by Simon Heffer
Higher rates of taxes, and taxes paid by a larger proportion of workers, would become a permanent part of the economic landscape. This signalled not merely a determination to pay off the country’s debts, but to finance what a political consensus now agreed and understood were its obligations for the future, if the expectations of those who had fought the war were to be met. Higher taxation helped Lloyd George convince the masses that the rich were surrendering their war profits for the national good. However, interest charges subsumed half of tax revenues. Labour suggested a capital levy, but Law rejected it. The war would cause little long-term financial damage: the collapse of free trade later on would do that. Yet there were immediate problems for British industry, which found it hard to compete internationally: for example, steel rails, which it made at £15 a ton, cost only £10 a ton in America. Other changes the country had to make, while not seismic, were symptomatic of the economic challenges it faced if it was to get back on its feet. The post-war world was different for everyone, from the top down. An early Act of the new Parliament repealed the law of Queen Anne, from 1707, requiring newly appointed cabinet ministers to offer themselves at a by-election to secure the approval of their electors; not just in the interests of efficiency, but to save unnecessary expense. Also, the people had become used to long summer evenings, and more daylight in working hours saved energy costs; so the government announced that the wartime innovation of British Summer Time would stay.
The precariousness of the international situation overhung even these serious domestic concerns. Too many politicians and military men believed the fight with Germany had been interrupted rather than ended, a view that would persist beyond the conclusion of the peace conference at Versailles. The defeated power was in ferment after the Kaiser’s abdication, and in shock at its failure to triumph after the advances of March to July 1918 – although some realised it was the exhausting nature of that advance that, paradoxically, finished off Germany’s chances. In the election campaign Lloyd George had been predictably upbeat, and publicly remained so. It was different in Paris. On Armistice Day Clemenceau’s daughter had implored her father to tell her ‘that you are happy’. He replied: ‘I cannot say it because I am not. It will all be useless.’26 For various reasons, starting with bereavement and privation, many British felt the same.
Curzon and Smith wanted Lloyd George to uphold the cabinet decision to try the Kaiser, because of concern about the effect on public opinion if he did not: the prime minister, despite his earlier, populist enthusiasm, knew that executing Wilhelm would be impossible. He also no longer needed the promise of it to impress an electorate. Labour and other politicians wanted reparations, which Lloyd George and Law saw would ruin Germany. Their wise view would not prevail at Versailles. The realities of the post-war world asserted themselves swiftly.
The election showed that the old Liberal Party was dead, with the Conservatives and Labour the main players. The war had effected a new polarisation in politics between hard-nosed conservatism and idealistic (but not, with the exception of odd pockets of militancy, revolutionary) socialism: which made Lloyd George’s position, as a prime minister without roots in either movement, all the more peculiar. During the war the trades unions, strengthened during the Great Unrest before 1914, had grown from 4 million members to 6.5 million, forming the basis of Labour’s support.27 Ireland had been revolutionised, and worse would come. The new government did not lack potential opponents.
The new Parliament, whose members had been elected partly as a result of having fed those expectations, met in February. Stanley Baldwin, the financial secretary to the Treasury, famously told John Maynard Keynes that the new MPs were ‘a lot of hard-faced men who look as if they had done well out of the war.’28 Baldwin was an ironmaster whose business interests too had flourished, but who donated considerable sums to charity throughout the conflict partly, it seems, out of his sense of frustration at being too old to fight (he was forty-seven in 1914). He so lacked the hard face that in June, just before the peace treaty was concluded, he wrote anonymously to The Times to announce he had given a fifth of his fortune (£120,000) to the Treasury to contribute towards the alleviation of the financial crisis, and urging others like him to do the same.29 The letter was published under the headline ‘Richesse oblige’. ‘The whole country is exhausted,’ he wrote. ‘By a natural reaction … all classes are in danger of being submerged by a wave of extravagance and materialism. It is so easy to live on borrowed money; so difficult to realise that you are doing so.’30 He called his gesture ‘a thank offering’; The Times described his letter as ‘nobly written’. J. C. C. Davidson, his confidant, used Baldwin’s idiom when describing the new Tory MPs as containing a ‘high percentage of hard-headed men, mostly on the make’, who were ‘to my mind unscrupulous.’ Austen Chamberlain called his new colleagues ‘a selfish, swollen lot.’31 There were 260 new MPs; many were businessmen and a few were trades unionists. Yet Northcliffe, wedded to his progressive, anti-Bolshevism programme, worried that too many of the Tory ‘Old Gang’ (to use a phrase beloved by the Daily Mail) were not just in Parliament, but in power.
II
When Lloyd George reconstructed his administration on 10 January 1919 The Times pronounced that it would ‘come as a deep disappointment to his gigantic following in the country’ because of the failure to promote new blood, which it thought showed ‘a hopeless want of imagination.’32 It called Long’s appointment as First Lord of the Admiralty ‘frankly inexplicable’, and said that Austen Chamberlain, the new chancellor, represented ‘an obsolete tradition’; and noted that sending Churchill to the War Office put him in ‘the one post where he is calculated to inspire the greatest distrust.’ The paper could not bring itself to comment on Sir F. E. Smith’s elevation to the Woolsack. The prime minister had, at least, had the inspired idea of appointing Sir S. P. Sinha, former president of the Indian National Congress, as an under-secretary at the India Office, with a peerage, the first Indian to sit in the government or in the Lords.
Lloyd George emphasised there would be no cabinet government on the old model, much to the annoyance of Chamberlain and others. It was argued that the main figures in the government would be at Versailles for the peace conference: cabinet government would be restored in October 1919. Chamberlain became chancellor despite, on 16 December, Hankey having witnessed ‘Bonar Law urging Chamberlain’s claim’ to the job and ‘Lloyd George absolutely refusing.’33 His initial refusal was because he feared the press would attack him for the appointment, and it did. Chamberlain in turn was reluctant. First, he was offended by the brusque way in which Lloyd George, in the letter of 9 January offering him the Exchequer, said that because of the demands of reconstruction there would be ‘great issues … when differences arise between the Treasury and other Departments’, and that these should be dealt with not by the cabinet, but by a committee of Chamberlain, Lloyd George, Law (who remained Leader of the Commons) and one other minister.34 Second, the usual proximity and access to a prime minister a chancellor had by living in 11 Downing Street would be denied him, as Lloyd George wanted Law to live there.
Third, Chamberlain learned that Lloyd George was considering a small wartime-style cabinet of which (unprecedentedly) he as chancellor would not be part. That was the last straw. Lloyd George tried flattery, arguing that in the circumstances of reconstruction a former chancellor such as Chamberlain (who had served under Balfour from 1903 to 1905) was exactly what was required. Chamberlain was less than impressed when he heard the list – including Churchill and Worthington-Evans – already considered but rejected on the advice of Lloyd George’s financier friends. He told the prime minister: ‘You will not be surprised that the office has no attractions for me. You offered it to me in what I must consider a very curt manner at the very last moment – very much as you would throw a bone to a dog. I must say I am not particularly flattered.’35 His stiff reaction was again at odds with Smith’s bon mot about playing the game, and always losing it.36 L
loyd George eventually talked him round by promising him a War Cabinet place.
Churchill had wanted to return to the Admiralty (which Lloyd George offered him, but then withdrew) with responsibility also for Air, which he was now given at the War Office. Curzon, whom Lloyd George had grown to detest but whose experience and following in the Tory Party made him essential to the coalition, remained Leader of the Lords. Balfour kept the Foreign Office, Fisher stayed at Education and Montagu at the India Office. Shortt became home secretary and Milner succeeded Long at the Colonies. The most controversial appointment was of Smith, despite his having been Attorney General, as Lord Chancellor with the title of Lord Birkenhead. The King, who regarded him as vulgar and unreliable, was angry: ‘His Majesty fears that the appointment will come as something of a surprise to the legal profession … His Majesty however only hopes he may be wrong in this forecast,’ Stamfordham told Lloyd George.37
Birkenhead, risen from middle-class origins in the north-western town from which he took his title, having had a glittering career at Oxford and the Bar, chose as the motto on his coat of arms faber meae fortunae – ‘Smith of my own fortune’ – showing both the cleverness of which the King was suspicious and the flashiness and poor taste he deplored. Churchill, one of Birkenhead’s closest friends, had urged the appointment because of his considerable constituency in the Conservative Party – Churchill called them ‘Tory democrats’ – that could be useful to Lloyd George.38 For the Morning Post, however, ‘it is carrying a joke beyond the limits of a pleasantry to make him Lord Chancellor. There are gradations in these matters.’39 The bibulous Birkenhead could not resist, on his appointment, asking: ‘Should I be drunk as a lord, or sober as a judge?’40
One of the most crucial appointments was of Addison as minister of local government. To an extent it was a continuation of his role at Reconstruction: but he would also oversee the distribution of state funds for council housing, to deliver Lloyd George’s promise of homes fit for ‘heroes’. This, like the other promises that had returned him to power, would be left to his ministerial colleagues to implement while Lloyd George spent most of the first half of 1919 posturing at Versailles.
Every statistic indicated a severe housing crisis. For the last two years of the war the Garden Cities and Town Planning Association regularly petitioned about the problem. A total of 1,103 local authorities in England and Wales had told the government during 1918 that they needed more housing for the working classes in their areas, with 510 of them needing more than 100 dwellings.41 An estimated 610,000 houses were now needed, and that figure was quickly revised upwards after the Armistice. Political embarrassment was reinforced when some soldiers came home to find that for sanitary reasons their houses had been condemned and they were given immediate notice to quit. Moreover, the shortage of housing caused increases in rents, and there were many cases of landlords selling houses over the heads of their tenants.
The government had admitted as early as March 1917 that the provision of better working-class housing ‘is the most pressing problem [it] would have to deal with after the war.’42 Exactly a year later it had intimated it would seek to build 300,000 houses in the first year of peace.43 During the winter of 1919 the War Cabinet discussed housing extensively, with H. A. L. Fisher telling it that, for example, in Sheffield there were 16,000 slum houses, yet plans to build only 500 new ones. Lloyd George concluded that central government would have to take control of the programme, as to rely on local authorities was ‘useless’.44 Councils were ordered to present plans within three months.
On 7 April Addison brought the Commons up to date. As well as five years of not building houses for the working class – which he estimated as meaning 350,000 houses unbuilt – he believed there were 370,000 that were either seriously defective or unfit for human habitation. He argued that such conditions had been a main cause of unrest in mining communities, and that nationally 3 million people lived in overcrowded conditions with more than two to a room, 750,000 of them in London alone.
He also cited a street in Shoreditch, east London, where 168 households lived in 129 houses, a total of 733 people. In many such streets there were numerous sufferers from tuberculosis, not only sharing a room with someone else, but quite often a bed. Addison argued that the cost of treating tuberculosis would equal the building of vast numbers of houses, so the cost to the country of not replacing poor living conditions was enormous. However, the 1,800 local authorities with the power to condemn a house were reluctant to do so until others were built to which they could move the inhabitants. It often required condemning whole areas, and the cost to the local authority of buying up large areas was prohibitive.
Addison offered various proposals to tackle the problem. He suggested that local authorities would be forced to make clearances, and owners would not be compensated for buildings that had become unfit for habitation, thus saving public money. New financial assistance would be offered to local authorities. Since January councils had applied to start 700 building programmes, using as labour men back from the war: Addison said these would provide 100,000 houses when completed: but that only represented about a seventh of the number needed in and around the capital. He also proposed improving the transport system out of London so that people could more easily live in houses further from the centre.
The government had an Acquisition of Land Bill designed to make it easier to buy plots of building land that were not occupied by defective housing; and Addison promised rents would be fixed at an economic level that would not suffocate private building, an assertion met with some scepticism from Tories. There was a sense that ministers were now so used to the state controlling all areas of life that it had insufficiently occurred to them that private enterprise might have a role to play in alleviating the housing problem. Addison reaffirmed his target of 3,000,000,000 bricks being made in 1919, and promised 5 million in 1920. On behalf of the government he put in an order for 300 million bricks in March 1919 alone, and said the demobilisation department had been ordered to get men out of uniform and into the brickyards as swiftly as possible. (Several MPs challenged his assertion that all brickyard workers had been demobilised, citing constituency cases to the contrary.)
There were fears of wholesale evictions in areas with the greatest demands for housing, and the government was urged to amend the Increase of Rents and Mortgage Interest Act of 1915 that had prevented such things happening for the duration; the lifting of controls that had come with the Armistice was the problem. Some ministers remained reluctant to interfere in the rights of landlords to treat or dispose of their property as they saw fit; but Addison, recognising that the difficulty could not be solved until more houses were built, promised the government would extend the Restriction of Rent Acts to alleviate the problem. In early March the government yielded to the inevitable, and introduced legislation extending rent restrictions for a further year.
In June 1919, after an Act of Parliament established it, Addison would run the Ministry of Health – appropriately, as he was a fellow of the Royal College of Surgeons – and would take responsibility for house building with him. This was a logical step. There was a connection back to the mid-nineteenth century between decent, or ‘sanitary’, housing and public health. This had been identified in slum-clearance legislation since the 1870s: but now the new ministry would announce that, to keep the prime minister’s promise, another 500,000 houses would be required by the end of 1921: the rate of building before 1914 had been 80,000 a year, so to find the labour would require an enormous effort.45 To make matters worse, there were acute shortages of bricks and timber.
In the event, only 213,000 houses would be built in the following two years, contributing to the coalition’s downfall in 1922. Given the extent of the housing crisis, the government’s fear about the development of Bolshevism in Britain, and the vulnerability of men with such genuine grievances to be recruited to leftist doctrines, the casualness with which Lloyd George in particular regarded the promises
made during the election was remarkable.
The government’s other main priority was to restore something resembling normality to the economy. Financial controls began to be loosened; Britain had never legally come off the Gold Standard, but the Bank of England had asked people to be ‘patriotic’ and not demand gold for their banknotes; there was no return to the Standard in 1919, even though the war was over: but this would come, with unfortunate results, in 1925. The pound fell to $3.50, which should, technically, have given an advantage to British exports, had manufacturing industry been in a position to capitalise upon it. Prices and wages both rose at the beginning of a post-war boom that would crash in 1920. This was driven not least by implementation of some campaign promises of the previous autumn; Eric Geddes announced an infrastructure programme to modernise road, rail, docks and canals, though overall government spending fell dramatically by 75 per cent in the two years from the Armistice, because of the end of wartime expenditure. To consolidate one of the necessities of a more modern future, the government also set about rationalising the electricity supply industry, and standardising the voltage of the grid.