Others were not so happy. The Liberal party grandee Lord Rosebery dismissed Lloyd George’s proposals as ‘tyrannical and socialistic’. Here was a call for the establishment to close ranks, regardless of party allegiance, and the Tory party was not slow in responding. Even the new breed of Conservative MPs, recruited from the wealthy business classes, denounced the budget as unjust. Stanley Baldwin spoke, in one of his first Commons speeches, of the excessive expenditure the aristocracy would have to undertake if the budget were passed. The atmosphere in the Commons had not been as tense since the debates on the 1832 Reform Act.
The atmosphere in the Tory-dominated Lords, meanwhile, was one of defiance mingled with dread. It threw out the People’s Budget and a constitutional impasse ensued, damaging confidence in the political system. Terrified by the possible ramifications, King Edward tried to arrange a deal behind the scenes, yet even the monarch’s efforts were in vain. The Tory peers justified their intransigence by arguing that the budget lacked an electoral mandate – an indication that Balfour believed they would win a general election.
The Terrible Twins welcomed the opportunity of taking the New Liberal case to the people, and Asquith assented to their demands for an election in early 1910. Lloyd George and Churchill directed the Liberal campaign with customary vigour. They formed the ‘Budget League’ and coordinated the activities of Liberal newspaper editors. They also used the latest technology, sending vans to remote areas of the country with speakers fixed to them so that their words could be broadcast in the highlands and lowlands. The struggle between the lower and the upper house was characterized as one of social democracy against inherited privilege. It was also cast as a war between an increasingly middle-class Commons, where the Liberals were dominant, and a patrician and Tory House of Lords. Lloyd George was determined to create a division between the middle class and the upper class; he would gain the allegiance of the former for his party, and unite every class below the aristocracy by identifying it as their common enemy. In his public speeches he described the unelected peers as ‘five hundred men chosen at random from among the unemployed’.
This language of class war appalled the establishment, with King Edward branding Lloyd George’s statements ‘improper’ and ‘insidious’. According to a Tory MP, the chancellor ‘set the fashion for attacking rich men because they were rich’. Yet the patrician Churchill was also responsible for introducing egalitarian and meritocratic ideas into Edwardian political discourse. ‘We do not only ask today, “How much have you got?”’ he declared, ‘we also ask, “How did you get it? Did you earn it by yourself, or has it just been left to you by others?”’ Churchill even advocated the abolition of the Lords, on the grounds that the Tories would always find a way of controlling the upper house.
Yet the omens were not good for Churchill and Lloyd George. The Tory party was able to mobilize its vastly superior financial and propaganda resources. The Times and the Daily Mail instructed the electorate to reject the Liberals and instead to back the Chamberlainite Tariff Reform as a means of funding social reform without raising taxes. The lower middle class seem to have been convinced by these arguments, while the suburban middle classes found Lloyd George’s class war rhetoric too socialistic. In the event, the Liberals lost 123 seats in the election, nearly all of which were taken by the Tories, but they returned to office courtesy of the support of the Irish Parliamentary Party and the burgeoning Labour party, which claimed forty seats.
The challenge of passing the ‘People’s Budget’ was now infinitely more difficult for the Liberal government; expediting the ‘wide programme of reconstruction’ that Lloyd George and Churchill had outlined during the election campaign was unthinkable for a minority administration. A friend of Asquith’s remembered how he ‘wandered about utterly wretched and restless’ in the days following the election, yet somehow the prime minister muddled through. However disappointing the election results were, he believed they gave his government a popular mandate for the budget. The best way to force the Tory peers to back down, he suggested, was for Edward to threaten to create enough new Liberal peers to ensure the budget’s safe passage. Although this proposal was not unprecedented, the king thought it ‘simply disgusting’. Like many members of the establishment, Edward believed the government was now controlled by an Irish party that planned to emasculate the upper house in order to force through a Home Rule bill. He decided to try to negotiate once again with Balfour and the Tory peers; when discussions led nowhere, however, he reluctantly acceded to Asquith’s demands with a proviso: he would threaten to create a crowd of new Liberal peers if the Lords continued to reject the budget, but only after two general elections had confirmed public opinion on the issue.
Asquith also pressed the king on a related matter – the introduction of legislation to alter the Lords’ power of veto. Once again, in the absence of a viable alternative, Edward reluctantly agreed. Asquith’s decision to pursue the reform of the Lords was no doubt instigated by pressure from the Irish MPs, yet his party had long desired to reduce the powers of the upper house. On his arrival in Downing Street in 1906, C-B had spoken of his desire to ‘clip the wings’ of the peers, and Lloyd George had been eager to carry out the threat of his old mentor for some time. To the chancellor, the upper chamber was not so much the ‘watchdog of the constitution’ as ‘Mr Balfour’s poodle’.
Edward’s willingness to create Liberal peers proved persuasive, and the Lords eventually let the People’s Budget through with a few amendments. The Tory peers remained recalcitrant, however, on the proposals to restrict their powers, and demanded another election on the issue. One was called in December 1910, but it produced a virtually identical result to the January contest. Asquith once again claimed a popular mandate for his proposals and the new king George V, who had succeeded his father in May, saw no choice but to threaten the upper house with the creation of new Liberal peers in order to force through the reforms.
The government introduced a Parliament Act, which removed the right of the Lords to veto money bills and limited its veto over other acts. It passed through the Commons and a long debate in the Lords was followed by a narrow victory for the government. Balfour and his allies in the Lords had surprised many by backing down at the last moment in the face of the king’s threat. As a result, the Tory and Unionist ‘die-hards’, an influential aristocratic faction within the alliance, accused their leader and his allies of betrayal.
The passing of the Parliament Act, and the People’s Budget before it, constituted an extraordinary victory for the Liberal party. After a two-year struggle, a radical budget and revolutionary constitutional bill had been passed, despite the opposition of the Tory party and the landed establishment. The supremacy of the lower house had been formally established, and the status of unelected hereditary peers had been diminished. One of the provisions of the Parliament Act was that MPs received a salary; politics became a career, open to men from the professional classes, rather than a gentlemanly hobby. A significant step had been taken towards full parliamentary democracy.