The Last Lion Box Set: Winston Spencer Churchill, 1874 - 1965 (136 page)

It was Churchill’s misfortune, and Britain’s, that he came to the Treasury with the right ideas at the wrong time. The country’s economists were torn between, on the one hand, those who regarded the classical law of supply and demand as an article of absolute faith and, on the other hand, the followers, still few in numbers, of John Maynard Keynes’s concept of a managed economy. A heavy parliamentary majority believed that the budget must be balanced, whatever the cost. Given the plight of the Treasury in the mid-1920s, this was wildly unrealistic. England’s great prewar assets were gone, spent, like the blood of its youth, in the trenches and no-man’s-land across the Channel. After the brief boom in the years immediately following the Armistice, management’s prewar troubles with organized labor returned, redoubled by a huge hard core of jobless men, refugees from giant industries—coal, cotton, shipbuilding, and steel and iron—which had once thrived on exports and could no longer find markets abroad. The miners’ union, exasperated with the coalfields’ shortsighted, reactionary, incompetent proprietors, turned to the government. An official inquiry recommended nationalization of the mines, but nothing was done. In 1921 a mine lockout was followed by competition from the revived German coal industry, which led to wage cuts in the British coalfields. Unrest was growing there.

Another of Winston’s unwelcome legacies was the servicing of England’s war debt to America. Great Britain owed the United States the preposterous sum of $4,933,701,642. Interest on this exceeded £35,000,000 a year. Again and again Churchill explained to England’s former ally, now its creditor, that Britain couldn’t repay the principal until France had paid Britain
its
war debt. Sometimes he thought he was succeeding. On January 10, 1925, he wrote Clementine: “I have had tremendous battles with the Yanks, & have beaten them down inch by inch to a reasonable figure. In the end we are fighting over tripe like £100,000!” But agreement after agreement collapsed, President Coolidge saying inanely: “They hired the money, didn’t they?” A Chartwell guest noted in his diary: “Winston talked very freely about the U.S.A. He thinks they are arrogant, fundamentally hostile to us, and that they want to dominate world politics.”
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In the House of Commons annual calendar, Budget Day belongs to the chancellor of the Exchequer. Churchill’s first such occasion was April 28, 1925. A large crowd awaited him outside No. 11 as he emerged smiling, the dispatch case in his hand. “Let me take the box, sir,” said Detective Thompson, and Winston recoiled in horror, saying: “No, no! There’s but one person to guard this box and it’s me!” The spectators tagged along as he proceeded down Parliament Street and into the crowded House, where Clementine, Diana, and Randolph were seated in the Strangers’ Gallery. His two-and-a-half-hour speech was lucid and witty; at one point he produced a pint of whiskey, poured some in a glass, and said: “It is imperative that I should fortify the revenue and I shall now, with the permission of the Commons, proceed to do so.” Everyone cheered as he sipped except Lady Astor, who had urged Britain to follow America’s example and adopt Prohibition. Bowing to her, he noted that she was “noble” but added: “I do not think we are likely to learn much from the liquor legislation of the United States.”
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Like all budgets, this one required careful scrutiny, and those who studied it line by line realized that in many ways it was an abrupt departure from the traditional Tory approach to ways and means. Churchill believed that the key to fiscal health was productivity, that the leisure class was “but the glittering scum on the deep river of production.” He wanted to lower taxes on the poor and raise them on unearned income: “The process of the creation of new wealth is beneficial to the whole community. The process of squatting on old wealth though valuable is a far less lively agent.” At the same time, the Treasury must assume responsibility for the victims of industrial distress. His proposals included a reduction in the pensionable age from seventy to sixty-five, immediate payment of benefits to over 200,000 widows and 350,000 orphans, and abolition of what he called “restrictions, inquisitions and means tests” for welfare applicants—“it would be nobody’s business what they had or how they employed their time.” He believed that “by giving a far greater measure of security to the mass of wage-earners, their wives and children, it may promote contentment and stability, and make our Island more truly a home for all these people.” Funds would be set aside to provide health insurance for thirty million Britons; it was here, he argued, that “the State, with its long and stable finance, can march in and fill the immense gap.” A special sense of urgency, he felt, should spur the government’s obligation to help those rendered helpless by circumstances over which they had had no control, adding passionately: “It is the stragglers, the exhausted, the weak, the wounded, the veterans, the widows and orphans to whom the ambulances of State aid should be directed.”
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Winston had stolen Neville Chamberlain’s thunder, and Chamberlain resented it. The chancellor’s mandate did not include the needy. But rustling was an old Churchillian habit, and few Tories would object if he could find the funds and balance the budget without raising taxes. He could and did. He had searched the files and minds of the Treasury’s senior civil servants, and had reached two momentous decisions. The first was a return to the gold standard, of which more presently; the second, a £10,000,000 cut in the service estimates, with the Admiralty as the heavy loser. Only the RAF had emerged unshorn. His reasons were various. One, perhaps, was a tribute to his father’s failed crusade. But others were stronger. If he were to win pensions, health insurance, and help for the helpless, he had to wield his scalpel somewhere, and the public mood would support drastic reductions in expensive armaments. Clementine spoke for millions of Britons when she wrote urging him to “stand up to the Admiralty…. don’t be fascinated or flattered or cajoled by Beatty.” Now that the kaiser’s fleet lay on the bottom of the Firth of Forth, Winston reasoned, Britain was secure at sea. The only foreign fleets of any size were those of the United States, which was hardly likely to declare war on England, even over debts, and Japan, whose military establishment, despite its successes against the Bolsheviks, was considered laughable. Churchill assumed that the Germans would keep their word and refrain from building another fleet to challenge British sea power, though later he described this supposition as “the acme of gullibility.”
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The Royal Navy felt betrayed. Here was a former first lord, whose memory was still cherished in wardrooms, “committed,” as Admiral Sir William James puts it, “to fight the Admiralty inch by inch for every penny of their estimates.” His chief adversary, the first sea lord, was David Beatty, a Churchill friend since Omdurman. Winston argued that battleships had been obsolescent for some time and were now obsolete. They had been torpedoed at the Yalu River in 1894, at Port Arthur in 1904, and, repeatedly, in the Great War; the American air power evangelist Billy Mitchell had just proved that they could be sunk by Martin MB-2 twin-engined bombers. At the height of the controversy Beatty wrote his wife: “Yesterday I was vigorously engaged with Winston and I think on the whole got the better of him. I must say, although I had to say some pretty strong things, he never bears any malice and was good-humoured through the engagement.” Later he joined those who thought Winston had lost his sense of proportion, writing her heatedly: “That extraordinary fellow Winston has gone mad. Economically mad, and no sacrifice is too great to achieve what in his shortsightedness is the panacea for all evils—to take 1 S off the Income Tax. Nobody outside a lunatic asylum expects a shilling off the Income Tax this Budget…. As we at the Admiralty are the principal Spending Department, he attacks us with virulence.” And again: “I have to tackle Winston and had 2½ hours with him this evening. It takes a good deal out of me when dealing with a man of his calibre with a very quick brain. A false step, remark, or even gesture is immediately fastened upon, so I have to keep my wits about me. We of course arrived at nothing…. We are working up a case for the Prime Minister to adjudicate on the differences which exist between us.”
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Baldwin, with his great skill at compromise, restored some of the Admiralty estimates, but Churchill won in the long run; during each of his five years as chancellor, every service except the RAF saw its appropriations dwindle. Even so, the public temper was such that he was frequently attacked as a military spendthrift; the
Economist
faulted him on the ground that 3 percent of the national income was being allocated to defense, compared with 2 percent in the later years of Victoria’s reign. Perhaps any other chancellor would have done the same. But one expects more from Churchill, and the saddest page in this record is his repeated insistence that the ten-year rule adopted in August 1919 be extended from year to year.
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He convinced the Committee of Imperial Defence that it was sound policy, though there was one demurrer. The minutes of the committee’s two hundred thirty-sixth meeting record that: “
LORD BALFOUR
was of the opinion that nobody could say that from any one moment war was an impossibility for the next ten years and that we could not rest in a state of unpreparedness on such an assumption by anybody. To suggest that we could be 9½ years away from preparedness would be a most dangerous suggestion.”
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Churchill was to oppose rearmament as late as 1929, when B. H. Liddell Hart wrote in the
Daily Telegraph
that “every important foreign Power has made startling, indeed ominous, increases of expenditure on its army…. Our Government, which has to keep watch for storm signals, would be false to its duty to this nation if it reduced our slender military strength more drastically until other nations imitate the lead which we have so repeatedly given.” In one instance Churchill was false to himself. He had inveighed against MacDonald for suggesting that the naval base at Singapore be abandoned. Now he argued that Singapore, like Iraq, could be defended by the RAF. He objected to “measuring our naval strength” against a “fancied” threat from Dai Nippon, commenting that the Admiralty was “unduly stressing the Japanese danger.” Indeed, he had been in No. 11 less than a month when he asked the Foreign Office to declare that war with Nippon would be impossible for the next twenty years. Austen Chamberlain hesitated, but the decision was made. Early in 1924 the Admiralty recommended the establishment of a submarine base at Hong Kong and the installation “as fast as possible” of new naval guns at Singapore. “For what?” asked Winston, who only a few months earlier had been Singapore’s staunchest champion. “A war with Japan! But why should there be a war with Japan? I do not believe there is the slightest chance of it in our lifetime.” He was convinced that “war with Japan is not a possibility any reasonable government need take into account.” Beatty thought otherwise. Later, with an eye on history, Winston claimed that he had been at a disadvantage because Beatty had not told him of secret telegrams bearing evidence of Japan’s aggressive designs. Still, one feels that this was not Churchill’s finest hour.
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T
he most sensational moment in Churchill’s first budget was his dramatic disclosure that Britain, which had left the gold standard during the war, was back on it.
The Times
reported that this announcement was greeted with “tremendous cheers.” After the applause had died down he said: “No responsible authority has advocated any other policy. It has always been a matter of course that we should return to it.” This was simply untrue. Beaverbrook had been against it; on the evening of Budget Day he wrote Bracken: “My opinion of Winston has not altered. I knew from the beginning that he would give in to the bankers on the Gold Standard, which, I think, is the biggest sin in this budget.” Half a century later Boothby, looking back on a long public life, said of the return to gold that “with the exception of the unilateral guarantee to Poland without Russian support, this was the most fatal step taken by the country.”
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Beaverbrook and Boothby were among the few Jeremiahs on the issue then; others, and they were almost the only others, were Winston’s old colleague Reginald McKenna, a former chancellor; John Maynard Keynes; and Vincent Vickers, who protested the move by resigning from the board of the Bank of England. Churchill has been blamed for it, and rightly so, because as chancellor he made the decision. The step was not taken lightly, however, or without learned advice. Responsibility was collective and bipartisan. In 1918 the step had been recommended by a standing committee of experts appointed by Lloyd George; a majority of Conservatives, Liberals, and Labourites had then endorsed it. Churchill regarded that endorsement as binding. According to Grigg, the new chancellor invited gold’s advocates and adversaries to dinner. Sir Otto Niemeyer of the Bank of England stated the case for gold; McKenna and Keynes argued against it. Winston thought some of the points made by McKenna and Keynes were valid. “But,” he added, staying off gold “isn’t entirely an economic matter; it [would be] a political decision, for it involves proclaiming that we cannot, for the time being at any rate, complete the undertaking which we all acclaimed was necessary in 1918, and introducing legislation accordingly.”
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