Describe and comment upon how Labour weathered the crises in 1929-31 and why it fell in 1931?

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Describe and comment upon how Labour weathered the crises in 1929-31 and why it fell in 1931?

The May recommendations caused an outcry from many Labour Party members and trade unionists. They wanted the government to find money by taxing the rich more heavily rather than by cutting government spending at the expense of the unemployed. Some even believed the crisis could be a good thing – if capitalism collapsed, then the way would be clear for socialism. MacDonald, however, felt compelled to follow the broad guidelines of the report. Although he himself favoured taxation increases (and had already raised income tax in 1930), the other parties would not agree to these, and given the importance which he and Snowden attacked to a balanced budget and the Gold Standard, MacDonald accepted that a reduction in unemployment benefit was the price his party had to be prepared to pay.

The Cabinet was bitterly divided. On 12 August the members of the ‘Cabinet Economy Committee’, including MacDonald, Henderson and Snowden, met to consider what to do. They agreed to the suggested pay cuts and to a 10 percent cut in unemployment benefit, which would have taken unemployment insurance back to where it had been before Labour’s increase in 1929. However, these cuts of £38 million were substantially less than the May Committee had proposed. By 19 August, the Cabinet had agreed to cuts amounting to £56 million – but the leaders of the other parties rejected these as too small. The next day, MacDonald and Snowden met with TUC leaders, who rejected any cuts at all that would affect the unemployed. They rejected the May Committee’s proposals entirely. This put considerable pressure on the Labour Cabinet.

The Bank of England desperately needed to arrange new loans from New York and Paris but the American bankers would only agree if substantial cuts to unemployment benefits were made. The Conservatives and Liberals accepted this but MacDonald struggled to persuade his Labour colleagues. MacDonald knew that the proposals represented ‘the negation of everything that the Labour Party stood for’ but he argued for a vote of approval in the national interest. On 23 August, the Cabinet gave that vote of approval, but only by 11 to 9 votes. Those who opposed included several leading ministers (inc. Henderson) and the vote split the Labour Cabinet so badly that MacDonald could no longer continue to lead it. On 24 August, he went to Buckingham Palace to tender his government’s resignation to King George V.

MacDonald’s visit to the King did not have the expected outcome. He had expected to resign but, after the King had spoken to both the other party leaders – Samuel for the Liberals (standing in for the ill Lloyd George) and Baldwin for the Conservatives – it was agreed that Ramsay MacDonald would keep going as PM at the head of a new ‘National Government’ based on support from all the main political parties. At the time, this seems to have been planned to be a temporary arrangement and as a ‘government of persons’ rather than a full coalition. The Conservatives and Liberals saw certain advantages in allowing MacDonald to continue as PM at a time when there had to be drastic economic cuts and generally unpopular measures taken. MacDonald himself may have wanted to remain in office, but he was also persuaded it was his duty to stay on.

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The Labour Cabinet was taken horribly by surprise. Only three of them chose to follow MacDonald into the new government. Labour was out but MacDonald was not. He became the new PM of a new National Government resting on the support of the Conservatives and some Liberals. Many Labour supporters never got over what they felt was an underhand move by MacDonald and a betrayal of the whole Labour movement. The events of August 1931 led to great bitterness in the Labour Party at the time and to controversy ever since.

After the events of 1931, many Labour ...

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