The disaster of the 1895 election, when the Liberals lost almost a hundred seats, struck a mortal blow at Rosebery's leadership and pointed to the urgent need for a new direction. Although for some it was the party's abandonment of its historic principles of self-help, voluntaryism and constitutional reform that lay at fault, to others it was the failure of the party to embrace the new imperialism. A growing number also felt that Liberalism's failure to formulate an adequate response to the new social problems of industrialisation had undermined its appeal.
Although living standards in general had risen throughout the latter half of the nineteenth century, society was characterised increasingly by the spread of slums, poverty, ignorance and disease, and the ending of the long mid-Victorian economic boom had removed the belief that economic growth would automatically solve such social problems. Just as the emergence of classical liberalism in the early and mid-nineteenth century was closely linked to the emergence of industrial capitalism, so the development of the ‘New Liberalism’ of the late-nineteenth and early-twentieth centuries derived from this further evolution of economy and society. It was to prove a decisive development in the history of British Liberalism, heralding its successful adjustment to the demands of the new industrial age, and enabling the Liberal governments of 1906-14 to lay the foundations of the welfare state Labour was to build on after 1945.
Thomas Hill Green was the first of the liberal thinkers to take the growing social inequality into account. Green argued that the unrestrained pursuit of profit had given rise to new forms of poverty and injustice; the economic liberty of the few had blighted the life chances of the many. ‘Negative liberty’, the removal of constraints on the individual, would not necessarily lead to freedom of choice for all. Workers, for example, frequently had little if any choice of employer, and no real choice between working or not working, whereas employers had plenty of choice regarding their employees. The free market therefore often could, and did, lead to exploitation. Green proposed the idea of ‘positive freedom’: the ability of the individual to develop and attain individuality through personal self-development and self-realisation.
Since much of the population was prevented from such self-realisation by the impediments of poverty, sickness, unemployment and ignorance, government was justified in taking action to tackle all these conditions. This was not a threat to liberty, but the necessary guarantee of it: ‘our modern legislation then with reference to labour, and education, and health, involving as it does manifold interference with freedom of contract, is justified on the ground that it is the business of the state, not indeed directly to promote moral goodness, for that, from the very nature of moral goodness, it cannot do, but to maintain the conditions without which a free exercise of the human faculties is impossible.’ (Lecture on ‘Liberal Legislation and Freedom of Contract’, 1888)
In this extension of the role of the state, Green was in fact reflecting what was already beginning to be common practice amongst Liberals in local government; Green himself was an Oxford councillor, as well as an academic. ‘The experience of the great towns is encouraging’, stated Joseph Chamberlain in 1885, drawing on his experiences as mayor of Birmingham. ‘By their wise and liberal use of the powers entrusted to them, they have, in the majority of cases, protected the health of the community; they have provided means of recreation and enjoyment and instruction, and they have done a great deal to equalise social advantages.’ Chamberlain’s departure from the Liberal Party the following year in the split over Irish Home Rule did not prevent Liberals following these trains of thought and action. Indeed, since he took many Whigs and major industrialists with him, it may have accelerated their adoption. The Newcastle Programme of 1891 reflected these beliefs, though in an unsystematic way, obscured by attachment to the single-issue causes of the past.
The members of the Rainbow Circle, a group of progressive politicians and thinkers who started meeting regularly in the early 1890s to discuss social and labour questions, provided much of the intellectual justification for the New Liberal programme. They included almost all of the major New Liberal writers: L T Hobhouse, J A Hobson, R B Haldane, Charles Trevelyan and Herbert Samuel, and they also had close links with trade union leaders, the new Fabian Society, and the Labour Representation Committee (LRC) formed in 1900. Their creed was a self-conscious departure from the past; as Lloyd George put it in 1908: ‘The old Liberals used the natural discontent of the people with the poverty and precariousness of the means of subsistence as a motive power to win for them a better, more influential, and more honourable status in the citizenship of their native land. The new Liberalism, while pursuing this great political ideal with unflinching energy, devotes a part of its endeavour also to the removing of the immediate causes of discontent. It is true that man cannot live by bread alone. It is equally true that a man cannot live without bread.’
New Liberal thinking was well advanced by the time of the electoral landslide of 1906, when the Liberals won almost 400 seats, partly thanks to the pact with the Labour Party (as the LRC became in 1906) negotiated by Herbert Gladstone, Liberal Chief Whip 1899-1905, and Ramsay Macdonald, the LRC’s Secretary. The victory was not, however, primarily won on the back of the new politics, but on the rejection of the exhausted and divided Unionist government. The overwhelming electoral issue was the thoroughly Gladstonian one of the defence of free trade against tariff reform; the main secondary issues all related to actions of the previous government which Liberals condemned: licensing, education, Ireland, Chinese slavery, and so on. Even under the new Prime Minister, Campbell-Bannerman, a radical at heart (though increasingly losing his impetus for action due to illness), almost all the main ministries were occupied by old Liberals or Liberal Imperialists. For the first two years the new government stuck to the reversal of Unionist legislation and traditional Liberal enthusiasms such as reform of the licensing laws, though most of its legislative efforts were blocked by the House of Lords.
Change came with the pressure of by-election defeats and the elevation of Asquith (a student of Green’s at Oxford) to the premiership following the death of Campbell-Bannerman in 1908. Although Asquith himself was not a consistent radical, his new cabinet contained several who were, notably Lloyd George, who replaced Asquith as Chancellor of the Exchequer, Winston Churchill and (from 1909) Samuel. The Liberal government radicalised in office, as Liberal governments, unlike Labour ones, have tended to do. The introduction of old age pensions, health and unemployment insurance, labour exchanges, school meals, and progressive taxation all paid tribute to the government’s willingness to intervene in the operation of the market, promote state welfare provision, and secure a modest redistribution of income and wealth.
The two elections of 1910 were triggered by the Lords’ rejection of Lloyd George’s ‘People’s Budget’, which contained increases in income tax and excise duties, new taxes on cars, petrol and land, and a new supertax for those with incomes above £5,000. All these measures were designed to raise revenue for the social spending of the New Liberal programme, and also higher defence expenditure as the arms race with Germany gathered speed. Goaded by Lloyd George’s inflammatory speeches, in November 1909 the Lords voted the Finance Bill down, an eventuality that had not occurred for more than 250 years. The elections of January and December 1910 were therefore fought on the issue of the limitation of the Lords’ veto. Since both saw the Liberals returned to power (albeit now dependent on Labour and Irish Nationalist votes), the King acceded to Asquith’s request to create, if required, enough new peers to overcome the Lords’ inbuilt Unionist majority. In the face of this threat, enough Unionist peers abstained to allow the Parliament Bill, which limited the Lords’ veto to two sessions, and removed it altogether for money bills, to become law in August 1911.
The four years following the 1910 elections placed Asquith’s government under increasing strain, with ministers under pressure over women’s suffrage, labour unrest and Irish Home Rule (an old Liberal cause returned to centre stage by the Liberals’ dependence on Irish Nationalist support in the Commons). Nevertheless, the party looked well placed to win the election due in 1915, and although by no means all Liberals were converts to the new thinking, it was the success and popularity of the New Liberal fiscal and social programmes that underpinned the government’s continuing support. Why did the New Liberalism come to dominate the government’s programme so thoroughly? Three main reasons can be identified.
First, and most simply, because there was no alternative agenda on offer. The electoral defeats of the previous decade and the withdrawal of the old Whigs had left something of a vacuum in the Liberal Party, in terms both of ideas and men. Many of the new radicals were able to gain nominations to parliamentary candidatures relatively easily, often being helped by Herbert Gladstone, who played a key part in placing radical candidates in winnable seats and supporting them financially. Outside the Liberal Party, the Conservatives were in significant disarray in the wake of the Chamberlainite split over tariff reform and the electoral disaster of 1906, and the Labour Party had no distinctive programme of its own and was in practice indistinguishable from advanced Liberals.
Second, because the New Liberal agenda met the requirements of the time. The living conditions of the working class, revealed in the poor physical conditions of Boer War recruits, and by social surveys such as that carried out by Rowntree in York, were clearly bad enough to stimulate action of some kind. Many of the New Liberals discovered the realities of poverty and destitution for themselves, through work in ‘settlements’ such as Toynbee Hall in East London, and came, along with Hobhouse (in Liberalism, 1911), to argue for extensive interference in the market to secure the ‘”right to work” and the “right to a living wage” … There is somewhere a defect in the social system, a hitch in the economic machine. Now, the individual workman cannot put the machine straight. He is the last person to have any say in the control of the market … He does not direct or regulate industry. He is not responsible for its ups and downs, but he has to pay for them. That is why it is not charity but justice for which he is asking.’
And it was justice which the New Liberalism delivered. The introduction of old age pensions and national insurance for periods of sickness, invalidity and unemployment, minimum wages for the miners, government grants for maternity and child welfare clinics, compulsory school meals, loans for local authority house-building, the establishment of labour exchanges and trade boards and of the Development Commission to provide investment in those sectors of the economy which private capital failed to finance: all marked the acceptance of the New Liberal belief that however much one removed constraints upon individual liberty, there were some things that individuals could not accomplish by themselves and therefore could not be truly free. The budgets of Asquith and Lloyd George marked a similar redirection of fiscal policy, abandoning the Gladstonian notion that taxation was merely a necessary evil, and accepting that taxation and expenditure could become positive instruments of social policy. Asquith’s 1907 Budget not only raised taxation in aggregate, in order to pay for the planned social expenditure of the years ahead, but for the first time differentiated between earned and unearned income, raising taxation on the latter, and Lloyd George subsequently graduated the income tax and super-tax structure more progressively.
The third reason for the success of the New Liberal philosophy was entirely pragmatic: that in electoral terms it worked. By and large the government’s social and economic programme was popular. The opposition of the House of Lords in 1909-11 not only helped the government through one of its more difficult periods (when increased taxation was beginning to bite but before many of the social benefits had been fully realised) but also enabled the Liberals to destroy the Lords’ veto, which had doomed so many of their earlier measures. Even the Conservatives accepted the irreversibility of much Liberal legislation (particularly old age pensions), coming to rely upon Ireland as the main weapon with which to attack the government.
The New Liberal programme also underpinned what contemporaries knew as the ‘progressive alliance’, the electoral and political combination of Liberals and Labour. The basis of political debate and behaviour had changed since the Gladstonian Liberal heyday; community and religious alignments were rapidly giving way before class-based voting, and the Liberal Party seemed successfully to have aligned itself with the working class, surviving the departure of much of the middle classes in the 1890s. Obscured in 1906 by the magnitude of victory, this new political alignment became much clearer in the two elections of 1910, when although many southern residential and county seats reverted to Conservatism, the Liberals gained working-class seats in northern and industrial areas which they had not won in 1906. The new Labour Party did not display the ability to survive electorally on its own; it was, rather, a reinforcement to advanced Liberalism.
This New Liberalism which was in so many ways so different from Gladstonian Liberalism was still, however, identifiably Liberal. While retaining a firm belief in liberty, it sought a wider definition. ‘Liberalism’, wrote Hobson in The Crisis of Liberalism in 1909, ‘is now formally committed to a task which certainly involves a new conception of the State in its relation to the individual life and to private enterprise. From the standpoint which best presents its continuity with earlier Liberalism, it appears as a fuller appreciation and realisation of individual liberty contained in the provision of equal opportunities for self-development. But to this individual standpoint must be joined a just apprehension of the social, viz., the insistence that these claims or rights of self-development be adjusted to the sovereignty of social welfare.’
What the New Liberals did was to inject the concept of a community wider than the individual firmly into Liberal thinking. The state was entitled to take action on behalf of the community as a collectivity, rather than merely on behalf of individuals as themselves. The New Liberals were quite clear, however, why they were advocating such collectivism: for the greater liberty of the individual. ‘Liberals must ever insist’, wrote Hobson, ‘that each enlargement of the authority and functions of the State must justify itself as an enlargement of personal liberty, interfering with individuals only in order to set free new and larger opportunities. Liberalism will probably retain its distinction from Socialism, in taking for its chief test of policy the freedom of the individual citizen rather than the strength of the State.’
In this way the Liberals evolved from a classical to a social Liberal party, seemingly well suited to the demands of the new century until the strains of the Great War blew it apart.
Duncan Brack is a freelance writer and a researcher. He is the Editor of the Journal of Liberal History, and has also co-edited the Dictionary of Liberal Thought, Dictionary of Liberal Biography and Great Liberal Speeches.