Labour history uncut: “They didn’t tell us we could do that”

by Pete Goddard and Atul Hatwal

“We are like marooned sailors on a dreary island”

Not a Morrissey lyric, but the upbeat analysis of Ramsay Macdonald, leader of the new national government, as he pondered the position of the small group of Labour ministers who had stood with him.

They had reason to feel lonely. Macdonald was still prime minister, but when Parliament returned, his government benches would be dominated by Tories and Liberals. Across the floor of the house, former Labour friends and colleagues would glare at him in angry opposition.

Meanwhile, over at Transport House, headquarters of the Labour party, the Transport Union (T&G) and the TUC, the mood was punchy. Ernest Bevin of the T&G declared, “this is like the general strike, I’m prepared to put everything in.” Although if it was like the general strike, he’d then take everything out again after a week and experience total defeat.

On the 27th August, two days after the fall of the Labour government, the party issued a manifesto. Something that clarified Labour’s position on the big issues.

It said, “We oppose the cuts.”

It then said, “Yes, the same cuts we were actually proposing two weeks ago. What? What? Shut up.”

Montagu Norman, governor of the Bank Of England – never trust a man whose names are the wrong way round

On the 28th, the parliamentary party was due to meet to ratify the manifesto and elect a new leader.

As a meeting of the PLP, invites went to all Labour MPs. In a moment of supreme administrative awkwardness, this included Macdonald and the rest of the splitters

It was a pivotal moment.

The mood on the left was bitter and the TUC was in no mood to compromise with Macdonald.

On the other hand, several former cabinet members, including Herbert Morrison and  Margaret Bondfield, had written to him to express their admiration for his leadership.

The meeting was a chance for Macdonald to walk into the lions’ den and demonstrate his leadership. To face his critics, show that he was always going to be a Labour man and rally those who felt an instinctive sympathy for his position.

At least it would have been, had he actually showed up.

Citing diary commitments, delayed receipt of his invitation and a pressing need to arrange his sock drawer, Macdonald avoided his Labour colleagues.

He was instead represented by Lord Sankey.

Sankey was received politely, but the opportunity was lost. The remaining embers of support for Macdonald across the PLP dimmed.

Ten days later, when parliament reassembled on September 8th, Arthur Henderson, who had returned for his third stint as Labour leader, taunted Macdonald for his no-show at the PLP, saying, Macdonald had never even “looked into the faces of those who had made it possible to be prime minister.”

Arthur Henderson earned a small income on the side advertising Home Pride

But Macdonald didn’t have time to dwell on insults.

Although the formation of the national government had enabled the Bank of England to secure $80m of credits from New York and Paris, the bankers wanted to see cuts and lots of them.

As a reminder, investors had thoughtfully begun to accelerate their withdrawals of foreign currency at the start of September, increasing pressure on the pound again.

So on 10th September, Philip Snowden aka Chancellor Scissorhands introduced his budget.

The debate in the Commons between Macdonald and his former colleagues was vitriolic and barbed. Tom Johnston, who closed the debate for Labour declared the House was faced with the spectacle, “not of a national government but a Wall Street government.”

How times change.

Despite all the anger on Labour’s benches, the government carried the day comfortably, passing £70m of cuts. These included the £13m cut to unemployment that had brought down the Labour government and £56m of cuts that the old cabinet had agreed.

After the battle, never one to miss a moment for melancholy, Macdonald told his private secretary that, “If I was to die soon, I’ll die from a broken heart” suggesting a promising alternative career as a Country and Western singer.

But there was barely time for a pat on the head and a nice cup of tea before reality intruded. The economic situation got worse.

The politicians had delivered on their end of the bargain and cut spending to the bone, then taken a large slice out of the bone too. But the markets wanted more.

Money continued to flow out of the UK at an alarming rate.

Then on the 15th September, the already-nervous markets were panicked by the Invergordon mutiny.

Units of the Atlantic fleet, including the warships Hood, Valiant and Rodney, refused to muster in protest at the government pay cuts, in particular the ‘less pay for sailors’ bit.

Despite it being possibly the most polite mutiny ever conducted, with more piano playing and singalongs than violent protest, the markets reacted badly, worried about Britain’s political stability. Or at least they did once they’d stopped laughing at the fact that we had a warship named Rodney.

The Invergordon mutiny gave editors across the land an opportunity to run their favourite "big guns" pictures.

On September 16th the Bank of England lost £5m, on the 17th £10m and on the 18th almost £18m.

The Bank of England made frantic calls to New York and Paris, pressed 3 for a multi-million dollar loan and endured endless hours listening to binky bonky hold music.

But no-one would lend Britain a farthing. And no amount of cuts could now sate the markets.

Only one option remained.

On 21st September 1931, after destroying the second Labour government, shattering the party and making his name a watchword for treachery, all to keep the pound on the gold standard, Snowden took Britain off the gold standard.

Everyone held their breath, waiting for the disastrous results orthodox economics had predicted.

And waited.

And waited some more.

Before realising, actually, it wasn’t that bad at all.

Allowed to float freely, the pound devalued and by the end of the month it had stabilised without the government hurling millions and millions of pounds at it.

Who’d have thought it?

Not the economists, certainly (except, of course Keynes, who’d been banging on about coming off gold for months). And not the politicians, who had done exactly what the economists had told them.

Nevertheless, despite the national government doing the exact opposite of what it had planned, it had accidentally found the solution to the currency crisis.

In the Labour camp the reaction was one of disbelief. During the debate in the Commons, Arthur Henderson had been supportive of the move but in truth his troops hadn’t known how to respond.

Labour stalwart Sidney Webb, summed it up when he said, “nobody told us we could do that.”

Now, with the crisis over, everyone had some time to think.

And in the Labour ranks, they were thinking “what are we going to do about that traitor Macdonald?”

Pete and Atul are not historians

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2 Responses to “Labour history uncut: “They didn’t tell us we could do that””

  1. paul barker says:

    This whole Labour history strand has been very well timed since you should be reaching the present just in time for the March conference that will bring that history to a close. Labour was founded as a movement with an Affiliate structure, the only way to Join was to belong to an affiliated Union or Socialist Society.
    All that will end in March with Labour becoming simply another Social Democrat Party with some members who are also Trades Unionists, Co-operators etc. Im impressed with the way its being done with so little fuss

  2. swatantra says:

    So am I impressed; couldn’t be done any sooner?
    OMOV, please so that only card carrying members of the Party can take decisions on its progress and future. If unionis, cooperators fabians and general dogsbodys want to take part, then let them join up.
    Otherwise, they can get lost.

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