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The Second Labour Govt; 1929-31 the key policies of the Labour
govt & their impact of the policies on the economic situation
The Formation of the Govt.
~ Despite calls to not form a govt the Labour leadership decided that this was another chance to
gain experience of leadership, remove any lingering doubts about their suitability to govern, and
gain more support.
~ MacDonald formed another minority govt., with Snowden as Chancellor and the first woman
cabinet member Margaret Bondfield as Minister of Labour.
~ Unemployment had dipped and Labour felt it was a good time to be in govt.
~ MacDonald told the House that he intended to be in office for at least 2 years and that he wanted
to establish a broad consensus with the other parties.
1. People seeking unemployment benefit no longer had to prove that they were `genuinely seeking
work' but instead officials had to show that an applicant had turned down a reasonable offer of
work if they wanted to stop benefits.
2. The Coal Mines Act reduced an eight hour day by 30 minutes.
The impact of the depression on Britain was:
~ The value of exports declined by nearly a half
~ Unemployment rose every month from Nov 1929 by July it hit 2 million, by Dec 1930 it hit
~ The cost of unemployment benefit rose from £12 million in 1928 to £125 million in 1931.
~ The PM had JH Thomas (Union Leader) set up a small ministerial team to tackle unemployment.
It included George Lansbury and Oswald Mosley a recent convert to Labour from the Tories.
This claimed that the govt was spending £42 million on public works.
~ Mosley though believed more could be done much more quickly. His proposals were rejected by
the cabinet and Labour Party. Mosley left Labour and set up the British Union of Fascists.
MacDonald set up a 15 man advisory council.
~ One of the men was the economist Keynes who told MacDonald that his choice was
"enterprise" or "thrift". Keynes called for a huge increase in public spending what was called
defecit financing or "reflation". But this idea was too close to Ll G's policies and had been those
suggested by Moseley. The Labour govt could not now introduce them despite the worsening
MacDonald wanted to maintain a level of respectability and responsibility this would not come
with untried policy initiatives.
~ Spending on public works did increase from £70 million (Feb) to £140 million(Sept 1930)
but they favoured the more orthodox advice of cutting govt spending (deflation) and waiting for
better times. This is what Chancellor Snowden favoured but cuts may need to be applied to social
benefits especially unemployment something which many in the Labour ranks were unwilling to
Therefore the govt took to the idea of drift with the budget left unbalanced for as long as possible.
~ The problem here though was this would damage foreign confidence in Britain. Therefore
Snowden called for budget cuts. (retrenchment)
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Restoring Britain to the Gold Standard had damaged the economy. Exports were uncompetitive
and the Bank of England had to sell their reserves to buy British gold from those who wished to
sell it so that they could maintain sterling at its pre war value. International confidence was
essential to maintain sterling at its value this would crumble if overseas markets sold sterling for
gold or other currencies.
~ But by 1930 MacDonald was showing signs of being worn out.…read more