The People’s Budget

Article by Andrew Tromans. Edited by Ellie Veryard.  Additional Research by Jack Barnes.

David Lloyd George

The “people’s budget” of 1909 has been described as the first modern budget, earning this title as it was the first attempt by a British government to redistribute wealth in any meaningful way. The budget of 1909 and its political fallout are landmarks in the development of the British state and constitutional arrangements.  However, the importance of this event is frequently overlooked, with far more attention given to the labour government of 1945 who are generally given the credit for the creation of the welfare state.

By 1909 the state had already, some provisions for pensions and limited welfare but it was the peoples budget that underpinned the state’s responsibility to care for the ill and infirm. The architect of the budget was David Lloyd George, a radical liberal whose thinking had been influenced by the writings of Green and Hobson. Green and Hobson, travelled Liberal attitudes about the state away from hostility, towards the notion that the state could be used to extend freedom and positively contributed to an individual’s development state education would be an example of this. Lloyd George declared that the 1909 budget was a war budget, designed “for raising money to wage implacable warfare against poverty and squalidness”. The liberal government was responsible for a culture change, away from the laissez faire attitudes of Victorian administrations, towards a new, model state endorsed welfare system.

Passing of the Parliament Bill in the House of Lords 1911

The label of “war budget” was adept, as the 1909 budget was designed to fight literal as well as metaphorical wars.  Since German reunification in 1871, the balance of power in Europe had shifted increasing in the favour of the Second Reich. In 1908, Germany began a massive programme of naval armament, which seemed to be a direct challenge to Britain’s naval dominance.  Stirred by the daily papers, the working people wanted warships as well as welfare out of the liberal government. The cost of this was set to be huge, and Lloyd George had decided who was to foot the bill: the aristocracy. To pay for pensions and sickness insurance and the arms race with Imperial Germany, Lloyd George proposed an increase in estate duty  as well as an income tax increase from 1s to 1s 2d in the pound, with a super-tax of 6d in the pound on the amount by which incomes of £5,000 or more exceeded £3,000.

Archibald Rosebery

With the House of Lords dominated by Conservative landowners in 1909, the “people’s budget” was fated to bring the liberal government to loggerheads with the Lords. It was not only tory grandees who opposed the budget but liberal lords also. Lord Rosebury (former Liberal prime minster) denounced the budget as “pure socialism”. The perfect constitutional storm began when the Upper House rejected the peoples’ budget and refused to accept it until 29 April 1910 a year to the day it was proposed.  The Lords refused the budget until the moment the king threatened to create 400 new liberal lords in order to manufacture a pro-budget majority. However this conflict had unearthed   deeper tensions between the Commons and Lords. The Lords had forsaken a centuries old tradition by rejecting a budget and paid heavily for their show of force. The Parliament Act of 1911 was to enshrine in law the superiority of the Lower House.  It perhaps somewhat Ironic that in January 2012 the upper chamber attempted to block reforms that were aimed at cutting state welfare provision.

Whilst Lloyd Georges’ primary opponents the titled gentry have largely been expelled from the Lords, we still have a unelected house of Lords whose power although tempered is not inconsiderable. The peoples budget in 1909 and the storm it left in its wake was a formative experience for the modern British polity and one that could soon be revisited in the proposed reforms of the House of  Lords by the present coalition government.

  • David Lloyd George was the only UK PM whose mother tongue was not English – he was a Welsh speaker
  • The 1911 Parliament Act abolished the House of Lord’s power to veto any bill introduced in the House of Commons

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