Hugh Dalton, the son of the chaplain to Queen Victoria, was born in Neath, in 1887. During his education at Eton he became friends with Rupert Brooke. While at King's College, Cambridge, he became a socialist and joined the Fabian Society. Under the influence of Sidney Webb he took a doctorate at the London School of Economics, and was then briefly a barrister before serving in France during the First World War.
Dalton returned to the LSE as a lecturer, and established a reputation as an economist with the publication of The Principles of Public Finance in 1922. He joined the Labour Party and in the 1924 General Election was elected to represent Camberwell the House of Commons.
Beatrice Webb was impressed by Dalton "I am inclined to agree with Arthur Henderson that if the Labour Government arrives during the next ten years Dalton will certainly attain Cabinet rank". However, she did not like him and added: "In his curiously deferential and ingratiating method of address with persons who are likely to be useful to him, there is just a hint of insincerity, in his colourless face there is a trace of cunning". His close friend, Mary Agnes Hamilton recalled, "he has forthright convictions of a robust kind... No one could charge Hugh with having a thin skin; it is not a quality he admires or comprehends. He is the complete extrovert; he loves the rough and tumble, the shouting and the fight."
The election of the Labour Government in 1929 coincided with an economic depression and Ramsay MacDonald was faced with the problem of growing unemployment. MacDonald asked Sir George May, to form a committee to look into Britain's economic problem. When the May Committee produced its report in July, 1931, it suggested that the government should reduce its expenditure by £97,000,000, including a £67,000,000 cut in unemployment benefits. MacDonald, and his Chancellor of the Exchequer, Philip Snowden, accepted the report but when the matter was discussed by the Cabinet, the majority voted against the measures suggested by Sir George May.
MacDonald was angry that his Cabinet had voted against him and decided to resign. When he saw George V that night, he was persuaded to head a new coalition government that would include Conservative and Liberal leaders as well as Labour ministers. Most of the Labour Cabinet totally rejected the idea and only three, Philip Snowden, Jimmy Thomas and John Sankey agreed to join the new government. MacDonald was determined to continue and his National Government introduced the measures that had been rejected by the previous Labour Cabinet.
Dalton voted to expel Ramsay MacDonald from the Labour Party. Only fifteen other MPs disagreed with Dalton. MacDonald had expected to split the party, but not a single local Labour Party decided to support him. Alfred Salter described the Labour members of the National Government as "renegades" and claimed that it was a "great triumph" that the party remained united.
The 1931 General Election was a disaster for the Labour Party with only 46 members winning their seats. Dalton was one of those who lost his seat. Ramsay MacDonald, now had 556 pro-National Government MPs and had no difficulty pursuing the policies suggested by Sir George May.
Dalton taught at the London School of Economics before re-entering Parliament after the 1935 General Election. His book, Practical Socialism (1935), had a major influence on the new Labour leader, Clement Attlee.
In 1940 Winston Churchill appointed Dalton as Minister of Economic Warfare in his government. While in this post he created the Special Operations Executive (SOE). Two years later he was promoted to Minister of the Board of Trade.
Following the 1945 General Election, the new Prime Minister, Clement Attlee, appointed Dalton as Chancellor of the Exchequer. He nationalized the Bank of England in 1946 but the following year was forced to resign after budget details were leaked to a journalist and was replaced by his long-time enemy Stafford Cripps.
Ben Pimlott, the author of Labour and the Left (1977) has argued: "Dalton's main flaw was a boyish enjoyment of plots and behind-the-scenes deals... Outgoing, worldly and gregarious, with a notoriously booming voice, politics remained for him on one level a compulsive, competitive undergraduate game. Revelling in personal success, with a huge confidence in his own abilities, he was distrusted both for his manoeuvrings and for his fierce careerism."
Dalton returned to office in 1948 as Chancellor of the Duchy of Lancaster. He also served as Minister of Town and Planning (1950-51). According to Konni Zilliacus, Dalton should have been Foreign Secretary instead of Ernest Bevin. "Hugh Dalton would have been far better, first of all because he really did know a lot about foreign affairs; secondly because he knew how to manage the Foreign Office officials, instead of being run by them; thirdly, because he was capable of learning from experience and correcting his mistakes; fourthly because he would listen to the views of back bench colleagues instead of treating any criticism or comments as an insult and relying on blind trade union loyalties and the power of the block vote to impose on the Labour Party the Churchillian policies that the Foreign Office had induced him to adopt."
Hugh Dalton, who was made a life peer in 1960, died in 1962.