British Politics, 1922—5

Three Party Politics

Britain entered into a period of three-party politics. Labour became the party of the left, and the Conservatives of the right, but the Liberal party continued to act as a third force. The British past-the-post system was not well adapted to three-party politics, and parliamentary majorities were a matter of some chance; during the inter-war period only the 1931 Conservative government was elected by more that 50% of the voters. On the other hand, there was not really much to separate one party from another. There was also not much change in policy: Labour stood for social reform, the Conservative party for protectionism, and the Liberals for free trade.

Conservative Administration following the Fall of Lloyd George

The cabinet under Law, following the fall of Lloyd George, was obscure! Austen Chamberlain, Balfour and Birkenhead resigned, but Curzon did not; McKenna was asked to come in as Chancellor, but refused, and Baldwin got the job instead. In Churchill's opinion it was 'a government of the second eleven'. In the ensuing general election (15th November, 1922), Law began by stating that he would undo the reforms in government that Lloyd George had introduced, but in the event he kept a good number of them — particularly, the cabinet secretariat, still headed by Hankey. In fact this is probably Law's greatest contribution as prime minister, since by retaining the cabinet office he served to cement the increased importance of the prime minister, and served to give the prime minister significantly more power than that of other ministers. Law was nervous about the election, and thought the Conservatives would lose it; so as to avoid controversy he even dropped the policy of protectionism. The Liberals remained divided between National Liberals (former Coalition Liberals) and independent Liberals, led by Asquith. Beaverbrook ensured that National Liberals had difficulty being reelected by financing candidates against them. Voting was as follows: Conservatives 5.5 million; independent Liberals 2.5 million; National Liberals 1.6 million; Labour 4.2 million. But the electoral system gave the Conservatives 345 seats, representing a 77 majority over the other two parties combined; Labour had 142 seats and Liberals 117. The leaders of the National Liberals were all unelected, excepting Lloyd George.

As foreign secretary Curzon was successful in negotiating with the Turks at the conference of Lausanne. His personal charisma was largely responsible for a favourable settlement to Britain. Although Turkey regained Constantinople and eastern Thrace, the Straits remained neutral and passable by warships; Britain also gained control of the oilfields of Mosul.

By contrast Baldwin behaved oddly when he went to America to discuss the issue of war loans. Despite the Cabinet decision to abide by the Balfour note [The Balfour note was issued in August 1922 by Balfour acting as foreign secretary while Curzon was ill. It proposed the cancellation of inter-Allied debts, and announced that Great Britain would collect from debts from its former Allies only sufficient to meet its own debt to the United States.], Baldwin allowed himself to be pressurised into settling on harsh terms, and he announced the settlement publicly on his return. Law would have repudiated the deal, which exchanged a loan at 5% for a loan at 3.5% spread out over a longer term, but the cabinet voted for acceptance. But the agreement in itself did not harm Britain. The real negative consequence was political — Britain was forced to collect from its European debtors, and hence to insist on German payments of reparations. The Germans defaulted on the payments and the French, led by Poincaré occupied the Rhur in an attempt to enforce it. The Germans adopted a campaign of passive resistance, which provoked a financial crisis in Germany. Although the British were not in favour of Poincaré's occupation of the Rhur, they still permitted the French to pass through the British zone, which is indicative of the fact that they were tied to the policy of reparations by their need to repay the Americans.

In May Law discovered that he had an incurable cancer of the throat. He immediately resigned. Although he expected Curzon to succeed him, he made no specific recommendation, and the king, thinking Law preferred Baldwin, sent for Baldwin! Baldwin accepted the office before being elected leader of the Conservative party. Lloyd George called him 'the most formidable antagonist whom I ever encountered'. Neville Chamberlain was Baldwin's associate, though they were linked by mutual dislike of Lloyd George, rather than by personal liking or common policies. Chamberlain was unable to oust Baldwin from the top job, despite being more popular in the party itself.

The government was "dull", but the Housing Act of July 1922 introduced by Chamberlain, was a substantial achievement. This reinstated the policy of public subsidies for housing, which had been suspended with the end of the Addison programme. However, the detail of the act caused Chamberlain to be marked as an 'enemy of the poor', for the act subsidised only houses built for sale, discriminated in favour of private enterprise, and favoured the lower middle classes, whilst doing next to nothing for industrial workers.

Unlike Law, Baldwin decided to defend Protectionism, arguing that unemployment could not be defeated without it. He announced his policy on 25th October, during an imperial conference provoked by the Chanak crisis. The conference raised the issue of Imperial preference again. Baldwin was aware of the crisis in the old export industries and believed that tariffs would increase exports of, for example, British steel, provided foreign imports were reduced. The effect of Balwin's policy decision was to reunite the Liberal party, behind the issue of Free Trade, and Asquith, with Lloyd George, who was funding the Liberal party out of his political fund, relegated to the position of unwilling lieutenant.

The Parliamentary Labour Party

The composition of the parliamentary Labour party had radically changed, and less than half of them were union nominees. Within the Labour Party, the Independent Labour Party represented the militant working-class, particularly of Glasgow; in the Clyde side region they won 21 of 28 seats. However, the ILP was not as militant as it had been, and McDonald and Snowden were nominees of it. Although Labour at this time had little support among the middle classes, those members of the middle classes that did join the Labour party were likely to become parliamentary candidates. Two Communists were elected to parliament, and this provoked alarm on the right. Labour refused to allow the Communist party to affiliate with it. The Labour leaders believed that they were the party of the majority class, and would, in time (and by 1926 in the opinion of Sidney Webb) gain a parliamentary majority. Ramsay MacDonald was elected leader of the parliamentary Labour Party following the general election. MacDonald was a first-rate chairman of the cabinet, a skilful and successful negotiator and had a unique grasp of foreign affairs.

First Labour Government, 1924

An election was held in December 1923. The total percentages of votes cast hardly changed, but the result was a swing against the Conservatives and Protectionism, with the Conservatives losing more than 90 seats; the Liberals gained 40, and Labour 50; but the National Liberals, under Lloyd George, saw their parliamentary representation dwindle to just 26. Since the Conservatives were bound to lose a vote of confidence, a minority government under either Asquith (the Liberals) or MacDonald (Labour) would have to be formed. Labour had a larger parliamentary party, Asquith agreed that Labour should be put in office, and the king took the view that Labour must be given 'a fair chance'. The Conservatives lost the vote of confidence on 21st January, and on 22nd January, MacDonald became the first Labour prime minister.

MacDonald combined the offices of prime minister and foreign secretary; Snowden became Chancellor of the Exchequer. No members of the revolutionary Left were appointed as cabinet ministers — their leader, Lansbury, was not included. Wheatley was the only radical who was given office, as minister for health. Being a minority government Labour were 'in office, but not in power', and the aim of the leadership was to establish that Labour could govern, rather than institute a radical programme. This upset the left. The lack of dynamism in the government was also caused by the inevitable reliance of ministers on civil servants, most of whom did not support an extensive socialist programme.

Wheatley was the most successful member of the cabinet, and he correctly analysed the long-term shortage of housing. The Wheatley Act of 1923 raised the subsidy and ensured that houses should be built for rent. Wheatley also organised cooperation between the state and industry, by ensuring that government subsidies would run for 15 years. The programme was discontinued during the economic crisis of 1932, but by then the housing shortage had been largely redressed. The Wheatley Act did not solve the problem of slums, and benefited the prosperous working classes rather than the very poor, but it was an achievement. It also signalled the change in opinion among the ruling classes as it was barely opposed — men of all parties agreed that the provision of houses was a social duty, though they differed over the method and the speed with which this should be done.

The other main achievement of the Labour administration was in education. Trevelyan was placed in charge of the Board of Education. He reversed the cuts implemented by the Geddes axe. He set up a committee under Sir Henry Hadow to devise a way of practically implementing the Labour education policy stated in their document, Secondary Education for All. The Hadow committee reported in 1926, after the fall of the Labour government, but it established the pattern for English state education, and set the goal of raising the school leaving age to 15. It advocated a break between primary and secondary education at 11. These achievements should largely be attributed to Trevelyan.

Snowden's budget was in the Gladstonian tradition of tight control over public expenditure and a balanced budget. Government expenditure was reduced, taxes were reduced, and the McKenna Duties, imposed during wartime, were abolished.

Labour had no remedy to the problem of unemployment. The socialist tradition did not help them — mass unemployment was not understood. Economists were equally puzzled — only Keynes was moving towards the idea of public works, and his was an isolated voice at the time.

Industrial conflict did not end with the establishment of a Labour government, and there were serious strikes, first by engine drivers, and then by dockers and London tramwaymen. The Labour government contemplated using the Emergency Powers Act to quell the unrest, but the dispute was settled by the intervention of Bevin.

MacDonald was able to act as an intermediary between France and Germany. The French were still occupying the Rhur, but both sides were looking, by this time, for a resolution to the conflict. Whilst Britain posed as a neutral arbiter, they in fact inclined to the German point-of-view. The French were regarded by the British at the time as holding up peace in Europe, maintaining great armaments and encouraging Eastern European states, which were their allies, to do so as well. However, MacDonald did accept that the French were genuinely afraid of Germany, and, although he believed these fears were without foundation, he nonetheless sought to allay them by British guarantees, which he thought would never require practical intervention. There already existed a scheme for the restructuring of German reparations, based on Germany's ability to pay, devised by the committee under the chairmanship of American general Dawes, and through the mediation of MacDonald, France and Germany were induced to accept it. MacDonald also put new spirit into the League of Nations. He demonstrated his commitment to it by attending its Assembly and he promoted the Geneva Protocol. This required members of the League to accept arbitration in the event of disputes, to seek disarmament through negotiation, and to support one another in the event of unprovoked aggression. However, the Protocol was never ratified, since the Labour government fell before this could be done, and the Conservatives did not support it. MacDonald's policy was "imprecise"; however, this vagueness reflected British opinion at the time, which regarded French fears of Germany as unrealistic, yet accepted that the French would not abandon them merely because they appeared irrational to the British, and hence the harsher aspects of the Versailles Treaty would have to be modified step at a time. The British view of the League of Nations was ambivalent — nobody really knew at the time what it stood for, or what commitment was required of Britain, and it was all things to all men.

The Labour government also sought to normalise relations with the Soviet Union. MacDonald did not share the enthusiasm that some Labour MPs had for the Soviet Union; however, the government did recognise the Soviet Union, and entered into some tangled negotiations which almost broke down and were saved by the intervention of some Labour MPs. The upshot was firstly a commercial treaty, then a treaty settling Russian debts, and finally a loan from Britain to the Soviet Union. The Conservatives were hostile, and the Liberals were ambivalent to the treaty, and Asquith didn't want to make up his mind; Lloyd George, realising that the Liberal party would be dead if Labour could demonstrate its ability to govern, attacked the treaty so as to expose the government, and succeeded in gaining the support of most of the Liberal party over the summer recess. The argument reached a new peak following the charging of a communist, J.R. Campbell, for incitement to mutiny for publishing an appeal to soldiers not to shoot in the Workers' Weekly. Labour backbenchers protested, and MacDonald agreed; thus the attorney general, Hastings, dropped the charge. This gave the Conservatives the opportunity to claim that justice was being tampered with, and they tabled a motion of confidence in the Labour government. Labour rejected the compromise of a select committee proposed by Asquith, which the Conservatives voted for. The Labour government then brought about a dissolution of parliament and an election, being weary of office without power.

The 1924 Election and the “Zinoviev” letter

The election was controversial owing to the publication, one day before polling day, of a forged 'Red letter', apparently written from Zinoviev, president of the Communist International, to the British Communist party advocating insurrection. Labour was tarnished by association. However, it is likely that the letter did not have any serious impact on the outcome of the election, and the Labour vote increased by 1 million. Actually, it was the Labour party who used the letter to rationalise their defeat in the election — they could pretend that everything was going well until the publication of this forgery. It may be, however, that the panic over Soviet influence caused the middle-classes to vote Conservative, and, in fact, 2 million more people voted at this election than at the previous one. Baldwin dropped Protectionism from the Conservative manifesto — this time for good, and thus removed the main stumbling block to a Conservative victory. Winston Churchill, as a result, felt able to rejoin the Conservative Party. The adoption of Free Trade as a Conservative policy also left the Liberals without a policy that was distinctively their own, and Lloyd George also refused to bolster the Liberal cause with cash drawn from his fund. Thus it was the decline of the Liberals, rather than the Zinoviev letter, that determined the outcome of the election. The Liberals lost 100 seats, and Asquith was not reelected — he entered the House of Lords; the Liberals were whittled down to 40 members in the House of Commons, led by Lloyd George. The Conservatives had an overwhelming majority with 419 out of 615.

The Treaty of Locarno

Baldwin appointed Birkenhead as secretary of state for India; Austen Chamberlain became foreign secretary; Churchill became chancellor of the exchequer; Neville Chamberlain became minister of health, and was the only member of the government who knew his business. The treaty with the Soviet Union was dropped. However, the Treaty of Locarno, negotiated by MacDonald, was signed in London on 1st December 1924. It was a pact of non-aggression between France, Germany and Belgium with guarantees of the borders given by Britain and Italy. It seemed like a great achievement at the time, but really made no lasting change in international power relations. It prevented staff talks between the British and French military on the grounds that this would violate British impartiality. The British did not extend the same guarantee to borders in Eastern Europe. Austen Chamberlain summed up the British view of the Polish corridor, saying that it was something 'for which no British Government ever will or ever can risk the bones of a British grenadier.'

The Return to the Gold Standard

As chancellor the exchequer, Churchill was responsible for returning Britain to the gold standard, which was another aspect of the illusion of having done with the war years and their legacy. But only Keynes opposed the reintroduction of the gold standard, and at the time the dollar/sterling parity was close to its pre-war level. The real problem with British trade at this time was not that British goods were over-priced, but that they were sub-standard. Additionally, Britain also benefited from the high exchange rate in being able to purchase raw materials and foodstuffs at lower prices. The weakness in the policy of returning to gold lay in the vulnerability of sterling to speculative forces. Before the war, Britain had been the great creditor nation, but after it, she sought to run the gold standard on borrowed money, which could be quickly withdrawn. The gold standard also only works if factor markets are completely mobile — that is, if labour and capital are readily able to shift from old industries to new. In Britain's case, this did not apply, and this was the real cause of the structural unemployment that dogged Britain during the interwar years. Britain returned to the gold standard when Churchill announced, on 28th April 1925, that the suspending act of 1919 would not be renewed. However, gold currency was not restored, and the gold-standard was used only for international purposes. The return to normality symbolised by this move was illusory, and the underlying economic problems that were eventually to bring on the Great Depression remained untackled.