to find a precedent, Lord Palmerston, who was, of course, as much responsible for the bill as Gladstone himself, intimated that this division would probably encourage the House of Lords to throw it out; that if they did so they would perform a public service, and that the government might well submit to so welcome a defeat. Throughout Lord Palmerston's second administration a feeling of more or less active hostility prevailed between himself and his chancellor of the exchequer. But, though Gladstone frequently threatened to resign, he remained in office for the rest of Lord Palmerston's life.
On 21 May Lord Granville moved the second reading of the paper bill in the House of Lords. After a learned argument from Lord Lyndhurst, to prove that the lords might reject though they could not amend a money bill, and a personal attack on Gladstone by Lord Derby, combined with effusive compliments to Lord Palmerston, the bill was thrown out by a majority of eighty-nine. On 25 May Palmerston moved for a committee to inquire into the privileges of the House of Commons and the rights of the House of Lords in matters of taxation. The committee having sat and drawn up a purely historical report, Palmerston moved, on 5 July, a series of resolutions, carefully framed and of great political value, which set out in effect that the grant of supply was in the commons alone. His speech, as might have been expected, was a mild one, and advanced liberals complained that he had practically given up the case. But Gladstone made amends in their eyes for the deficiencies of his chief. In the most radical speech that he had yet made, he affirmed that for two hundred years the lords had never ventured to retain a tax which the commons had remitted, and, answering Lord Lyndhurst by implication, he pointed out that it was not in the lords' power to reject money bills, and the representatives of the people were bound to combat their claim to interfere with taxation. In significant language he reserved to himself the right of enforcing the commons' privileges not by words but by action. The vote of the lords was, however, decisive for the year. In the month of July it became necessary for the chancellor of the exchequer to provide for the cost of the Chinese expedition jointly carried out by England and France. He found the money by increasing the spirit duties one shilling a gallon.
Gladstone's budgets were the greatest and most popular events of Palmerston's second and longer administration. They excited unparalleled interest in the country, and the House of Commons was always crowded from floor to roof when they came on. Disraeli, who, though he was three times chancellor of the exchequer, never became an expert financier, could make no head against them, albeit his parliamentary genius was never more fully displayed than as leader of the opposition in the parliament of 1859. But before the budget of 1861 Gladstone introduced a social and economic reform which has proved immensely advantageous to the lower and middle classes of society. This was the post office savings bank bill, which he brought in on 8 Feb., and which became law without serious difficulty. Hitherto small savings could only be invested on the security of government through the savings banks, which were six hundred in number, and open for but a few hours in the day. The bill enabled them to be invested through the postal and money order offices, of which there were then between two and three thousand, and which were open from morning till night. The rate of interest was two and a half per cent., which was quite sufficient for the purpose; and the success of the measure was immediate and complete.
On 15 April 1861 Gladstone introduced his budget for the year in a speech which was pronounced by some impartial critics to be the finest he had yet delivered. He took off the penny which he had put on the income tax the year before. He again proposed the repeal of the paper duty. As for the income tax, he declared that it depended entirely upon the national expenditure. If the country would be content to be governed at the cost of 60,000,000l., they might get rid of the tax. If they persisted in spending 70,000,000l., it was impossible for them to dispense with it. The repeal of the paper duty was once more vigorously opposed, and Thomas Berry Horsfall, supported by the whole of the conservative party, moved that the tea duty should be abolished instead. The motion was defeated by a majority of eighteen; but the conservatives made a good deal of play with the cry of tea before paper. Gladstone had been subjected to some ridicule for his defeat by the House of Lords in the previous year. But it now became apparent that he knew well what he was about when he reserved to himself in 1860 the right of asserting by action the privileges of the commons. By a bold and practical innovation, which has since been the rule of parliament, he included all the taxes in one bill. This bill, being a money bill, could not be amended by the lords, who were