‘Truly it has been said’, writes Morley, ‘that there is something repulsive to human nature in the simple reproduction of defunct budgets. Certainly if anything can be more odious than a living tax it is a dead one.’1 Despite this warning it is impossible to avoid some discussion of Disraeli’s first essay in constructive legislation. Apart from the interim financial statement of April he only produced three budgets in the whole of his career, and that of December 1852 was by far the most controversial. The circumstances were very difficult. He was under the pressure of complicated conflicting forces which perhaps no one could have reconciled, and the blame for defeat was not his alone. Yet, although he fought with great courage, it is clear that he made serious mistakes and presented unnecessary targets. The story throws much light on his qualities and defects as a statesman.

Disraeli’s problem was to satisfy the ‘interests’ that deemed themselves to have been damaged by free trade, and at the same time to avoid reuniting against him the whole of the opposition in the House of Commons. The principal interests were the landed, the sugar and the shipping lobbies. Long before the session opened it was clear that there could be no question of reviving protection. Yet it was no less clear that Disraeli had to do something. His shadowy promises of ‘compensation’ would be flung in his face by his own supporters if he did not. But what could he do without arousing the wrath of the formidable phalanx of financial panjandrums on the Opposition benches? He had to encounter such figures as Wood, Goulburn and Baring, who had introduced between them the last thirteen budgets; Russell and Graham who prided themselves upon their expertise in political economy; Cobden and Bright ever vigilant to pounce on anything that savoured even faintly of protection. Above all, there was Gladstone, disciple of Peel, determined to vindicate his master’s doctrines. Already as early as July 30 he was finding, so he told Aberdeen, each successive speech of Disraeli on finance ‘more quackish in its flavour than its predecessor’.2

It was not an easy problem. The injured interests could only be satisfied by remission of taxes. This meant either cutting expenditure or imposing additional taxes on someone else. Disraeli was to find, as every new Chancellor of the Exchequer invariably finds, how narrow are the limits within which he could manœuvre. These limits may, and often do, seem in the retrospect of fifty or a hundred years absurdly conventional and unnecessary, but the self-imposed barriers of custom and habit are not less oppressive and constricting than those of the physical world. It requires an effort now to envisage rich men objecting to an income tax of 7d in the pound, but the problem was a real one then.

In the decade preceding Disraeli’s budget, government expenditure varied between £48 m and £55 m. Rather over half of this, about £28 m, went on the service of the National Debt. The other principal item was the armed services. From 1825 to 1852 expenditure on the Army, including the Ordnance, which counted as a separate service until 1854, averaged £8¾ m, on the Navy £6½ m. Civil expenditure ran at about £5 m–6 m. When in opposition everyone talked about extravagance and the need for economy, but no one who had any experience seriously believed that substantial cuts could really be made. The service of the Debt could not be much diminished. Expenditure on the armed services tended to rise with technical innovations, and any attempt at reduction met severe opposition from the Court.

The only area where economy seemed at all feasible lay in the field of civil administration: hence the glee with which Disraeli jumped at the chance of suppressing an office, especially if it happened to be held by a political opponent. But suppression was a double-edged weapon. The Tory leaders did not wish to deprive themselves of useful patronage. The sort of conflict which followed is well illustrated by the episode of the Secretaryship of the Board of Trade described in the last chapter. In any case such economies were mere drops in the ocean. The inexorable trend of the time was for governmental expenditure to increase, as governments found themselves forced to provide the framework of an orderly and civilized society. The suppression of sinecures could do little, if anything, to offset it.

On the revenue side recent budgets had shown receipts of about £20–21 m from the Customs, £14½ m from the Excise, £6 m–7 m from the stamp duties, £4 m from a variety of direct taxes, and £5 m–5½ m from the unpopular income tax, reimposed, after an interval of twenty-six years, by Peel in 1842. Income tax was defended as a temporary measure designed first to remove the deficit inherited from the Whigs, secondly to tide over the loss to the revenue incurred by the great tariff revisions of 1842 and 1845. These had been very successful: the remission of a large number of vexatious duties had greatly increased trade; the reduction to a low level of many others had not only increased the volume of trade but, after a year or so, actually augmented the revenue, for higher consumption outweighed the effect of lower rates. But income tax remained intensely unpopular. It had been renewed for three years in 1845 and again in 1848, but Sir Charles Wood’s attempt to repeat the process in 1851 caused a parliamentary revolt: he was, as we saw, only able to renew it for one year, a period extended for one more by Disraeli’s interim budget.

The fiscal experiences of the previous decade had established certain canons of financial orthodoxy. First, the national credit must never be endangered by the least hint of a deficit. Secondly, remission of duties must be made with the following considerations in mind: the good done to the consumer and to the revenue; the need to remove the last vestiges of protectionism; the need to abolish duties which cost as much to collect as they produced; and the desirability of lowering wherever possible duties on highly taxed articles of general consumption. Thirdly, the income tax, if it had to be levied at all, must be levied at a uniform rate on all types of income. It was believed by Peel and his disciples, though hotly disputed by the Radicals, that to distinguish between ‘precarious’ and ‘realized’, or, as we would say, earned and unearned income was impracticable and would wreck the whole structure of the tax. Anyone who ignored these canons did so at his peril. Disraeli characteristically disregarded almost all of them.

The exact nature of his original scheme is not known. Heavy last-minute demands for increased expenditure on the armed services caused him twice to recast his figures, first at the beginning of November, the second time only three days before introducing his budget. But during August he evidently contemplated a much more drastic plan. ‘Can you really’, wrote Stanley on August 9, ‘take off half the malt tax and half the income-tax? Great will be the joy if you do, but it sounds too good to be true.’3 It was. A war scare prompted by fear of Louis Napoleon – a fear which both Disraeli and Malmesbury rightly dismissed – swept through the Court and the Cabinet. Derby insisted on accepting the demands of the services. Disraeli’s potential surplus was further reduced by the pessimistic estimates of the Treasury officials who found it difficult to calculate with certainty so early in the financial year and naturally erred on the side of caution. By the time he came to propound his budget there was no question of halving the income tax.

The malt tax, however, was another matter. For years past it had been one of the standing grievances of the agricultural party. Levied at 2s 7d per bushel, it produced in 1851 just over £5 m. To reduce it seemed the simplest way of satisfying the landed interest. The alternative which Disraeli had advocated in the past was to shift part of the burden of the Poor Rate on to the Consolidated Fund. But the difficulty here was that rate-borne expenditure which largely went on poor relief had already fallen from £6·2 m in 1848 to £4·9 m in 1851, thanks to increased prosperity in the country, and therefore the case for a further reduction had become much weaker. Moreover, the rates were mainly a tax on occupiers of land. To relieve them would not help the general public, and would look like class legislation of the worst sort. On the other hand, a reduction of the malt tax would make the growing of barley more profitable, bring new land into production, and please the whole community by lowering the price of beer. Disraeli, therefore, resolved to halve the malt tax, and also the duty on hops, the effect being to reduce the price of beer by ¼d a quart – not, it must be admitted, a very notable contribution to the reduction of the cost of living.

Having thus dealt with the landed interest, he had to decide what to do for the shipping and sugar lobbies. He did not do much. He gave some relief to the former by reducing or abolishing certain minor but vexatious dues, and to the latter, despite contrary advice from the Customs Board, he gave the privilege of refining colonial sugar in bond.

The budget was unlikely to succeed unless Disraeli did something more to gratify the general public, or at least those with votes, as well as particular interests. Accordingly he decided to make two important changes. The first, and less controversial, was to lower the duty on tea. This was in full accord with financial orthodoxy as tending, in Gladstone’s words, to stimulate ‘the self-producing powers’ of the revenue, and it was cordially backed by the Treasury and the Customs Board. The tax was very high, 2s 2¼d a pound, and Disraeli proposed to reduce it by stages, 6¼d in the first year, 2d in the second and l½d in the next four, till it fell to 1s after six years.

The second major change affected the income tax and was much more disputable. Originally, he intended both to reduce the total sum raised, and to make the incidence of the tax less inequitable, but he soon saw that he could not do without the full product. He had therefore to confine himself to modifying the way in which it was levied. The tax was still the same as that carried by Peel in 1842: 7d in the pound on all incomes over £150 p.a. in England and Scotland. Ireland was exempt, but paid higher spirit duties instead. Farmer’s profits were assessed at one-half of their rental in England, one-third in Scotland. The stock criticism of the tax in Radical quarters was that it failed to distinguish between earned and unearned income. Disraeli, therefore, resolved to make a bold bid for support from that side of the House by proposing to levy tax on ‘precarious’ incomes at three-quarters of the rate on ‘realized’ incomes, ie 5¼d instead of 7d. He also decided to assess profits of farmers in England at one-third instead of one-half of their rental. To compensate for these losses he proposed to lower the exemption limit to £100 in the case of earned and £50 in the case of unearned income, and to extend to Ireland Schedules C and E of the income tax, ie those covering incomes derived from the Funds and from salaries.

There was much to be said on grounds of equity for distinguishing between precarious and realized incomes, and taxing the former less heavily than the latter. This has become accepted practice today, and Disraeli was ahead of his own time in putting forward such a proposal. On the other hand, it is clear that he did not examine the difficulties with enough care. He committed the serious mistake of treating the various schedules as if they could be grouped according to the distinction he wished to make. He reduced the rate on B (farm incomes), D (profits from trade, business, professions, etc.) and E (salaries), leaving A (incomes derived from land) and C (the Funds) at 7d. But his critics were quick – and right – to point out that Schedule A also included in those days profits from businesses connected with land, such as collieries, quarries and canal companies, although these were not in principle different from the profits of a cotton manufacturer, which came under Schedule D. Conversely, Schedule D covered certain sources of income which would be more properly taxed at the full rate. For example, it included income derived from any personal or real property outside England and Scotland. The absentee Irish landlord would pay under Disraeli’s scheme at 5¼d, while the Irish fund holder would pay at 7d. Schedule D also covered income from investments in England, other than in land or government stock. Why should these pay at three-quarters of the full rate? Disraeli, so Gladstone later claimed, had never even informed the Inland Revenue Board of his intentions,4 and it is evident that his critics, pedantic and petty though some of their arguments were, correctly guessed that he was attempting to solve a problem of immense complexity without sufficient investigation. To reverse successfully the doctrines hallowed by such authorities as Pitt and Peel required a knowledge of detail which Disraeli simply did not possess.

Finally, he had to find from some other source enough revenue to make up the deficiency caused by his reduction of the malt tax, and the tea and hop duties. He boldly – even recklessly – proposed to do this by a large increase in the house tax. The history of this highly unpopular levy was bound up with that of the even more odious window tax. From 1778 to 1834 both had featured in every budget. The exemption limit for the house tax after various changes was fixed at a rateable value of £10 in 1825. Clearly this would not be popular with the new borough electorate. Althorp, the Whig Chancellor of the Exchequer, abolished it in 1834, retaining the window tax which fell relatively more heavily upon the rich. But in 1851 Sir Charles Wood, influenced by the representations of the health reformers decided to reverse this decision; he reimposed the house tax, and abolished the window tax. He was careful, however, to put the exemption limit considerably higher than before – £20 rateable value instead of £10. The tax was levied at 6d in the pound on shops, inns and farmhouses, at 9d on all other dwellings. Disraeli decided to bring the exemption limit back to £10 and to double the rates. At one time he considered going even further and raising them to 1s 4d and 2s respectively, but G. A. Hamilton, the Parliamentary Secretary to the Treasury, warned him that the towns, being highly rated compared with the country, would never tolerate such a burden.

The house tax was not in itself regarded by orthodox financial opinion as undesirable, although many people felt that it ought to be levied on a graduated scale, and that the whole local rating system should be revised, if rates were to be the criterion of taxable value. But it was not a wise move politically. The class most affected by the extension to £10 houses was the very class which would also be hit by the proposal to tax incomes between £50 and £150. Any goodwill gained in that quarter by the reduction of taxes on earned income was likely to be thrown away by the lowering of the exemption limits of the income and house taxes. It is surprising that Disraeli, usually so astute in calculating the political balance, should not have seen this danger; nor for that matter the danger involved in extending the income tax to Ireland at a time when he was hoping to court the Irish vote.

The budget was discussed at a series of Cabinets held between mid-October and mid-November. Even allowing for the demands so far made by the Services, Disraeli seemed likely to end up with a comfortable surplus, but he knew that he might have trouble with some of his colleagues, and he was determined to carry Derby with him. On October 18 he asked for an interview:

Herries continued to regard Disraeli’s plan as ‘wild work’, but he did not press his doubts and Disraeli was cordially supported by Derby. The Cabinet as a whole acquiesced in the budget. Most of them lacked the knowledge and experience to do otherwise.

The opening of Parliament took place on November 4 and the Queen’s speech was delivered a week later. The Government were clearly going to run into heavy weather almost at once, for the extreme free traders led by Charles Villiers let it be known that they were dissatisfied with the ambiguousness of that part of the speech which dealt with free trade, and that they intended to move a resolution on the subject. On November 17 the terms of Villiers’s resolution were announced. It declared among other things that the repeal of the Corn Laws ‘was a wise, just, and beneficial measure’. The vast majority of the Tories had no intention of trying to reverse free trade, but they were not prepared to eat all their words spoken during and after 1846. If Villiers’s motion was carried, the Government would feel forced to resign. Disraeli decided to move an amendment. ‘Our men’, he wrote to Derby the same day, ‘will take anything wh: is not absolutely spitting in their faces.’6 His amendment declared simply that free trade had improved the condition of the working class and that the Government should adhere to it. But Russell after some hesitation had given his imprimatur to Villiers’s motion and the prospect looked black.

Meanwhile Disraeli had been involved in an embarrassing episode which made him look ridiculous at a moment when he needed above all else to display a front of suitable gravitas to the world at large. On November 15 it had fallen to him as leader of the House to pronounce a suitable eulogium upon the Duke of Wellington, who had died in September. By a curious trick of memory he used for part of his speech words almost identical with those of a passage by Thiers in an obituary article on Marshal St Cyr. This had first appeared in 1829 in a French journal, but an English translation had been published, apparently at Disraeli’s own suggestion (if Smythe is to be believed), in the Morning Chronicle in 1848. Some sharp-eyed Liberal journalist spotted the resemblance, and a few days later Disraeli to his consternation read the relevant parts of his speech and Thiers’s article printed in parallel columns in Palmerston’s newspaper, the Globe. There is no need to doubt that the plagiarism was unconscious. Apart from anything else, he would never have been such a fool as to do it on purpose. But the opportunity was too good for his enemies to miss, and the literary world, apart from Monckton Milnes and Lytton, who both wrote to ask if they could help, vociferously condemned the unlucky Chancellor.

Disraeli had bigger worries than this. His amendment had been designed to bring over the Peelites, who were known to be uneasy about the Villiers resolution; but it failed to satisfy them. It looked as if they would vote against it, and the Government might sink before Disraeli could ever even launch his budget. At this stage Gladstone intervened. Half hoping for a Conservative reunion, he genuinely disapproved of the policy of rubbing the noses of the protectionists in the dirt, and he considered that Russell ought to have dissociated himself from the extremists. Moreover, he had an instinctive feeling that Disraeli’s budget would be hasty and ill conceived. It was important, from his point of view, to oblige the Government to put forward definite proposals of some kind. If these were satisfactory the Peelites might rejoin their old party. If, as he thought much more likely, they were bad, a reputable public reason could be given for ejecting the administration and coalescing with the Whigs and Liberals.

Accordingly Gladstone and Herbert drafted a less vindictive resolution which was similar to Disraeli’s own, though naturally rather more emphatic on the virtues of free trade. They took it to Palmerston, who at this particular moment stood apart from all other political groups. He cordially approved and agreed to write to Disraeli as if unprompted suggesting the compromise and offering to move it, if Disraeli was agreeable. It was a most welcome olive branch. Palmerston’s speech reminding the members that they were an assembly of gentlemen and that ‘we who are Gentlemen on this side of the House should remember that we are dealing with Gentlemen on the other side’ carried the day. Villiers’s motion was defeated by 336 to 256, and Palmerston’s carried by 468 to 53, opposed only by Colonel Sibthorp and a group of ultras.

Nevertheless the debate which occupied November 23, 25 and 26 must have been unpleasant for Disraeli. He had to explain why he accepted Palmerston’s resolution in spite of the party’s real and his own ostensible professions of protection. He had to steer an awkward line between on the one hand giving mortal offence to his own die-hards, on the other risking the loss of Palmerston’s amendment. He was, moreover, suffering from influenza and a heavy cold which made it difficult for him to speak at all. The Liberals and Radicals were hot for revenge and, although the Peelites were unwilling for the moment to let the Government be defeated, they, too, were in no mood to forgo the chance of repaying the gibes which Disraeli had showered upon them for years past. Herbert in particular assailed his personal integrity in language of extraordinary bitterness. Disraeli, perhaps unwisely, had tried to show at much length that he and his party had never wished to re-enact the Corn Laws. Herbert declared that he entirely acquitted the Chancellor of the Exchequer of ever having been a believer in protection: Disraeli had not, as some said, forgotten his previous beliefs; he had merely forgotten what he once wished people to believe that he believed. He went on to make an allusion in very questionable taste to the difficulty of Jews in making converts because of the ‘surgical operation’ involved in the rite of circumcision. Towards the end of his speech his passion broke out. Peel, he said, would not have wished to humiliate his enemies, but if anyone did seek retribution, ‘for it is not words that humiliate but deeds – if a man wants to see humiliation – which, God knows, is always a painful sight – he need but look there’. And Herbert pointed his finger at Disraeli silent, impassive and apparently unperturbed.

The Government rode out this storm, but they were soon facing the full fury of another. Some enigmatic observations from Gladstone to Derby at Lady Derby’s reception a few days later made it at least clear that the Peelites’ support of the compromise resolution did not necessarily mean a rapprochement. All would depend on the budget, and here it was only too obvious that trouble impended. The latest Service demand was for another 1,500 Marines. On November 23 Disraeli wrote in some dismay to Derby that, although he had reckoned on an extra estimate for 5,000 seamen and 2,000 artillerymen nothing had been said before about the Marines.7  Derby’s reply has not survived, but evidently he felt obliged to press for the Marines as well. This was bad enough, but on November 30 Hamilton received an even more alarming letter from Augustus Stafford.

I am afraid the Naval Estimates for 53/54 will be nearly a million more than those of last year … I do not see what I can cut down except the Public Works. I have my own strong notions about Dockyard Retrenchments but it is an awful subject and cannot be entered on except by a very strong Government. Your estimate was £30 per man: it is nearer £50 …8

Disraeli expostulated with the Prime Minister in a letter on the same day:

We have had no explanation from Stafford as to his letter of this day to Hamilton that the Navy Estimate for 1853/54 will be increased nearly one million. I trust that the Admiralty have not got into debt and are attempting to shuffle off this scot on future estimates. This will never do, for, if permitted, we shall never be safe.

We are pledged to the Queen as far as the seamen and Marines are concerned, and we must not seem to waver; but I think you must exercise your utmost authority that there shall be retrenchment, no matter at what inconvenience, in all in which her honour and safety are not concerned …9

He added that he deeply regretted ‘that on the very eve of battle I should suddenly be called on to change all my dispositions’.

Derby put his foot down over the million-pound increase. He would not, he said, permit more than £350,000 – the cost of the seamen and the Marines. But even this meant important changes. It reduced Disraeli’s surplus to £100,000. This was not enough. Derby suggested that another £400,000 could be produced by spreading the reduction of malt tax, like that of the tea duty, over a period of years instead of doing it in a single step. A further possibility was to reduce tea by 4¼d instead of 6¼d in the first year, but on the whole Derby preferred the former course. Then there was a proposal with which Disraeli had been toying – to abolish the advertisement duty. This could not be done now, but Disraeli might make things look a bit better by estimating the loss on the malt tax at £1,400,000, instead of £1,500,000. It must be largely guesswork anyway. ‘Put a good face on it,’ Derby cheerfully ended, ‘and we shall pull through. L’audace – l’audace – toujours l’audace.’10

Seldom can a Chancellor of the Exchequer have been faced with such last-minute problems of improvisation. To make matters worse Disraeli was far from well and had no help. ‘I am in a forlorn condition,’ he wrote to Derby, ‘with a sick private secretary and not the slightest assistance.’ In the end he decided against Derby’s advice about the malt tax and adopted instead his alternative suggestion of reducing the duty on tea by 4¼d instead of 6¼d in the first year. He played about with some of his estimates (‘I see you have “doctored” your figures considerably’,11 wrote Derby in approving tones), and produced a surplus of £423,000 or, as he characteristically put it in his speech, ‘something less than £500,000’.

On December 3 Disraeli made his long-awaited financial statement to a packed house. He spoke for five hours. Macaulay, himself not the most terse of orators, noted, ‘I could have said the whole as clearly, or more clearly in two’, and anyone who bothers to read the Hansard report12 will agree that Disraeli was inordinately long-winded. His audience was very critical, some of the Whigs – notably Sir Charles Wood and Sir George Grey – openly sneering, joking and making signs to each other, in a manner that disgusted at least one observer.13 So long a speech was a great physical strain on a man who had scarcely recovered from influenza. Towards the end he admitted to the House that he was ‘quite exhausted’ and when he attempted to answer one or two questions his voice was so frail as to be almost inaudible.

First reactions to the budget were not unfavourable. The general sentiment seems to have been that of Dr Johnson on hearing a woman preach, surprise that it had been done at all. But within a few days opposition began to harden. Gladstone found his worst suspicions confirmed. ‘Fundamental faults of principle which it is impossible to overlook or compound with’, he wrote to his wife, and again in a later letter, ‘the least conservative budget I have ever known’. But the more common verdict was less extreme than this and was probably best summed up by Macaulay: ‘The plan was nothing but taking money out of the pockets of people in towns and putting it into the pockets of growers of malt. I greatly doubt whether he will be able to carry it; but he has raised his reputation for practical ability.’

The debate began on December 10 and lasted for four nights. Apart from the remission of tea duties, almost every point in the budget was seriously attacked. Not always with good arguments; for example, Goulburn and Gladstone claimed that no differentiation should under any circumstances be made between earned and unearned income, because it would be a fraud against the holder of Government securities, whose income, so it was alleged on the strength of a dubious interpretation of Pitt’s Loan Act of 1801, and of certain obiter dicta from that great man, could never be treated less favourably than anyone else’s. Disraeli had little difficulty in dealing with this somewhat esoteric charge. He was less happy when he tried to extricate himself from his muddle over the income-tax schedules. In fact, he never answered the criticism at all, and was reduced to the feeble expedient of offering to recast this part of the budget – an offer understandably ridiculed by his opponents. The reduction of the malt tax and the increased house tax came in for much attack. The former was stigmatized as a piece of sectional legislation – which, of course, it was. As for the latter, it was bound to be very unpopular. Disraeli’s enemies had little difficulty in showing that the boons which he had conferred with one hand upon the middle-class householder in the form of earned income relief were neatly removed with his other when he imposed the house tax and lowered the income-tax exemption limit. The only category of persons who escaped this levelling process were the farmers, whose houses were notoriously underrated, as compared with urban houses, and who, by having their income assessments fixed at one-third of their rental instead of a half, lost nothing by the lowering of the exemption limit from £150 to £100.14 Thus another example of class legislation could be alleged.

One relatively minor item in the budget excited an immense amount of controversy, Disraeli’s proposal to wind up the Public Works Loans Board and apply the balance of the fund to the national income and expenditure account. The Fund consisted in 1852 of £360,000 which could be used as a revolving credit for loans to local authorities for purposes approved by the Loan Commissioners. The Opposition claimed that this was a highly useful function, and, in any case, if it was to be abolished, its balance should be applied towards extinguishing the National Debt, since the Fund had originally been created by borrowing. Worse still, it was pointed out that if you took away £360,000 from Disraeli’s surplus of £423,000 there was practically nothing left. The country was being presented, in Gladstone’s words, with a proposal ‘to vamp up a surplus out of borrowed money’. Disraeli had a better case than his enemies allowed. He had been strongly advised by Sir Charles Trevelyan, the Permanent Secretary to the Treasury, to abolish the Fund. ‘To put a stop to this Loan Fund will be to stop not one but a whole progeny of Jobs. It has been the prolific mother of Jobs, English, Scotch and Irish’ he wrote.15 He further pointed out that repayments had never been used before to extinguish the National Debt, and that the only way of doing this now was to put the balance to the Income and Expenditure account, for the law provided that one-quarter of any surplus in it must be devoted automatically to the liquidation of the National Debt through the operation of the Sinking Fund. There was, in fact, no other method of putting the money to the use required by Disraeli’s critics. But Sir Charles admitted that the question was highly technical. ‘… the whole system is so enveloped in obsolete forms that one cannot be surprised at almost any degree of error surviving under cover of them.’16

However sound Sir Charles Trevelyan’s reasoning may have been, the fact remained that Disraeli’s surplus had been made respectable by the appropriation of a sum which had originally been borrowed. This may have been the only legal way of using it to reduce the National Debt, but his position would have been better if he could have shown a genuine revenue surplus over and above the artificial one created by these means. Speaker after speaker dwelt on the danger which such a negligible real surplus offered to the public credit. The irony was that, if Disraeli or his officials had predicted the expenditure and income of the financial year more accurately, there would have been nothing to worry about. By April 1853 the nation’s finances showed a far greater surplus than anyone dreamed of in December, but Gladstone, not Disraeli, was to be the beneficiary.

As the debate proceeded it became clear that Disraeli had his back to the wall. His supporters, Bulwer Lytton, Lord John Manners, Spencer Walpole, could not match the formidable battery of ex-chancellors who bombarded him from the Opposition benches. He received no help at all from Herries, the one financial administrator of experience on his own side, who no doubt continued jealously to regard the budget as ‘wild work’. This omission did not go unnoticed. ‘His studied abstinence from assenting to anything in the budget was remarkable,’ said Bernal Osborne. ‘When he was appealed to there had been nothing but a grave shrug and a very suspicious silence.’ Henley, too, whose position as President of the Board of Trade made him a natural participant in a debate on the budget, remained equally dumb and uncooperative.

To Disraeli the prospect of defeat was most unwelcome. He thoroughly enjoyed the prestige, the deference, the sense of power which come to the holder of high office. He never even paid lip service to the convention that ministers accept their tasks reluctantly out of a sense of public duty and lay them down with a sigh of relief, returning gladly once again to country pursuits and the perusal of the classics. Politics had by now become his passion. He was prepared to try almost any expedient in order to prolong his uncertain tenure. For example, there were the Irish members. True, they were not likely to welcome the extension of the income tax to their country, but might they not be won over by concessions on a Tenant Right Bill, very dear to their hearts? Alas, Russell, as Disraeli discovered later, had outbid him by a pledge that a Whig government would not extend the income tax to Ireland.17 In any case Derby, who had an uncanny flair for discovering Disraeli’s more questionable manœuvres, and who, like other ex-Secretaries for Ireland, detested the native Irish, fired a warning shot. ‘If we lose the landed gentry of Ireland, and especially of the North, we are gone’, he wrote.18 And so nothing came of this overture.

In desperation Disraeli cast about for some other device. The battle was to be joined on the resolution about the house tax and it seemed clear that the proposals, as they stood would be rejected. But what if he amended them so as to retain merely the extension of the lower limit from £20 to £10, leaving the actual rate to be determined by a later vote of the House? Might not the Radicals be placated by such a gesture? The difficulty was that, unless he adhered to his plan to double the rate of tax, he could not halve the malt tax, and any vacillation on this point was bound to enrage his own supporters.

Nevertheless at nine o’clock on December 15, the evening before the final debate and division, Disraeli sent a note to Bright at the Reform Club asking him as a matter of urgency to call. About an hour later Bright arrived and was shown up to the top of the house in Grosvenor Gate, where he found Disraeli alone at his papers in an ornate room crammed with furniture, pictures and mirrors. He stayed till half past eleven and the conversation left such an impression on his mind that he recorded it with a degree of detail and length quite exceptional in his journal. Certainly it is a queer picture which comes down to us from Blight’s pen of this colloquy à deux late in the night before the day which was to settle the fate of the Government. Disraeli unburdened himself with remarkable candour, partly calculated, one suspects, but not wholly. ‘If he could get a vote, a majority of one only, his honour would be saved and he would give up House Tax and Malt Tax and remodel his scheme’, Bright wrote. Disraeli referred bitterly to ‘those damned defences’, which had wrecked his budget. He expressed, as he once had before to Bright, his anxiety to be rid of ‘the old stagers and red tapists’. He added that the party would do almost anything for him: they had swallowed a great deal already and he did not see why they should not swallow the little bit more involved in a modification of the Resolution. If so, would Bright and his friends stay neutral?

Caution and an uneasy sense of still not being wholly accepted forced Disraeli to maintain a certain constraint in conversation with his Tory colleagues. To Bright he opened his mind in the way which men sometimes do to a political adversary with whom they none the less feel a certain bond of sympathy. But nothing came of the talk. Half amused, half shocked, Bright declared that he could not entertain any sort of bargain and privately noted, ‘He seems unable to comprehend the morality of our political course.’ Perhaps, as G. M. Trevelyan suggests, it was on this occasion that Disraeli, implicitly brushing aside such considerations as irrelevant to life in Parliament, declared, ‘We came here for fame.’19

Even if Bright had been prepared to play, the game would have been effectively ended by Derby, who once again, through either rumour or intuition, seems to have known what Disraeli was up to. The following morning, December 16, the Chancellor received a long letter from his chief setting out with characteristic cogency and common sense the objections to a modification of the house tax at this belated stage. ‘We have’, he wrote, ‘staked our existence on our Budget as a whole … How can we declare by concession on the house tax that we will deprive ourselves of the means of doing anything for that interest, to which, after all, we owe our position?’ Towards the end of his letter he made an observation which sums up as well as any the line that he almost always took when Disraeli came out with some subtle plan for acquiring or preserving power. ‘… if we are to be a Government we must be so by our own friends and in spite of all combinations, and not by purchasing a short-lived existence upon the forbearance of the Radical party.’ If Disraeli differed, he continued, let a Cabinet be summoned, and he (Derby) would take each opinion in turn, reserving his own to the end.20  Disraeli quickly replied that he saw no need for a Cabinet. He fully accepted Derby’s view, he said; and his only fear had been a rumour that defeat might cause Derby to retire altogether from politics. ‘Personally I should then feel isolated; but as it is I would prefer being your colleague in opposition to being the colleague of any other man as Minister.’21

At 10.20 that evening Disraeli rose to make what was expected to be the final speech of the long debate before the critical division was taken. He intended to go down fighting and to repay with interest the attacks of his enemies, but he knew that he was on very uncertain ground with regard to some features of the budget. It may have been this knowledge which prompted him to have recourse, if Gladstone is right, to Dutch courage. The latter records in his diary that Disraeli appeared flushed and looked as if he had had too much to drink.22 He scarcely attempted to answer the more acute criticisms of the budget, although, briefed by Trevelyan, he made a good defence of his plan to abolish the Public Works Loans Fund and he was able to point with pride to certain economies and retrenchments. Much of his speech was personal. Wood’s bad manners received a scathing indictment; after holding up one of the former Chancellor’s budgets to ridicule he went on

The right hon. gentleman tells me – in not very polished and scarcely in Parliamentary language – that I do not know my business. He may have learned his business. The House of Commons is the best judge of that; I care not to be his critic. Yet if he has learned his business, he has still to learn some other things – he has to learn that petulance is not sarcasm and insolence is not invective.23

But some of Disraeli’s remarks went too far for the taste of the House. He referred to Graham as one ‘whom I will not say I greatly respect, but rather whom I greatly regard’, and mocked at Goulburn as ‘that weird Sibyl, the member for Cambridge University’. He made an unfortunate attempt at broad humour, linking some earlier remarks of Robert Lowe about emigration and productivity, with the question of the possible ‘productivity’ in another sense of women who might get married. Jokes of this kind were not Disraeli’s métier, and his efforts went down badly. He ended on a note of defiance. He had been advised to take back his budget, but he would not, he said, pointing at Wood ‘submit to the degradation of others’. He was faced by a coalition.

He sat down a few moments later at one o’clock amidst tremendous applause from the Government benches, having driven the Opposition into a condition of apoplectic rage by his gibes, personalities and taunts. Gladstone wrote that the speech ‘as a whole was grand; I think the most powerful I ever heard from him. At the same time it was disgraced by shameless personalities and otherwise.’25 The sense of drama was heightened by a remarkable phenomenon. Although it was mid-winter a violent thunderstorm raged. Disraeli made much of his speech as if to the accompaniment of an artillery bombardment, and flashes of lightning seemed to penetrate the very chamber itself.

On ordinary form Disraeli’s reply should have ended the long debate, but, to the surprise of the House, yet another member leapt to his feet. Only the day before Gladstone had written ominously to his wife, ‘I am sorry to say I have a long speech fermenting within me and I feel as a loaf might in the oven.’26 He was greeted with such a storm of shouts and catcalls – the Tories were good at hooting – that he could scarcely make himself heard. But he was no less courageous than Disraeli. He stood his ground, determined not to let the Chancellor’s invective go unanswered. Amidst screams of abuse he began by censuring Disraeli’s remarks about emigration and productivity. ‘There were other reasons besides the reason of triviality and irrelevancy why a discussion should have been avoided tonight by the right hon. Gentleman on the subject of emigration.’ At last the yells and counter-cheers died away.

I must tell the right hon. gentleman [he went on] that whatever he has learned – and he has learned much – he has not yet learned the limits of discretion, of moderation, and forbearance, that ought to restrain the conduct and language of every member of this House, the disregard of which is an offence in the meanest among us, but is of tenfold weight when committed by the Leader of the House of Commons.27

He followed this by a well-reasoned indictment of the whole budget, displaying that mastery of financial detail which was to make him by far the greatest Chancellor of the Exchequer in his own, and perhaps any other, time. Derby listening from the Peers’ Gallery might murmur ‘Dull!’ and bury his head in his hands, but Gladstone held the House, and by the time he had finished there was little left of Disraeli’s grand financial plan.

The speech was important not merely for its immediate effect. More than any other single event it made a reconciliation between the Peelites and the Derbyites impossible. It has to be read in full28  for its wounding nature to be apparent. Gladstone was still a Conservative and his attack provoked all the bitterness of an intra-party dispute exacerbating the antagonism which invariably prevails between two rival sects each claiming to be guardians of the true faith. When he appealed to the authority of Pitt, when he declared that the budget was ‘the most subversive in its tendencies and ultimate effects that I have ever known’, he was striking a blow such as no Whig or Radical could strike. It was deplorable but not wholly surprising that a few days later a group of tipsy Tories actually threatened him with physical violence when he was dining quietly alone at the Carlton Club.

There is a yet deeper significance in Gladstone’s speech. It is the beginning of the great parliamentary duel which for twenty-eight years was to be a feature of English public life and to dominate it for the last twelve of them. Gladstone had long disliked and distrusted Disraeli, but hitherto the latter had not reciprocated. As late as September he had commended Lord Henry Lennox for giving his vote to Gladstone at Oxford. From now onwards his attitude changed, and, although on occasions he tried to win over Gladstone to his side, he acted from motives of party expediency, not personal sympathy. As time went on the two men came more and more to embody in the eyes of the nation the opposing elements in politics and to personify according to the prejudices of the onlooker the forces of good and evil. The artist who wished to immortalize, as if upon a Greek vase, an instant of time that would illuminate the political history of the mid-Victorian era would have done well to choose the moment when Gladstone rose to answer Disraeli at one o’clock in the morning of December 17, 1852; the faces of the members, pallid in the flaring gaslight, contorted, some with anger, some with delight, arms gesticulating in hostility or applause; Gladstone on his feet, handsome, tall, still possessing the youthful good looks, the open countenance, which had charmed his contemporaries at Eton and Christ Church; Disraeli seated on the Treasury Bench, aquiline, faintly sinister, listening with seeming indifference to the eloquent rebuke of the orator. It was a scene which was not easily forgotten. It coloured the parliamentary life of a whole generation.

The division was taken at four o’clock on the morning of December 17. All the groups except the Conservatives voted against the resolution. Although the Government mustered its full strength, it was beaten by 305 votes to 286 – a narrow margin, but enough. As Disraeli, all passion spent, walked out into the wet street to return home, he observed to Sir William Fraser in the calmest of tones that it would be disagreeable weather for the journey to Osborne. Derby promptly resigned. On the 20th, the following Monday, the two leaders officially announced the news to their respective Houses. Derby in the Lords was unwontedly cross and petulant. Disraeli, however, was all sweetness and light. It had been suggested to him by Russell through Walpole that an apology for some of the personalities in his speech might not come amiss. He delivered it with urbanity, grace and good taste, and the victims of his former sarcasm replied with equal courtesy. It only remained for him to write to the Queen and the Prince thanking them for their kindness. To the latter he observed that he ‘would ever remember with interest and admiration the princely mind in the princely person’. Nor did he forget less important personages. His letter to the head of the Treasury drew a most cordial reply, and from other evidence, too, there can be no doubt that Disraeli was respected and admired in the department with which he had the closest dealings.

Disraeli was unlucky over his first budget, more unlucky than most Chancellors. His financial secretary, G. A. Hamilton, wrote on October 28.

These were serious difficulties, and if Disraeli had only been allowed to bring his budget forward at the normal season of the year he would have had a far larger surplus to play with. There had also been the trouble about the ‘damned defences’, and the overwhelming pressure to do something for the landed interest. The latter constituted an insoluble dilemma. He could not please the landed interest without risking destruction in a Parliament which that interest no longer controlled. He could not resist it without risking the break-up of his party. If the method chosen had to be a reduction of the malt tax – and it is hard to see any alternative – then there would have been much to be said for repealing it entirely, thus abolishing the whole expensive and vexatious machinery of collection and giving a perceptible boon to the beer-drinker. This was indeed argued by some of his opponents. But where was the money to come from? The very people who pressed for complete remission would have been the first to protest if house tax or income tax had been increased or the tea duty left as it was. It is hard to see how Disraeli could have escaped this dilemma.

Where he courted unnecessary trouble was over the income tax and the Public Works Loans Fund. The appropriation of the balance in the latter to the income and expenditure account gave endless scope for the accusation that his surplus was in some way fraudulent or illusory, and the matter was almost impossible to explain intelligibly. More damaging still was his attempt to distinguish between earned and unearned income. As a purely political manœuvre it did not succeed; the Radicals voted against him to a man. His confusion about the schedules was a bad mistake, and he laid himself open to the legitimate charge that his reforms would create more anomalies than they abolished. Disraeli, always vague about details, had not done his homework properly. The proposed changes brought in no extra money and from that point of view were quite unnecessary. It is unlikely that any measure which he could have carried would have satisfied his supporters, but it is hard to avoid the impression that he had failed to consider the implications of some of his ideas. Gladstone, a few months later, produced the most notable budget of the century. He had the advantage of a parliamentary majority and the good luck to inherit a surplus which could have been available to his predecessor. But when every allowance is made for his good fortune, and when full account has been taken of the mistakes which he, too, made, there remains a great contrast. Gladstone’s budget embodied a coherent plan. Disraeli’s was a bundle of expedients.

1 Morley, i, 461.

2 ibid., 429.

3 Hughenden Papers, Box 111, B/XX/S/560.

4 Morley, i, 436, quoting some of Gladstone’s fragmentary notes. In fact, some memoranda from the Inland Revenue Board do exist among Disraeli’s papers. Their tenor is certainly opposed to any suggestion to vary the rates on the different schedules.

5 Derby Papers, Box 145/2.

6 Derby Papers, Box 145/2, November 17, 1852.

7 M. & B., iii, 407.

8 Hughenden Papers, Box 98, B/XX/H/94.

9 M. & B., iii, 425.

10 Hughenden Papers, Box 109, B/XX/S/81, November 30.

11 ibid., B/XX/S/100, n.d., but probably December 4.

12 Hansard, 3rd series, cxxiii, 836–907.

13 Sir William Fraser, Disraeli and His Day (1891), 166–7.

14 A farmer paying a rent of £300 was assessed at £100 instead of £150. He therefore remained exempt from income tax, and probably had a house assessed at less than £10. Those paying a higher rental gained by the earned-income relief.

15 Hughenden Papers, Box 32, B/IV/C/2, December 13, 1852.

16 ibid., Box 32, B/IV/C/13d, December 8, 1852.

17 Derby Papers, Box 145/3, Disraeli to Derby, April 24.

18 Hughenden Papers, Box 109, B/XX/S/101, n.d.

19 G. M. Trevelyan, The Life of John Bright (1913), 205–7.

20 M. & B., iii, 440–1.

21 ibid., iii, 442.

22 Magnus, Gladstone, 103.

23 Hansard, 3rd series, cxxiii, 1653.

24 ibid., 1666.

25 Morley, i, 438.

26 loc. cit.

27 Hansard, loc. cit.

28 Hansard, 3rd series, cxxiii, 1666–93.

29 Hughenden Papers, Box 31, B/IV/A/52a.