by Pete Goddard and Atul Hatwal
Panic gripped the Bank of England.
By the 7th August 1931, just a week after the publication of the doom-laden May report on Britain’s finances, unhappy foreign investors were selling sterling at a record pace.
The Bank of England reported that its gold and foreign exchange reserves had lost £60m in the past few weeks in its attempt to prop up the value of the nation’s currency and keep Britain on the gold standard.
A first-ever Brexit seemed imminent. Although nobody actually used the word “Brexit” because these were more civilised times.
Only a hastily arranged £50m credit from French and American bankers was keeping the Bank of England solvent. This wouldn’t last long and future loans were in doubt – it’s hard to take a payday loan when you’ve got no payday in sight.
In order to secure more international loans to sustain the currency, a plan to pay down the deficit was needed.
The bankers wanted £80m of cuts. So prime minister Ramsay Macdonald and chancellor Philip Snowden put together a programme to deliver them, including a painful reduction of over £40m to unemployment benefit.