P8 - 2nd labour gov : 1929-31

Election slogans

Libs - “We can conquer unemployment” - radical but many didn’t trust LG

Conservatives - “Safety First”

Labour - “Labour and the Nation” - offered to reverse the 1927 Trades Disputes act

limits the labour gov faced

some told MacDonald not to form a gov due to minority gov would prevent them from introducing socialism - he ignored them

-he wanted to prove the party was fit to run the nation + gain more voters

-formed with dependence of support from liberals but would allow MD to put his ideas into action

Macdonald gov 1929-31

experienced politician

cautious cabinet:

• Snowden - Chancellor - og Gladstonian lib

• Margaret Bondfield - first female cabinet minister

high optimism of party - dip in unemployment

promised to deal with unemployment + international friction

1929-31 measures passed (5)

-Greenwoods Housing act - increased subsidies for house building + slum clearance

-Land utilisation + Agricultural marketing act - market boards to help producers supply food to public - fixed pricing + improve efficiency

-Coal mines act - reduced miner days to 7.5 hours + attempt to make pits efficient - can be ignored

-Unemployment benefit increased - unrequired to prove seeking work for aid + steps made making public works funded by gov

-London Transport Bill 1931 - delayed till 1933 - provided for public corporations to give cheap + efficient bus and underground in London

Labour party domestic struggles (3)

some measures not passing due to lack of lib backing:

-education Bill - raise leaving age to 15

-bill of max working week 48H

-repeal 1927 Trade disputes act - upset labour left

Wall street Crash 1929 - BR effect

world fell into a global depression:

gold standard - BR currency strength decline

structural unemployment - sales fell which effect staples leading to cuts made

cyclical unemployment - supply and demand fluctuations trends

1931 - High unemployment of 2.64m:

• ship building 30.6%

• Coal miners 25%

• shipping 22.3%

• Textile trade 15.2%

1932 - almost 3m

• 34% coal

• 47% steel

• 62% ship makers

North South divide

South East + midlands flourished - had newer industries here e.g. car making + chemical

• ppl preferring to move to South as ppl working/earing here, so provided customers

• South didn’t have same record of troubled industrial relations

• ability to move further from Northern mines + road/rail transport more inclined

depressed areas - NW 16.2%, NE 16.6%, Scotland 18%, N.Ireland 25%, Wales 28.5% e.g.

-Jarrow (Tyneside) + Merthyr Tydfil (South Wales) had 60% unemployment

-Birmingham + Oxford had 6% unemployment

Causes of Economic Depression post 1929

-loss of markets

-Wall street crash - intensified economic issues in BR

-debt - biggest debtor by 1918 + paying back loans to US

-world economy - US largest creditor in isolation

-Staple industries decline - exports fell by 50% + 2.5m unemployed

-1925 Gold standard - BR goods more expensive + less competitive

-Hatry Crash 1929 - ppl bought into scam war bonds, so less comfortable abt investing

Unemployment benefit

designed to be funded through worker + employer contributions but only effective if most were employed

deficit -by 1929 more being paid out then coming in

-in 1922 gov extended unemployment benefit to run for an unlimited period - unsustainable to lvls of 1931

MacDonalds options

labour stood for welfare of working class, so benefits were integral

-Bill for unemployment aid was 12m, escalating to £125m in 1931

-constant spending undernimmed MD balanced budget

created 1930 Economic Advisory Council of Industrialists and economists:

• Mosley’s memorandum + Snowden’s ideas provided as solutions

Mosley Memorandum

junior member of party, with ideas supported by Keynes

-expansionary economic policy on foreign policy financed by public wants

-encourage greater domestic productivity

-protect BR with tariffs

-greater gov intervention in businessmen to improve efficiency

MD feared radical ideas would lose confidence of BR economy + create more unemployment

Snowden’s ideas

Chancellor of Exchequer

had traditionalist belief in balanced budget + laissez faire approach + disliked change

-stay on gold standard

-cut un welfare benefits, notably unemployment benefit

-free trade

MD backed Snowden, leading to Mosley resigning

1931 European banking crisis

as BR on gold standard depositors withdrew money in gold

lost 2.5m in gold a day

no fault of MD

May Committee 1931

MD required to balance the budget, keep opposition on their side, protect the interest of wk man

-libs proposed a May committee to regain confidence

• 1931 JULY predicted deficit of £120m by 1932 unless cuts were made

• recommended 96.5m + 20% in unemployment benefit + increased taxation

• pay cuts for teachers police, civil servants

Why did Labour fail to agree on budget cuts in August 1931?

Labour had raised income tax in 1930, so couldn’t persuade other parties to raise it again

Liberals and Conservatives agreed to a £56m cut, but rejected cuts to unemployment benefit

MacDonald and Snowden wanted £78m cuts including a 10% cut to unemployment benefit

-when finally agreed opposition though it was too small + TU rejected idea of any cuts

• Cabinet vote was 11–9 in favour, but the split led the Cabinet to resign to the King on 24 August 1931

Creation of the National gov

met the King George V who already spoke with Baldwin + Herbert Samuel

saw it as temp to balance the budgets + save the pound

MD would head national gov

“country before party” - economic crisis so serious that it required national unity

Reaction of Labour Cabinet

-saw as a betrayal + abandoning of wk man, thinking only of his own career ambitions

-MD expelled from party with Henderson becoming leader

-”Lucifer of the Left”

Thomas, Sankey, Snowden remained loyal to MD

National Government actions

formed 1931 AUG - cabinet of 4 CON, 2 LIB , 3 LAB

Snowden immediately:

• 10% cut to unemployed benefit

• cut salaries of gov employees

• raised tax to 25%

• balanced the budget to enable loan negotiations

Invergordon Mutiny

sailors received 10% cuts so refused to follow orders - papers accidently reported it as 25%

• Triggered a loss of confidence in the pound → investors withdrew gold

• Britain left the Gold Standard in September 1931 - realistic exchange rates

mutiny resolved with cuts resolved

Election 1931 OCT

-MD with no party was pressured by Cons to hold election to maintain coalition

-gov only asked for a vote of confidence - “Doctors Mandate” - do any means to resolve issue

National gov 554 to opposition 61

67% of votes

National Labour party

MD + his supporters formed this

supported CON dominated administration so re-joining less likely to occur

-MD was head of the Conservative dominated gov

Effect of the election on others: Liberals

led by LG, and only had 4 seats

-refused to join coalition

also split again:

• Simonites – supported the National Government - believed in free trade

• Samuelites – more cautious/independent stance

Mosley’s New Party

formed in MAR 1931

no seats but 36,000 votes

-didn’t have enough time to organise party

Labour

fell from 288 seats to 54 but had 30% votes

greatest electoral defeat in labour history

-MD used as a scapegoat in the Labour party