Brexit

Time for a National Government? Lessons from 1931

BY George Trefgarne | Georgetrefgarne   /  12 February 2019

It is an interesting question as to whether the formation of a National Government would help solve the current Brexit impasse. It has certainly worked in the past.

In 1931 a National Government was formed to get us out of the Depression and overall it did a pretty good job. Britain recovered faster than any other major economy, helped by coming off the Gold Standard, restructuring War Loans, tax cuts and embarking on a housebuilding boom.

When the crisis began that year there was a minority Labour Government, the pound was under pressure and the Cabinet was divided. An Austrian bank called Credit Anstalt had gone bust and contagion had spread to London’s financial markets. The budget deficit was spiralling out of control due to faltering tax revenues and the cost of rising unemployment benefits.

During the summer, the Prime Minister Ramsay MacDonald was trying to get agreement among his Labour colleagues to cut government expenditure and raise taxes. Balancing the budget was a prerequisite to the approval of an emergency loan being arranged by JP Morgan in New York. The Conservative and Liberal parties refused to countenance the £100m in tax rises which the Cabinet agreed to and instead demanded further economies.