Labour history uncut: How the department for transport killed hopes for a Keynesian stimulus in 1930

by Pete Goddard and Atul Hatwal

In 1930, the situation for the second Labour government was like a man wearing a bra – it looked bad and they had no idea how to get out of it.

In May, Oswald Mosley had resigned his cabinet post. He was protesting at the temerity of the party leadership who had rejected his neo-Keynesian recovery plan – a plan he felt was as effective, as necessary and as desirable as he was.

For Mosley, increased spending on public works like roads, financed through a big loan, seemed like the answer to the nation’s ills.

Oswald Mosley or Harry Enfield – you decide

Unfortunately, Ramsay Macdonald simply couldn’t get his traditionalist head around how the solution to a debt crisis could be more debt.

But that didn’t mean he was keen on continuing cuts to balance the budget either, no matter how many times his chancellor, Philip Snowden, wandered past his office waving a pair of giant prop scissors and winking.

Unemployment continued to spiral upwards.

Paralysis gripped the government and political dissension filled the vacuum. Each week the calls for something to be done, from the press, the party and the public, got louder.

In June 1930 Macdonald asserted his leadership with a decisive act that showed everyone that the buck stopped… over there somewhere.

He announced a reshuffle.

Well, someone had to take the fall didn’t they? Unemployment had risen from 1.5 million in January 1930 to cross 2 million in June for the first time in history.

So Macdonald decided Jimmy Thomas, union leader, stalwart of the Labour right and the man responsible for tackling unemployment, would finally do something useful. By getting fired.

Thomas was demoted from lord privy seal to the role of secretary of state for the dominions. This was lower than his status in the 1923 government when he’d been the boss of both colonies and dominions.

Now, in the most junior role in cabinet, he basically just had to look after Canada and Australia, – possibly the most easy-going foreign affairs role in the world.

Meanwhile Mosley’s now-vacant berth as chancellor of the duchy of Lancaster went to a young, up and comer called Clement Attlee. Well, young-ish. He’d already been in parliament for almost eight years by this time, but next to the rest of Macdonald’s nursing-home-ready cabinet, he was a political Justin Bieber.

OK, maybe not quite Justin Bieber

Thomas’ old job of lord privy seal was gifted to Vernon Hartshorn. With responsibility for high and rising unemployment, it was the kind of gift to which you’d say “ah, you shouldn’t have,” and really, really mean it.

Fortunately, the role came with extra help. Hartshorn became deputy to Macdonald on a whole new committee for solving unemployment.

This committee was to be supported by a dedicated secretariat of civil servants, with a permanent secretary in charge. Macdonald had effectively created something half-way between a cabinet committee and a new department, under his direct control.

As a manoeuvre, setting up new government machinery helped buy Macdonald some time with the press and public. The down side was that he was now unavoidably, personally on the hook for fixing unemployment.

Fortunately, he had a plan. Admittedly it was one he didn’t really believe in. But something had to be done and this was, at least, something.

Macdonald fished Mosley’s plan out of the bin, brushed off the old tea bags and biscuit crumbs and set about cherry picking some of his preferred proposals.

The prime minister commanded his new organisation to take a second look at building roads. Roads were good. Peoples like roads, possibly because the M25 had yet to be invented.

The treasury didn’t like roads. They felt inflation would increase after any expansion of public works based on debt and the economy would surely collapse under the weight of even a single bucket of borrowed tarmac.

But with unemployment now headed towards 2.2 million Macdonald desperately needed something. Unwilling to overrule the Treasury single-handed, he looked for support by asking the ministry of transport for a second opinion on the whole roads thing.

The ministry put its top road engineer on the job. Sir Henry Maybury was sent off to review the notion and come back with the definitive view.

Sir Henry Maybury reviewed the road building scheme and still found time to sidekick for Danger Mouse

After three weeks, the man from the ministry said “no.”

Maybury thought there was no way the road building programme could be accelerated as Mosley intended. Even if it could, the best that could be achieved was a £20m increase in spending. That would create just 16,000 jobs, most of which were putting down and picking up cones.

Minister of transport Herbert Morrison agreed; “Road work can assist, but it cannot possibly be a principle cure of unemployment.”

And that was that. It wasn’t the treasury mandarins that finally killed off the prospect of a new public works programme, or even Snowden or Macdonald, but the ministry of transport.

Macdonald fell back on encouraging local authorities to bring forward their public infrastructure programmes but a nation-saving shift in economic policy it was not.

The lack of progress infuriated the left of the party. The ILP’s criticism became increasingly strident. Jimmy Maxton asked “has any human being benefitted from the fact that there has been a Labour government in office?” To which Macdonald replied “Of course they have. I’ve done alright, for a start.”

Fed up, Maxton’s ILP declared at their conference in 1930, that it was “an independent socialist organisation, making its distinctive contribution to Labour Party policy and having its distinctive position within the party.”

In other words, the ILP was a separate party within the party. If any MP wished to remain in the ILP, they had to pledge to vote against the parliamentary Labour party whenever their position opposed that of the ILP.

This demand to put ILP before PLP (like ‘bros before hos’ but with less fake tan and misogyny) resulted in the departure of all but 18 MPs, leaving the ILP an even more implacably radical rump.

Jimmy Maxton made their feelings clear at the October 1930 Labour conference in Llandudno. He moved a vote of censure in the Labour government.

He was defeated, 1,800,000 votes to 330,000, but there was no mistaking the simmering mood of unrest. This was underlined when the rebellious Oswald Mosley was voted onto Labour’s ruling National Executive Committee (NEC).

As Labour bickered, unemployment kept rising. It crossed 2.5 million by the end of the year. The breathing space Macdonald had bought himself in June was rapidly running out.

So on 14 February 1931 Macdonald set up the national expenditure committee. OK, it was another committee, but this one was different.

This time, there was no doubting the outcome. Snowden declared to Parliament “The national position is so grave that drastic and disagreeable measures will have to be taken.”

He was talking about cuts – specifically cuts in unemployment benefit.

For many in the party this didn’t seem to be the kind of thing a Labour government should be doing. Possibly because it wasn’t the sort of thing a Labour government should be doing.

But regardless of party opinion, Macdonald had made his choice. Action was coming.


Pete and Atul are not historians

5 Responses to “Labour history uncut: How the department for transport killed hopes for a Keynesian stimulus in 1930”

  1. swatantra says:

    In those days 1.8m to 0.3m really meant something; these days those figures are simply not worth the paper they’re printed on. Govts of whatever complexion shouldn’t really be walking away from tough decisions and passing the buck just because ‘we’re not in the business of doing that sort of thing.’

  2. Richard Gadsden says:

    I don’t think relations with Australia were all that easy – he was effectively made “Minister for apologising for Bodyline”

  3. Nick says:

    Banking crash in 2008 caused by too much borrowing and spending and people not paying their debts.

    Labour’s solution?

    Lets borrow and spend lots of money.

    Economic voodoo.

  4. Rallan says:

    OMG, what a video! I always thought Harry Enfield was exaggerating, but no! He was actually toning it right down!

  5. swatantra says:

    The 1945 election was actually won in 1939/40.
    But if the 1945 election were held today, I doubt if Atllee would have been PM.

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