He entered on his new duties at a time when the country was profoundly stirred by the rapid increase of the German fleet, and was in doubt whether the preparations of the Admiralty were on a sufficiently extensive scale. McKenna, supported by the prime minister and Edward Grey, persuaded his other colleagues to agree to the building of four battleships of dreadnought type in 1909, and to ask for power, if necessary, to prepare for the construction of four more a year later. This contingent programme was also carried.
From the Admiralty McKenna went in the autumn of 1911 to the Home Office, and, as home secretary, had charge of the Welsh Disestablishment bill. In the first Coalition ministry in 1915 he was made chancellor of the exchequer, and a still more diffi cult task was imposed on him—to find the money to carry on the World War. By a 41% war loan a subscription of nearly i600,000,000 was obtained. In the autumn he introduced a sup plementary war budget, providing for over £100,000,000 by new taxation. Income tax was raised 4o%, and the abatement and exemption limits lowered ; the rates of supertax were seriously heightened ; all the old duties on sugar, tea, tobacco, cocoa, coffee, motor spirit and patent medicines were almost doubled; the im port of luxuries such as motor cars, cinema films, clocks and musical instruments was restrained by an ad valorem duty of 33-A-%; and an excess profits tax of 5o% was imposed. Other
methods of financing the war which he adopted were war savings certificates, which realized over £40,000,000 in their first year; 5% exchequer bonds, replaced after a year for a short time by 6% exchequer bonds: but for current expenses he relied mainly on the sale of treasury bills. In his 1916 budget he raised taxation still further. Income tax was increased to 5s. in the I and excess profits tax to 6o% ; there were further increases on sugar, cocoa and coffee ; higher duties were imposed on motor vehicles ; there were new taxes on amusements, railway tickets, matches and mineral waters.
McKenna went out of office with Asquith in Dec. 1916, and, in 1919, he accepted the chairmanship of the London City and Midland (now the Midland) Bank, and speedily gained a position of authority in the city of London. (G. E. B.)