Today is the anniversary of the death in 1937 of Ramsay MacDonald, Labour’s first prime minister, but today a largely forgotten figure.
He did more than anyone to create the Labour Party – the only new party in over a hundred years to form a government.
In the first Labour government, MacDonald served as Prime Minister and Foreign Secretary. This government did not have a majority in the Commons and lasted only nine months during 1924. However, it served to show that the Labour Party would be moderate and responsible in power and had supplanted the Liberals as the alternative party of government to the Conservatives.
Labour regained power in 1929, but still without an overall Commons majority. Today this might seem to have been a good election to have lost. The election was at the end of May and in October the Wall Street crash happened.
Faced with falling government tax revenues, increasing bills for unemployment benefits and a mistaken belief that borrowing or leaving the Gold Standard would be a disaster, the Labour cabinet split in 1931. A majority were willing to cut unemployment benefits by 10%, but a significant minority refused.
The Labour government resigned, but MacDonald returned as Prime Minister of a National Government, which he headed until 1935. He was thrown out of the Labour Party as is still regarded by many as a traitor.
The key piece of information which many overlook about the situation in 1931 was that there was deflation. Prices had fallen by 11.5% since 1929. A cut in unemployment benefits of 10% would still have left their real value higher than they were in 1929.