The economic rivalry created tension in international politics, with increased militarism in the industrialised countries. Britain was engaged in an expensive naval arms race with Germany, and at home the Liberal government faced industrial unrest and political agitation from the common people for the cause of universal suffrage.
The Liberal government, motivated by the need to fund their social reforms and the arms race, became embroiled in a two-year conflict with the Conservative-dominated House of Lords. The battle would eventually see the power of the Upper House permanently curbed, as well as bring Ireland to the brink of civil war.
The battle for power
In 1909 the Chancellor, David Lloyd George, proposed a radical Budget to pay for the programme of social reforms that included a super-tax against incomes of more than £5,000 pa, a tax on the land of wealthy landowners and an increase in death duties.
The Lords rejected the Budget, breaking an unwritten protocol in which the Upper Chamber refrained from rejecting financial bills put forward by the elected Lower House. It provoked a constitutional crisis and Prime Minister H. H. Asquith dissolved Parliament, calling a general election in January 1910. The Liberals were re-elected with a greatly reduced majority and formed a coalition with the Irish Nationalists.
The Parliament Act
The election forced the Lords to accept the Budget and the Finance Act was passed in April 1910. But a wider issue had been raised, and now the government sought to reduce the power of the House of Lords by removing their right of Veto. The Parliament Act proposed to give the government the right to bypass the House of Lords and obtain Royal Assent for any Measures that had been passed three times in the Commons and rejected three times by the Lords, making them an Act of Parliament.
Anticipating that the Lords would reject the bill, Asquith lobbied King Edward VII for the creation of several hundred new peers to force the bill through. The King agreed, provided the government obtained a mandate for change from the people, and in December 1910 the government called a general election for the second time in a year. Again they were returned to power. Despite the election results, the Lords made substantial amendments to the bill on the third reading, before it was passed.
The Liberals made it clear that they would not accept the changes and Edward’s successor, George V, agreed to create 250 new Liberal peers to remove the Conservative majority in the Lords.
On 10 August 1911, with the support of 24 Conservative peers and 11 Lords Spiritual (Bishops of the Church of England, who do not normally vote), the bill was passed by 131 to 114 votes.
Home Rule for Ireland
The support of the Irish Nationalist Party had been crucial in the power struggle with the House of Lords, and in return for their support the Irish Nationalists had been promised Home Rule, which involved the transfer of power for Ireland to a parliament in Dublin. Previous attempts to pass a Home Rule Act had failed and this attempt also met with resistance. The House of Lords rejected the bill and the government used the Parliament Act to make the Government of Ireland Act 1912 law.
The House of Lords also used the Parliament Act to delay the Government of Ireland Act 1912 for two years, so that it did not come into force until 1914. During that time the two opposing factions, the Ulster Unionists (anti Home Rule) and the Irish Volunteers (pro Home Rule), began to arm. Civil War was avoided by the outbreak of the First World War in August 1914 and the postponement of Home Rule.