William Ewart Gladstone - Chancellor of The Exchequer (1852–1855)

Chancellor of The Exchequer (1852–1855)

In 1852, following the appointment of Lord Aberdeen as Prime Minister, head of a coalition of Whigs and Peelites, Gladstone became Chancellor of the Exchequer. The Whig Sir Charles Wood and the Tory Disraeli had both been perceived to have failed in the office and so this provided Gladstone with a great political opportunity.

His first budget in 1853 almost completed the work begun by Peel eleven years before in simplifying Britain's tariff of duties and customs. 123 duties were abolished and 133 duties were reduced. The income tax had legally expired but Gladstone proposed to extend it for seven years to fund tariff reductions:

We propose, then, to re-enact it for two years, from April, 1853, to April, 1855, at the rate of 7d. in the £; from April, 1855, to enact it for two more years at 6d. in the £; and then for three years more...from April, 1857, at 5d. Under this proposal, on the 5th of April, 1860, the income-tax will by law expire.

Gladstone wanted to maintain a balance between direct and indirect taxation. He also wished to abolish the income tax. He knew that its abolition depended on a considerable retrenchment in government expenditure. He therefore increased the number of people eligible to pay it by lowering the threshold from £150 to £100. The more people who paid income tax, Gladstone believed, the more the public would pressure the government into abolishing it. Gladstone argued that the £100 line was "the dividing line...between the educated and the labouring part of the community" and that therefore the income tax payers and the electorate were to be the same people, who would then vote to cut government expenditure.

The budget speech (delivered on 18 April), at nearly five hours length, raised Gladstone "at once to the front rank of financiers as of orators". H. C. G. Matthew has written that Gladstone "made finance and figures exciting, and succeeded in constructing budget speeches epic in form and performance, often with lyrical interludes to vary the tension in the Commons as the careful exposition of figures and argument was brought to a climax". The contemporary diarist Charles Greville wrote of Gladstone's speech:

...by universal consent it was one of the grandest displays and most able financial statement that ever was heard in the House of Commons; a great scheme, boldly, skilfully, and honestly devised, disdaining popular clamour and pressure from without, and the execution of it absolute perfection. Even those who do not admire the Budget, or who are injured by it, admit the merit of the performance. It has raised Gladstone to a great political elevation, and, what is of far greater consequence than the measure itself, has given the country assurance of a man equal to great political necessities, and fit to lead parties and direct governments.

However with Britain entering the Crimean War in February 1854, Gladstone introduced his second budget on 6 March. Gladstone had to increase expenditure on the Services and a vote of credit of £1,250,000 was taken to send a 25,000 strong force to the East. The deficit for the year would be £2,840,000 (estimated revenue £56,680,000; estimated expenditure £59,420,000). Gladstone refused to borrow the money needed to rectify this deficit and instead increased the income tax by one half from sevenpence to tenpence-halfpenny in the pound (From ~2.92% to ~4.38%) . Gladstone proclaimed that "the expenses of a war are the moral check which it has pleased the Almighty to impose on the ambition and the lust of conquest that are inherent in so many nations". By May £6,870,000 was needed to finance the war and so Gladstone introduced another budget on 8 May. Gladstone raised the income tax from 10 and a half d. to 14d. in order to raise £3,250,000 and spirits, malt, and sugar were taxed in order to raise the rest of the money needed.

He served until 1855, a few weeks into Lord Palmerston's first premiership, whereupon he resigned along with the rest of the Peelites after a motion was passed to appoint a committee of inquiry into the conduct of the war.