While the liberal media and their pundit friends continue basking in the collectivist rhetoric and progressive overreach of President Obama’s second inaugural address and the State of the Union — notwithstanding his current post-sequester dive in the polls — conservatives should be well reminded that the farce of the waning days of the 112th Congress is not the first time a determined, left-leaning administration has successfully used obstinate executive power to outmaneuver and overwhelm a disorganized and divided conservative opposition to promote divisive and threatening economic, fiscal, social and political change.
While Franklin Roosevelt was a master of this dark art — despite his failure to pack the Supreme Court with liberals in 1937 — the last English Government led by the Liberal Party set the bar for successfully emasculating Conservatives just over a hundred years ago in the tumultuous passage of the People’s Budget of 1909 and the ensuing Parliament Act of 1911.
Like the recurring contretemps which increasingly seem to replace responsible leadership at both ends of Pennsylvania Avenue, the fracas in Westminster began with an aggressive, overtly progressive budget, quickly migrating to the political blood sport of ruthless pursuit of power. The ensuing mayhem malodorously oozed class warfare and, at times, fractious heights of demagoguery. At its core was a brash young lawyer turned politician, with a fine voice and turn of word, unyielding and determined to fundamentally alter society in favor of the working and middle classes, adroitly advancing his political career at the same time.
This story begins with David Lloyd George, who succeeded the indolent Herbert Asquith as Chancellor of the Exchequer in 1908 — Asquith having gone on to become a Prime Minister far more interested in his romantic obsession with Venetia Stanley and London gossip than governing England.
Lloyd George was ambitious, opinionated and abjectly hated the rich. Ruthlessly goading the Conservatives — and the House of Lords in particular — on the eve of the legislative battle over the People’s Budget, he devastatingly defined the English upper class as worthless, entitled fiends who would rather set their dogs on England’s poor than offer them any succor or hope.
Lloyd George cleverly took an opportunity to capture the prosaic, annual budget debate in Parliament, decisively engineering a program of radical wealth redistribution. Over time he was highly successful, but it would take a frontal assault on the English establishment — in particular the venerable House of Lords — and a series of transformative entitlement acts in the early 1920s to successfully bake and serve up the stultifying English welfare state personified by a long series of gray and debilitating British Labor Party governments led by Ramsay MacDonald, Clement Attlee, Harold Wilson and James Callaghan.
Lloyd George’s immediate task was to find enough money to fund the benefits promised in the Old Age Pensions Act of 1908, which was the first wedge of the British welfare state. England was also engaged in an arms race with Germany, and the Royal Navy needed funding for six new battleships, or dreadnaughts as they were called at the time.
Beginning with the Napoleonic Wars, Britain had periodically imposed income taxes throughout the 19th century, but the rates had been low, typically affecting a relatively small number of Englishmen, and collection was often lax. Lloyd George proposed a dramatic increase in rates, coverage and collection, including a super tax on incomes which exceeded $650,000 in today’s money — in this regard he was a century ahead of, but more generous than, President Obama and Senator Reid.
This radical Chancellor of the Exchequer also proposed a series of onerous land and inheritance taxes, which struck at the heart of the wealth and values of the Conservative Party, in particular the House of Lords.
Lloyd George was supported by a singularly determined young man descended from one of England’s greatest, if more eccentric, aristocratic families, Winston Spencer Churchill. At the time, Churchill was an advocate for decreased military expenditure and increases in social welfare, having played an active role in establishing Britain’s first labor exchanges and minimum wage as the Liberal Party President of the Board of Trade from 1908 to 1910. Despite his aristocratic blood, Winston Churchill was descended from the younger son of the Duke of Marlborough, consequently possessing no inherited lands or wealth in his own right. However, Churchill did inherit unlimited political ambition, which for him in 1911 as he approached middle age could only find realization in the Liberal Party.
Churchill’s 1909 vote in the House of Commons came in the context of a comfortable majority for the Liberal Party, which enabled easy approval of the People’s Budget in the lower house. By tradition, the House of Lords did not use its veto powers on legislation to curb budget bills passed by the House of Commons. Henry Petty-Fitzmaurice, the 5th Marquess of Lansdowne and the leader of the Conservatives in the House of Lords, and Arthur James Balfour, leader of the Conservatives in the House of Commons, were of this view, and were reluctantly inclined to let the People’s Budget go to the King, despite their intense distaste for its provisions. Most of their Lordships, however, felt quite differently.
To quote George Dangerfield in his masterful book, The Strange Death of Liberal England:
But the House of Lords had grown reckless, and its large Conservative majority of obscure and far from intelligent peers was in no mood to take advice. To the constitutional comedy which now begins … there could be none more apt than Sir William Gilbert’s verse:
And if the House of Peers withholds
Its legislative hand
And noble statesmen do not itch
To interfere with matters which
They do not understand —
Then bright will shine Great Britain’s rays
By a majority of 300 to 75, the People’s Budget was rejected by the Lords. Faced with this exceptional rejection of a budget bill, Prime Minister Asquith went to King Edward VII and asked for dissolution of the government and a general election. After a month of somnolent campaigning, a lethargic electorate sharply reduced the Liberal majority to just two, forcing Asquith to form a coalition government dependent on the 71 members from Ireland. This had a profound impact on the United Kingdom, leading to the Irish Free State in 1922, following over a decade of bloodshed. Ominously for the Conservatives, John Redmond and his Irish caucus demanded from Asquith an abolition of the House of Lord’s historic veto, particularly as it affected their right to veto Irish independence.
What began as a debate on taxes, notwithstanding a much broader social agenda in Lloyd George’s mind, was rapidly escalating into a significant confrontation over the distribution of power in Great Britain, with the volatile issue of Irish independence — and its potentially devastating impact on the Protestant Ulstermen of Northern Ireland — now spicing the increasingly volatile stew of Westminster politics. Sensing this, in April 1910 the House of Lords reluctantly accepted Lloyd George’s budget, confiscatory as it was in the minds of most of the Conservative Lords.
I’m sure few, if any, Conservatives who voted for the People’s Budget in either House had any appreciation that this was the thin wedge opening the way to the extraordinary high-end taxation of coming decades: 99.25% as the top rate by the end of the Second World War and 90% for much of the ’50s, ’60s and ’70s as successive British Labor Party Governments financially eviscerated their most economically productive subjects to find the money for otherwise unsustainable — however well intentioned — social welfare and entitlement programs.
Act Two of the 1909-1911 Westminster Drama opened when Asquith — at the behest of his newly found, and, in his mind, no doubt, forced, Irish allies — dutifully submitted legislation to curb the Upper House’s veto powers, entitled the Parliament Bill. He received an insurance policy against opposition in the Lords with a secret commitment from a dying and increasingly politically embittered Edward VII to create hundreds of new Liberal Peers if necessary to swamp the Conservative majority in the House of Lords, provided the Liberals and their allies could win yet another new election. When Edward expired in May 1910 — the first and only British monarch of the venerable House of Saxe-Coburg and Gotha — Asquith and the Liberal Leader in the Lords, the Marquess of Crewe, somewhat forcibly extracted the same commitment from a bewildered and inexperienced George V.
The December election of 1910 produced similar results to the January election in that prolific year of British politics. With the help of John Redmond’s Irish MP’s, the Parliament Bill duly passed the House of Commons and went to the Upper House with a Hobson’s choice facing the Conservative Lords. They could veto the bill, facing the prospect of a stampede of new, Liberal, and decidedly non-aristocratic Lords of the Realm; or they could accept a significant attenuation of their ancient powers. As Lord Selborne, a former First Lord of the Admiralty and High Commissioner to South Africa, plaintively put it, “Shall we perish in the dark, slain by our own hand, or in the light killed by our enemies?”
A large number of the Lords, unconvinced that their Tory-leaning new King would actually “pack the House,” decided to die in the daylight, if need be. The Earl of Halsbury, a former Lord Chancellor of England, famously declared, “I will [vote against the Parliament Act], even if I vote alone.” He was joined by a colorful cast of largely aristocratic characters, many with spectacular names, including Baron Willoughby de Broke and James Edward Hubert Gascoyne-Cecil. They were called Ditchers following Lord Curzon’s emphatic statement, “Let them make their peers, we will die in the last ditch before we will give in.”
Unfortunately for the Ditchers, the vain and duplicitous Lord Curzon, a former Viceroy of India, defected to the Government side in the Lords, known as the Hedgers. Appropriately in this context, at least according to Oxford lore, the self-serving Curzon was the inspiration of the following bit of college table doggerel:
My name is George Nathaniel Curzon
I am a most superior person
My cheeks are pink, my hair is sleek
I dine at Blenheim twice a week
Blenheim of course being the greatest noble house in England, a gift from Parliament to Winston Churchill’s ancestor John Churchill, the first Duke of Marlborough, for his great military triumph over the French and the Bavarians in the Battle of Blenheim in 1704.
Despite Curzon’s predictable defection, on the sweltering evening of August 10, 1910, the Ditchers made their last stand with a vote of 131 to 114 in favor of the Liberals’ Parliament Act. But for the careerist bishops of the Church of England, the Ditchers might well have prevailed, forcing the neophyte George V to either fold, as he so reluctantly promised Asquith and Lord Crewe, or play out his hand in accordance with his innate Conservative instincts.
Over a bitter and divisive 18 months, Lloyd George, Asquith and their Liberal, Labor and Irish allies artfully played the hapless Conservatives, decidedly changing the balance of power at Westminster.
Through this all, I believe Lloyd George was myopically focused on making the rich and successful relentlessly pay for social programs without fully appreciating the devastating effect a policy of political retribution and expropriation would inevitably have on future economic growth and entrepreneurship in Great Britain. This political agenda was embraced by decades of Labor Party leaders, leading to a series of transformative entitlement acts and corresponding taxes which built the English welfare state — brick by each progressively heavy and enervating brick — until Margaret Thatcher’s rejuvenating Government of 1979-1990.
The transformation of Britain into a highly taxed social welfare state, with much of her industry under government control, was a major element in the stagnation — certainly from the 1930s into the 1970s — of what was once the most dynamic country in the world. Let us strive to avoid the same fate here in America, though I fear we may be launched on the same course with a similar financially and economically ill-informed leadership, presently well entrenched in power and so eminently self-satisfied with their intellect and agenda.
As Margaret Thatcher so eloquently put it, “The problem with socialism is that you eventually run out of other people’s money.”
Christopher H. Lee is the Founder and Managing Partner of Highstar Capital.