Wars and Welfare: Britain in Transition: 1906-1957
Summary
Summary The National Government
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Wars and Welfare: Britain in Transition: 1906-1957
Institution
AQA
Detailed notes on the National Government's policies, leaders, decisions, and how they all affected Britain at the time. includes starter tasks with answers to test knowledge and understanding as you go through the document.
Wars and Welfare: Britain in Transition: 1906-1957
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Chicken and the egg starter
2.5 million unemployed / wall street crash – the 2.5 million were unemployed due to the wall
street crash causing national unemployment.
Run on the pound / May Commission – the May commission was as a response to the run on the
pound (how to solve) may commission made banks want to pull ou.
Mosley memorandum / resignation of labour government – labour government voted on Mosley
memorandum.
Halving of value of Britain’s exports / wall street crash – loss of American markets.
World economic crisis / return to the gold standard – Britain returned to the Gold Standard in
1925 and 1929 wall street crash.
How far was the National Government responsible for the economic recovery of the 1930’s?
1931-1935 MacDonald – historically from labour but belongs to no party (1933 onwards he was
ill and almost incoherent)
1935-1937 Baldwin – conservative PM during 1923 and 1934-1929 (getting old reaches 70).
Abdication crisis
1937-1940 Chamberlain – relations and appeals with foreign policy.
Two general elections during the time they are in charge: Nov 1931 and Nov 1935 (to gain legitimacy
and acknowledge his support – technically another landslide) almost exclusively conservative at this
point.
Chancellors
Snowden who doesn’t stand for re-election in Nov 1931.
Neville Chamberlain + combines this role when he’s PM. (promoted ‘thrift’ – save rather than
spend) adjusted/adapted orthodoxy.
Economic recovery
Unemployment figures: 1932 – 2.7m, 1939 – 1.5m -> cyclical unemployment massively reduced, and
trade cycle goes back on an up, but structural unemployment remains a problem in staple industries.
Is there really a recovery if the intractable 1million are still there. Also rises in 1938 but recovers due
to rearmament as it stimulates the staples.
- could be regional and hides variation through purely looking at statistics (if it was spread it
wouldn’t be as impactful but it being specifically in certain areas, it makes it worse) e.g., Jarrow ->
ship building ͌ 75% unemployment. While Birmingham is thriving. THE ECONOMIC RECOVERY WAS
REGIONAL AND DEPENDED ON WHERE YOU LIVED! More so than ever before.
Immediate actions of the national government
Snowden introduces the £70 million cuts and income tax increase (22% - 25%) to balance the
budget.
This led to the Invergordon mutiny as the navy were angered at the financial change – remained
as a threat and didn’t go into action.
The threat of such mutiny caused foreign investors to pull out of the British economy – yet
another run on the pound.
Such a substantial blow to the economy meant that Britain was forced off the gold standard and
the value of the pound fell by 30% ($4.86 - $3.40) - what it should have been pre-war levels.
, Britain’s exports then became competitive and pushed people away from the ‘sacred cow’ of
Orthodoxy. (happy accident – not a conscious policy not the goal but a concequence)
Starter
1) How many seats did labour gain in the 1931 election? 52
2) What percentage of the vote did the national government receive in Nov 1931? 67%
3) Who was the chancellor who introduced the initial £70million of cuts in late Aug 1931? Snowden
4) Who succeeded him as chancellor? Neville Chamberlain
5) Explain why Britain was forced to leave the gold standard in September 1931. Britain had to
leave the gold standard as the cuts made by Snowden led to the Invergordon mutiny. This
scared foreign investors who consequently pulled out of the British economy causing another
run on the pound – forcing Brit off the gold standard.
6) Explain why leaving the gold standard had a beneficial impact on the British economy. The value
of the pound fell by 30% as it had been over-valued in 1925, making British prices competitive
again as it was valued accurately, and exports became cheaper. !!The government are
able to lower interest rates!!
Less on an instinctive to save and encourages borrowing and investment.
Multiplier effect due to the new spending.
The value of the pound fell by 30% as it had been over-valued in 1925, making British exports
competitive again and allowing the government to lower interest rates. This encouraged borrowing
and increased the spending and investment rates creating a multiplier effect.
Further actions of the National Government
CUTS done by Snowden.
£70 million worth of cuts from unemployment benefit and public sector wager (approx.
10%). IMPACTS: it solved the immediate banking crisis – run on the pound stopped and
they fell off the gold standard. Reduced spending as predicted by Beatrice Webb which
contributes to continuing rising unemployment.
Import Duties Act 1932 – imperial preference.
Placed a 10% duty on most imports, except those from the empire. This, as well as
increasing sales on British goods at home brought in extra revenue so raising the income
tax could be avoided. Ottawa Conference held to discuss Empire trade but was met with
little success. Defence expenditure and interest on war loans were reduced and some
attempt was made to reorganise iron, steel, shipbuilding, textiles, and coal to persuade
new industry into areas of high unemployment without much success. Bank rate
reduced from 6% to 2% to reduce debt charges. Little real effect on economic recovery.
IMPACTS: Most British industry was producing for domestic markets and not selling
overseas. Leads to reciprocal taxation from other countries with trading partners placing
tariffs on their goods. NEUTRALISED THE BENEFITS OF LEAVING THE G/S – became
competitive then tariffs increase the cost again.
Exchange Equalisation Fund
The Exchange Equalisation Account (EEA) is a fund of His Majesty's Treasury in the
United Kingdom. It holds the country's the special drawing rights (SDR) held at the
International Monetary Fund as well as reserves of foreign currencies and gold. It was
set up to provide funding which, if necessary, can be used to manage the exchange value
, of pound sterling on international markets. The EEA was established by Neville
Chamberlain's budget of 19 April 1932 following the pound's exit from the gold
exchange standard the previous September. Keep the value of the pound low and
continue from the gold standard. IMPACT: most British products were domestic, and the
value of the pound had been neutralised by the import duties act and reciprocal tariffs.
Should only impact the export industries but the recovery was in the domestic.
Interest Rate policy
Interest rates were lowered from 6% in 1931 to 2% the following year and were kept at
this level until 1939. This could be done as we had left the gold standard. IMPACT: easier
and cheaper to borrow money – promotes spending for consumers, ordinary, everyday
people (Cheap Credit). Increases demand and creates a multiplier effect, making more
jobs for industry workers. !ALL DOMESTIC! Business owners and industrialists can invest
into mechanisation and expansion – create more jobs for the unemployed. Local
authorities borrow money to spend on house building which creates further
employment. Contributes towards a housing boom which helps to benefit the economy
(roads, plumbing, raw materials, builders, electricians, cars etc.,) Chamberlain promotes
‘thrift’ and holding back on spending – contradictory. Its also not the only thing that
pushes for this housing boom – don’t overdo it. Massively inflator.
Special Areas Act 1934
Made £2million available in aid. As a result, about 44,000 workers were encouraged to
move to other towns and another 30,000 were found places on retraining courses. Some
improved social amenities such as parks and swimming pools were also provided. But
the sums involved were small, areas like Lancashire (textiles) were not included in the
scope of the act and nothing substantial was achieved. The two unpaid commissioners
who were responsible for implementing the legislation criticised its limitations and
resigned in 1936. IMPACT: large areas not included – not far reaching enough as not
enough money. People didn’t want to move as they liked community.
Special Areas (Amendment) Act 1937
Tried to encourage firms to establish factories in the distressed areas by offering
remission of rates, rent and income tax, up to 100% for 5 years. Little substance was
achieved. New trading estates were set up in South Wales, the North-East if England and
in Scotland , but they employed hundred rather than thousands. The Lord Mayor of
Newcastle described it as a ‘mere flea-bits and a sop’. Cosmetic changes. IMPACT: big
trading estates set up in NE and Scotland but no compulsion.
Unemployment Benefit changes
1931 – Means Test
Decided whether houses were ‘worthy’ of unemployment benefit through assessing
income. Considered savings, assets, and household income – not well received by the
public as it was highly intrusive. Also seen as punishing the ‘thrifty’ as it targets those
who have been carful with their money and putting money away. 53% of benefits were
cut which shows the mass scale.
1934 – Unemployment assistance Act
Reorganised unemployment benefits though the Unemployment Assistance Board
(UAB). A benefit to cover the periods not covered by National insurance but at a lower
level. IMPACT: all this deals with is the effects, not the causes and wont help
unemployment go away – doesn’t create jobs but lessens the very worse excesses of
poverty.
Managed Capitalism (Industry rationalisation)
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