In its manifesto for the 1929 General Election the Conservative Party blamed the General Strike for the country's economic problems. "Trade suffered a severe set-back owing to the General Strike, and the industrial troubles of 1926. In the last two years it has made a remarkable recovery. In the insured industries, other than the coal mining industry, there are now 800,000 more people employed and 125,000 fewer unemployed than when we assumed office... This recovery has been achieved by the combined efforts of our people assisted by the Government's policy of helping industry to help itself. The establishment of stable conditions has given industry confidence and opportunity." (3)

The Labour Party attacked the record of Baldwin's government but did not propose an alternative: "By its inaction during four critical years it has multiplied our difficulties and increased our dangers. Unemployment is more acute than when Labour left office.... The Government's further record is that it has helped its friends by remissions of taxation, whilst it has robbed the funds of the workers' National Health Insurance Societies, reduced Unemployment Benefits, and thrown thousands of workless men and women on to the Poor Law. The Tory Government has added £38,000,000 to indirect taxation, which is an increasing burden on the wage-earners, shop-keepers and lower middle classes." (4)

A. J. P. Taylor has argued that the idea of increasing public spending would be good for the economy, was difficult for the politicians to grasp. "It seemed common sense that a reduction in taxes made the taxpayer richer... Again it was accepted doctrine that British exports lagged because costs of production were too high; and high taxation was blamed for this about as much as high wages." (5) John Maynard Keynes later commented: "The difficulty lies, not in the new ideas, but in escaping from the old ones, which ramify, for those brought up as most of us have been, into every corner of our minds." (6)

During the election campaign, David Lloyd George, the leader of the Liberal Party, published a pamphlet, We Can Conquer Unemployment. Deeply influenced by the ideas of Maynard Keynes, Lloyd George pledged that if his party were returned to office, they would reduce levels of unemployment to normal within one year by utilising the stagnant labour force in vast schemes of national development. Lloyd George proposed a government scheme where 350,000 men were to be employed on road-building, 60,000 on housing, 60,000 on telephone development and 62,000 on electrical development. The cost would be £250 million, but the cumulative effect of all schemes would generate an annual saving of £30 million to the Unemployment Fund. (7)

Lloyd George was attacked by Tory politicians as they feared the proposals would appeal to the public. Neville Chamberlain, the Conservative MP for Ladywood argued that it cost £250 a year to find work for one man and only £60 to keep him in idleness. The government published a White Paper that "would reduce unemployment without bankrupting the nation". Baldwin suggested that "he (Lloyd George) has spent his whole life in platering together the true and the false and therefore manufacturing the plausible". William Joynson-Hicks, the Home Secretary, said he could not "understand how a man of Lloyd George's ability could put such a proposal before the people of this country". (8)

A massive campaign in the Tory press against the proposal of increased public spending was very successful and Ramsay MacDonald, the leader of the Labour Party was unwilling to promise an increase in public spending during the 1929 General Election campaign. Despite their economic problems of the government, the Conservatives won 8,656,000 votes (38%), the Labour Party 8,309,000 (37%) and the Liberals 5,309,000 (23%). However, the bias of the system worked in Labour's favour, and in the House of Commons the party won 287 seats, the Conservatives 261 and the Liberals 59. Lloyd George admitted that his campaign had been unsuccessful but claimed he held the balance of power: "It would be silly to pretend that we have realised our expectations. It looks for the moment as if we still hold the balance." However, both Baldwin and MacDonald refused to form a coalition government with Lloyd George. Baldwin resigned as prime minister and once again MacDonald agreed to form a minority government. (9)

The Wall Street Crash in October 1929, added to the government's economic problems. In January 1930 unemployment in Britain reached 1,533,000. By March, the figure was 1,731,000. Oswald Mosley and the ILP proposed a programme that they believed would help deal with the growing problem of unemployment in Britain. According to David Marquand: "It made three main assertions - that the machinery of government should be drastically overhauled, that unemployment could be radically reduced by a public-works programme on the lines advocated by Keynes and the Liberal Party, and that long-term economic reconstruction required a mobilisation of national resources on a larger scale than has yet been contemplated. The existing administrative structure, Mosley argued, was hopelessly inadequate. What was needed was a new department, under the direct control of the prime minister, consisting of an executive committee of ministers and a secretariat of civil servants, assisted by a permanent staff of economists and an advisory council of outside experts." (10)

The Chancellor of the Exchequer, Philip Snowden, was a strong believer in laissez-faire economics and disliked the proposals. (11) MacDonald had doubts about Snowden's "hard dogmatism exposed in words and tones as hard as the ideas" but he also dismissed "all the humbug of curing unemployment by Exchequer grants." (12) MacDonald passed the Mosley Memorandum to a committee consisting of Snowden, Tom Shaw, Arthur Greenwood and Margaret Bondfield. The committee reported back on 1st May. Mosley's administrative proposals, the committee claimed "cut at the root of the individual responsibilities of Ministers, the special responsibility of the Chancellor of the Exchequer in the sphere of finance, and the collective responsibility of the Cabinet to Parliament". The Snowden Report went onto argue that state action to reduce unemployment was highly dangerous. To go further than current government policy "would be to plunge the country into ruin". (13)

At a meeting of Labour MPs took place on 21st May, Oswald Mosley outlined his proposals. This included the provision of old-age pensions at sixty, the raising of the school-leaving age and an expansion in the road programme. He gained support from George Lansbury, Tom Johnson, and other left-wingers but Arthur Henderson, speaking on behalf of MacDonald, appealed to Mosley to withdraw his motion so that his proposals could be discussed in detail at later meetings. Mosley insisted on putting his motion to the vote and was beaten by 210 to 29. Mosley resigned and eventually left the Labour Party. (14)

Unemployment continued to rise and by the end of 1930 the national fund was in deficit. Austen Morgan, has argued that when Ramsay MacDonald refused to become master of events, they began to take control of the Labour government: "With the unemployed the principal sufferers of the world recession, he allowed middle-class opinion to target unemployment benefit as a problem... With Snowden at the Treasury, it was only a matter of time before the economic issue was being defined as an unbalanced budget." (15)

In February 1931, on the advice of Philip Snowden, MacDonald asked George May, the Secretary of the Prudential Assurance Company, to form a committee to look into Britain's economic problems. Other members of the committee included Arthur Pugh (trade unionist), Charles Latham (trade unionist), Patrick Ashley Cooper (Governor of the Hudson's Bay Company), Mark Webster Jenkinson (Vickers Armstrong Shipbuilders), William Plender (President of the Institute of Chartered Accountants) and Thomas Royden (Thomas Royden & Sons Shipping Company). (16)

A. J. P. Taylor has pointed out that four of the May Committee were leading capitalists, whereas only two represented the labour movement: "Snowden calculated that a fearsome report from this committee would terrify Labour into accepting economy, and the Conservatives into accepting increased taxation. Meanwhile he produced a stop-gap budget in April, intending to produce a second, more severe budget in the autumn." Snowden made speeches in favour of "national unity" hoping that he would get help from the other political parties to push through harsh measures. (17)

In July, 1931, the George May Committee produced (the two trade unionists refused to sign the document) its report that presented a picture of Great Britain on the verge of financial disaster. It proposed cutting £96,000,000 off the national expenditure. Of this total £66,500,000 was to be saved by cutting unemployment benefits by 20 per cent and imposing a means test on applicants for transitional benefit. Another £13,000,000 was to be saved by cutting teachers' salaries and grants in aid of them, another £3,500,000 by cutting service and police pay, another £8,000,000 by reducing public works expenditure for the maintenance of employment. "Apart from the direct effects of these proposed cuts, they would of course have given the signal for a general campaign to reduce wages; and this was doubtless a part of the Committee's intention." (18)

The five rich men on the committee recommended, not surprisingly, that only £24 million of this deficit should be met by increased taxation. As David W. Howell has pointed out: "A committee majority of actuaries, accountants, and bankers produced a report urging drastic economies; Latham and Pugh wrote a minority report that largely reflected the thinking of the TUC and its research department. Although they accepted the majority's contentious estimate of the budget deficit as £120 million and endorsed some economies, they considered the underlying economic difficulties not to be the result of excessive public expenditure, but of post-war deflation, the return to the gold standard, and the fall in world prices. An equitable solution should include taxation of holders of fixed-interest securities who had benefited from the fall in prices." (19)

William Ashworth, the author of An Economic History of England 1870-1939 (1960) has argued: "The report presented an overdrawn picture of the existing financial position; its diagnosis of the causes underlying it was inaccurate; and many of its proposals (including the biggest of them) were not only harsh but were likely to make the economic situation worse, not better." (20) Keynes reacted with great anger as it was the complete opposite of what he had been telling the government to do and called the May Report "the most foolish document I ever had the misfortune to read". (21)

The May Report had been intended to be used as a weapon to use against those Labour MPs calling for increased public expenditure. What it did in fact was to create abroad a belief in the insolvency of Britain and in the insecurity of the British currency, and thus to start a run on sterling, vast amounts of which were held by foreigners who had exchanged their own currencies for it in the belief that it was "as good as gold". This foreign-owned sterling was now exchanged into gold or dollars and soon began to threaten the stability of the pound. (22)

The Labour government officially rejected the report because MacDonald and Snowden could not persuade their Cabinet colleagues to accept May's recommendations. MacDonald and Snowden now formed a small committee, made up of themselves and Arthur Henderson, Jimmy Thomas and William Graham, three people they thought they could persuade to accept public spending cuts. Their report was published on 31st July, the last day of parliament sitting. It was a bland document that made no statement on May's recommendations. (23)

On 5th August, John Maynard Keynes wrote to MacDonald, arguing that the committee's recommendations clearly represented "an effort to make the existing deflation effective by bringing incomes down to the level of prices" and if adopted in isolation, they would result in "a most gross perversion of social justice". Keynes suggested that the best way to deal with the crisis was to leave the gold standard and devalue sterling. (24)

Philip Snowden presented his recommendations to the Cabinet on 20th August. It included the plan to raise approximately £90 million from increased taxation and to cut expenditure by £99 million. £67 million was to come from unemployment insurance, £12 million from education and the rest from the armed services, roads and a variety of smaller programmes. Most members of the Cabinet rejected the idea of the proposed cut in unemployment benefit and the meeting ended without any decisions being made. Clement Attlee, who was a supporter of Keynes, condemned Snowden for his "misplaced fidelity to laissez-faire economics". (25)

Frederick Pethick-Lawrence and Susan Lawrence both decided to resign from the government if the cuts to the unemployment benefit went ahead: Pethick-Lawrence wrote: "Susan Lawrence came to see me. As Parliamentary Secretary to the Ministry of Health, she was concerned with the proposed cuts in unemployment relief, which she regarded as dreadful. We discussed the whole situation and agreed that, if the Cabinet decided to accept the cuts in their entirety, we would both resign from the Government." (26)

Arthur Henderson argued that rather do what the bankers wanted, Labour should had over responsibility to the Conservatives and Liberals and leave office as a united party. The following day MacDonald and Snowden had a private meeting with Neville Chamberlain, Samuel Hoare, Herbert Samuel and Donald MacLean to discuss the plans to cut government expenditure. Chamberlain argued against the increase in taxation and called for further cuts in unemployment benefit. MacDonald also had meetings with trade union leaders, including Walter Citrine and Ernest Bevin. They made it clear they would resist any attempts to put "new burdens on the unemployed". Sidney Webb later told his wife Beatrice Webb that the trade union leaders were "pigs" as they "won't agree to any cuts of unemployment insurance benefits or salaries or wages". (27)

At another meeting on 23rd August, 1931, nine members (Arthur Henderson, George Lansbury, John R. Clynes, William Graham, Albert Alexander, Arthur Greenwood, Tom Johnson, William Adamson and Christopher Addison) of the Cabinet stated that they would resign rather than accept the unemployment cuts. A. J. P. Taylor has argued: "The other eleven were presumably ready to go along with MacDonald. Six of these had a middle-class or upper-class background; of the minority only one (Addison)... Clearly the government could not go on. Nine members were too many to lose." (28)

That night MacDonald went to see George V about the economic crisis. He warned the King that several Cabinet ministers were likely to resign if he tried to cut unemployment benefit. MacDonald wrote in his diary: "King most friendly and expressed thanks and confidence. I then reported situation and at end I told him that after tonight I might be of no further use, and should resign with the whole Cabinet.... He said that he believed I was the only person who could carry the country through." (29)

MacDonald told his son, Malcolm MacDonald, about what happened at the meeting: "The King has implored J.R.M. to form a National Government. Baldwin and Samuel are both willing to serve under him. This Government would last about five weeks, to tide over the crisis. It would be the end, in his own opinion, of J.R.M.'s political career. (Though personally I think he would come back after two or three years, though never again to the Premiership. This is an awful decision for the P.M. to make. To break so with the Labour Party would be painful in the extreme. Yet J.R.M. knows what the country needs and wants in this crisis, and it is a question whether it is not his duty to form a Government representative of all three parties to tide over a few weeks, till the danger of financial crash is past - and damn the consequences to himself after that." (30)

After another Cabinet meeting where no agreement about how to deal with the economic crisis could be achieved, Ramsay MacDonald went to Buckingham Palace to resign. Sir Clive Wigram, the King's private secretary, later recalled that George V "impressed upon the Prime Minister that he was the only man to lead the country through the crisis and hoped that he would reconsider the situation." At a meeting with Stanley Baldwin, Neville Chamberlain and Herbert Samuel, MacDonald told them that if he joined a National Government it "meant his death warrant". According to Chamberlain he said "he would be a ridiculous figure unable to command support and would bring odium on us as well as himself." (31)

On 24th August 1931 Ramsay MacDonald returned to the palace and told the King that he had the Cabinet's resignation in his pocket. The King replied that he hoped that MacDonald "would help in the formation of a National Government." He added that by "remaining at his post, his position and reputation would be much more enhanced than if he surrendered the Government of the country at such a crisis." Eventually, he agreed to form a National Government.

On 24th August 1931 King George V had a meeting with the leaders of the Conservative and Liberal parties. Herbert Samuel later recorded that he told the king that MacDonald should be maintained in office "in view of the fact that the necessary economies would prove most unpalatable to the working class". He added that MacDonald was "the ruling class's ideal candidate for imposing a balanced budget at the expense of the working class." (32)

Later that day MacDonald returned to the palace and had another meeting with the King. MacDonald told the King that he had the Cabinet's resignation in his pocket. The King replied that he hoped that MacDonald "would help in the formation of a National Government." He added that by "remaining at his post, his position and reputation would be much more enhanced than if he surrendered the Government of the country at such a crisis." Eventually, he agreed to continue to serve as Prime Minister. George V congratulated all three men "for ensuring that the country would not be left governless." (33)

Ramsay MacDonald was only able to persuade three other members of the Labour Party to serve in the National Government: Philip Snowden (Chancellor of the Exchequer) Jimmy Thomas (Colonial Secretary) and John Sankey (Lord Chancellor). The Conservatives had four places and the Liberals two: Stanley Baldwin (Lord President), Samuel Hoare (Secretary for India), Neville Chamberlain (Minister of Health), Herbert Samuel (Home Secretary), Lord Reading (Foreign Secretary) and Philip Cunliffe-Lister (President of the Board of Trade).

MacDonald's former cabinet colleagues were furious about what he had done. Clement Attlee asked why the workers and the unemployed were to bear the brunt again and not those who sat on profits and grew rich on investments? He complained that MacDonald was a man who had "shed every tag of political convictions he ever had". His so-called National Government was a "shop-soiled pack of cards shuffled and reshuffled". This was "the greatest betrayal in the political history of this country". (34)

MacDonald, Snowden, Thomas and Sankey were expelled from the Labour Party. As David Marquand has pointed out: "In the circumstances, its decision was understandable, perhaps inevitable. The Labour movement had been built on the trade-union ethic of loyalty to majority decisions. MacDonald had defied that ethic; to many Labour activists, he was now a kind of political blackleg, who deserved to be treated accordingly." (35)

On 8th September 1931, the National Government's programme of £70 million economy programme was debated in the House of Commons. This included a £13 million cut in unemployment benefit. All those paid by the state, from cabinet ministers and judges down to the armed services and the unemployed, were cut 10 per cent. Teachers, however, were treated as a special case, lost 15 per cent. Tom Johnson, who wound up the debate for the Labour Party, declared that these policies were "not of a National Government but of a Wall Street Government". In the end the Government won by 309 votes to 249. (36)

The 1931 General Election was held on 27th October, 1931. MacDonald led an anti-Labour alliance made up of Conservatives and National Liberals. Labour Party candidates were portrayed as being unpatriotic for not supporting the cuts in expenditure. It was a disaster for the party with several leading Labour figures, including Arthur Henderson, John R. Clynes, Arthur Greenwood, Charles Trevelyan, Herbert Morrison, Emanuel Shinwell, Frederick Pethick-Lawrence, Hastings Lees-Smith, Hugh Dalton, Susan Lawrence, William Wedgwood Benn, Tom Shaw and Margaret Bondfield losing their seats. The Government parties polled 14,500,000 votes to Labour's 6,600,000. In the new House of Commons, the Labour Party had only 52 members and the Lloyd George Liberals only 4. The Labour Party polled 30.5% of the vote reflecting the loss of two million votes, a huge withdrawal of support. (37)

Theresa May is in a similar situation to that of Ramsay MacDonald in August 1931. At her Cabinet meeting on Thursday, 15th November, it is believed that eleven ministers spoke against her Brexit plan. Dominic Raab, her Secretary of State for Exiting the European Union resigned. So did Esther McVey, the Secretary of State for Work and Pensions. However, others such as Michael Gove, Liam Fox, Penny Mordaunt, Andrea Leadsom and Chris Grayling, are threatening resignation, if May refuses to renegotiate the Brexit deal. (38)

As Michel Barnier, the European Union Chief Negotiator, has already made clear that he is not willing to renegotiate the treaty unless the British government is willing to have another referendum or a general election, this demand is likely to result in Gove, Fox, Mordaunt, Leadsom and Grayling, resigning. If they do this, it would be impossible for Theresa May to replace the five with Brexiters and therefore would find it impossible to maintain a balanced Cabinet. As with MacDonald in 1931, the only way she could stay in power would be to form a National government, that was made up of MPs that wanted to remain in the EU. This would include anti-Corbyn Labour MPs, plus representatives of the Liberal Democrats (12 seats), Scottish National Party (35 seats) and Plaid Cymru (4 seats). This government would then offer a second referendum on membership of the European Union.

(1) David Marquand, Ramsay MacDonald (1977) page 484

(2) G.D.H. Cole, A History of the Labour Party from 1914 (1948) pages 198-200

(3) The Conservative Manifesto: Mr. Stanley Baldwin's Election Address (May, 1929)

(4) The Labour Manifesto: Labour's Appeal to the Nation (May, 1929)

(5) A. J. P. Taylor, English History: 1914-1945 (1965) page 339

(6) John Maynard Keynes, The General Theory of Employment, Interest and Money (1936) page viii

(7) David Lloyd George, We Can Conquer Unemployment (March, 1929)

(8) John Campbell, Lloyd George: The Goat in the Wilderness (1977) page 226

(9) Roy Hattersley, David Lloyd George (2010) page 608

(10) David Marquand, Ramsay MacDonald (1977) page 539

(11) Edmund Dell, A Strange Eventful History: Democratic Socialism in Britain (1999) page 35

(12) Ramsay MacDonald, letter to Walton Newbold (2nd June, 1930)

(13) Philip Snowden Report (1st May, 1930)

(14) Martin Pugh, Speak for Britain: A New History of the Labour Party (2010) page 212

(15) Austen Morgan, J. Ramsay MacDonald (1987) page 170

(16) Oliver M. Westall, George May : Oxford Dictionary of National Biography (2004-2014)

(17) A. J. P. Taylor, English History: 1914-1945 (1965) page 361

(18) G. D. H. Cole, A History of the Labour Party from 1914 (1948) pages 251-252

(19) David W. Howell, Charles Latham : Oxford Dictionary of National Biography (2004-2014)

(20) William Ashworth, An Economic History of England 1870-1939 (1960) page 399

(21) Hugh Dalton, Call Back Yesterday (1953) page 290

(22) G. D. H. Cole, A History of the Labour Party from 1914 (1948) page 252

(23) Austen Morgan, J. Ramsay MacDonald (1987) page 180

(24) John Maynard Keynes, letter to Ramsay MacDonald (5th August, 1931)

(25) John Bew, Citizen Clem: A Biography of Attlee (2016) page 153

(26) Frederick Pethick-Lawrence, Fate Has Been Kind (1942) page 165

(27) Francis Beckett, Clem Attlee (2000) page 100

(28) A. J. P. Taylor, English History: 1914-1945 (1965) pages 366-367

(29) Ramsay MacDonald, diary entry (23rd August, 1931)

(30) Malcolm MacDonald, diary entry (24th August, 1931)

(31) David Marquand, Ramsay MacDonald (1977) pages 627-637

(32) Herbert Samuel, Memoirs (1945) page 204

(33) Austen Morgan, J. Ramsay MacDonald (1987) page 198

(34) Clement Attlee, As It Happened (1954) page 74

(35) David Marquand, Ramsay MacDonald (1977) page 663

(36) Tom Johnson, speech in the House of Commons (8th September, 1931)

(37) Martin Pugh, Speak for Britain: A New History of the Labour Party (2010) page 21

(38) Terri-Ann Williams, The Daily Mail (17th November, 2018)

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