Second Labour Government

Second Labour Government

1. Dealing with the Economic Crisis 1929-31

   • Reforms
     • Lack of support from the Liberals in a minority government stopped the Education Bill - aimed at raising school leaving age to 15 - and a bill to increase maximum working week of 48 hours, as well as a plan to repel the 1927 Trade Union Act
     • Arthur Greenwood's Housing Act - Increased subsidies for house-building and introduced new slum clearance schemes.
     • Land Utilisation Act and Agricultural Marketing Act - Establised a series of marketing boards to help producers
     • Coal Mine Act - Reduced the minnrs day to 7.5hr instead of 8
     • Unemployment benefits increased
   • Wall Street Crash
     • American stock market crashed, leading to loss of American markets and loss in the trade of other European countries
     • Unemployment was already over a million due to long-term structural decline. End of 1932 almost 3 million unemployed
     • Depositors withdrew all their money fro the Bank of England This was withdraw by gold as Britain was still on the Gold Standard, this threatened Britain's reserves
   • Financial Crisis - More unemployed meant more unemployment benefits putting greater strain on government finances - Labour values of supporting the working man vs traditional belief in 'balancing the budget'
     • John Maynard Keynes - Radical Liberal - Embark on massive spending programme. Spend your way out of trouble - Get Britain off the Gold Standard - Keep Free Trade
     • Ramsay MacDonald - Dependent on other peoples advice - Economic Advisory Council of industrialists and economists to sort out the problem - Balance Budget - Committee by George May of the Prudential Insurance
       • May Committee 31st July budget deficit of £120million by 1932 unless severe cuts were made in government spending
         • Recommended cuts amounting to £96.5million from public sectors 20% cut in unemployment benefits and heavier taxation
     • Oswald Mosley - British Union Facists - Spend it's way out of trouble - Public Work Schemes for unemployed (it had worked for the Nazis)
     • Philip Snowden - Chancellor of Exchequer - Balance Budget and maintain the Gold Standard - Public Spending cuts - Keep Fair Trade
     • Stafford Cripps - Extreme Left-wing socialist - Create socialist economy by nationalising industries banks and services

2. Collapse of Labour Government

   • Divided Party - Many wanted the government to tax the rich heavier rather than cutting unemployment benefits
     • The fact MacDonald left his party's belief to do what he though was right bitterly divided the Labour Government
   • Cabinet Economy Committee meeting
     • Pay cuts- 10% unemployment benefit cut £38million - substantially less than the My Committee suggested
     • New York Bankers only agreed to loans if they cut unemployment benefits Conservative and Liberals agreed to this but Labour still struggled against it
     • A vote was casted on Sunday 23rd August It was approved 11 votes to 9 This split the Labour party so bad that MacDonald could no longer run it This lead to the set up of the National Government

3. Setting up of the National Government

   • Establishment
     • Support
       • The Conservatives and Liberals saw it an advantage that a Labour PM would be in place at a time when major cuts were needed As for the rest of the Labour Party on 3 chose to follow MacDonald - Snowden, Thomas and Sankey.
     • MacDoanld threatened to resign brought the King to make an agreement between Lloyd-George and Herbert Samuel; Ramsay would stay PM of a National Government
   • MacDonald's 'crimes'
     • Attitude
       • Had become arrogant and convinced he knew best - Disloyal to the party - Not brave enough to consider new ideas, ignored Oswald Mosley - Slow in responding to crisis and allowed them to get worse. - Snobbish and abandoned the working class
     • Labour Beliefs
       • Too ready to ignore the Trade Unions and the advice of his own cabinet ministers - Sacrificed Labour in the interest of the upper class 'aristocratic embrace'
     • Failed in Honour - should of resigned when the Liberals declined instead he sided with the Conservatives so that he could become the country 'saviour'
   • MacDonald's Defence
     • He had no reason to distrust 'orthodox economic principles',coming off the Gold Standard was thought to cause inflation
       • He acted honourably by sacrificing his party's principles for the greater good of the nation
       • Continued to borrow money up to summer 1931 to maintain unemployment insurance funds
       • MacDonald was one of the founders of the Labour Party, he had no need to want to destroy it

4. 1931 Crisis; Impact on Labour to 1940

   • Decline in Seats
     • As Labour was an unstable party seats went down from 288 seats in 1929 52 seats 1931
     • However, Labour did not loose the 1931 elections dramatically, it was Britain's 'first past the post' system which lead to Labours fall from power
   • MacDonald became a prisoner to the Conerrvtives as he lead a Conservative majority cabinet
   • Labour Recovery 1930's
     • Labour Won most by-elections and support went up more than anyone seemed to have though in the 30's They won control of London City Council in 1934
     • 1935 - Labour's seats increased to 153 - 102 more than in 1931 The won 38% which was higher than ever before even mores so than 1929
     • No Opposition
     • Flaws of the National Government
       • Unemployment had rose to 3 million in 1932 and many was long-term Hatred of means test and many 'hunger marches' helped to maitain working-class loyalty to Labour
     • Reforms
       • The biggest change to the Labour party was the move away from radicalism and the turn in becoming more modest and make 'respectable policies'
     • Socialist League
       • Set up by Stafford Cripps, for all radical socialists of the Labour Party, was shut down and Cripps was banned from the Party.