April 18, 2010

“Fructify in the pockets of the people “Gladstone as Chancellor



In the previous series of posts we have looked at Gladstone’s political thought from his pragmaticism to his opposition to government spending. Now we are to look at some of his actions. In particular we are to look at his hugely important tenure as Chancellor of the Exchequer.

There has been a lot of focus on Gladstone as prime Minister. His chancellorship is I’d say much less known. And it was in this period that he fundamentally moved to “liberal” viewpoint and left behind fully his High Tory past. It’s his tenure as one of Britain’s most important Chancellors ever that he forged the power that made him Prime Minister he would never have become Prime Minister.
He was probably the most important single chancellor of the nineteenth century. This can be seen in a number of ways.

Firstly he simply changed the economic and fiscal policy of the United Kingdom the world’s preeminent economic power. Partly this was through the constant application of “economy” and expenditure control. Gladstone’s accession to the Chancellorship marks a halt for several decades of what was otherwise a continuous century’s long increase in regular expenditure and borrowing. In a sense Gladstone’s chancellorship and its imitators (of both parties) managed to halt Gladstone managed to apply rigorous expenditure control. This was combined with a switch away from direct taxation (such as income tax) –though Gladstone’s economy measures were enough that he still cut the income tax in several budgets in the 60’s having previously raised it. It was in indirect taxation that there was a sharp downward trend. Perhaps the most significant single tax change was the abolition of Paper duties which helped spark a massive boom in the British (particularly the provincial) press.

Nor was strict fiscal policy the only area where Gladstone had an enormous effect on direct policy. He also was possibly the prime force in the Anglo-Franco trading treaty. This saw mutual reduciaons in tariffs by both Britain and France. yet
Britain was seen then (and since) as the epitome of free trade ideology and France as a relatively and somewhat ideologically Protectionist state. The cynic might say that it was inevitable that the fiscal reality was that Britain’s real tariffs were higher against France’s than vice versa –because their restrictions on wine were on a major import while France’s tariffs were overwhelmingly on relatively minor imports . Gladstone used the treaty to push down trade barriers. But it also represented an early version of his “Cobdonite” international vision whereby trade and international agreement could replace military force and empire ( much more enthusiasm of the great Liberal though barely liberal statesman Palmerston who was Prime Minister for much of this period). It did indeed spark a whole series of multilateral trading treaties-though ironically some argue that in turn helped inaugurate the end of the free trade era.

From a longer perspective the modern Treasury was also in large part the product of Gladstone’s Chancellorship. The institutional obsession with a balanced budget and low spending that lasted well into the twentieth century (and many would argue well beyond) owed a great deal to the powerful ethos of Gladstone. Similarly The modern Chancellor’s budget – in it’s use as the single seminal moment of the fiscal year ( which has started breaking down in recent years) is in many ways the product of Gladstone’s desire both to control the whole fiscal operations of government as a cohesive whole and his public showmanship. Finally dominance of the treasury among departments and control over spending dates in it’s fullness from this period.

One reason why Gladstone was able to have such massive and lasting policy and institutional effects as Chancellor was his huge political success. His economic agenda was genuinely popular. IT’s worth remembering that taxation was regressive in this period and very little expenditure whet on welfare (and that which did was mostly the poor law whose recipients were disenfranchised). Gladstone’s reforms represented a direct rise in the real incomes of virtually all voters and most adults-and were rewarded at the polls. Similarly the burden of debt through taxation (from the Napoleonic war) had caused strain for decades so minimising it was cherished. There was a widespread political demand to keep taxation and debt low.

What was at least in part new was that Gladstone achieved enormous political dividends through the assurance that he would actually deliver on such demands.
Partly for this reason his chancellorship also saw the liberal party change from a coalition of somewhat free trade groups to a party (it was coalescing in this period) where free trade was a supreme dogma. Free trade sentiment even experienced a strong pull on the Conservatives – though they had more or less abandoned protection towards the early 1850’s just before. However it was though the fiscal, political and perceived economic success of Gladstone’s chancellorship that a very strong consensus was forged across the parties on the permanence of free trade-the elections of the 1840's had contrary to myth been far from unambiguous on the subject. This consensus was not to be shaken till the 1880's , not to be broken till the 1900's and not to lead to the formal abandonment of free trade till the 1930's and the National Government inaugurated a new era of “preferential trade” that lasts till this day. Gladstone did not only increase free trade directly but indirectly through building a new fiscal architecture with free trade as a fundamental building block.

The popularity of Gladstone’s record also made him a huge popular and public figure in a way he had not been before. He nurtured this through the provincial press. This was strongly sympathetic to him-partly because his abolition of paper duty had been of such economic benefit to them and partly because of it’s ideology-it was mostly strongly liberal in a rather “Gladstonian” way. There was also of course a role for great national papers including the new rising star of the media firmament-the Telegraph. Gladstone gave a large number of speeches in this era including in the provinces. These were extensively reported by the press and in combination with his record built up a huge political following.

It was this following that was to make him Prime Minister. It was because of this that when Russell retired in 1866 Gladstone was the inevitable successor. This was not because of his support among the Parliamentarians of the Liberals , among whom he was respected but also regarded as eccentric and increasingly as excessively radical. It was because his public profile and support was so much higher with Russell gone than any other liberal mp that he was the inevitable candidate.
Thus for a whole number of reasons Gladstone has to be regarded as a monumentally important Chancellor up there , David Lloyd George, Neville Chamberlain and Gordon Brown. Indeed he arguably exceeds them all in importance.

This is a picture of Number 11 downing Street- the residence of the office-the Chancellor of the Exchequer which owes so much of its modern importance to Gladstone.

1 comments:

James Higham said...

and Gordon Brown. Indeed he arguably exceeds them all in importance

We're talking about two different things here - constructive importance and destructive. There's almost no one now but rosette ostriches who considers Brown's chancellorship as beneficial in any way.