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The TUC and the 1929 Labour government

Section seven

EVER SINCE Britain went back to the Gold Standard in 1925 more than .a million and a quarter workers had been unemployed: a fact of which the voters in the 1929 general election evidently took note. So the new Labour Government decided to set up a Committee on Finance and Industry, whose President was Lord Macmillan, a judge, and whose only trade unionist member was Ernest Bevin. The Committee was required to inquire into banking, finance and credit, and into the effect of monetary policy upon employment and trade.

To this Committee the Trades Union Congress submitted evidence which indicated that the deflationary situation caused by the return to the Gold Standard had been accentuated by a whole series of wage cuts. At the same time the employers were arguing for cuts in the wages of public employees, cuts in expenditure on the social services and cuts in unemployment benefit, as a means of keeping the country .on the Gold Standard and safeguarding the pound. These were arguments of a kind to which by July, 1931, when the number of unemployed had risen to 2,750,000 Philip Snowden, the Labour Chancellor, was inclined to lend an ear.

His inclinations were powerfully reinforced by the report of Sir George May's Committee on National Expenditure, which Snowden himself had set up early in 1931, at the behest of the Parliamentary Liberal Party. On August 1st it came out with recommendations for the wholesale slashing of government expenditure.

This method of "solving" the economic crisis was directly contrary to the thinking of the TUC and of the General Council's Economic Committee, which had been created in 1929. Bevin, who had learnt a great deal from J. M. Keynes during sessions of the Macmillan Committee about the economic consequences of deflation and the potentialities of expansion, was able to kindle the imagination of members of the General Council's Economic Committee with his own enthusiasm for some of Keynes's expansionist policies. And, early in 1931, the General Council of the TUC issued a document which stressed the necessity of maintaining at all costs the purchasing power of consumers.

But, by this time, Snowden and MacDonald had their ears cocked in quite another direction the direction of the City and its exponents of "sound finance". By mid August they had evidently made up their minds that there was no alternative to adopting most of the May Committee's recommendations, whatever the TUC might think. However, MacDonald and Snowden were eventually persuaded by Arthur Henderson to call, on August 20th, a meeting of the TUC General Council, the Cabinet Economy Committee and various other members of the Labour Party Executive, to review the financial crisis.

At this meeting at Transport House MacDonald and Snowden argued that, if the drain on gold were to be stopped and the budget balanced, there would have to be drastic cuts in government expenditure including teachers' salaries, Servicemen's and policemen's pay and severe economies in the national insurance system; as well as increased taxation of an undisclosed kind.

The TUC representatives listened to these arguments, and then retired to discuss them. They decided to oppose any of the Government's proposals which could make still worse the already appalling situation of the nearly three million unemployed. They also agreed to put forward their own counterproposals: for a graduated levy on all sections of the community; for a tax on all fixed interest bearing securities, which had become worth more as prices had fallen; and for the temporary suspension of the Sinking Fund.

When Citrine and Bevin led a five man TUC delegation to Downing Street that same evening, Snowden noted that the General Council appeared to be opposed to all the Government's recommended economies, without the implementation of which, he claimed, the number of unemployed might well rise to ten million.

Next day, Henderson and several other Cabinet Ministers, emboldened by the TUC General Council's attitude, stiffened their own opposition to the Macdonald-Snowden plan.

On August 23rd, MacDonald thought it expedient to resign. As he had expected, he was asked to carry on, regardless this time, as head of a "National" Government.

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