Lloyd George

1
Lloyd George The Peoples 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.

2
Lloyd George The Peoples Budget

• The Re-alignment of 1885 -86
• Salisburys gamble pays off the villa vote is
  more Conservative than the politicians realized
• Chamberlains populist rhetoric makes
  middle-class Liberals jittery (Three acres a
  cow!)
• Gladstones 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

3
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
• Chamberlains agitation inside party for
  Imperial Preference
• Liberals landslide victory of 1906
• Victory masks fundamental weakness of Liberals
  position

4
The Liberals Predicament

• Alliance with Irish Nationalists is constraining
• Irish Question internally divisive (Home Rule
  Crisis, 1886)
• Reliance on vagaries of SMP electoral system
• Class dividing the Liberals 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)

5
The Strategic Prescription

• Liberals need to
• Widen partys social intellectual base
• Incorporate Labour position and support
• Get rid of Irish Question (i.e., make politics
  uni-dimensional)
• Curb House of Lords
• Note 1-3 are closely related strategies.

6
The Conservative Blockade

• The difficulty the Conservatives use the Lords
  to undermine the Liberal government
• 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 Government.
• (Lord Rosebery, quoted in Jenkins 1954, 17)

7
Balfours Analysis of the Situation

• Exercise of Lords veto is not straightforward
• Balfour (the Unionist Commons 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)

8
Balfours Analysis of the Situation
Median Lord (Unionist)
Balfour (i.e. Unionist Commons Position)
Moderate Liberal Cabinet Minister
Extreme Liberal Cabinet Minister
Median Labour MP
Cabinet Median
Midpoint between Balfour and Moderate Liberal
Cabinet Minister
9
Balfours Analysis of the Situation

• Unionists must employ Lords veto strategically
• How should Unionists proceed?
• Unionists could amend bills to a point where the
  moderate cabinet members actually prefer the
  amended bill to the Cabinets initial,
  radical-left proposal.
• Unionists might allow some bills through the
  Lords without amendment leaving the moderate
  Liberal ministers with the choice of voting with
  their cabinet colleagues for a law that they do
  not like or voting against their own colleagues
  to prevent this outcome.

10
Balfours Analysis of the Situation

• Above strategies are not unproblematic logically
• One must account for fact that
• The fact that the Liberals are aware of the
  Unionists incentives and vice versa
• Unionists want to limit policy change, create an
  open split in the cabinet, and avoid raising
  questions about the Lords veto
• Liberals want to alter policy, avoid being split,
  and build a case against the Lords veto
• Actors cannot credibly commit to acting against
  their own preferences

11
Balfours Analysis of the Situation
sq
b1
B(U)
L(U)
M(L)
E(L)
LAB

• Assume sq to right of Unionist-Liberal midpoint
  reasonable due to the fact that the Unionists had
  been in power for an extended period of time.
• Assume further that Balfour is correct left wing
  of Cabinet succeeds in convincing moderates to
  agree to a very left-wing bill, b1, at the ideal
  point of the most left-wing cabinet member

12
Balfours Analysis of the Situation
sq
b1
b2
L(U)
B(U)
M(L)
E(L)
LAB

• Amending to b2 leaves the all cabinet members to
  the right of the cabinet median better off than
  sq the cabinet accepts the amendments.

13
Balfours Analysis of the Situation
sq
b1
b2
b3
B(U)
L(U)
M(L)
E(L)
LAB

• But Unionists would prefer amending to b3 rather
  than b2
• b3 leaves M(L) better off than under b1 and sq
• b3 also leaves E(L) better off than under sq
• Cabinet therefore accepts the Lords amendments
• This just limits Unionists losses. Can
  Unionists do even better?

14
Balfours Analysis of the Situation
sq
b1
b4
B(U)
L(U)
M(L)
E(L)
LAB

• Amending to b4 leaves Unionists better off than
  sq.
• E(L) prefers b1 to b4, but also prefers sq to
  b4.
• M(L) prefers b4 to b1, but prefers sq to b4.
• Cabinet rejects the Lords amendments and sq
  stands.
• Inference If Unionists make rightward
  amendments to sqs already to right of cabinet,
  they will a) fail to move policy and b) end up in
  a confrontation with the Liberal cabinet.

15
Balfours Analysis of the Situation
sq
b1
b2
L(U)
E(L)
B(U)
M(L)
LAB

• Only way Unionists can split the cabinet is with
  sq inside the cabinets Pareto set.
• Then, Unionists may be able to amend so that
  M(L) prefers the Unionists amended bill to both
  sq and b1, e.g., b2. This would split cabinet
• To avoid a cabinet split, Liberals should leave
  sq policies inside cabinets Pareto set
  untouched... or meekly accept any such amendments

16
Balfours Analysis of the Situation
b1
b2
sq
L(U)
E(L)
B(U)
M(L)
LAB

• Unionists run into trouble when sq far to right,
  near L(U)s ideal point
• Balfour can direct Lords to amend to b2 (which
  Cabinet would accept), but will Lords follow
  Balfours orders?
• As government, Liberals control agenda

17
Balfours Analysis of the Situation
Policy change and amendments concentrated on
issues in this interval
L(U)
E(L)
B(U)
M(L)
LAB

• Policy changes and amendments concentrated on x
  ?(M(L), L(U)
• Liberals avoid splits by ignoring sq ?E(L),
  M(L)
• Unionists have to worry about sq ?B(L), L(U)
• These insights arise once we stop thinking of
  parties as monolithic entities

18
Over-riding the Conservative Blockade

• A failure to curb Lords will undercut Liberals
  attempts to deal with Ireland or outflank Labour
• Consider their efforts on several policies
• Education Bill
• Licensing Bill
• Old Age Pensions
• Budget of 1909, The Peoples Budget

19
The Education Bill

• Lords votes 132 52 insisting on amendments
  gutting the bill
• Liberals accept the amendments
• 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)

20
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
  Majestys Ministers have this important subject
  under consideration with a view to a solution of
  this difficulty.
• (Jenkins 1954, 28)

21
But Little Action

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

22
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.

23
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, 37)
• 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.

24
Stalemate

• 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)
• Liberal retreats suggest that Liberal cabinet has
  concentrated on issues inside their own cabinets
  Pareto set
• Only pensions seems to have caused Unionists angst

25
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 Peers vs. People
  constitutional crisis might spark?
• Still, both actors have incentives to take
  advantage of the others loss of nerve

26
Constitutional Chicken
27
Constitutional Chicken

• Note
• If Liberal Govt submits populist bills, the
  Lords accept
• But if Lords can commit to veto, Liberals
  submit moderate bills

28
Constitutional Chicken

• Note
• If Liberal Govt 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.

29
Constitutional Chicken

• The normal form does not capture true legislative
  sequence
• An extensive form version of the game does
• Only one NE survives backward induction! Never
  get to (moderate, accept) in equilibrium
• Lords promise to accept moderate bills are not
  credible not subgame perfect.

0, 0
Veto
Populist
Accept
3, 1
Liberal Govt.
Lords
2, 2
Accept
Moderate
Veto
1, 3
30
Constitutional Chicken

• Puzzle Even if we concede that Liberals stand
  to gain from forcing a Peers v. people election,
  we dont get to the Populist, Veto outcome.

0, 0
Veto
Populist
Accept
3, 1
Liberal Govt.
Lords
2, 2
Accept
Moderate
Veto
1, 3
31
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)

32
The Peoples Budget

• Introduced 29 April 1909
• Addressed budget shortfall by increased taxation
• On incomes (Irish opposition)
• On spirits
• On land!
• In as much as land had never been taxed, the land
  tax
• arouses Aristocratic opposition
• represents movement from a sq very favourable to
  Lords

33
The Peoples 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

34
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)

35
Overreaction

• 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)

36
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)

37
Damn the Consequences

• Tories driven by Chamberlains 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

38
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)

39
A Pyrrhic Victory?

• Lyttons 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)

40
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, 75-350

41
The Aftermath

• Two election take place in 1910
• The January election results in a hung
  Parliament, but the Peoples 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.

42
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-protectio
  nists)
• Balfours 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.

43
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
• Suggests that the spatial model we started out
  with is broadly accurate depiction of the
  situation Unionists torn apart by Liberals
  moves on issues inside the Unionist Pareto set