The Chancellors (10): Winston Churchill

Winston-Chuchill-Chancello_466Winston Churchill, 1924-29

Conservative (under Baldwin)

Churchill spent most of his early political career, after crossing the floor from the Conservatives to the Liberals, as a hate figure on the Tory benches, notably as the scourge of the Tories at the time of the House of Lords crisis of 1909-11. As an arch-coalitionist he found the reunited Liberal party of 1923 uncongenial. What drove him back towards the Conservatives though was the rise of Labour. He lost his Dundee seat in 1922, having been violently heckled more than once (one of the winning candidates was a Labour candidate): it was not the last time a working class crowd treated the great man roughly. He lost again in the general election of 1923, as a candidate in Leicester West: again to a Labour candidate. He was passionately opposed to socialism. When the Liberals, in effect, allowed Labour to take office in 1924, he grandly opined ‘The enthronement in office of a Socialist Government will be a serious national misfortune such as usually has befallen great states only on the morrow of defeat in war’. Come March, he stood in the as an independent anti-socialist in the Westminster Abbey by-election and nearly won. Once Baldwin abandoned tariffs, the way was openly for Churchill to return to the Tory fold (he had crossed the floor in 1904 in opposition to Joseph Chamberlain’s tariff reform). Epping’s Conservative party adopted him as a constitutionalist candidate. He re-joined the Conservatives just as many of his old (Tory) coalition colleagues returned to the fold. By then, he was well to the right of many Tories. Baldwin, perhaps to make sure Churchill remained from Lloyd George, and get him inside the tent, as the saying goes, offered him number eleven: ‘I should have liked to have answered, will the bloody duck swim?’ Rather touchingly, in accepting, he told Baldwin that he still owned his father’s robes that he had worn as chancellor.

41CGIh4uRXL._SX324_BO1,204,203,200_His most important decision was to return the pound to the Gold Standard at $4.86, something he later acknowledged to be an error: Keynes’ The Economic Consequences of Mr Churchill made the case against at the time. In truth though, Churchill was following the same policy that Britain had pursued since the Cunliffe Committee had recommended returning to gold. The policy also had the firm backing of the Treasury, the Bank and the economists (one is tempted to aver that it was almost certainly wrong, therefore). Furthermore, the spectre of the hyperinflation that had crippled Germany in 1923 made the imperative of a sound currency seem all the more pressing. Unfortunately, it was still a mistake. The rate of $4.86 was too high and would, in the end, prove unsustainable. In the next four years it would depress Britain’s key staple industries, force interest rates up and help ensure that the direction of government policy was deflationary. Mr Churchill had very serious economic consequences.

The next big issue he confronted was that of the coal industry and the General Strike of 1926. Churchill was so much of a hardliner that Baldwin wisely farmed him out to edit the government newspaper, the British Gazette). The broad assumption was for free trade, but Churchill did introduce some limited protectionist measures. The wartime McKenna duties, that Labour had abandoned, were renewed. Some industries were safeguarded, including the nascent British movie industry. Churchill’s first budget cut income tax, and funded Chamberlain’s widows and orphan’s pension scheme.

He argued with Chamberlain on rating reform and more, but the two developed a sometimes uneasy, but largely effective working relationship: both had a liberal hinterland, and Churchill did not stand in the way of most of Chamberlain’s reforms, as chancellors are able to do. He also imposed deep defence cuts: he cut the navy’s cruiser programme, put off the building of a naval base in Singapore (something that would come back to haunt him in 1942) and made the ten-year rule permanent.

Churchill certainly made budget day a parliamentary occasion to be savoured, and into an explicitly political occasion in way that the house had not seen since the days of Lloyd George. However, the notion of an economic policy was still in its infancy, and it is in that light that the failure of the Baldwin government to tackle the persistent unemployment of the ‘twenties should be judged. The high cost of servicing the national debt was another constraint. Nonetheless, returning to gold at $4.86 was deflationary, and it is also true that Churchill was adamantly opposed to Keynes and Lloyd George’s bolder ideas for public works. What measures there were, under the auspices of the Unemployed Grants Committee were pretty small beer. On the other had, Churchill ensured that unemployment was relieved, whether through the national insurance scheme of the new transitional benefit for those not covered. At the time, Britain’s provision of unemployment relief was more extensive than any other major state.

Economic problems, and unemployment, probably helped Labour in 1929. When the Conservatives lost the 1929 election, Churchill’s support for free trade and his passionate opposition to the Irwin declaration (that the ultimate goal of British policy was dominion status for India) saw him become a leading opponent of Baldwin. As such, as Baldwin reasserted control and then formed the National Government, Churchill was heading for the margins: in John Charmley’s words, he was ‘scalped by Baldwin’. His ministerial career seemed over, something he neither forgot nor forgave.

Churchill was one of ten chancellors since 1900 to go on to be prime minister (one of twelve to go on to be party leader). He was also one of only three men to have been chancellor, home secretary and prime minister. He is only man to become chancellor whose father had also held the office (Lord Randolph Churchill, 1886-87). Chancellors, like prime ministers, are defined by their key decisions: the gold standard was Churchill’s. It was not his finest hour.

You can read about Churchill’s time as home secretary here.


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