In 1888 Mr Balfour served on the Gold and Silver Commission, currency problems from the standpoint of bimetallism being among the more academic subjects which had engaged his attention. On the death of Mr W. H. Smith in 1891 he became first lord of the treasury and leader of the House of Commons, and in that capacity introduced in 1892 a Local Government Bill for Ireland. The Conservative government was then at the end of its tether, and the project fell through. For the next three years Mr Balfour led the opposition with great skill and address. On the return of the Unionists to power in 1895 he resumed the leadership of the House, but not at first with the success expected of him, his management of the abortive education proposals of '96 being thought, even by his own supporters, to show a disinclination for the continuous drudgery of parliamentary management under modern conditions. But after the opening session matters proceeded more smoothly, and Mr Balfour regained his old position in the estimation of the House and the country.
He had the satisfaction of seeing a bill pass for providing Ireland with an improved system of local government, and took an active share in the debates on the various foreign and domestic questions that came before parliament during 1895-1900. His championship of the voluntary schools, his adroit parliamentary handling of the problems opened up by the so-called "crisis in the Church" caused by the Protestant movement against ritualistic practices, and his pronouncement in favour of a Roman Catholic university for Ireland - for which he outlined a scheme that met with much adverse criticism both from his colleagues and his party, - were the most important aspects of Mr Balfour's activity during these years. His speeches and work throughout this period took a wider range than before his accession to the leadership of the Commons. During the illness of Lord Salisbury in 1898, and again in Lord Salisbury's absence abroad, he was in charge of the foreign office, and it fell to his lot to conduct the very critical negotiations with Russia on the question of railways in North China. To his firmness, and at the same time to the conciliatory readiness with which he accepted and elaborated the principles of a modus vivendi, the two powers owed the avoidance of what threatened to be a dangerous quarrel.
As a member of the cabinet responsible for the Transvaal negotiations in 1899 he bore his full share of controversy, and when the war opened so disastrously he was the first to realize the necessity for putting the full military strength of the country into the field. At the general election of 1900 he was returned for East Manchester (which he had represented since 1885) by a majority of 2453, and continued in office as first lord of the treasury. His leadership of the House of Commons in the first session of the new parliament was marked by considerable firmness in the suppression of obstruction, but there was a slight revival of the criticisms which had been current in 1896. Mr Balfour's inability to get the maximum amount of work out of the House was largely due to the situation in South Africa, which absorbed the intellectual energies of the House and of the country and impeded the progress of legislation.
The principal achievements of the long session of 1902 (which extended to the autumn) were the passing of the Education Act, - entirely reorganizing the system of primary education, abolishing the school boards and making the county councils the local authority; new rules of procedure; and the creation of the Metropolitan Water Board; and on all these questions, and particularly the two first, Mr Balfour's powers as a debater were brilliantly exhibited.
On Lord Salisbury's resignation on the 11th of July 1902, Mr Balfour succeeded him as prime minister, with the cordial approval of all sections of the Unionist party. For the next three and a half years his premiership involves the political history of England, at a peculiarly interesting period both for foreign and domestic affairs. Within a few weeks Mr Balfour had reconstituted the cabinet. He himself became first lord of the treasury and lord privy seal, with the duke of Devonshire (remaining lord president of the council) as leader of the House of Lords; Lord Lansdowne remained foreign secretary, Mr (afterwards Lord) Ritchie took the place of Sir Michael Hicks-Beach (afterwards Lord St Aldwyn) as chancellor of the exchequer, Mr J. Chamberlain remained colonial secretary, his son Austen being postmaster-general with a seat in the cabinet. Mr G. Wyndham as chief secretary for Ireland was included in the cabinet; Lord Selborne remained at the admiralty, Mr St John Brodrick (afterwards Lord Midleton) war minister, Lord George Hamilton secretary for India, and Mr Akers-Douglas, who had been first commissioner of works, became home secretary; Lord Balfour of Burleigh remained secretary for Scotland, Lord Dudley succeeded Lord Cadogan as lord lieutenant of Ireland, and Lord Londonderry became president of the Board of Education (with Sir William Anson as parliamentary secretary in the House of Commons). Mr Balfour's brother Gerald (b. 1853), who had entered public life as his private secretary when at the Local Government Board, and had been chief secretary for Ireland from 1895-1900, retained his position (since 1900) as president of the Board of Trade.
The new prime minister came into power practically at the same moment as the king's coronation (see Edward VII.) and the end of the South African War (see Transvaal). The task of clearing up after the war, both in South Africa and at home, lay before him; but his cordial relations with Mr Chamberlain (q.v.), and the enthusiastic support of a large parliamentary majority, made the prospects fair. For a while no cloud appeared on the horizon: and the Liberal party were still disorganized (see Campbell-Bannerman and Rosebery) over their attitude towards the Boers. Mr Chamberlain went to South Africa in the late autumn, with the hope that his personality would influence the settlement there; and the session of 1903 opened in February with no hint of troubles to come. A difficulty with Venezuela, resulting in British and German co-operation to coerce that refractory republic, caused an explosion of anti-German feeling in England and some restlessness in the United States, but the government brought the crisis to an end by tactful handling and by an ultimate recourse to arbitration.