Labour Unrest: Ramsay MacDonald and the Labour party, 1931

Our series this summer has taken a look at historical cases of division within political parties.  In our last post of the series, this week we discuss the Labour party of the 1930s, and how Ramsay MacDonald came to be reviled by the party he led for many years…

Ramsay Macdonald, via Wikimedia
Ramsay Macdonald, via Wikimedia

The wartime split in the Liberal party and the increase in suffrage in 1918 and 1928 created an opportunity for the Labour party to emerge as the new opposition to Conservatism. After the war the party ended their electoral arrangements with the Liberals, and twice formed minority governments (in 1924 and 1929-31), both led by Ramsay MacDonald. Yet in a dramatic reversal in 1931 Labour’s first Prime Minister was expelled from the party, and after the October election fewer Labour MPs were returned to Westminster than in 1918.

MacDonald had risen from humble beginnings to become Labour leader: an illegitimate son from a Scottish fishing village who established himself in a middle-class lifestyle with a deep commitment to Labour politics. He ‘looked the part’ in Commons, with great charisma, but he was also ‘prone to alternate feeling[s] of superiority with a self-pitying sense of martyrdom to duty.’ [Wrigley, ‘Ramsay MacDonald’ in Jeffreys (ed.), Leading Labour]. A moderate with few ties to the Trade Unions, his chief aim as the head of minority Labour administrations was to prove that the country need not be afraid of a Labour government.

When Labour returned to power in 1929 the chief issue was unemployment, especially in Labour’s industrial heartlands. Structural problems including an aging industry and high employment costs had already made British manufacturing uncompetitive. The government’s decision to return sterling to the Gold Standard in 1925 tied the pound to the value of gold at what many believe was too high a rate, making British goods even more expensive abroad. Labour entered government hoping to reduce unemployment through public works schemes inspired by the economist J.M. Keynes, but these had little impact after the Wall Street Crash began a period of global depression.

The immediate problem for the government was the growing cost of unemployment insurance – a vital lifeline to many, but considered at the time hugely expensive. The Labour party grew increasingly divided on how to respond to the crisis: Chancellor Philip Snowden favoured economic ‘orthodoxy’ – free trade, remaining on the Gold Standard, and balanced books – whereas others could not countenance a cut in unemployment benefits. Facing criticism in the Commons the government established a commission to investigate the state of the government’s finances. Its report in July 1931 that the government was £120 million in deficit (although today’s accounting standards would consider this figure greatly exaggerated) came at the worst possible time, following a European banking crisis. Confidence in sterling plummeted, and the Bank of England began to use up its reserves to keep the pound on the Gold Standard. Something had to be done: either large cuts were needed to balance the books and restore confidence, or Britain would be forced to leave the Gold Standard and devalue the pound.

The cabinet was divided. Cutting expenditure would mean cutting unemployment benefits, but leaving the Gold Standard would be seen by many (although not all) as a dramatic failure. MacDonald worked hard for a compromise. Believing that the credibility of the Labour party was at stake, he attempted to find a package that would satisfy the bankers, the opposition parties, and his cabinet. On 23 August MacDonald won a cabinet majority for cuts of £76 million, including 10% of unemployment insurance payments, by eleven votes to nine. However, those opposed, including former leader Arthur Henderson, supported by the Unions, indicated that they would resign from cabinet rather than stay to implement the cuts. MacDonald went to the King and offered his resignation and that of the whole cabinet.

What happened next destroyed MacDonald’s reputation in the Labour movement and proved fatal for the party for the next decade. MacDonald was persuaded to stay on as the head of a ‘National Government’ to implement the government cuts and restore confidence. His biographer David Marquand has argued he only did so ‘very reluctantly’, yet it was taken to be little short of treachery by Labour MPs [Marquand, ‘MacDonald, Ramsay’, ODNB].  Now MacDonald’s ability to ‘look the part’ as Prime Minister now appeared to be little more than vain social climbing, and for years many believed he had plotted to bring about this outcome. Sidney Webb called him the ‘author, producer and principal actor’ of the crisis. More recently historians have dismissed the theory of a deliberate plot, arguing that MacDonald acted for what he perceived to be the country’s best interest.

The consequences were dramatic. MacDonald led a ‘National Government’ comprised of the Conservatives, some Liberals and very few Labour MPs; all members or associates of the National Government were expelled by the Labour party. Despite government cuts Britain was forced off the Gold Standard anyway before the end of September.

The real damage to Labour, however, was the decision to hold an election in 1931, and for MacDonald to fight it on behalf of the National Government (although with the personal support of only a few MPs he had little other choice). In many constituencies Labour faced a single National Government candidate as the parties arranged pacts against them, and their former Chancellor Snowden called the party’s 1931 manifesto ‘Bolshevism run mad’ on a BBC broadcast. Labour’s vote share fell from 37.1% to 30.6%, but the real cost was in the number of seats: only 52 Labour or Independent Labour MPs were returned. New leader Arthur Henderson lost his seat. MacDonald returned to lead a government with a huge majority, but 470 of the 554 National Government MPs were Conservatives.

Macdonald remained Prime Minister until 1935, but was increasingly isolated. In December 1932 he wrote in his diary: ‘Was I wise? Perhaps not, but it seemed as though anything else was impossible.’ [Marquand, ‘MacDonald, Ramsay’, ODNB] MacDonald’s reputation has since been revised, but never fully rehabilitated.


Further reading:

  • Chris Wrigley, ‘Ramsay MacDonald’ in Kevin Jeffreys (ed.), Leading Labour (1999)
  • Oxford Dictionary of National Biography: David Marquand, ‘MacDonald, Ramsay
  • ODNB: Chris Wrigley, ‘Henderson, Arthur

You can read the other blogs in our ‘party split’ series here.

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