1931
MacDonald’s second administration, like his first, was a minority, but this time Labour were at least the largest party in the House of Commons. David Lloyd George was happy to give passive support to a Labour ministry, and so Labour once again entered Government. MacDonald made sure not to repeat the mistakes of his first term, and declared that his Government’s first priority would be to deal with unemployment and the worsening standard of living of the British working class. Veteran trade unionist J. H. Thomas was appointed Lord Privy Seal (effectively a minister without portfolio) and given extensive power to investigate and propose legislation to deal with the employment, and in 1930, Labour passed laws to clear slums, raise unemployment assistance and stabilise the situation of coal miners (the root cause of the 1926 general strike).
If MacDonald had looked forward to a quiet term in which to carry out the Labour programme, however, it was not to be. In October 1929, the New York Stock Exchange crashed, ending a near-decade of continuous economic growth. It took a while for the effects to reverberate in the less interconnected global economy of the time, but through 1930, Britain’s economic situation became worse and worse. The Labour Government, like most other governments of the day, was totally unprepared for this, and faced a dilemma as to how to resolve it. There was a rising clamour for interventionist state spending, led by Cambridge economist John Maynard Keynes, but those ideas were extremely radical for the time. Chancellor Philip Snowden, a classical liberal at heart, refused to countenance deficit spending, and clung to austerity as the only acceptable course of action.
Opposition to this was swift and harsh from the Labour backbenches. One of the leading Keynesian voices in Parliament was Oswald Mosley, MP for Smethwick and Chancellor of the Duchy of Lancaster (another de facto minister without portfolio), who wrote up the “Mosley Memorandum” outlining a policy of protectionism, nationalisation and extensive public works. The Memorandum further called for a synthesis of government, business and organised labour, in order to “obliterate class conflict and make the British economy healthy again” – a view that contrasted quite sharply with those of most Labour and Unionist MPs. Mosley would resign from Cabinet in May 1930, launching the “New Party” with the goal of uniting the left and right behind the programme laid out in the Mosley Memorandum. Because of its corporatist orientation as well as Mosley’s increasing respect for Benito Mussolini, the New Party would soon drift toward fascism, but the process was not yet complete by the 1931 election.
Mosley, the Unionists, and indeed Labour were all overtaken by events in the summer and autumn of 1931, as Britain further sank into economic depression and the standing of the pound sterling became more and more threatened. Hitherto, the pound had been backed by gold, which aided international trade and was useful as long as Britain’s economy remained strong. In times like this, however, when the British economy was weak but the value of gold remained high, it was incredibly risky – the pound couldn’t adapt to changes in the economy, and became the target of speculation, reducing available gold reserves and further threatening the economic stability of the Government. Snowden, true to form, refused to abandon the gold standard, and instead plans were made for massive austerity measures in the 1931 budget, including cuts in public-sector wages and unemployment assistance. While a narrow majority of Cabinet backed the budget, a large minority did not, and threatened to resign if it were carried out. Seeing a split that would likely doom his government anyway, MacDonald decided to instead submit his resignation as Prime Minister on 24 August 1931.
The King wanted nothing more than to avoid chaos and division in this time of crisis, so in place of sending for Stanley Baldwin, he encouraged MacDonald to form a new government – a grand coalition, with ministers from across the political spectrum. This “National Government” would be able to take firm action, backed by thumping majorities in both houses of Parliament, to see Britain through the crisis and restore the pound to a solid footing. MacDonald liked the idea, and as it turned out, so did both Baldwin and most senior Liberals. The only party that was not convinced, embarrassingly for MacDonald, was Labour – to the unions and the Labour backbenches, this “National Government” sounded a lot like a plot to get austerity through behind their backs even though they’d just won the election.
The Labour executive, shortly after rejecting MacDonald’s plan for government, removed MacDonald himself from the leadership and replaced him with Arthur Henderson, a former party leader who had led opposition to the austerity plan inside Cabinet. When MacDonald accepted the King’s invitation to head the National Government over his party’s objection, he was expelled from the Labour Party altogether, and Snowden and Thomas as well when they joined his new Cabinet.
MacDonald and his allies immediately formed a new party, the National Labour Organisation, to support the National Government. No trade unions backed it, leaving it essentially at the mercy of the other Government parties, of which the most powerful by far was the Conservative and Unionist Party – the label “Unionist” was gradually replaced with “Conservative” over the course of the interwar period, and it’s hard to pinpoint a date when one name definitively overtook the other. For our purposes, though, the creation of the National Government is as good a place as any. The Scottish branch of the party would carry on using “Unionist” until centralising reforms in 1965, while the Ulster branch would never change names and eventually spin off into a separate party altogether in the 1970s (already being essentially independent from partition onward).
The formation of the National Government was transformative for all three major parties, but the Liberal split was probably the deepest-seated and most disastrous in the long term. The party had been rudderless ever since Lloyd George’s Coalition fell apart, and would split into three factions for the 1931 election. The first, under Deputy Leader Herbert Samuel, went into the National Government hoping to advance the Liberal programme of free trade and public spending, while a minority under John Simon drifted towards the Conservative protectionist position. Simon had resigned the whip as early as June, and with his participation in the National Government, a rival Liberal faction was formed dubbed the Liberal Nationals (changed to National Liberals after 1945). Finally, there was David Lloyd George, who remained leader of the Liberal Party through all of this, although a wounded prostate kept him hospitalised through most of the fateful days in August. He initially gave the National Government his support, but later pulled out and formed his own “Independent Liberal” party, which famously stood six candidates in 1931, four of whom were related to Lloyd George by blood or marriage (the other two were junior minister and future
Evening Standard editor Frank Owen, who had been elected as MP for Hereford at age 23 and remained Baby of the House, and science-fiction writer Edgar Wallace, the only Independent Liberal candidate who wasn’t a sitting MP).
Most expected the National Government to sit for a few weeks, sort out the economy, then disband and return to normal party politics. This was probably also its goal, but it would soon turn out that the economic situation was far more dire than anyone had expected. The public-sector pay cuts advanced by Chancellor Snowden included a pay cut for Navy personnel of between 10 and 25 percent. On 11 September, the Atlantic Fleet pulled into harbour at Invergordon, in the Scottish Highlands, and its sailors received the rude shock of reading about the pay cuts in the previous day’s London newspapers. The Fleet was due to sail again on the 15th, but only one capital ship actually left port – on the others, the sailors mutinied and refused to set sail unless the pay cut was rescinded. The Invergordon Mutiny lasted about thirty-six hours, and caused panic both in Cabinet and on the London Stock Exchange. Banks continued to hoard gold, and the pound continued to plummet, until Snowden was finally forced to concede defeat and take the pound off the gold standard on the 21st.
The National Government now found itself without its key policy promise, and Britain found itself in uncertain economic waters. Both the Conservatives and MacDonald now wanted an election, and one where the National Government would go to the country as one unit, as the Coalition had in 1918. There were two major stumbling blocks: the end of the gold standard meant the major unifying factor in the Government was gone, and the Liberals still disagreed with everyone else on trade. The solution was childishly simple: the National Government would not campaign on any policy promises, instead seeking a “doctor’s mandate” to do whatever it deemed necessary to restore the economy to good health. Individual candidates were free to support protectionism or free trade, and protectionist Conservatives were frequently opposed by Liberal candidates, making 1931 not quite a full “coupon election”.
Despite the vagueness of its platform, it can’t be denied that the National Government did extremely well out of the 1931 election. Held on 27 October, six weeks after Invergordon and just over a month after the end of the gold standard, the election saw Labour reduced to just 52 seats, its worst result since the war, although its voteshare remained relatively healthy at 30.6%. Nearly all the rest of the votes went to the National Government, however, including the Conservatives, who won an outright majority of the popular vote for the last time (to date) in British political history. The National Government would take over ninety percent of seats in the House of Commons, and the Conservatives alone won a three-quarters supermajority.
As in 1924, the biggest losers in terms of votes were not Labour but the Liberals. The three factions of the Liberal Party increased their share of seats compared to 1929 (indeed, they won more seats put together than Labour did), but because of the National Government electoral pacts, there were only Liberal candidates in some 150 constituencies. Everywhere else, the local party branches had nothing to fight for and no funding, and the once-proud Liberal ground organisation continued to atrophy.
The National Government, intended to last a month or so, would continue in one form or another until 1945.