We have already distinguished in various ways between the social-imperialisms of the Liberal-Imperialists and of the Tariff Reform League. There is one more vital distinction. Central to promises of social reform which came from both camps was the question of how the money to implement social legislation was to be raised. The alternatives proposed by the two imperialisms were derived, seemingly inevitably, from their chief tenets and, in certain instances, were made necessary by the political support of the interests affected. Certainly the rival 'budgets' were received differently by the working class, particularly the organized working class, and these conflicting financial programmes had an obvious influence in determining which of the rival programmes of social-imperialism the working class was to favour.
During the last years of the nineteenth century, the revenues collected from the conventional sources were proving insufficient for the greatly increased needs of Great Britain. This situation was not peculiar to Britain; it was duplicated in all the nations of Western Europe and in the United States. The expenditures of the British government which had been £70,000,000 in 1870 had reached a total of £90,000,000 in 1891 and had climbed to £100,000,000 four years later. The Boer War and the increasingly severe naval rivalry with Germany multiplied the rate at which these expenditures were growing as did parliamentary efforts to meet the strong demands for
The future postmaster general in the Asquith Cabinet, Herbert Samuel, was quoted in the report of a Radical land reform organization in 1901 as stating that 'the reason for this scarcity of suitable men for the service was that we had not got the same proportion of healthy, sturdy, agricultural population as we formerly had.' Samuel described land reform groups interested in keeping 'a large population in the rural districts' as laying 'one of the truest foundations of imperial greatness.' Quoted in Ping-ti-Ho, 'Land and State in Great Britain, 1873-1910: A Study of Land Reform Movements and Land Policies,' (An unpublished Columbia University Ph.D. Thesis, 1950), p. 241, fn.
social reform. Where was the wherewithal necessary for increased naval expenditures and for the programme of social reform, promised by both parties, to come from? The Tariff Reform solution was that it should come from tariff revenues rather than from increased direct taxation, which was the method generally favoured by the Liberals.
The Tariff Reformers opposed the taxation methods of liberalism on principle. The taxes on land, progressive taxation of income, super-taxes and the like were all 'direct' taxes. The Tariff Reformers insisted that new sources of revenue be derived from 'indirect' taxes. In the early part of the nineteenth century, indirect taxes -- tariffs and excises -- had constituted the prime source of government income. Liberal Chancellors of the Exchequer had aimed at producing budgets in which revenues came approximately equally from direct and indirect sources. Due to their efforts, the proportion of direct to indirect taxation was swiftly increasing. In 1871-72, the proportion of direct taxation to indirect stood as 27:73; in 1881-82, it was 40:60; in 1891-92, 44:56; in 1895, 48:52. By the turn of the century, direct taxes were supplying more revenue than indirect taxes, although as late as 1909 indirect levies still accounted for 45% of the total. In responding to needs for new revenue sources, Liberal Chancellors were wont to turn to direct taxation and Tory Chancellors to indirect. The financial requirements of increased governmental activity led to the introduction of death duties in the Liberal Harcourt Budget of 1894, for example, and the deficits growing out of the Boer War resulted in a small tax on imported corn under the Unionist Government in 1902.
In 1907, the budget of Liberal-Imperialist H. H. Asquith, the Chancellor of the Exchequer in the Government of Henry Campbell-Bannerman, began to differentiate, for tax purposes, between earned and unearned incomes -- instead of simply taxing one shilling on the pound. A super-tax on estates over £1 million in value was also enacted. In 1909, Lloyd George, the Liberal Chancellor under Asquith, who had become Prime Minister after Campbell-Bannerman's death, presented his first budget. In that budget, the principle of progressive taxation was introduced; a super-tax was levied against incomes above £3,000; there was an increase in the liquor and tobacco ex-
cises; there was a substantial increase in death duties; a large duty on the unearned increment of land values, and another on the capital value of undeveloped lands were proposed. When this budget reached the House of Lords, the peers, in seeming violation of constitutional precedent, rejected it and provoked a nation-wide debate on the issues of trade and tax policies, two general elections, and, as one result, the reform of the upper house.
It was primarily the taxes on land which had caused the peers to reject the Lloyd George budget of 1909. The Unionist party declared that the budget amounted to confiscation of wealth and its redistribution, that it was socialistic, that the Liberals, acting from a socialist philosophy of class antagonism, meant to expropriate the property of Englishmen. 34The Unionists suggested that Tariff Reform, which would 'widen the basis of taxation,' would be the appropriate way of raising new revenues. In reply, Liberal election leaflets carried such slogans as 'The 1909 Budget is a good Budget because it places the Burden on the Right Back.' One huge black sheet with thick white lettering read:' "Tariff Reform" would let off the RICH in order to TAX THE POOR.' Still another urged: 'Stick to Free Trade under which the nation makes both ends meet by putting the Biggest Burden on the Broadest Back.' 35
That the land taxes which had aroused such a storm of Tory resentment were not a piece of personal demagoguery on the part of Lloyd George and that they were not solely designed as a trap for the Lords -- as some historians have suggested -- is the conclusion of a recent student of the problem who has demonstrated that they were the inevitable culmination of decades of agitation on the part of Radicals within the Liberal Party. 36In the 'eighties and 'nineties, a large number of land reform societies flourished in Great Britain. The visit of Henry George to Great Britain in 1883 had initiated a widespread agitation among Radical elements to do something about the 'unearned' profits of the landlord. Anti-landlord sentiment had long been a part of the Radical tradition; Spence, Paine,
Ricardo, and John Stuart Mill had all contributed to its formulation. George's visit, and writings, gave this sentiment a renewed impetus. These land reform groups espoused a wide variety of programmes, from the most moderate to one advocating land nationalization. In the early 'nineties, the most important of them united on a platform calling for taxation on the 'unearned increment' of the landed property. The 'unearned increment' was the increase of the value of the land due not to capital improvements on the part of the landlord but to general social development. From the 'eighties onward, there had been a tremendous expansion in the value of urban property resulting from British imperial, commercial, and industrial development. Here -- the Radicals believed -- was an obvious, and a just source of much needed revenues. The urban landlords in the House of Lords -- generally supporters of Tariff Reform -- howled with rage.
In a debate on the King's speech at the opening of the Liberal parliament of 1906, Joseph Chamberlain had expressed his doubts that the Chancellor of the Exchequer 'will ever find the money he requires for this policy of social reform, and especially for such a scheme as old-age pensions, unless he is able to widen very much more than I think he will be under the present system the basis of taxation.' 37Chamberlain was right about the need to increase tax revenues and about the difficulties of widening the basis of taxation under Free Trade. The Liberals had chosen, however, not to widen the basis -- this was the method of Tariff Reform -- but to tax more heavily those already being taxed. That Tariff Reform was the only way to pay for social reform was an electioneering slogan. That Tariff Reform should be the way to pay for social reform, that any other method was socialist confiscation, was, for Chamberlain, a political principle.
In a letter to the Duke of Devonshire, August 25, 1903, Chamberlain had spoken of his belief that the social reforms 'which are certain to come in the future . . . ought in my opinion to be provided for by indirect, and not by an increase in direct taxation.' 38In the House of Commons, some three
Parliamentary Debates, Fourth Series, CLII, 163, February 19, 1906.
Quoted in Bernard Holland, Life of Spencer Compton, Eighth Duke of Devonshire ( London, 1911), Volume II, pp. 322-323.
months earlier, Chamberlain had announced that 'while it would be absolute confiscation to put the cost of social reform wholly on the shoulders of one class, and that the richer class, the minority, yet on the other hand it is fair and right that they should make a contribution in return for the indirect advantages they gain from the great prosperity and contentment of the country.' Three-fourths of the new food taxes would, he admitted, like all taxes on consumption, be paid by the 'poorer-classes'; one-fourth would be paid by the 'well-to-do.' 'That being so, according to my mind it is a matter of common justice that the working classes are entitled to every penny of the three-fourths; and I would give them without the slightest hesitation the other one-fourth as well.' 39
There were many within the ranks of the Tariff Reformers who stood to gain by reliance on tariff revenues and who violently opposed further direct taxation. Some spoke rather openly of the benefits they would receive as a result of the increase of 'indirect taxation.' In an address to his fellow Tariff Reform League stalwarts, Sir Gilbert Parker spoke of the advantages to the working man of a return to the tariff and added, to the obvious delight of his listeners, that 'if we get revenue that way -- well, we won't have to pay in other directions. (Hear, hear.) Your income tax will go down -- (hear, hear) -- and so will mine, I am glad to say -- (laughter).' 40
The social-imperial issue was clearly drawn. The answer given by the Free Trade imperialists to the question of how the money for social reform was to be raised was that it would be raised by increasing the 'ransom,' to use Chamberlain's earlier term, exacted from the profits, direct and indirect, of imperial activity. The Tariff Reformers, on the other hand, wanted the cost of social reform to be borne by the population as a whole, the major part of it by the poorer classes, a charge which, they asserted, working men might easily bear once employment was made more secure and more profitable by protection and imperial preference. This difference on financial questions had a considerable influence in determining the attitude of organized labour.
Parliamentary Debates, Fourth Series, CXXIII, 186, May 28, 1903.
Parker, A National Policy, p. 18.
Even socialists sympathetic to Tariff Reform proposals, like the Fabians and Robert Blatchford, parted company with the Tariff Reformers on this question. The Fabians, in fact, made the issue of whether Tariff Reform should be tied to lowering income taxes the criterion by which to distinguish sincere from selfish Tariff Reformers. 41The leaders of the working class were even more disturbed and provoked. The working-class leaders agreed that there must be increased taxation to meet the cost of social reform but believed, in the words of Philip Snowden, that Tariff Reform in 'broadening' the basis of taxation was 'putting the cost of those so-called social reforms upon the people themselves by means of indirect taxation.' If, therefore, the cost of old age pensions were to be paid by the broad masses of the people, 'then there could not be in the aggregate any raising of the standard of comfort amongst the people.' A special Labour Conference on the Incidence of Taxation, which met on January 27, 1909, in conjunction with the Ninth Annual Conference of the Labour Party, called instead for 'a Super-tax on large Incomes; Special Taxation of State-conferred Monopolies; Increased Estate and Legacy Duties; and a really substantial beginning with the taxation of land values.' 42
The Unionist attitude toward the Budget kept even trade union leaders sympathetic to protection on the Free Trade side. Class distrust of the Tories which resulted in Labour's support for the Liberals was deep and had revealed itself before the budget controversy. In an address to the Fourth Annual Conference of the Labour Party in 1904, John Hodge, of the Steel Smelters Union and Chairman of the Party, neatly compounded trade-unionist protectionist sentiment -- of which there was a good deal -- with trade union distrust of the Conservatives. If Chamberlain wished to help the British working man, Hodge argued, he could do so by 'giving our Trade Dispute Bill a helping hand.' Instead Chamberlain filled his Tariff Reform platform with barons and dukes and earls, and with Arthur Pearson, Hodge added, unable to restrain his protectionist impulses, a newspaper publisher 'whose "Xmas
'Xtra" was printed in Holland.' Hodge was no theoretical Free Trader; he simply could not support the party of Taff Vale and the ' Dukes.' 'If you watch a pot of treacle,' Hodge concluded, 'you won't find the flies far away.' 43The gaps in the Cobdenite armour were filled with the hard putty of class hatred. The budget controversy confirmed these feelings to the great advantage of Liberalism.
Labour Representation Committee Conference ( 1904), p. 31.