1931 Year Of Crisis

Question 1

4 things that happened in 1931

Answer 1

• European banking crisis
• may committee
• run on the bank
• loans

Question 2

Describe the European banking crisis

Answer 2

• major banks of Austria, Germany and Geneva collapsed
• European countries assisted- British bankers lent the bank £4.3 million
• by July they could no longer lend any more money.
• led to divisions over welfare cuts- cutting it seemed to be a betrayal of working class interests
• crisis also undermined faith in labours economic competence and also showed the limitations in democratic socialist policies in the face of global financial pressure

Question 3

Describe the may committee

Answer 3

• had been created to deal with the financial problems
• reported that by April 1932, there would be a balance of payments deficit by £120 million
• recommended significant cuts in government spending were needed
• teachers salaries cut by £13 million
• police and armed forces salaries be cut by 12.5% and 10% respectively
• cuts in unemployment benefits would save £66 million
• unemployment should be limited to 26 weeks, and a means test introduced

Question 4

What was the impact of the may committee

Answer 4

• many internal divisions- in the labour left, many opposed cuts to unemployment benefits and social services, viewing them as a betrayal of working class interests
• formation of the national government led to Macdonald’s expulsion from the party
• precipitated a political crisis by forcing labour to confront a stark choice between economic orthodoxy and party principles
• its inability to reconcile these pressures led to its collapse and the formation of the national government

Question 5

What was the run on the bank

Answer 5

• due to the publication of the may committee, many foreign investors were concerned England was going to go bankrupt
• many increasingly started withdrawing their money
• Britain still on the gold standard, so asked for money to be withdrawn in gold
• by end of July 1931, 1/4 of the bank of England’s gold reserves had been used

Question 6

Why was Britain forced to ask for loans

Answer 6

Economic crisis through the may committee causing the run on the bank

Question 7

What were the problems that snowden was facing by 1931

Answer 7

• unemployment increased and so unemployment insurance had increased
• public work schemes cost had increased

Question 8

Divisions within labour

Answer 8

Macdonald supported Snowden bu the derision believed that the government should resign rather than impose unemployment benefits cuts. Macdonald and Henderson were convinced that each other were betraying their ideals

Question 9

Factors why labour fell from governance

Answer 9

• global economic crisis (run on the bank, European banking crisis)
• may committee and welfare cuts, betrayal of w/c interests
• internal divisions- Macdonald and Henderson
• limited success of domestic reforms (Wall Street crash)

Question 10

Why was a national government formed

Answer 10

• 24th august 1931- Macdonald resigned as PM
• then formed a new national government with the conservatives and the liberals
• only Snowden and Thomas agreed to serve in the national government, were expelled from the party, viewed as traitors

Question 11

Events leading to the national governments creation

Answer 11

• foreign opinion needed total confidence in the economic management of the country and division in the cabinet prevented this from happening- so a new coalition needed to be formed
• may committee- betrayal of w/c interests meant there was a belief that statesmanship required a more national outlook
• national government formed as a change of government completely would heighten sense of crisis and reduce confidence overseas further, conservatives didn’t want labour to be the opposition party to oppose cuts and gain popularity
• role of the king- asked Macdonald to form national government
• Macdonald not abandoning a party of particular achievement- due to Wall Street crash

Question 12

To what extent did Labour recover in the 1930’s

Answer 12

• Seats in parliament began to increase throughout the 1930’s
• labour became main opposition party - 154 seats.
• support for Labour remained- unemployment remained high under the national government
• cuts in unemployment benefit and the means test introduction meant that Labour gained support
• reorganisation following divisions- Attlee leader from 1935, created a more united front