Wednesday, 20 December 2017

Why did Corn Law repeal lead to the end of Peel’s government?

Relations between Peel and his backbenchers were strained from the early days of his ministry. Peel was insensitive to their interests of many Conservative MPs and made little attempt to court backbench opinion. He took the loyalty of Conservatives in Parliament for granted and was irritated when this was withheld. Peel managed his government but he made little effort to manage his party. Conservative whips warned Peel of the unpopularity of his 1842 Budget among Protectionists and 85 Conservatives failed to support him. Poor Law and factory reform also led to backbench discontent. These rebellions did not threaten Peel’s position in 1842 and 1843 but divisions between Peel’s government and his Protectionist MPs widened further.

In March 1844, 95 Tories voted for Ashley’s amendment to the Factory Bill and in June 61 Tories supported an amendment to the government proposal to reduce the duty on foreign sugar by almost half. Both amendments were carried and though Peel had little difficulty in reversing them his approach caused considerable annoyance. He threatened to resign if they refused to support him. Reluctantly they fell into line. Party morale was low in early 1845 and party unity was showing signs of terminal strain. On the Corn Laws, Peel pushed his party too far.

Corn Law 1

Arguments for repeal

By 1845, it was increasingly recognised that repeal was in the national interest. The Corn Laws were designed to protect farmers against the corn surpluses, and hence cheap imports, of European producers. By the mid-1840s, there was a widespread shortage of corn in Europe and Peel reasoned that British farmers had nothing to fear from repeal because there were no surpluses to flood the British market. The nation would benefit, the widespread criticism of the aristocracy would be removed and the land-owning classes were unlikely to suffer.

By 1841, Peel had, in fact, recognised that the Corn Laws would eventually have to be repealed. The moves to free trade in the 1842 and 1845 Budgets were part of this process. Since corn was one of the most highly valued import Peel needed to include it. He argued that tariff reform did not mean abandoning protection for farming, but he called for fair, rather than excessive protection. In 1842, Peel reduced the levels of duty paid under the existing sliding scale on foreign wheat from 28s 8d to 13s per quarter when the domestic price of what was between 59s and 60s. The Whigs favoured a fixed duty on corn but were defeated and the expected protectionist Tory rebellion did not occur. The following year, the Canadian Corn Act admitted Canadian imports at a nominal duty of 1s a quarter. Peel argued that this was a question of giving the colonies preferential treatment rather than freer trade. Protectionist backbenchers were not convinced and though their amendments were easily defeated, they demonstrated a growing concern about the direction of Peel’s tariff policies.

Corn Law 2

Yet, Peel did not announce his conversion to repealing the Corn Laws until late in 1845. Why? There are different possible explanations for his decision. Peel had accepted the intellectual arguments for free trade in the 1820s supporting the commercial policies put forward by Huskisson. His later thinking was influenced by Huskisson’s view that British farmers would eventually be unable to supply the needs of Britain’s growing population and that imports of foreign grain would be essential. In which case, the repeal of the Corn Laws would then be inevitable. Peel may have accepted this but he was the leader of a Protectionist party. According to this view, Peel intended to abandon its commitment of agricultural protection before the General Election due in 1847 or 1848 with repeal following during the next Parliament, probably in the early 1850s. This might have given Peel the time to convince his own MPs.

Time ran out when famine broke out in Ireland. By October 1845, at least half of the Irish potato crop had been ruined by blight and this led to a major subsistence crisis since large numbers of people depended entirely on the potato for food. If the government was to act quickly to reduce the worst effects of famine, every barrier to the efficient transport of food needed to be removed. The most obvious barrier was the Corn Laws and this meant either their suspension or abolition to open Irish ports to unrestricted grain imports. Suspending the Acts was not a viable option as Peel maintained it would be impossible to reconcile public opinion to their re-imposition later. However, there is a problem with this view. The failure of the potato crop meant that those Irish did not have any way of earning the money to pay for imported corn, even if it was sold more cheaply. The £750,000 spent by Peel’s government on public work projects, cheap maize from the United States and other relief measures were of far more practical value to Ireland than the repeal of the Corn Laws. Peel used the opportunity provided by the Famine to introduce a policy on which he had already made up his mind and the crisis merely accelerated this process.

Peel disapproved of extra-parliamentary pressure and viewed the lobbying of the Anti-Corn Law League with considerable suspicion. The success of the League, especially between 1841 and 1844, may have persuaded Peel not to move quickly to repeal. He saw it as his duty to act in the national interest and did not want to be accused of acting under pressure. The activities of the League threatened to divide propertied interests and Peel saw that social stability was essential for economic growth. Giving in to the League was an unacceptable political option. Peel was also critical of the League’s propaganda especially its language of class warfare. The strident, anti-aristocratic attacks by the League and the creation of a Protectionist Anti-League raised the spectre of commercial and industrial property pitted against agricultural property. This, Peel believed, would significantly weaken the forces of property against those agitating for democratic rights. However, Peel recognised that the Anti-Corn Law League might exploit the crisis in Ireland. Repeal was therefore a pre-emptive strike designed to take the initiative away from middle-class radicals and as a result help to maintain the landed interest’s control of the political system.

Corn Law 3

The politics of repeal

Peel told his cabinet in late 1845 that he proposed repealing the Corn Laws outlining that it was in the national interest to do so. This was too sophisticated for the Protectionists. For small landowners and tenant farmers, the most vocal supporters of protection, repeal meant ruin. Peel’s argument that free trade would offer new opportunities for efficient farmers made little impact. Although only Viscount Stanley and the Duke of Buccleuch resigned on the issue, Peel nonetheless felt that this was sufficient for him to resign.

He hoped that Lord John Russell and the Whigs would form a government, pass repeal through Parliament and perhaps allow him to keep the Conservative Party together. Lord John Russell had recently announced his conversion to repeal in his ‘Edinburgh Letter’ in December 1845 but was unwilling to form a minority administration. This meant that Peel had to return to office. Predictably, repeal passed its Third Reading in the Commons in May 1846. The Whigs voted solidly for the bill but only 106 Tories voted in favour of repeal compared to 222 against. The great landowners voted solidly for repeal as they recognised that it did not threaten their economic position. The bulk of the opposition came from MPs representing the small landowners. Retribution was swift. In June 1846, sufficient Protectionists voted with the Whigs on an Irish Coercion Bill to engineer Peel’s resignation. He did not hold office again dying in 1850 after a horse riding accident.

Saturday, 16 December 2017

Peel’s ministry 1841-45

Peel is credited with the Conservative victory in 1841: without his leadership, many contemporaries believed that the Tories could have been assigned to permanent opposition. Peel’s parliamentary performance during the 1830s was an important element in this revival. His grasp of economics let him capitalise on the growing economic problems the Whigs faced after 1838. Nevertheless, there were other pressures at work over which Peel had little or no control. After the 1832 election, the Whigs rapidly found their dominant position eroded. Forty MPs who has supported the Reform Act moved to the Conservative benches between 1832 and 1837. Four Whig cabinet ministers resigned over Irish appropriation in June 1834, two of whom became Conservative supporters by the late 1830s and ministers in the 1840s. In addition, the Whigs were seen as unable to control the radicals that Tory propaganda played on.

Peel 2

The unexpected frequency of General Elections after 1832 also aided the Conservative cause. Peel used William IV’s invitation to form a government in late 1834 to call an election in 1835. A further election was held on William’s death in 1837. These gave those voters, concerned that the Whigs wished to push reform further and threaten their position as property-owners, the opportunity of voting Tory. The Conservatives increased their MPs by about 100 in the 1835 election and added 40 more in the election two years later. By-election successes between 1837 and 1841 further improved their position. Between 1837 and 1841, they were only 30 votes short of the Whigs and their normal voting allies. The electoral tide was running in their favour.

The emergence of an organisational structure also played an important part in reviving Tory fortunes. Peel played little part in organisational change in the 1830s and the initiative came from individuals like Francis Bonham. The Reform Act required voters to register and this provided opportunities for local supporters to organise and consolidate their party’s voting strength. Peel recognised the need for party organisation but was, at least initially, ambivalent in his attitude. He was suspicious of extra-parliamentary pressure and this meant that his relations with many local Tory organisations were not particularly close but by 1837, Peel was urging his supporters to register. The fact that Conservatives were a much better organised party in 1841 was an important factor in their victory. During the 1830s, Peel turned the Conservatives into a viable party of government and established a sense of direction and leadership. However, there were important divisions of principle between Peel and the right of the Conservative party that were to re-emerge, with disastrous consequences, after 1841.

Why is Peel’s ministry of 1841-1846 considered so successful?

When Peel took office in 1841, he recognised that the major problem facing Britain was economic, and his priority was to make the country debt-free and affluent. He set about establishing a government based on administrative effectiveness. The focus of his administration before the Corn Law crisis was on fiscal and economic reform. A prosperous country, he believed, was one where social distress and disorder would be reduced.

Although Peel had attempted to broaden the base of the Conservative Party in the 1830s, this was not evident in the election results: the election was a triumph for Protectionist Toryism.[1] The party did best in the English and Welsh counties and in those boroughs, little changed by the 1832 Reform Act. The MPs elected were largely from the ‘Tory’ wing of the party who had no interest in change and little sympathy for reform. Above all many were ardent Protectionists. Tory votes had been cast in favour of a party that was most likely to protect landowners and defend the Established Church. Theirs was a far narrower perspective than Peel’s. Nevertheless, Peel appointed those in the party who supported his policies and beliefs to important positions. His only concession to party feeling was the appointment of a leading Protectionist, the Duke of Buckingham, to the post of Lord Privy Seal.

Peel increasingly adopted policies out of sympathy with the majority of his MPs. Public duty on behalf of the monarch and in the interests of the nation was his first priority; party came a poor second. This proved a problem particularly as the election had been fought largely on the question of Protection. The route from the electoral triumph of 1841 to the political disaster of 1846 was, in retrospect, predictable.

Economic and financial reform

The economy had slumped in the late 1830s and Peel inherited a budget deficit in 1841. Peel recognised that the only way he could remedy this was to introduce tariff reform, building on the work of Huskisson in the 1820s and to reintroduce income tax to generate the income needed to make tariff reductions possible. Parallel to his budgetary programme, Peel reformed the business practices of banks and companies. The 1842 Budget sought to restore prosperity to the manufacturing sector and so promote social stability.

Income tax[2] was reintroduced at 7d (3 per cent) in the pound on annual incomes of over £150 excluding most of the working-classes and would raise £3.7 million. Peel assured MPs that it would not be made permanent and would only be retained for three years. This significantly reduced opposition from the Whigs and from within the Conservative ranks. Customs duties were reduced on about 750 items and maximum duties on imported raw materials, partially manufactured goods and manufactured items were set at 5 per cent, 12 per cent and 20 per cent respectively. Duties on imported timber and all export duties on manufactured goods were abolished. Peel argued that reduced import duties would both encourage trade and provide cheaper goods for British consumers stimulating demand. Changes were made to the scale of duties on corn reducing the level of tax paid and as a result, Buckingham resigned from the Cabinet. These proposals were controversial especially to Protectionists who saw the proposals as an abandonment of protection for farming and to Free Traders who did not think Peel had gone far enough. They were, however, popular and certainly politically astute.

The 1842 Budget did not produce immediate improvements in trade or employment. The economy remained sluggish throughout 1842 and trade did not revive until late 1843. By 1844, however, there was clear evidence that the economy was recovering helped by good harvests in 1843 and 1844 and by a boom in railway investment. Government finance moved into profit and 1844 and further changes took place in the 1845 Budget. The estimated budget surplus of around £3.4 million for 1845-1846 was sufficient for Peel to dispense with income tax but he argued that it should be renewed for a further three years to allow further reductions in tariffs. This, Peel argued would result in greater economic prosperity. There were further reductions in tariffs. All surviving import and export duties on raw materials, like cotton and coal, were abolished. Duties on colonial sugar from the West Indies and foreign sugar were both reduced. Further reductions followed and when Peel fell in 1846, Britain was almost a free-trading country.

Peel’s economic liberalism had its origins in the 1820s. At its heart were the notions of ‘sound money’ through low levels of taxation and freeing of trade to produce a balanced budget. Without monetary control and stability there would be inflation and this, Peel maintained, would limit economy growth. He thought it was necessary to restrict the Bank of England’s power to issue money ‘to inspire just confidence in the medium of exchange’. The Gold Standard linked sound money to cheap government and low rates of direct and indirect taxation. If businessmen and industrialists were given freedom to exploit the market, Peel suggested this would increase profitability, improve employment and lead to economic growth for everyone’s benefit.

Peel considered the Bank Charter Act 1844 as one of his most important achievements. Its aim was to establish a more stable banking system by preventing the excessive issuing of paper money that had led to some crises in the past. Between 1826 and 1844, over-issue by provincial banks had caused the failure of a quarter of all banks entitled to issue their own notes. The 1844 Act defined the position of the Bank of England in the British economy very carefully. The Bank could issue notes to the value of its gold reserves to a limit of £14. No new English provincial bank was allowed to issue its own notes. The Act recognised 279 banks with note-issuing powers and Peel aimed to reduce their rights of issue and concentrate them within the Bank of England. The effect of the 1844 Act could have limited the scope of banks to finance economic growth but the new gold discoveries (in California and Australia) from the late 1840s increased the Bank of England’s reserves enabling an increase in the issue of notes. Without this, the economic expansion of the 1850s and 1860s that Peel is often credited with would not have occurred.

The repeal of the Bubble Act in 1825 freed joint-stock companies from the regulations that had prohibited their growth for over a century.[3] The result was increased often speculative investment in projects of every sort: docks, gas and water companies and especially after 1830, railways. Many of these companies collapsed because they were poorly organised or fraudulent and many people lost their savings. William Gladstone,[4] President of the Board of Trade introduced the Joint Stock Companies Act in 1844. The Act established the Registrar of Companies and all companies with more than twenty-five members and freely transferable shares were required to register. Company directors had to submit fully audited accounts to the Registrar. This Act helped protect the public from unscrupulous companies and created a more responsible climate for company development.

Poor Law and factory reform, 1842 and 1844

Peel believed that social reform was linked to successful economic conditions. These would enable economic growth, create new jobs and so stimulate consumption. Government support for social reform was lukewarm and Peel was sceptical of the value of direct government intervention in solving social problems. Free market answers were more effective. He recognised that government could not abdicate all responsibility in the ‘social question’ but, like many contemporaries, believed that its role should be severely limited and definitely cost-effective. Peel supported the Whig government when the Poor Law Amendment Act was passed in 1834. In 1842, the operation of Poor Law was tightened to reduce excessive costs while Peel argued, without reducing the generosity and fairness of the system of relief, compared to other countries.

Although Peel’s government was not known for its support for social reform, publication of reports from committees originally set up by the Whigs in the late 1830s and extra-parliamentary pressure from radicals as well as Tory politicians, led to two important acts being passed. The Mines Act 1842, which banned women and children from working below ground, was not a piece of government legislation. Factory reforms introduced by the government caused much controversy. In 1843, Sir James Graham, the Home Secretary--who had defected from the Whigs in 1834--sought to reduce the hours worked by women and children. This was linked to proposals for compulsory schooling provided largely by the Church of England. Nonconformists did not intend to allow the Church of England to take control of all factory schools and organised widespread opposition and the Bill was withdrawn. The following year it was reintroduced without its education clauses. The legislation was in effect the first health and safety act in Britain. All dangerous machinery was to be securely fenced off and no child or young person was to clean mill machinery while it was in motion and failure to do so was a criminal offence

There was a well-organised campaign inside and outside Parliament to restrict the maximum working day for all to ten hours and include this in the Factory Act. Peel disagreed: he was prepared to pass laws preventing exploitation of children and women but he argued adult males were free agents and the law should not interfere with market forces. The Commons did not agree with Peel’s position and Ashley’s Ten Hours’ amendment was carried with the support of the Whigs and Protectionist Tories. It was only Peel’s threat of resignation that persuaded Tories to overturn the amendment. The passage of the Factory Act established a maximum working day of twelve hours.

[1] Protectionist Tories argued for retaining the Corn Laws to protect British farming

[2] Income tax had previously been introduced by William Pitt during the French wars as a wartime tax. In 1816, against the wishes of the Tory government of Lord Liverpool, Parliament had voted against its continuance.

[3] Joint-stock companies raised capital by issuing shares. Investors purchased these shares and received a dividend from the profits made by the company based on the number of shares they owned. It was the failure of the South Sea Company in the early 1720s that led to the Bubble Act.

[4] William Ewart Gladstone (1809-1898) was in office every decade from the 1830s to the 1890s and was Liberal Prime Minister on four occasions (1868-1874, 1880-1885, 1886 and 1892-1894). He was Vice-President and then President of the Board of Trade between 1841 and 1845 and supported Peel over the repeal of the Corn Law.