OCR Specification focus:
‘the economic policies of the National Government, success and limitations; social policies of the National Government; the recovery, causes, extent, regional variations’
The National Government (1931–1939) sought to stabilise Britain’s economy after the Depression, balancing financial conservatism with modest welfare reform. Their policies reveal tensions between restraint and recovery.
Economic Policies of the National Government
Formation and Priorities
The National Government was a coalition formed in 1931 under Ramsay MacDonald to address the economic crisis. Its main priorities included:
Restoring financial stability
Protecting the value of the pound sterling
Reducing unemployment
Restoring confidence in Britain’s credit and international trade
The Abandonment of the Gold Standard (1931)
One of the most significant economic measures was Britain’s departure from the Gold Standard, which allowed the pound’s value to float.
This facilitated cheaper exports, boosting industries like textiles and shipbuilding.
However, it also caused imported goods to rise in price, affecting consumers.
Gold Standard: A monetary system where a country’s currency is directly tied to a fixed amount of gold.
The Import Duties Act (1932)
To protect British industries, the government introduced tariffs of 10% on most imports, exempting those from the Empire.
This marked a shift from free trade to protectionism.
The policy provided some relief to struggling industries but also risked limiting global trade recovery.
Spending Cuts and the May Committee (1931)
The May Committee Report advised drastic cuts to public spending to balance the budget.
Resulted in cuts to unemployment benefit by 10% and reductions in public sector pay.
While intended to restore international confidence, the cuts worsened hardship for the unemployed.
Unemployment Trends and Recovery
Unemployment remained high during the early 1930s, peaking at around 3 million.
A long-run chart of the UK unemployment rate from 1881 to the present. Note the pronounced peak in the early 1930s and the decline by the late 1930s, aligning with policy-led recovery. The source explains that measurement bases change over time, but the pattern for the 1930s is clear. Source
However, recovery began mid-decade.
Factors aiding recovery included:
Rearmament programmes from 1935 onwards.
Growth of new industries such as cars, chemicals, and electrical goods.
Expansion in the housing sector, fuelled by cheap mortgages and suburban development.
Regional Variations
Recovery was uneven across Britain:
South and Midlands benefited from new industries and suburban housing booms.
North, Scotland, and Wales remained dependent on declining staple industries (coal, shipbuilding, steel, textiles).
This geographical divide highlighted the structural weaknesses of Britain’s economy.
Jarrow marchers en route to London in 1936, protesting unemployment and industrial decline on Tyneside. The march underscores how hardship persisted in old staple regions even as national indicators improved. Real-world evidence complements the policy detail in your notes. Source
Social Policies of the National Government
Education and Housing
The government introduced modest social reforms in the 1930s:
Housing Acts (1933, 1935) encouraged slum clearance and construction of council housing.
Improved access to better-quality housing for working-class families.
Education reforms were limited, as austerity overshadowed investment in schools.
Health and Nutrition
Although there was no major overhaul of the health system, initiatives sought to alleviate poverty’s impact on health:
Means-tested unemployment benefits and public assistance provided basic support.
Improvements in nutrition came from declining food prices and access to cheaper imported goods.
Means Test: An assessment of a household’s income to determine eligibility for welfare support.
Unemployment Insurance and Worker Protection
The Unemployment Insurance Act (1934) consolidated earlier schemes, tightening conditions for benefit and increasing reliance on the Means Test.
Critics argued it stigmatised the unemployed and failed to address structural joblessness.
On the other hand, it standardised welfare provision nationally.
The Special Areas Act (1934)
An attempt to address regional disparities:
Provided government grants and aid to depressed industrial areas such as South Wales and Tyneside.
However, investment was minimal and had little transformative effect.
Successes of the National Government
Financial Stability: Restored confidence by stabilising the pound and balancing the budget.
Economic Recovery: By the late 1930s, unemployment had fallen and living standards rose for many in the south and Midlands.
Social Housing: Expanded provision of council housing improved conditions for sections of the working class.
Modernisation of Industry: Growth of new industries laid foundations for future economic development.
Limitations of the National Government
Persistent Unemployment: Millions remained unemployed throughout the decade, particularly in staple industry regions.
Uneven Recovery: Prosperity in the south contrasted with stagnation in the north and Wales.
Limited Welfare Reform: The government prioritised financial orthodoxy over expansion of social services.
Minimal Intervention: Reluctance to adopt Keynesian policies of state-led investment meant recovery was slower and patchier compared to some European neighbours.
The Approach to Rearmament
By the late 1930s, rearmament provided a significant boost to industry and employment.
Industries such as steel and engineering benefitted from military contracts.
However, rearmament was primarily driven by foreign policy needs rather than domestic economic planning.
The Balance Between Restraint and Recovery
The National Government’s record was shaped by caution. While it restored financial stability and oversaw partial recovery, it failed to decisively address deep-rooted structural and social problems. Its policies reflected a tension between austerity-driven restraint and the demands of economic recovery.
FAQ
Neville Chamberlain, as Chancellor of the Exchequer from 1931 to 1937, was central to policy direction. He favoured orthodox financial management, prioritising balanced budgets and low interest rates to encourage private investment.
Chamberlain also oversaw the introduction of tariffs under the Import Duties Act and backed limited housing reform to stimulate employment. His cautious approach reflected his belief that stability and confidence were essential for recovery.
Although John Maynard Keynes advocated state-led investment to reduce unemployment, the government resisted because:
It feared high borrowing would undermine investor confidence.
Many ministers believed in financial orthodoxy, preferring low debt and balanced budgets.
They assumed recovery would come naturally through market forces and global improvement.
This reluctance left long-term unemployment in depressed regions largely unaddressed.
Cheap interest rates after leaving the Gold Standard encouraged borrowing for housing. Private builders, particularly in the South and Midlands, constructed hundreds of thousands of new homes.
Effects included:
Job creation in building, furniture, and household goods industries.
Expansion of suburban living, shaping new patterns of social life.
Reinforcement of regional inequality, since depressed northern areas saw little benefit.
Critics argued the Act was timid and underfunded. Grants and subsidies were too small to attract enough firms to severely depressed areas.
Additional criticisms included:
It failed to provide substantial retraining or relocation schemes for workers.
Aid was unevenly distributed, with only a few areas benefiting.
Many argued it was more about political appearance than solving unemployment.
Rearmament demonstrated how quickly unemployment could fall when the state intervened directly. By 1938, orders for ships, planes, and weapons revitalised heavy industries that had languished for years.
This shift highlighted the limitations of earlier policies. Critics noted that what decades of austerity failed to achieve, defence spending achieved rapidly, raising questions about whether earlier intervention could have mitigated mass unemployment sooner.
Practice Questions
Question 1 (2 marks):
What was the purpose of the Special Areas Act (1934)?
Mark Scheme:
1 mark for identifying that it aimed to provide government assistance to areas of high unemployment or industrial decline.
1 mark for noting that it involved financial aid or grants to encourage new industries to move into depressed regions such as South Wales and Tyneside.
Question 2 (6 marks):
Explain how the National Government’s economic policies contributed to the recovery of Britain in the 1930s.
Mark Scheme:
Award up to 6 marks for explanation of relevant points.
1–2 marks: General description of recovery without clear reference to specific policies (e.g., unemployment fell, economy improved).
3–4 marks: Some accurate reference to specific policies such as abandonment of the Gold Standard, Import Duties Act, or housing programmes, but limited explanation of how these aided recovery.
5–6 marks: Clear, developed explanation showing links between policies and recovery. For example:
Abandonment of the Gold Standard (1931) made exports cheaper, boosting demand for British goods. (1 mark)
Import Duties Act (1932) protected British industries from foreign competition, helping stabilise employment. (1 mark)
Housing construction and growth of new industries (cars, chemicals, electricals) fuelled economic growth and reduced unemployment in some regions. (1 mark)
Rearmament from 1935 onwards provided a significant stimulus to industrial output and job creation. (1 mark)
Answers should demonstrate understanding of how government action linked directly to economic improvement.
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