Gladstone as Chancellor

2 Periods as Chancellor Gladstone was Chancellor for 2 periods in Aberdeen’s First Ministry (Whig- Peelite coalition) in Palmerston’s Second Ministry (a Whig -Peelite coalition)

Who was WE Gladstone Originally elected as a Tory in 1833, he was the son of a Tory MP Not however a traditional landed aristocratic background – his father was a wealthy corn merchant and ship-owner. WE Gladstone was educated at Eton and Oxford gaining a double first in classics and mathematics During Peel’s second Ministry Gladstone was President of the Board of Trade and was a strong supporter of Peel’s free trade reforms. On the resignation and death of Peel, Gladstone became one of the recognised leaders of the ‘Peelite’ faction in parliament, and was later to be one of the leading figures in the emergence of the Liberal Party around 1859 with the merging of the Whigs and the Peelites.

Chancellor Gladstone’s handling of public finance was arguably the main success of Aberdeen’s government. Gladstone continued in Peel’s tradition of pressing ever closer to completely free trade. In his budget of 1853 nearly all duties on foodstuffs were abolished and duties on all manufactured goods halved. He also outlined plans for the complete abolition of income tax and started to reduce it. Gladstone also believed that government spending should be kept to an absolute minimum and that all government departments should be scrupulously honest and financially accountable

Fall of the Coalition The outbreak of the Crimean War put pay to firstly Gladstone’s plan to abolish income tax, (instead it rose from 7d to 1s 2d in the pound to fund the war), but also to the Coalition government. Reports of appalling conditions in the Crimea did nothing for the government’s popularity and when a committee of enquiry into the conduct of the war was proposed Aberdeen quickly resigned. The Queen was now forced to call on Palmerston, (whom she personally disliked) to form a government – Gladstone left the government refusing to work with Palmerston only to return in 1859 when Palmerston invited him back to be Chancellor again.

Gladstone’s Second period as Chancellor By 1859 the Whigs had essentially merged with the Peelites forming a new force in politics called the Liberal Party This has been by some as Gladstone’s most successful period in politics - left alone by Palmerston (who was much more interested in foreign affairs), Gladstone introduced a number of successful budgets and successful reforms.

Budgets Gladstone’s first priority was to bear down on income tax again reducing the numbers who had the pay it (only those who earned more than 200 pounds a year so no working men were liable). By 1865 he had managed to reduce the rate of income tax down to 6d in the pound. Gladstone’s aim was to abolish it completely however with Britain’s military expenditure this was not possible – the next best thing therefore was to make it fair and with the burden of tax on those best able to pay. Gladstone frequently found himself in conflict with Palmerston over tax as Palmerston wanted more and more money for defence for his ‘adventurous’ foreign policy.

The Cobden Treaty 1860 Palmerston again started to demand more money for battleships in 1860 following widespread public fears of ‘the threat from France’ who were now ruled by Emperor Napoleon III France under Napoleon III had expanded into Nice and Savoy and fears of new ‘Napoleonic wars’ were widespread. With Palmerston clamouring for more ships and new defences to the Royal Dockyards, Gladstone cleverly allied himself with free trader MP Richard Cobden and sent him to Paris to negotiate ‘The Cobden treaty’ – a free trade agreement between the 2 countries which both eased international tension and improved trade. The Treaty reduced French duties on most British manufactured goods to levels not above 30% and reduced British duties on French wines and brandy. In consequence the value of British exports to France more than doubled in the 1860s and the importation of French wines into Britain also doubled. More importantly for Gladstone, the steam was taken out of the ‘French scare’ even though Palmerston did get his way and get more funds for defences and ships in 1861.

Further tariff/duty reduction By 1865 only 16 duties on imported goods remained – the main two being on tea and sugar (Gladstone drastically reduced these too). By 1865 Britain was essentially a free trade state with an extraordinarily low rate of income tax (6d) Perhaps most significant was in 1861 Gladstone’s abolition of duty on paper which many saw as a ‘tax on knowledge’ – here gain he went directly against the wished of the PM Palmerston who was worried that abolition of paper duty would lead to the spread of a cheap revolutionary press and the spread of radical ideas.

Reform of the Civil Service Gladstone used his position as Chancellor to insist on rigid economy throughout the whole civil service. He introduced competitive examinations for posts in the Civil Service to ensure the best candidates achieved the best positions and made each department accountable for its budget and expenditure. The Civil Service emerged from these reforms far leaner and more efficient than it had been before.

Limited Liability By two acts of Parliament 1856 and 1862 Gladstone introduced the idea of company ‘limited liability’ – the effect of which was to make investment in business and industry much less risky and much more attractive. * A limited liability company means that if a company fails the investors are only liable to cover the costs of their initial investment

Evaluation Gladstone as Chancellor developed a reputation as ‘liberator of British trade’ and for the establishing the principles of cheap and efficient government. Does he deserve this reputation?