The formation of the National Government in August 1931 remains one of the more controversial issues in Labour Party and 20th Century British political history. For decades afterwards, many on the left talked of "the Great Betrayal of 1931." It would take 27 years before this thesis was seriously challenged. (1) As Herbert Morrison (a major figure in the Labour Party during the 1930s and 1940s) later wrote:
- "The spiritual and psychological effects upon the Labour Movement of what became known as "the Great Betrayal" were, I am inclined to think, as serious as the thing in itself and its immediate electoral consequences. It left in the Party a spirit of distrust of the idea of leadership, a determination that for the time being there should be no more great men, and seeking to tie the leadership with conditions and checks of one sort and another. This spirit of distrust and apprehension of other betrayals went on for round about ten years." (2)
In the May 1929 General Election, the Labour Party had won 37% of the popular vote (their best showing up to that date) and returned 287 MPs. (3) As the largest Party in Parliament, despite being 21 seats shy of an overall majority, the Labour Party formed the new Government. James Ramsay MacDonald became Prime Minister for the second time (his first premiership being for nine months in 1924). The Government lasted two years.
During those two years, the Great Depression struck. When the Government took office in June 1929, unemployment was about 1.2 million, which was actually an improvement from 1928. (4) A year and a half later, however, it had doubled. (5) At the same time, several European banks collapsed, most notably the Credit Anstadt, Austria's chief bank. This helped to create a world financial crisis, as several German banks collapsed in an almost domino effect. Naturally, Britain's turn had to come sometime. By the end of July 1931, it did.
In early 1931, the Labour Government faced parliamentary scrutiny over Government spending. As a result, the were forced to accept the Liberal Party's demand (the Party maintaining the Labour Government in power, as it was a minority Government) that they create a special committee, known as the May Committee, to examine government expenditures. By the end of July, just as many European banks were failing, the committee released its long awaited report. (6) It estimated a budget deficit of £120 million for 1932, and recommended new taxes of £24 million and budget cuts of £96 million to make up the shortfall. (7)
