In Feb. 1901 he was called upon to undertake the administra tion of the two Boer states, both now annexed to the British Empire, though the war was still in progress. He thereupon resigned the governorship of Cape Colony, while retaining the post of high commissioner. The work of reconstructing the civil administration in the Transvaal and Orange River Colony could only be carried on to a limited extent while operations continued in the field. Milner therefore returned to England for a holiday; on his arrival he was raised to the peerage with the title of Baron Milner of St. James's and Cape Town. Meanwhile the diplomacy of 1899 and the conduct of the war had caused a great change in the attitude of the Liberal party in England towards Lord Milner. A violent agitation for his recall, in which Sir Henry Campbell Bannerman joined, was organized, but without success, and in August he returned to South Africa, where he plunged into the herculean task of remodelling the administration. In the nego tiations for peace he was associated with Lord Kitchener, and the terms of surrender, signed at Pretoria on May 31, 1902, were drafted by him. On July 15 he was made a viscount.
Immediately following the conclusion of peace Milner pub lished (June 21) the Letters Patent establishing the system of crown colony government in the Transvaal and Orange River colonies, and exchanging his title of administrator to that of governor. The reconstructive work necessary after the ravages of the war was enormous. He provided a steady revenue by the levying of a tax of o% on the annual net produce of the gold mines, and devoted special attention to the repatriation of the Boers, land settlement by British colonists, education, justice, the constabulary, and the development of railways. During a visit to Europe he was offered the post of secretary of State for the Colonies, but refused, returning to South Africa, where eco nomic depression was becoming pronounced. He was back in Johannesburg in Dec. 1903, and had to consider the crisis in the gold-mining industry caused by the shortage of native labour. Reluctantly he agreed, with the assent of the home government, to the proposal of the mineowners to import Chinese coolies on a three years' contract.
In the latter part of 1904 and the early months of 1905 Lord Milner was engaged on the elaboration of a scheme to provide the Transvaal with a system of "representative" government, a half-way house between crown colony administration and that of self-government. Letters Patent providing for representative gov ernment were issued on March 31, 1905. Owing to the advent of a Liberal ministry in England, in Dec. 1905, this scheme remained inoperative. (See TRANSVAAL : History.) For some time he had suffered in health from the incessant strain of work, and he determined to retire. He left Pretoria on April 2, and sailed for
Europe on the following day. Speaking at Johannesburg on the eve of his departure, he recommended to all concerned the pro motion of the material prosperity of the country and the treat ment of Dutch and British on an absolute equality. When he left, the economic crisis was still acute and criticism rife. But the foundations of revival had been laid.
Experience in South Africa had shown him that underlying the difficulties of the situation there was the wider problem of imperial unity. In his farewell speech at Johannesburg he con cluded with a reference to the subject. "When we who call our selves Imperialists talk of the British Empire we think of a group of states bound, not in an alliance—for alliances can be made and unmade—but in a permanent organic union. Of such a union the dominions of the sovereign as they exist to-day are only the raw material." This thesis he further developed in a magazine article written in view of the colonial conference held in London in 1907. He advocated the creation of a permanent deliberative imperial council, and favoured preferential trade relations between the United Kingdom and the other members of the empire; and in later years he took an active part in advocating the cause of tariff reform and colonial preference.
Milner occupied himself mainly, after his return from South Africa, with business interests in the City of London. He was active on behalf of causes which appealed to him from the im perial side, and he made several speeches on behalf of tariff re form and colonial preference. He was roused, however, by Lloyd George's budget of 1909, and he advised the House of Lords to reject the Finance Bill, and, as he said at Glasgow, to "damn the consequences." He made several speeches in the next 12 months in defence of the Lords' position ; and when the Parliament Bill came up to the House of Lords in 1911, he was a leading spirit among the "Diehards" who advised resistance to the end.
Lloyd George, when he formed his first war ministry in Decem ber 1915, at once turned to Milner, the only British administra tor who before 1914 had directed a war from the civil side, and constituted him one of his principal colleagues in his War Cabinet of four. From this time to the cessation of hostilities their rela tions were close, and, after Lloyd George, Milner took the largest share in the civilian conduct of the War. Milner's experience, scholarship, steadiness and somewhat bureaucratic habit of mind supplied an invaluable complement to his chief's daring, impa tience of precedent, quickness of apprehension and intellectual agility. In February 1917 he attended, on behalf of the British Government, a conference of the Allies in St. Petersburg (Lenin grad).