When you think of statesmen who have navigated Britain out of stagnation, the image of a reactionary press baron working alongside a bankrupt swindler and serial litigator probably does not come to mind. Horatio Bottomley, who was Member of Parliament for Hackney South, became one of the most well-known political populist figures in the early 20th century. He joined forces with the press baron Lord Rothermere to bring down the government of David Lloyd George. Their quest? Tackling squandermania – the practice of extravagant government spending. There are strong lessons we can learn from what they did then to what needs to be done today.
A radical Liberal Party politician, Lloyd George’s first act as Chancellor in 1909 was to declare war on poverty, by introducing wide-ranging social reform. To pay for this, he delivered the ‘People’s Budget’, controversially deciding to tax land, introduce state pensions for the first time and slap a supertax on income. The Conservative Party called the Budget vindictive and tried to block it in the House of Lords. Lloyd George, in his quest to smash the wealthy classes, brought in the Parliament Act 1911, which removed the power from the House of Lords to block money bills.
Outraged by Lloyd George’s shenanigans, Lord Rothermere used his newspapers to try and shape public opinion against the reforms, including a series of articles against what he called ‘squandermania’. To combat Lloyd George’s orgy of spending, paid for by the significant rise in the level of income tax, he even founded a new political party: the Anti-Waste League.
Lord Rothermere warned that the government could not continue to keep demanding money from people that was not there. He called for ‘root and branch reduction of government expenditure’, warning there was no ‘modern parallel for the appalling taxation under which the British nation was steadily being crushed out of existence’. Alongside Horatio Bottomley, he rallied for faster and deeper cuts and the need to get rid of professional politicians, replacing them with ‘a common sense, business government for a common sense, business people’.
No doubt Lord Rothermere and Horatio Bottomley would be appalled that 100 years after their campaign to tackle waste, our governing class appears stuck in the same high-tax, high-spend doom loop.
When introduced by William Pitt in 1799, income tax was meant to be a short-term stopgap to stave off the French and their disruption to our trade during the Napoleonic Wars. The French minister of finance conceded that the invention of this tax was ‘genius’. The tax was repealed in 1802 by Pitt’s successor, Henry Addington, but Addington then reversed course and enshrined it by an Act in 1803. The tax made little impact to the fortunes of the country, as the proportion of the population earning an income was minuscule. In 1919, the number of people earning enough income to pay tax was under 1 million. Even today, there are only 37.4m taxpayers out of a population of 68m, and just 10% of these contribute over 60% of income tax receipts.
This is why income tax has always been controversial. It is a tax on aspiration: a disincentive designed to hit the most productive. It may have been genius in 1799, but as history has shown, the tax is ultimately unable to keep pace with profligate government spending, even as it continues to be the linchpin of government revenue.
America, it seems, has woken up to the idea that, since tax revenue cannot go up indefinitely, the state needs to be gutted. Fresh off the back of Donald Trump’s presidential win, the world’s richest man, Elon Musk, is set to do a Twitter-style cull, with the aim of slashing trillions of dollars of waste from the budget. Who in the UK is making the case today for a war on waste, in an effort to reduce our ballooning tax burden?
For example, where is the outcry against the billions in bad procurement in the MoD and the NHS? Who is arguing about the grossly over-specified and poorly project-managed contracts, like HS2? Who will tackle the overall poor spend management at a devolved level, where good money is chucked after bad, still resulting in bankrupt councils?
The Conservative Party did work towards updating the Procurement Act, in an effort to deal with misspend and help raise standards of public sector buying to drive economic growth. It received Royal Assent in 2023, but the Public Accounts Committee has already condemned the Act as not fit for purpose. Due to be implemented this year, the Act has been further delayed by the new Labour Government until 2025.
David Lloyd George, horrified by the rise of Rothermere’s Anti-Waste League, appointed a businessman, Sir Eric Geddes, to head a new Committee on National Expenditure. Colloquially named ‘The Geddes Axe’, by 1922 it had slashed waste totalling £87m, worth 10% of the country’s entire GDP. Geddes was hailed a ‘superman’.
Rachel Reeves is in the throes of setting up a new Office for Value for Money. Does this mark the arrival of a new Geddes Axe, ready to chop through wasteful state spending? Judging by the person she has appointed to head it – David Goldstone, who is linked to several big projects that went massively over-budget: the London Olympics, Parliament’s restoration and HS2 – I wouldn’t hold my breath.
Click here to subscribe to our daily briefing – the best pieces from CapX and across the web.
CapX depends on the generosity of its readers. If you value what we do, please consider making a donation.
