People's Budget

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The 1909 People's Budget was a product of Herbert Asquith's Liberal government that introduced many unprecedented taxes on the wealthy and radical social welfare programmes to Britain's political life. It was championed by Chancellor of the Exchequer David Lloyd George and his strong ally Winston Churchill, who was then President of the Board of Trade. Churchill's biographer William Manchester called the "People's Budget" "a revolutionary concept" because it was the first budget in British history with the expressed intent of redistributing wealth to the British public. It was a key issue of contention between the Liberal government and the House of Lords, ultimately leading to two general elections in 1910 and the enactment of the Parliament Act 1911.

The budget included several proposals to further the Liberal government's Liberal reforms, which included old age pensions, by raising taxes. Income tax was held at 9d in the pound (or 3.75%), but a higher rate of one shilling (12d or 5%) was proposed for incomes over £2,000,( £140,289.76 in 2007 money) and an additional surcharge or "super tax" of 6d (a further 2.5%) was proposed on the amount by which incomes of £5,000 (£350,724.40 in 2007 money) or more exceeded £3,000. An increase was also proposed in death duties and naval rearmament.

More controversially, the Budget also included a proposal for the introduction of a land tax based on the ideas of the American tax reformer Henry George. This would have had a major effect on large landowners, and the Conservative opposition, which consisted mostly of large landowners, had a large majority in the Lords. Furthermore they believed that money should be raised through the introduction of tariffs on imports, which was claimed to benefit British industry and to raise revenue for social reforms at the same time.

The House of Lords vetoed the new budget—the first time since the 17th century that it had challenged the House of Commons' power of the purse—setting the stage for a tremendous showdown, which Churchill relished. The Liberals countered by making their proposals to reduce the power of the Lords the main issue of the general election in January 1910. The Unionists won more votes than the Liberals but not more seats, and the outcome was a hung parliament. The Lords subsequently accepted the Budget after the election when the land tax proposal was dropped, but contention between the government and the Lords continued until the second general election in December 1910, which resulted again in the Unionists gaining more votes than the Liberals but producing another hung parliament. Nonetheless, the Lords passed the Parliament Act 1911.