Home Political science A Century of Fiscal Squeeze Politics : 100 Years of Austerity, Politics, and Bureaucracy in Britain
The National Government after the General Election of October 1931
The National Government formed in August 1931 had been presented as an emergency administration, aiming to balance the budget and restore confidence in the financial markets before dissolving itself and calling a general election. But that coalition split over the issue of whether to go into that election asking for a mandate for introducing protective tariffs to raise revenue and support domestic industry (a measure opposed by many of the Liberals in the coalition). The parties in the coalition could only agree to go into the October 1931 general election by asking for a so-called 'Doctor's Mandate' to do what was necessary, with each of the parties campaigning under its own manifesto.
Of the parties opposing the National Government in that post-squeeze election, the Labour Party campaigned on a manifesto that endorsed balanced budgets and free trade, but opposed cuts in unemployment benefit and called for nationalization of banks, energy, transport, and iron and steel as part of a programme of 'socialist reconstruction'. The non-coalition Liberals split into two parties, because they were divided both over protectionism and over support or opposition to the National Government.
That general election produced a seismic electoral change. Far from being retrospectively punished by voters for the major expenditure and revenue squeeze measures it had announced the previous month or for its failure to maintain the gold standard that the squeeze was supposedly designed to secure, the National Government secured the greatest landslide in any UK general election to date. The coalition parties together won 556 seats in the House of Commons, against forty-six won by the section of the Labour Party that had stayed out of the National Government and thirty-five by the two different sections of the Liberal Party that opposed the coalition. That result was a disaster for the main group of the Labour Party, which lost 231 seats compared to those the Party had won in 1929, and the overwhelming gainers were the Conservatives, who won over two hundred extra seats. With both of the left-of-centre parties (Liberal and Labour) split over support or opposition to the National Government, the 'National Labour' group led by Ramsay MacDonald, the prime minister, won a mere thirteen seats, while the 'National Liberal' group (the group of Liberals willing to accept protective tariffs) led by Sir John Simon won thirty-five.
Even though the Conservatives after the election comprised by far the largest party in the National Government, Ramsay MacDonald remained prime minister for the rest of this fiscal squeeze episode, continuing in office until 1935 when he was replaced by Stanley Baldwin, the Conservative leader, six months before the general election of that year. By contrast, the Labour Chancellor of the Exchequer, Philip Snowden, who had remained in place under the National Government at its formation in August 1931 and introduced the dramatic budget that implemented the cuts in September 1931, did not contest his parliamentary seat in the general election of the following month—making this fiscal squeeze episode the most prominent case in the book of a political career-ending event for a Chancellor. Snowden was succeeded as Chancellor by the Conservative leader Stanley Baldwin, and thereafter played a marginal role in the government as Lord Privy Seal before resigning in protest over the introduction of tariffs.
Having put together its emergency fiscal squeeze package before the election, the National Government proceeded to implement it over the next two years, which included a second stage of public sector pay cuts, but two years later, in July 1934, half of those pay cuts were reversed and the remainder of those pay cuts were reversed the following July, a few months ahead of the 1935 general election. 
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