4 - The Political Economy of Sir Robert Peel

Summary

On 24 June 2016 the Electoral Commission announced that the United Kingdom had voted to leave the European Union. Forty minutes later, David Cameron, the Conservative prime minister who had called the referendum to unite his party, resigned. He had campaigned to remain in the bloc. The same week 170 years earlier, on 29 June 1846, the Conservatives’ first ever prime minister, Sir Robert Peel, also resigned after splitting his party. While it was the question of Britain's continued membership of the EU which had divided Mr Cameron's Conservative party, Peel's split over his repeal of the Corn Laws, a set of import duties on cereals. Peel had forced the measure through with opposition votes. In revenge, protectionist backbenchers brought their own government down by vetoing its important Irish Coercion Bill. The split became permanent. Peel's parliamentary supporters within the old Conservative party became known as the ‘liberal’ Conservatives or Peelites, evolving into the modern Liberal party in 1859. The rebels formed a new Conservative party, the direct institutional ancestor of today's organisation of that name.

Historians have long argued over why Peel u-turned over the issue of the Corn Laws and split his party apart over it, in retrospect permanently. In contrast, his role in establishing a new economic-policy paradigm, one that lasted until 1931, has been downplayed. Although Norman Gash praised Peel as ‘chief architect’ of the mid-Victorian ‘age of stability’, historians generally see William Gladstone and Benjamin Disraeli as pivotal in establishing a political consensus around ‘sound’ finance. But as Martin Daunton has pointed out, the historiographical veneration of Gladstone has downplayed Peel's role in establishing the policies Gladstone continued as his protégé. Peel, as chairman of the Currency Commission in 1819, a cabinet minister in the 1820s, and prime minister in the 1840s, drove the adoption in Britain of the classic ‘gold standard’ policies, of which free trade was just one:

• 1. The value of British currency should be firmly fixed to a gold standard, with the pound freely convertible by the Bank of England.

• 2. Banknote supply should be limited based on a multiple of gold reserves.

• 3. Free movement of bullion from 1819, and free trade, or more accurately lower tariffs on food and raw materials, from 1842.