The term Whig originates from the Exclusion Bill crisis of 1678-1681. The Whigs were those who supported the exclusion of James II and VII from the thrones of England, Ireland and Scotland (the "Petitioners") and the Tories were those who opposed it (the Abhorrers). Both names were originally insults: a "whiggamor" was a cattle driver, and a "tory" was an Irish term for an outlaw.
Generally, the Tories were associated with the landed gentry and the Church of England, while Whigs were more associated with the great noble houses, the monied class, and religious dissenters (that is non-Anglicans), but there was a good deal of overlap in the two groups' constituencies. Neither group could be considered a true political party in the modern sense.
After the Glorious Revolution of 1688, King William III governed with both Whigs and Tories, despite the sometimes questionable loyalty of many of the Tories, many of whom still supported the deposed James II. William saw that the Tories were generally more friendly to royal authority than the over-mighty Whigs, and generally used both in his government as much as he could. His successor Queen Anne, despite her Tory sympathies, maintained this policy, supported by her moderate Tory ministers, the Duke of Marlborough and Lord Godolphin. However, as the War of the Spanish Succession went on, becoming less and less popular with the Tories, Marlborough and Godolphin were forced to rely more and more on the Junto of Whig magnates, so that by 1708 they headed an administration almost entirely consisting of Whigs. Anne herself grew increasingly uncomfortable with this dependence on the Whigs, especially as her personal relationship with the Duchess of Marlborough deteriorated, and in 1710 she dismissed her Whig ministers, replacing them with Tories.
The Whigs now moved into opposition, and particularly decried the 1713 Treaty of Utrecht, which they attempted to block through their majority in the House of Lords, until Anne forced it through by creating new Tory peers.
With Hanoverian succession in 1714, when Elector George Louis of Hanover became King George I, the Whigs returned to government. Particularly after the Jacobite Uprising of 1715 discredited much of the Tory party as traitorous Jacobites, the Whigs became the dominant party of government. During the long period between 1714 and 1760, the Tories practically died out as an active political force, although they always retained a considerable presence in the House of Commons. Both the governments of Robert Walpole and the Pelhams (Henry Pelham and his older brother, the Duke of Newcastle), which ruled with only brief breaks between 1721 and 1756, and the leading opposition elements referred to themselves as Whigs.
This changed during the reign of George III, who hoped to restore his own power by freeing himself from the great Whig magnates. Thus, George promoted his old tutor, Lord Bute to power, and broke with the old Whig leadership surrounding the Duke of Newcastle. After a decade of factional chaos, a new system emerged, with two separate opposition groups. The Rockingham Whigs, who claimed the mantle of "Old Whigs," as the purported successors of the party of the Pelhams and the great Whig families. With such noted intellectuals as Edmund Burke behind them, the Rockingham Whigs laid out a philosophy which for the first time extolled the virtues of faction, or at least their faction. The other group were the followers of Lord Chatham, the great political hero of the Seven Years War, who took a stance of opposition to party and faction, generally.
They were opposed by the government of Lord North, which they accused of being a Tory administration, although it largely consisted of individuals previously associated with the Whigs - many old Pelhamites, as well as the Whig factions formerly led by George Grenville and the Duke of Bedford, although it also contained elements of the "Kings' Men", the group formerly associated with Lord Bute and which was generally seen as Tory-leaning. This association of Toryism with the North government was also influential in British North America, where Whiggery was closely identified with the Patriots.
Following the British defeat in America, the North administration fell from power in March 1782, and a coalition of the Rockingham Whigs and the former Chathamites, now led by the Earl of Shelburne, took its place. After Rockingham's unexpected death in July 1782, this uneasy coalition fell apart, with Charles James Fox, Rockingham's successor as faction leader, quarreling with Shelburne and withdrawing his group from the government. The Shelburne administration which followed was short-lived, however, and in April 1783 Fox returned to power, this time in an unexpected coalition with his old enemy Lord North. Although this pairing was seen as unnatural by many at the time, it was to last beyond the fall of the coalition in December 1783. The coalition's untimely fall was brought about by the machinations of George III in the House of Lords, and the King now brought in Chatham's son, William Pitt the Younger, as his prime minister.
It was only now that a genuine two-party system can be seen to emerge, with Pitt and the government on the one side, and the ousted Fox-North coalition on the other. Although Pitt is often referred to as a "Tory" and Fox as a "Whig," Pitt himself always considered himself to be an "independent Whig," and generally opposed the development of a strict partisan political system.
Fox's supporters, however, certainly saw themselves as legitimate heirs of the Whig tradition, and they presented a raucous and strong opposition to Pitt for his early years in office, notably during the regency crisis revolving around the King's temporary insanity in 1788-1789, when Fox and his allies supported full powers for their friend, the Prince of Wales, as regent.
The opposition Whigs were split, however, by the onset of the French Revolution. While Fox and some younger members of the party such as Charles Grey and Richard Brinsley Sheridan were sympathetic to the party, others, and especially Edmund Burke, quickly became virulently opposed. Although Burke himself was largely alone in defecting to Pitt in 1791, much of the rest of the party, including the influential House of Lords leader the Duke of Portland, Rockingham's nephew Lord Fitzwilliam, and William Windham, were increasingly uncomfortable with the flirtations of Fox and his allies with radicalism and the French Revolution. In early 1793 they split with Fox over the question of support for the war with France, and by the end of the year they had openly broken with Fox. By the summer of the next year, large portions of the opposition had defected entirely, joining Pitt's government.
Although many of the Whigs who had joined with Pitt would eventually return to the fold, joining again with Fox in the Ministry of All the Talents following Pitt's death in 1806, after Pitt's death the divisions finally began to harden into clear political parties. The followers of Pitt - led, until 1809, by Fox's old colleague the Duke of Portland, increasingly reactionary in his old age, took up proudly the label of Tories, while Fox's followers - led since Fox's death in 1806 by Lord Grey - retained the label of Whig. After the fall of the Talents ministry in 1807, the Whigs remained out of power for many years. The accession of Fox's old ally, the Prince of Wales, to the regency in 1811 did not change the situation, as the Prince had become increasingly conservative as he aged, and now broke entirely with his old Whig companions.
It was only after the death of George IV, in 1830, that the Whigs finally returned to power, and the administration of Lord Grey, finally in office, accomplished a number of important reform measures — most notably the parliamentary Reform Act 1832 and the abolition of slavery. The Whigs, however, remained a largely conservative party (as did the Tories), and generally opposed any further changes to the British governmental system. It was around this time that the great Whig historian Thomas Babington Macaulay began to promulgate what would later be coined the Whig view of history, in which all of English history was seen as leading up to the culminating moment of the passage of Lord Grey's reform bill. The Whig view led to serious distortions in later views of 17th century history, as Macaulay and his followers attempted to fit the complex factional politics of the Restoration into the neat categories of early 19th century political divisions.
The Liberal Party
The Liberal Party (the term was first used officially in 1868, but it had been used colloquially for decades beforehand) arose out of a coalition between Whigs, free trade Tory followers of Robert Peel, and free trade Radicals which was first created, tenuously under the Peelite Lord Aberdeen in 1852, and put together more permanently under the former Canningite Tory Lord Palmerston in 1859. Although the Whigs at first formed the most important part of the coalition, the Whiggish elements of the new party progressively lost influence during the long leadership of the Peelite William Ewart Gladstone, and many of the old Whig aristocrats broke from the party over the issue of Irish home rule in 1886 to help form the Liberal Unionist Party. The Unionist turn to protection in the early twentieth century, however, (inspired by the Liberal Unionists' own leader, Joseph Chamberlain, probably the least Whiggish character in the party) further alienated the more orthodox Whigs, however, and by the early twentieth century whiggery was largely irrelevant and without a natural political home.