Second term (1929–1931) The strong majority held by the Conservatives gave Baldwin a full term during which the government had to deal with the
1926 General Strike. Unemployment remained high but relatively stable at just over 10%, and apart from 1926, strikes were at a low level. At the
May 1929 election, Labour won 288 seats to the Conservatives' 260, with 59 Liberals under Lloyd George holding the balance of power. MacDonald was increasingly out of touch with his supposedly safe Welsh seat at
Aberavon; he largely ignored the district, and had little time or energy to help with its increasingly difficult problems regarding coal disputes, strikes, unemployment and poverty. The miners expected a wealthy man who would fund party operations, but he had no money. He disagreed with the increasingly radical activism of party leaders in the district, as well as the permanent agent, and the
South Wales Mineworkers' Federation. He moved to
Seaham Harbour in
County Durham, a safer seat, to avoid a highly embarrassing defeat. Baldwin resigned and MacDonald again formed a minority government, with intermittent Liberal support. This time, MacDonald knew he had to concentrate on domestic matters.
Arthur Henderson became Foreign Secretary, with Snowden again at the Exchequer.
JH Thomas became Lord Privy Seal with a mandate to tackle unemployment, assisted by the young radical
Oswald Mosley.
Margaret Bondfield was appointed as
Minister of Labour, becoming the first-ever woman cabinet minister. MacDonald's second government was in a stronger parliamentary position than his first, and was able to introduce a number of progressive reforms. In 1930, for instance, it was able to raise
unemployment pay, pass an act to improve wages and conditions in the
coal industry (i.e. the issues behind the
General Strike) and pass the
Housing Act 1930 which focused on
slum clearances. However, an attempt by the Education Minister
Charles Trevelyan to introduce an act to raise the school-leaving age to 15 was defeated by opposition from
Roman Catholic Labour MPs, who feared that the costs would lead to increasing local authority control over faith schools.
Great Depression MacDonald's government had no effective response to the economic crisis which followed the
Stock Market Crash of 1929.
Philip Snowden was a rigid exponent of orthodox finance and would not permit any
deficit spending to stimulate the economy, despite the urgings of
Oswald Mosley,
David Lloyd George and the economist
John Maynard Keynes. Mosley put forward a
memorandum in January 1930, calling for the public control of imports and
banking as well as an increase in
pensions to boost spending power. When this was repeatedly turned down, Mosley resigned from the government in February 1931 and formed the
New Party. He later converted to
fascism. By the end of 1930, unemployment had doubled to over two and a half million. The government struggled to cope with the crisis and found itself attempting to reconcile two contradictory aims: achieving a
balanced budget to maintain
sterling on the
gold standard, and maintaining assistance to the
poor and unemployed, at a time when tax revenues were falling. During 1931, the economic situation deteriorated, and pressure from orthodox economists for sharp cuts in
government spending increased. Under pressure from its Liberal allies, as well as the Conservative opposition, who feared that the budget was unbalanced, Snowden appointed a committee headed by Sir
George May to review the state of public finances. The
May Report of July 1931, urged large public-sector wage cuts and large cuts in public spending, notably in payments to the unemployed, to avoid a budget deficit.
National government (1931–1935) Formation of the National Government Although there was a narrow majority in the Cabinet for drastic reductions in spending, the minority included senior ministers such as
Arthur Henderson who made it clear they would resign rather than acquiesce in the cuts. With this unworkable split, on 24 August 1931, MacDonald submitted his resignation and then agreed, on the urging of King
George V, to form a
National Government with the Conservatives and Liberals. With Henderson taking the lead, MacDonald, Snowden, and Thomas were quickly expelled from the Labour Party. They responded by forming a new
National Labour Organisation, which provided a nominal party base for the expelled MPs, but received little support in the country or the unions. Great anger in the labour movement greeted MacDonald's move. Riots took place in protest in
Glasgow and
Manchester. Many in the Labour Party viewed this as a cynical move by MacDonald to rescue his career, and accused him of 'betrayal'. MacDonald, however, argued that the sacrifice was for the common good.
1931 general election In the
1931 general election, the National Government won 554 seats, comprising 473 Conservatives, 13 National Labour, 68 Liberals (
Liberal National and Liberal) and various others, while Labour, now led by Arthur Henderson won only 52 and the
Lloyd George Liberals four. Henderson and his deputy
J. R. Clynes both lost their seats in Labour's worst-ever rout. Labour's disastrous performance at the 1931 election greatly increased the bitterness felt by MacDonald's former colleagues towards him. MacDonald was genuinely upset to see the Labour Party so badly defeated at the election. He had regarded the National Government as a temporary measure, and had hoped to return to the Labour Party. MacDonald, Chamberlain and Runciman devised a compromise tariff policy, which stopped short of protectionism while ending free trade and, at the
1932 Ottawa Conference, cementing commercial relations within the Empire. Besides his preference for a cohesive British Empire and a
protective tariff, he felt an independent British defence programme would be the wisest policy. However, budget pressures and a strong popular pacifist sentiment forced a reduction in the military and naval budgets. MacDonald involved himself heavily in foreign policy. Assisted by the National Liberal leader and Foreign Secretary
John Simon, he continued to lead British delegations to international conferences, including the
Geneva Disarmament Conference and the
Lausanne Conference in 1932, and the
Stresa Conference in 1935. He went to
Rome in March 1933 to facilitate
Nazi Germany's return to the concert of European powers and to continue the policy of appeasement. On 16 August 1932 he granted the
Communal Award upon India, partitioning it into separate electorates for
Hindus,
Muslims,
Sikhs and
Untouchables. Most important of all, he presided at the
World Economic Conference in London in June 1933. Nearly every nation was represented, but no agreement was possible. The
American president torpedoed the conference with a bombshell message that the US would not stabilise the depreciating
dollar. The failure marked the end of international economic cooperation for another decade. MacDonald was deeply affected by the anger and bitterness caused by the fall of the Labour government. He continued to regard himself as a true Labour man, but the rupturing of virtually all his old friendships left him an isolated figure. One of the only other leading Labour figures to join the government, Philip Snowden, was a firm believer in
free trade and resigned from the government in 1932 following the introduction of tariffs after the
Ottawa agreement.
Retirement By 1933, MacDonald's health was so poor that his doctor
Thomas Horder had to supervise his trip to Geneva personally. By 1934, MacDonald's mental and physical health had declined further, and he became an increasingly ineffective leader as the international situation grew more threatening. His speeches in the House of Commons and at international meetings became incoherent. One observer noted how "Things ... got to the stage where nobody knew what the Prime Minister was going to say in the House of Commons, and, when he did say it, nobody understood it". Newspapers did not report MacDonald denying to reporters that he was seriously ill because he only had "loss of memory". MacDonald was aware of his fading powers, and in 1935, he agreed to a timetable with Baldwin to stand down as Prime Minister after King George V's
Silver Jubilee celebrations in May 1935. He resigned on 7 June in favour of Baldwin, and remained in the cabinet, taking the largely honorary post of
Lord President vacated by Baldwin. == Last years and death (1935–1937) ==