by Roy Jenkins
He cited a Daily Mail article, rather curiously signed Editor, which had attacked him for presiding over the disappearance of ‘an immense fortune’ left him by his father, and had concluded: ‘It is difficult to see how the leader of a party who has lost his own fortune can hope to restore those of anyone else, or his country.’
Baldwin then castigated the ‘Editor’ in what now seems rather old-fashioned but nonetheless devastating terms:
I have no idea of the name of the gentleman. I would only observe that he is well qualified for the post which he holds. The first part of the statement is a lie and the second part of the statement by its implications is untrue. The paragraph itself could only have been written by a cad. I have consulted a very high legal authority and am advised that an action for libel would lie. I shall not move in the matter, and for this reason: I should get an apology and heavy damages. The first is of no value, and the second I would not touch with a barge pole. What the proprietorship of these papers is aiming at is power, and power without responsibility—the prerogative of the harlot throughout the ages … this contest is not a contest as to who is to lead the party, but as to who is to appoint the leader of the party.
Duff Cooper, against all expectations of a few weeks before, won by a majority of nearly 6000. This was the end of the tunnel for Baldwin. Nineteen days after the Sunday when he was deemed to have no alternative than to resign in ignominy his leadership was more secure than at any time since the 1929 election. Neville Chamberlain was still lamenting that Baldwin did not attack the Government instead of the press lords. A concordat of a sort had to be arranged with him, and this was done with mutual protestations that only misunderstanding had impaired goodwill. Chamberlain also believed that he had arranged a mini-concordat of his own with Beaverbrook.2 The Empire Crusade continued in existence (indeed its symbol still decorates the front page of the Daily Express), but like many of Beaverbrook’s enterprises, it quickly faded from his attention and that of the country. And Austen Chamberlain was still telling Baldwin that the Conservative position would only be restored if he bestirred himself and put a less negative spirit in his speeches. One of Baldwin’s weaknesses in dealing with his colleagues was that, at least until after 1931, he inspired no awe. In public he could be magisterial. But in private he affected too much modesty, and before 1922 had been junior to too many of them.
All this, however, did little to impair his triumph. He could approach the cataclysmic events of the forthcoming August with an adequate authority; and he could in the future look back on 1931 with a certain complacency, as ‘the year my party tried to get rid of me’.8 They tried, and they failed. They did not try again.
CHAPTER SIX
The National Government
During the first half of 1931, the prospects of the Labour Government worsened sharply. This may indeed have been an underlying cause of the revival of Baldwin’s own fortunes. The lively hope of success is always a good healer for a political party and a prop to the position of its leader. Unemployment, reacting to the world slump and concentrated in the export trades, had risen steadily throughout 1930. By the end of the year it passed the two and a half million mark, just over double the figure when the Government had taken office. For some time MacDonald managed to ride this deterioration with remarkable aplomb. ‘It is not our crisis, it is the crisis of capitalism,’ he had successfully if unconstructively assured the 1930 Labour Party Conference. But as the figure mounted still further, as it became abundantly clear that the Cabinet was barren of remedy, as the harsh eloquence of Oswald Mosley’s attacks damaged without moving the Government from which he had recently resigned, so comforting oratory became less of a substitute for action. The Labour Party began to lose by-elections, and the performance of the Conservative Party improved substantially even in those seats which did not change hands.
In March 1931 Snowden, the Chancellor of the Exchequer, referred to ‘the national position [as being] so grave that drastic and disagreeable measures will have to be taken’, and accepted a Liberal amendment to set up an Economy Committee. Under the chairmanship of Sir George May, secretary of the Prudential Assurance Company, the committee became a time-bomb ticking away under the life of the Government. The Government had asked an outside and unfriendly body to make recommendations upon one of the most sensitive areas of politics. When the recommendations came, the Government, in a prejudiced atmosphere, would have to decide whether or not to accept. The Report was due at the end of July, and as the summer advanced the mounting drain on the insolvent unemployment insurance fund made the issue still more critical.
Before mid-summer Baldwin did not believe that the Government could last beyond the autumn, but he was still hoping that he could get his Aix holiday. The evidence is overwhelming that he did not at this stage contemplate a coalition government. What he expected was to see the Labour Government driven into an election either by its own dissensions or by the action of the Liberals, and its consequent replacement by a Conservative administration, obviously with himself at the head. But he believed that MacDonald had made some soundings in a coalition direction, and in a speech at Hull on 19 July he went out of his way to reject ‘the idea that a national government such as existed during the war should be set up in the present difficulties’. Before this speech he had carried Neville Chamberlain with him in such rejection, but a week later, when there had already been a period of some pressure against the pound in the foreign exchange markets, Chamberlain thought that events would ‘beat down Baldwin’s native instinct against coalition’.1
Baldwin knew of the development of Chamberlain’s view, and made the major mistake in the circumstances of proceeding with his plans for France and leaving Chamberlain in charge in London. From this may well have followed the whole highly undesirable evolution of British politics in the thirties. It was undesirable not only from a national point of view, but also from Baldwin’s own standpoint. The political cataclysm of 1931 undermined his central strategy of the twenties. He had wanted a stable balance in politics, with a large, moderate and ‘responsible’ Labour Party sharing power, although preferably not on an equal basis, with his own form of Conservatism. This balance, for which he had worked hard and long, he allowed to be destroyed by overreaction to the relatively minor financial crisis of August 1931. It was Baldwin’s biggest political mistake.
The result was also disadvantageous for him personally. It gave him four and a half years of power without full responsibility—although he no doubt did not consider that this placed him in the harlot class. For this period he was the leader of the party which gave the Government nine-tenths of its majority, but he was only the third man in the hierarchy. This meant some easing of the burden, which he liked, but it also meant that he was not Prime Minister, which he also liked being, that he did not have Chequers, for which his affection was second only to that of MacDonald, and that his salary as Lord President was £2000 instead of the £5000 which Secretaries of State as well as the Prime Minister were paid. This last was a serious matter, at least until the substantial improvement of the fortunes of Baldwins Ltd in 1934. Altogether it was an expensive holiday for which he crossed to Le Havre on 8 August.
It was not even an uninterrupted holiday. For the Government the culminating crisis began on the morning of 11 August 1931, when MacDonald arrived overnight from Lossiemouth. The problem which confronted the Government arose out of the confluence of two streams of difficulty. July had been a month of international financial upheaval. The trouble began with the inability of the German Government to meet their reparations obligations, and with the intransigence of the French, much greater than that of the Americans or the British, towards giving them relief on politically acceptable terms. Berlin suspended cash payments on 13 July and imposed exchange controls two days later. Then the pressure of exchange speculation was diverted against sterling, vulnerable as a currency presided over by a Labour Government with budgetary troubles.
Over the next three week
s the Bank of England lost about £60 million in gold and foreign exchange. The sum, while considerable, was not enormous. It was the equivalent of about £1500 million at 1980’s values, although greater than that in relation to the size of the economy. Nor do the crisis protection measures of putting the bank rate to 3½ per cent on 23 July and 4½ per cent on 30 July sound very desperate today. Any good effect of these moves, however, was more than cancelled by publication, without any accompanying statement of Government policy, of the report of the ill-conceived May Committee on that same penultimate day of July. This forecast a budget deficit of £120 million and recommended expenditure cuts of £97 million, including a saving of £67 million on the unemployed. The House of Commons rose and ministers dispersed on their holidays with little chance of an undisturbed recess. If they were to try to maintain the parity of sterling against gold (which was in accordance with their own instincts as well as with the views of most of their advisors, although not of Keynes) they needed substantial foreign credits and they were unlikely to get these without welfare economies which would disrupt the Cabinet and its parliamentary support.
On the morning of 12 August Baldwin, who had got to Angers in the Loire, was summoned back and arrived early the following day. He saw Chamberlain, then a group of Bank of England directors (Montagu Norman was away) and in the afternoon MacDonald and Snowden. On this last occasion, according to Chamberlain, who was also present, Baldwin ‘asked no intelligent question, made no helpful suggestion’, which Chamberlain attributed to his desire ‘to be gone before he was “drawn into something”’.2 Whether or not this was a correct explanation of his reticence, it was certainly the case that Baldwin was quickly ‘gone’. He was back across the Channel that evening and in Aix, after his habitual tour, on Tuesday 18 August. Chamberlain was deputed to handle all negotiations in his absence, and in particular to attend a meeting of the leaders of the three parties which was fixed for that same Tuesday.
Arrangements for such a meeting clearly presupposed an unusual degree of party collusion, but Baldwin persisted in expecting no new combination. As soon as he got to Aix he wrote to Chamberlain: ‘I think in the long view it is all to the good that the Government have to look after their own chickens as they come home to roost, and get a lot of the dirt cleared up before we come in.’3
Meanwhile the death throes of the Labour Government were beginning. Wednesday was a day of interminable meetings, during which the split over unemployment benefit between MacDonald and a substantial but fluctuatingly composed group of his Cabinet began to assume its final form. On Thursday there was a series of meetings between the leaders of the Government and the opposition parties, the General Council of the TUC and the National Executive of the Labour Party. That evening Chamberlain telephoned to Baldwin in Aix and told him that he ought to return to London. Baldwin accepted this advice, but he did not reach Victoria Station until the evening of Saturday, 22 August, two days later. In the meantime discussion of a National Government had become open and serious between MacDonald and Snowden and the Conservative and Liberal leaders. It is not clear who first raised the matter.1 What is certain is that by the late evening of 21 August Chamberlain had strongly urged this course upon MacDonald. And he did so with the support, not only of Hoare, who was his adjutant in all the talks with the Government, but also of Cunliffe-Lister, Hailsham, Eyres-Monsell and Davidson, the last being brought in as the best means of liaison with Baldwin.
Davidson recorded his own position in his draft memoirs:
Earlier in the month I had been strongly against any idea of coalition…. But the situation was now so critical, and the time for restoring confidence so short, that, very reluctantly, I agreed that each Party must sink its political programme temporarily and combine to pursue an economic policy to save the nation from bankruptcy. What influence I had with S.B. was now used to persuade him of the wisdom of this course.4
Davidson had of course great opportunity for influence upon Baldwin, and he used it to the full on this occasion. In the late afternoon of 21 August, he crossed to Paris and joined Baldwin at the Ritz shortly before midnight. They talked until one. The next day he accompanied Baldwin back to London, and upon arrival took him to his house in Westminster. After dinner the leading Conservatives arrived. Davidson’s account was as follows:
The discussions at my house that evening were inconclusive. S.B. was deeply reluctant to envisage a new coalition. He had destroyed one and did not wish to form another. Neville Chamberlain became very impatient with S.B.’s attitude. He made it quite clear that he could see no other way out of the situation. S.B. agreed that if that was indeed the case it would be his duty to take part in it. It was clear, however, that he was still very worried about the whole idea.5
Hoare confirmed this view of Baldwin’s state of mind.2 Baldwin gave him the impression ‘that the last thing in the world that he wished was either a return to office or the end of his holiday…. Only if a National Government was really inevitable was he willing to take his part in it. Chamberlain and I were inclined to be impatient when we saw him so reluctant to take the only course which seemed to us possible.’6
Baldwin’s reluctance had therefore to be set against a formidable opposition which had been allowed to solidify and organize itself in his absence. He was determined at least to discuss it with his friend Geoffrey Dawson, the editor of The Times, before entering into commitment. The following morning he went to Dawson’s house, thereby missing a telephone call from the King’s private secretary asking him to go to the Palace before luncheon (it is not clear why the message was not passed on). As a result the King, who was consulting the opposition leaders with MacDonald’s approval, saw Samuel before he saw Baldwin. Samuel argued strongly and persuasively in favour of a National as opposed to a purely Conservative Government, and considerably influenced a receptive King.
Baldwin did not get the King’s message until he arrived at the Travellers’ Club for lunch. He then went to the Palace at three. The King asked him if he would serve in a National Government under MacDonald. Had he been there earlier he might have been asked a less direct question. But once it was asked, his whole character and political stance gave him little alternative but to say ‘yes’. He must, in any event, have felt that the pressures were foreclosing the issue against his original instinct. The King recorded that he was ‘greatly pleased with Mr Baldwin’s readiness to meet the crisis which had arisen, and to sink Party interests for the sake of the Country.’7 It is only necessary to reverse the meaning of the sentence to realize how difficult it would have been for Baldwin to have given a negative answer. Thus, against his better, earlier judgment, the decisive step was taken towards the damaging decade-long distortion of the political pattern. It came about through a mixture of chance, his own predeliction for holidays, and Neville Chamberlain’s effective, narrow-sighted determination.
There still remained the question of whether MacDonald would fill his essential part in the new arrangement. Probably, after the discussions of the Friday evening, there was not much real doubt about the outcome. But it appeared otherwise at the time. That same Sunday, in the evening, there was played out in the Cabinet Room the sad farce of waiting for the telegram of conditions for the line of credit from Morgans’ in New York, relayed through the Bank of England, and containing when it came the terms which were wanted by MacDonald and Snow-den, but which were anathema to half the Cabinet. On that the final split occurred. MacDonald said he would report to the King, and advise a Palace conference of the three party leaders for the following morning. He asked for and received the resignations of his Cabinet; it was not clear whether they included his own.
Later that night MacDonald saw the other party leaders in Downing Street. Davidson, who talked to Baldwin immediately afterwards, recorded as follows:
It was quite clear that he [MacDonald] intended to resign and that he had no intention of joining in a Coalition, even though the King had urged him to lead one. Neville, however, pr
essed on him the support in the country that he would bring to such an administration and the effect it would have in restoring confidence. His arguments seemed to have no effect. To every one else at the meeting it seemed quite clear that MacDonald intended to resign, and S.B. returned from it convinced that he would have to form a Government. Nor did he think this a bad thing since, as I had emphasised before, he had little love for Coalitions.8
By the next morning MacDonald had changed his mind. In a half-hour audience the King’s new National Government was created. Afterwards the three leaders spent an hour and a half agreeing upon heads of terms. These stated explicitly that the Government would last only for the emergency, and that any subsequent elections would be fought not by the Government as a whole but by the parties. Over the next six weeks this decision was gradually and ineluctably reversed.
A small Cabinet of ten—four Conservatives, four former Labour ministers and two Liberals—was quickly set up. Baldwin became Lord President of the Council and number three in the Cabinet list (Sankey, the Lord Chancellor, was above him). The only douceur which he asked for and obtained was 11 Downing Street. ‘It was very comfortable,’ he surprisingly recorded, ‘and I could always keep my eye on the Prime Minister.’9 More to the point was that it was some compensation for the lower salary. His three Conservative colleagues were Hoare, Cunliffe-Lister and Neville Chamberlain. The last, the real architect of the Government, accepted tenth place in his old post of Minister of Health. After the autumn election, however, he succeeded Snowden as Chancellor, and remained at the Treasury, manifestly the second man in the Conservative Party, for longer than anyone since Lloyd George. His brother Austen, affronted by the lack of respect paid to his seniority, reluctantly accepted the Admiralty outside the Cabinet. Churchill was left out altogether.