The original Liberal Party, of which it claims to be a continuation, was one of the two major British political parties from the mid-19th century until the 1920s, and a third party of varying strength up to 1988.
The Liberal Party grew out of the 18th and early 19th century Whig Party, which was augmented in the 1850s by "Peelite" defectors from the Tories and "Radicals" representing the new manufacturing interests. The term "Liberal Party" was first used officially in 1868, though it was used colloquially for decades before-hand. The establishment of the party as a national membership organisation came with the foundation of the National Liberal Federation in 1877.
Under Gladstone the Liberal Party was a dominant force until 1886 when it split over the issue of Home Rule for Ireland, when several senior figures left to found the Liberal Unionist Party. Thereafter it was only in power for short periods until it was returned by a landslide in 1906 under the leadership of Henry Campbell-Bannerman. Campbell-Bannerman died in 1908 and was succeeded by Herbert Henry Asquith. In the years leading up to the outbreak of the First World War, the Liberals pushed through numerous pioneering social reforms, such as regulation of working hours, national insurance and welfare, as well as the reform of the House of Lords, in 1909. Irish Home Rule proved harder to orchestrate, however, and the Liberal government seemed on the verge of collapse in the summer of 1914, when it was saved by the outbreak of the First World War. The poor British performance in the early months of the war forced Asquith to invite the Conservatives into a coalition on (May 17, 1915). This tenuous coalition fell apart at the end of 1916, when the Conservatives refused to support Asquith any longer and gave their support instead to the formerly Radical Welsh Liberal David Lloyd George, who became Prime Minister at the head of a coalition government largely supported by Conservatives. Asquith's followers moved into opposition, and the Liberal Party was split.
The divided party fell apart in the disastrous elections of 1922, 1923 and 1924, when it was superseded as the main party of the left by the Labour Party. Liberals, in ever-dwindling numbers, continued to be elected, though their ranks were once more split between "National Liberals" in coalition with the Conservatives, and those who stayed out of the government. Some MPs continued to be elected as National Liberals (effectively part of the Conservative Party) into the 1960s.
The Liberal Party hit a low ebb in the years after the Second World War, with only six MPs being elected in 1951, all but one of them aided by the Conservatives not putting up a candidate. Under the leadership of Jo Grimond (1956-67) the party increased its vote and managed to survive without Tory help. The upward trend continued under Jeremy Thorpe, but the party lost ground again in 1979, the first election under new leader David Steel, as Margaret Thatcher swept all before her.
In 1981 the Liberals were challenged for their place in the centre ground of British politics by the Social Democratic Party, which had been founded by defectors from the moderate wing of the Labour Party. The two parties quickly realised that there wasn't room for both of them, and fought the next two general elections jointly as the SDP-Liberal Alliance. The Alliance won over 20% of the vote each time, but never made the hoped-for breakthrough in terms of parliamentary seats. In 1988 the two parties merged to create (after a number of name changes) the Liberal Democrats. Over two-thirds of the members, and all the serving MPs of the Liberal Party, joined this new Liberal Democrat party.
A group of Liberal opponents of the merger continued under the old name of "the Liberal Party"; this was legally a new organisation (the headquarters, records, assets and debts of the old party were inherited by the Liberal Democrats), though its constitution asserts it to be the same party as that which had previously existed. It has a handful of local councillors, though its annual assembly scarcely attracts more than a hundred members.
See also: British politics
Chris Cook, A Short History of the Liberal Party, 1900-2001 (6th edition). Basingstoke: Palgrave, 2002. ISBN 0-333-91838-X