In 1908 David Lloyd George, the Chancellor of the Exchequer in the Liberal government led by Herbert Asquith introduced the Old Age Pensions Act that provided between 1s. and 5s. a week to people over seventy. To pay for these pensions Lloyd George had to raise government revenues by an additional £16 million a year.
In 1909 David Lloyd George announced what became known as the People's Budget. This included increases in taxation. Whereas people on lower incomes were to pay 9d. in the pound, those on annual incomes of over £3,000 had to pay 1s. 2d. in the pound. Lloyd George also introduced a new supertax of 6d. in the pound for those earning £5000 a year. Other measures included an increase in death duties on the estates of the rich and heavy taxes on profits gained from the ownership and sale of property.
The Conservatives, who had a large majority in the House of Lords, objected to this attempt to redistribute wealth, and made it clear that they intended to block these proposals. Lloyd George reacted by touring the country making speeches in working-class areas on behalf of the budget and portraying the nobility as men who were using their privileged position to stop the poor from receiving their old age pensions.
With the House of Lords extremely unpopular with the British people, the Liberal government decided to take action to reduce its powers. The 1911 Parliament Act drastically cut the powers of the Lords. They were no longer allowed to prevent the passage of 'money bills' and it also restricted their ability to delay other legislation to three sessions of parliament. The bill also changed the maximum length of time between general elections was reduced from seven years to five and provided payment for Members of Parliament.
When the House of Lords attempted to stop this bill's passage, the Prime Minister, Henry Asquith, appealed to King George V for help. Asquith, who had just obtained a victory in the 1910 General Election, was in a strong position, and the king agreed that if necessary he would create 250 new Liberal peers to remove the Conservative majority in the Lords. Faced with the prospect of a House of Lords with a permanent Liberal majority, the Conservatives agreed to let the 1911 Parliament Act to become law.