New directions, new taxes
In the late 19th century an increasing proportion of annual revenue was coming from direct, as opposed to indirect, taxation. The number of working people paying income tax was steadily rising and in 1905 there were around one million.
Existing taxes were not enough, however, to meet the estimated costs of the radical programme of measures - old age pensions, national insurance, and unemployment assistance - being proposed by David Lloyd George which demanded considerable extra expenditure.
The cost of pensions
In his 1909 'People's Budget' Lloyd George requested that Parliament endorse proposals for raising £7 million to pay for old age pensions in the coming year.
There were to be increases in income tax for the better-off, but with reductions for those on lower incomes. A 'super tax' (or surtax) of 6d in the pound was to be levied on incomes over £5000 (payable on the amount by which incomes exceeded £3000).
In addition, there were steep increases in 'death duties' which had been introduced in 1894.
Most controversial of all, however, were the proposed taxes on land which would fall on the richest members of society. It was this last provision which resulted in the 1909 Finance Bill being rejected by the House of Lords and causing one of the most serious constitutional crises of the 20th century.
The 1909 Finance Bill, though delayed, nevertheless received Royal Assent in April 1910. Lloyd George's taxation measures provoked much displeasure among the rich and wealthy, but he had prevailed on Parliament to accept that taxation should be used not only to raise revenue, but also to 'redistribute' wealth to the less fortunate members of society.