In 1902 George Barnes, General Secretary of the Amalgamated Society of Engineers, formed the National Committee of Organised Labour for Old Age Pension. Barnes spent the next three years travelling the country urging this social welfare reform. The measure was extremely popular and was an important factor in Barnes being able to defeat Andrew Bonar Law , the Conservative cabinet minister in the 1906 General Election.
David Lloyd George, the Chancellor of the Exchequer in the Liberal government led by Herbert Asquith in 1908, was also an opponent of the Poor Law in Britain. He was determined to take action that in his words would "lift the shadow of the workhouse from the homes of the poor". He believed the best way of doing this was to guarantee an income to people who were to old to work. In 1908 Lloyd George introduced the Old Age Pensions Act that provided between 1s. and 5s. a week to people over seventy. These pensions were only paid to citizens on incomes that were not over 12s.
Although most Labour Party members of the House of Commons welcomed Lloyd George's reforms, politicians such as James Keir Hardie, George Barnes, Fred Jowett, Joseph Clynes, and George Lansbury argued that the level of benefits were far too low. They also complained that the pensions should be universal and disliked what was later to be called the Means Test aspect of these reforms.
To pay for these pensions David Lloyd George had to raise government revenues by an additional £16 million a year. In 1909 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.
After a long struggle with the House of Lords Lloyd George finally got his budget through parliament. As a result of this conflict, the Liberal Government passed the 1911 Parliament Act that restricted the power of the House of Lords to block legislation passed by the House of Commons.
The Old Age Pensions Act was brought in by Mr. Lloyd George, and provided pensions for some half a million men and women over seventy years of age. But it was a well-recognised fact that the Liberals would never have supported these Bills in their final form, save for the pressure of Labour behind them, which made them fearful of losing their position as the professedly reformist Party in Parliament.
The Labour ranks were very angry and disappointed at the nervousness of the pension proposals. Pensions were to be paid at the rate of 5s. a week to persons over seventy years of age who could prove that they had no other income exceeding 10s. a week. If two pensioners lived together they were to receive only 7s. 6d. between them.
This is a war Budget. It is for raising money to wage implacable warfare against poverty and squalidness. I cannot help hoping and believing that before this generation has passed away, we shall have advanced a great step towards that good time, when poverty, and the wretchedness and human degradation which always follows in its camp, will be as remote to the people of this country as the wolves which once infested its forests.