One of the major problems facing the Liberal Party in the inter-war period was the lack of funds that they had at their disposal. As the Party became increasingly defunct, so it became impossible to attract the wealthy donors, who formed the foundation of the Liberal finances.
Yet, as the Party’s financial situation deteriorated further, so it became unviable to fund the kind of sophisticated campaigns that were necessary in order to retain such support. More and more Liberal candidates were forced to fund themselves, which they became increasingly reluctant to do as the Party’s chances of success became slimmer. The Million Fund was established by Asquith in 1925, in an attempt to solve the Party’s financial problems by attracting smaller donations from a greater number of sources. However, potential donors were reluctant to part with their money, given rumours that the Party had access to Lloyd George’s private fund, which supposedly amounted to millions of pounds. Unfortunately for the Liberals, the gossip was indeed little more than rumour and Lloyd George proved stubbornly reluctant to part with his money.
Lloyd George had accumulated the fund during his time as Prime Minister, through the sale of honours to wealthy newspaper proprietors and those who wished to buy influence within the political arena. Such a practice was not a new phenomenon and had been a common practice for some time. Indeed, the Tory agent, Sir George Younger, warned Bonar Law in January 1921 that Lloyd George ‘was poaching the Conservative Party’s preserves’. The honours list of 1922 had attracted such criticism that it led to the formation of a special commission to investigate dubious awards and eventually resulted in legislation which led to the conviction of the honours tout, Maundy Gregory in 1933.
The existence of Lloyd George’s fund therefore presented many Liberals with something of a dilemma. By attempting to gain access to his tainted money, they would be compromising their own moral values, but if they ruled out its use, they would be snubbing their only potential source of significant funding. In the end, they concluded that lofty principles were a luxury that the cash strapped Party could not afford to subsidise and Liberal headquarters subsequently began issuing Lloyd George with awkward pleas for assistance.
Lloyd George’s reluctance to part with his money proved to be an ongoing bone of contention within the Party and increased feelings of animosity towards him amongst Asquith’s supporters. Even following the re-unification of the Party in 1923, the fiery Welshman had maintained his own headquarters at 21 Abingdon Street, just three doors away from the official Liberal headquarters at number 18. For the man who lacked a party of his own, the fund was a useful tool to barter with, in order to strengthen his own political position and was not a resource that he was going to part with lightly.
In January 1924, Donald Maclean approached Lloyd George and suggested that both wings of the Party should pool their resources. Lloyd George refused these terms, stating that he would only agree to provide periodic grants to Liberal headquarters, on the proviso that his key allies, Freddie Guest and William Edge were given prominent roles within the organisation. Although such stipulations angered many Liberals, the prospect of fighting another election, without adequate resources, was not one that they relished and so they had little choice but to barter with him.
The Party’s treasurer, Herbert Gladstone, subsequently made a concerted effort to get Lloyd George to part with his money, initially asking him for an agreed annual sum and an additional £100,000 towards financing a future election. Unfortunately, Lloyd George decided that it was he who should stipulate demands and in April 1924 he told Maclean that no money would be forthcoming unless he was consulted more by the Party and the efficiency of the organisation were improved. Realising that he would be unable to plan ahead on the basis of such a vague gesture, Gladstone recruited Asquith to press Lloyd George into making a more definite pledge.
Asquith bowed to these demands by establishing a special committee, under Sir Alfred Mond, to investigate how the Party could reform its structure. Lloyd George, however, refused to accept its findings on the grounds that five of its members were prominent Asquithians, who he claimed were part of the very problem at Liberal headquarters. His ensuing attempt to secure the removal of key Asquith supporters from their posts served only to exacerbate the vengeful feelings his enemies felt towards him.
Two days after the Labour Government was finally ousted in 1924, Lloyd George finally agreed to donate £50,000, but this was far off the £130,000 that the Party had requested for election expenses and many Liberals subsequently blamed Lloyd George for the Party’s poor performance at the polls.
Nonetheless, Lloyd George was able to continue using the fund to gain further leverage over the Party and eventually replace Asquith as Liberal leader. By financing a series of policy studies in the later 1920s he was also able to steer the Party along his own ideological lines and sideline the former Asquithians and traditionalists that might stand in his way. He continued to provide sporadic funding until 1931, when he finally withdrew his support in disgust at the Party’s decision to accept the National Government’s tariff policy.
From then on, the Party’s financial health rapidly deteriorated. ‘Unless certain steps are taken immediately we shall be unable to maintain the present structure of the party apart from any question of enlarging and strengthening it’, the deputy Liberal leader, Archibald Sinclair warned his new boss, Herbert Samuel, following the election of 1931. The Chief Whip, Harcourt Johnstone, also cautioned that the Party would need to raise around £10,000 a year, in addition to a £20,000 election fund, if it were to survive. With access to a mere £1000 a year and a maximum of £4500 in the election pot, the situation looked dire and deteriorated further following the death of the Party’s wealthy donor, Lord Cowdray.
By the time of the 1945 election, the Liberal Chief Whip was congratulating himself on being able to field even the smallest number of candidates. ‘We had no large headquarters fund to finance candidates and they had to depend first on contributions out of their own pockets and secondly on money raised locally’, Tom Horabin admitted. A Party committee was established to examine the situation, resulting in the establishment of a Foundation Fund in May 1946. This initiative was relatively successful, raising over £58,000 within the first eight months of its existence. Nonetheless, the general lack of funding that had hampered the Party’s political chances and exacerbated internal tensions throughout the preceding period, continued to be an ongoing problem for the organisation over subsequent years.