Impact of gov. actions on relieving poverty (3.7)


The second Labour government, 1929-31

  • first Labour government lasted for 9 months and was brought down by a potential political scandal
  • second Labour government lasted for longer, brough down because of cabiniet divisons over cuts in government expenditure 
  • dependent for its survival on the support of the Liberal party 
  • registered unemployment had fallen between Jan and July
  • unemployment benefits seemed to be sufficient to keep working people and their families from dire and desperate poverty 
  • The Wall Street Crash and Depression lay just around the corner
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The 1931 crisis and the May Report

  • gov faced with a double financial crisis
  • foreign investors, frightened by the collapse of the giant Viennese bank, began making withdrawls from London banks. Between 15th July and 7th August, £33 million in gold and £33 million in foreign exchange was withdrawn from London - almost one quarter of the reserves
  • balancing the annual budget was proving difficult. Increasing unemployment meant that more and more had to be paid out in benefits. Fewer people in work meant less being paid to the government in taxes. 
  • The chancellor of the exchequer, Philip Snowden, set up a committee to advise on what was to be done
  • July 1931 - committee published its report 
  • It calculated that £120 million was neeed to balance the budget, and it recommended that £23 million should be found from increased taxation, and £97 million by cuts in gov spending 
  • Snowden - argued unemployment benefit should be cut by 10%
  • foreign secretary - would not accept this 
  • economist Maynard Keynes advised that Britain should come off the gold standard and allow the pound to drop in value 
  • cabinet agreed to make cutbacks of £56 million (not enough) - National Gov formed 
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The National Government, 1931-40

  • one of the first acts of the new gov. was to implement cuts to which the Labour cabinet, by a slim majority, had agreed
  • teachers' pay reduced by 15%
  • the pay of the armed forces, judges and MPs reduced by an average of 10%
  • police pay reduced by 5%
  • reduction in unemployment benefits by 10%
  • there were tax increases that was hoped to bring in about £51.5million
  • gold standard seemed secure and the bank of england was able to negotiate a loan of £80 million
  • sailors of the Atlantic Fleet learned that their pay was being reduced by 10% while those of the admirals was only being cut by 7%, they refused to put to sea
  • value of the pound plummeted and they were forced off the gold standard
  • british goods could be sold abroad more cheaply, exports were encouraged and imports discouraged
  • the weaker pound made it easier to balance the budget
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The 1931 election

  • National Government unelected, and in order to get itself and its policies endorsed by the public, it called an election for October 1931
  • The result demonstrated nationwide support for the national government
  • polled 14.5 million votes that won them 556 seats
  • The Labour Party vote fell by 1.5 million to 6.6 million, leaving the Labour Party only 56 seats
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Towards recovery?

  • from the mid-1930s, there was a general recovery in world trade
  • British goods cheap to buy
  • exports began to rise and this created more jobs
  • Neville Chamberlain introduced import duties, a general tariff barrier of 10%, in order to protect british agriculture
  • low interest rates led to a housing boom, creating jobs and a 'feel good' factor
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The plight of the unemployed

  • unemployment act of 1934 set up a national unemployment assistance board which standardised dole payments, made when a persons' 26 weeks entitlement to unemployment benefit had run out, and paid them using a means test
  • the national gov backed the iron and steel federation, formed in 1932, to supervise the demolition of old, unprofitable works and build new ones, thus creating jobs
  • the special areas act 1934 applied to regions of high unemployment: south wales, tyneside, west cumberland and southern scotland. Within these areas, the gov financed projects and this created new jobs
  • in 1935, the gov developed a scheme whereby shipowners could apply for gov loans that would enable them to scrap old ships and buy new ones
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