Populist                       • An extensive form version of the
                                           game does
                        Accept    3, 1
Liberal                                  • Only one NE survives backward
Govt.                Lords
                                           induction! Never get to
                                  2, 2     (moderate, accept) in
                         Accept            equilibrium

                                         • Lords‟ promise to accept
                         Veto              moderate bills are not credible –
                                  1, 3     not subgame perfect.
Constitutional Chicken

                                         • Even if we concede that Liberals
                                  1, 0     stand to gain from forcing a
                                           Peers v. people election, we
                                           don‟t get to the {Populist, Veto}
                        Accept    3, 1
Govt.                Lords

                                  2, 2

                                  1, 3
    Circumventing the Veto

•      Liberal must incorporate social policy into budgets:

       “Accordingly he [Lloyd George] proceeded to frame his Budget for 1909
       with the threefold purpose of raising the extra funds needed for old age
       pensions and other intended reforms; of making provisions for these
       reforms in the finance bill; and of adopting tax-raising devices which
       would be particularly distasteful to the Peers and might rouse them to
       throw out the Budget.”

       (quoted by Jenkins 1954, 41)
The People‟s Budget

•    Introduced 29 April 1909

•    Addressed budget shortfall by increased taxation
    –   On incomes (Irish opposition)

    –   On spirits

    –   On land! (Aristocratic opposition)
    The People‟s Budget

•        Conservatives are implacably opposed:

     –     Balfour: “vindictive, inequitable, based on no principle, and injurious to
           the productive capacity of the country.”

     –     Carson: “the beginning of the end of all property rights.”

     –     Landowne: “It is a monument of reckless and improvident finance.”

     –     Rosebery: “It is inquisitorial, tryannical, and Socialistic.”

•        Blockade the Commons: 554 divisions over 6 months
    The Limehouse Speech

•      Lloyd George ratchets up the rhetoric:

         “We are placing the burdens on the broadest shoulders. Why should I
         put burdens on the people? I am one of the children of the people. I
         was brought up amongst them, I know their trials, and God forbid that I
         should add one grain of trouble to the anxieties which they bear with

         such patience and fortitude.

         (Jenkins 1954, 56)

•   Aristocrats threaten massive reductions in staff on their estates

•   They become shrill; a Conservative MP noted:
       “He only wished the Dukes had held their tongues, every one of
       them…. It would have been a good deal better for the Conservatives
       Party if, before the Budget was introduced, every Duke had been
       locked up…”

       (Jenkins 1954, 57)
    Continued Provocation

•      Lloyd George implicitly threatens the Lords should they
       exercise their veto:

          “The question will be asked „Should 500 men, ordinary men, chosen
          accidentally from among the unemployed, override the judgement – the
          deliberate judgement – of millions of people who are engaged in the
          industry which makes the wealth of this country?‟…. The answers are
          charged with peril for the order of things which the Peers represent.”

          (Jenkins 1954, 57)
    Damn the Consequences

•      Tories driven by Chamberlain‟s extremism (and Chamberlain
       was electorally popular):

       “…the peers are not worthy of their seats if they do not reject the budget.”

•      The King, anxious to avoid a crisis, urges cross-party talks;
       both sides refuse

•      Tories prepare to veto
A Pyrrhic Victory?

•   Not all Tories convinced:
       “A general election immediately following the rejection of the Budget
       would, beyond all doubt, be disastrous to the fortunes of the Unionist
       Party. The Government would be returned with a sufficient majority
       to re-enact the Budget and to remain in office another five years. This
       would be bad enough, but it would be still worse if they obtained – as
       the must inevitably try to obtain – power to curtail the veto of the
       House of Lords.

       (Lord Lytton, quoted in Jenkins 1954, 62)
    A Pyrrhic Victory?

•      Lytton‟s opinion is not isolated

       “My Lords, if you win, the victory can at most be a temporary one. If you

       lose, you have altered and prejudiced the position, the power, the prestige,
       the usefulness of this House…”

       (Balfour of Burleigh, quoted in Jenkins 1954, 66)
    The Die is Cast

•      Lansdowne moves on second reading,
          “… that this House is not justified in giving its assent to the Bill until it
          has been submitted to the judgement of the country.”

•      On 28 November 1909, the Budget is defeated by the Lords,
    The Aftermath

•        Two election take place in 1910

•        The January election results in a hung Parliament, but the
         People‟s Budget is passed after land tax dropped.

•        A December election fails to break deadlock
     –      Liberals rely on Irish nationalists to govern

     –      Pass the Parliament Act 1911 undercutting Lords‟ veto.
„Oligarchies are seldom destroyed and more frequently commit suicide‟
(Lord Reay)

•        Why did the Unionist leadership act so recklessly?
     –      Moderates (e.g., Lytton) were free-traders, disliked by “Whole-
            Hoggers” (Chamberlain-protectionists)

     –      Balfour‟s leadership hinged on Whole-Hoggers

     –      Whole-Hoggers were a powerful lobby:

            “The agents, the organisations, and the Licensed Victuallers‟ Trade
            all demand it. They know nothing of, and care nothing for
            constitutional Law.”
    Policy, Office, and Votes?

•      Rejection suited the whole-hoggers policy goals:
       “What, then, are the two ways, and only two ways, before the country of meeting the
       necessities of the nation? On the one hand, you may do as we are doing. You may impose….
       taxes on accumulated wealth. What is the other?, the only other that has yet been disclosed or
       even foreshadowed to Parliament and the country? It is to take a toll of the prime necessaries
       of life…. it is to surround your markets with a tariff wall…”
       (Asquith, quoted in Jenkins 1954, 64)

•      Defeating the Budget, left protectionism as the only alternative.

•      Intra-party victory for whole-hoggers at expense of inter-party defeat
The People‟s Budget Essay

•   Balfour (the Unionist Common‟s leader) wrote to Lansdowne
    (the Unionist leader in the Lords) that,

    “I conjecture that the (Liberal) Government methods of carrying on their
    legislative work will be this: they will bring in Bills in a much more extreme form
    than the moderate members of their Cabinet probably approve: the moderate
    members will trust to the House of Lords cutting out or modifying the most
    outrageous provisions: the left Wing of the Cabinet, on the other hand, while
    looking forward to the same result, will be consoled for the anticipated mutilation
    of their measures by the reflection that they will be gradually accumulating a case
    against the Upper House, and that they will be able to appeal at the next election
    for a mandate to modify its constitution (i.e., the make-up of the House of Lords)”
The People‟s Budget Essay

•    In an essay,

1. Describe the spatial model of politics that underpins
   Balfour‟s view of the political situation;

2.   Suggest how the Unionist‟s should respond to the Liberal
     government‟s strategy (i.e., if Balfour‟s conjecture about the
     Liberal‟s strategy were correct, what is the Unionist‟s best

3.   Identify the expected equilibrium of this game.
    The People‟s Budget Essay

•     You do not have to draw out your spatial model, but if you do, you may
      append an extra page to the back of your essay containing your illustrations

•     Evaluation hinges on clarity of your logic not the use of jargon

•     Sources:
     –   Clarke, Peter. 1981. „Peers versus People?‟ History Today, Nov 1981, Vol. 31
         Issue 11, p26 (online)

     –   Jenkins, Roy. 1954. Mr. Balfour’ Poodle. London: Heineman (Barber reserve...

     –   Liberal Democrat History Group:

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