National Government (United Kingdom) - The Crisis of 1931

The Crisis of 1931

The Wall Street Crash heralded the global Great Depression and Britain was particularly badly hit. The government was trying to achieve several different, contradictory objectives: trying to maintain Britain's economic position by maintaining the pound on the gold standard, balancing the budget, and providing assistance and relief to tackle unemployment.

In 1931 the situation deteriorated and there was much fear that the budget was unbalanced, which was borne out by the independent May Report which triggered a confidence crisis and a run on the pound. The Labour government agreed to make changes in taxation and expenditure in order to balance the budget and restore confidence, but the Cabinet could not agree on the two options available: either introduce tariffs, or make 20% cuts in unemployment benefit. When a final vote was taken the Cabinet was split 11:9 with a minority - including many political heavyweights such as Arthur Henderson and George Lansbury - threatening to resign rather than agree. Due to this unworkable split, on 24 August 1931 the government resigned.

The political crisis generated much concern and the leaders of both the Conservative and Liberal parties met with King George V and MacDonald, at first to discuss support for the measures to be taken but later to discuss the shape of the next government. On 24 August MacDonald agreed to form a National Government composed of "men from all parties" with the specific aim of balancing the Budget and restoring confidence. The government would then dissolve itself and a general election would be held on party lines. A small Cabinet of just ten Ministers was formed to take emergency decisions, with ministerial posts divided as proportionally as possible between the three parties, though relatively few Labour members joined the government.