The Second Labour Government

It was not going to be easy for the Labour government. The Wall Street Crash of 1929 would lead to the Great Depression– a devastating economic event that would lead to a 50% reduction in exports over the next two years, and leave two million unemployed by December 1930.

The effects of the Great Depression had not been helped by the General Strike. The unfair distribution of wealth between the miners and mine owners meant that the working class had little to spend on food and goods. As the largest population group had no money to spend, businesses were struggling for income.

What changes did the Labour government put in place?

Firstly, it implemented the 1930 Coal Mines Act, which brought the working day of miners down from 8 hours to 7.5 hours and gave mine-owners control over minimum prices and production quotas.

Secondly, it implemented the 1930 Housing Act, calling for low-quality housing to be demolished and replaced with new buildings. This resulted in 450,000 former slum-dwellers being re-housed by August 1936 due to the mass clearance of slums.

However, with regard to solving the Great Depression, the government was unable to do so. It rejected the Mosley Memorandum in May 1930, which suggested state control over industry and the use of credit to expand the economy. In 1931, Sir George May was appointed to head a committee on national expenditure. His report, published at the end of July, suggested increased taxation and public spending cuts, in order to balance the budget.

As the Labour government was unable to agree on what measures they should take to avert the disastrous effects of the Great Depression, on 24th August 1931, MacDonald formed a National government with the Conservatives and some liberals.