stylistic:style_transfer
Premiership (1721–1742)

Soon after Walpole returned to the Cabinet, Britain was swept by a wave of over-enthusiastic speculation which led to the South Sea Bubble. The Government had established a plan whereby the South Sea Company would assume the national debt of Great Britain in exchange for lucrative bonds. It was widely believed that the company would eventually reap an enormous profit through international trade in cloth, agricultural goods, and slaves. Many in the country, including Walpole himself (who sold at the top of the market and made 1,000 per cent profit), frenziedly invested in the company. By the latter part of 1720, however, the company had begun to collapse as the price of its shares plunged.

In 1721 a committee investigated the scandal, finding that there was corruption on the part of many in the Cabinet. Among those implicated were John Aislabie (the Chancellor of the Exchequer), James Craggs the Elder (the Postmaster General), James Craggs the Younger (the Southern Secretary), and even Lords Stanhope and Sunderland (the heads of the Ministry). Both Craggs the Elder and Craggs the Younger died in disgrace; the remainder were impeached for their corruption. Aislabie was found guilty and imprisoned, but the personal influence of Walpole saved both Stanhope and Sunderland. For his role in preventing these individuals and others from being punished, Walpole gained the nickname of "The Screen", or "Screenmaster-General".

The resignation of Sunderland and the death of Stanhope in 1721 left Walpole as the most important figure in the administration. On 3 April 1721 he was appointed First Lord of the Treasury, Chancellor of the Exchequer and Leader of the House of Commons. Walpole's de facto tenure as "prime minister" is often dated to his appointment as First Lord of the Treasury in 1721, though he himself rejected that title (it was originally a term of abuse), stating in 1741: "I unequivocally deny that I am sole and prime minister." His brother-in-law Lord Townshend served as Secretary of State for the Northern Department and controlled the nation's foreign affairs. The two also had to contend with the Secretary of State for the Southern Department, Lord Carteret. Townshend and Walpole were thus restored to power and "annihilated the opposing faction".