Electoral and Other Consequences: Turkeys Voting for Christmas?

This squeeze period seems to be a critical case for the electoral politics of fiscal squeeze. As we have seen, it helped to produce the greatest ever general election landslide in modern British electoral politics in October 1931, even though the Conservatives and the other parties in the National Government had just announced major cuts to welfare benefits, public servants' pay, and other key items of public spending that would impact significantly on a large mass of voters. Far from being punished by those voters for those measures which were fresh in memory, as the standard version of 'retrospective voting' theory might suggest, the Conservative Party won some 55 per cent of the popular vote and gained over two hundred seats, while the Labour Party was punished rather than rewarded for not applying a painful fiscal squeeze, losing over two hundred seats.

That outcome has to be qualified in two ways. First, we can only say that fiscal squeeze 'helped to produce' this outcome, because fiscal squeeze, although undeniably a key element, was not the only major issue in play in this watershed election. Indeed, an element of 'heresthetic', discussed in Chapter One, clearly applied here, because cutting across the fiscal squeeze versus expansionism issue, was the Conservatives' campaign for the introduction of tariffs to protect British industry and employment, which seems to have been a factor in that party's electoral victory. But given that there is no opinion poll data from that period we cannot assess the relative effect of the fiscal squeeze and tariff issues on the voters' choices.

Second, it might be argued that the key test of retrospective voting might lie in the general election after the squeezes had been applied rather than the one immediately after they had been announced and begun to take effect. And indeed, if we take that post-squeeze general election, which was held in November 1935, we do see a clear swing (just over 7 per cent) from the Conservatives to Labour (with the former losing some eighty-three seats and the latter gaining 103), while MacDonald's National Labour group was reduced to a mere eight and MacDonald lost his own seat. That result is more compatible with the orthodox 'punishment' view. But even so, the Conservatives were comfortably re-elected, with a majority of 161 over all other parties in the legislature, even leaving aside their remaining forty-one

Labour and Liberal allies in the National Government. Accordingly, the biggest post-squeeze electoral punishment was suffered by MacDonald's own Labour group.

Going beyond electoral consequences, the policy impact of this squeeze has been much debated by historians, with a range of different 'narratives' and interpretations of the merits or otherwise of the tax rises and spending cuts adopted in this episode. Advocates of Keynesian economic policy, notably Robert (Lord) Skidelsky (1967), see fiscal squeeze in the 1930s as a classic case of misguided policy response to depression and financial crisis. But others have offered a more 'revisionist' position, notably Ross McKibbin (1975; 1990), who argues that a full-blown Keynesian approach was not a practicable policy option for the UK at that time, because the state did not have the necessary administrative capacity, such that the real options available to the minority Labour Government came down to 'drift' (the approach it followed in its do-nothing April 1931 budget) or 'deflation' (the approach taken by the emergency National Government in the September 1931 budget) and that by sticking too long to the 'drift' option the Labour Government brought about its own collapse.

Others have argued that the Treasury's position in resisting Keynesian-style ideas in favour of financial orthodoxy was more defensible in the circumstances of the time than the standard Keynesian critique had allowed for, and that given the scale and nature of unemployment at that time the loan- financed public works programmes then being advocated by Lloyd George and others would have been ineffective or even counterproductive if they had been implemented (Williamson (1992): 9-10; Middleton (1982); Booth and Glyn (1975)). In short, the 'battle of the narratives' among economic historians of this period has produced a far from clear-cut outcome.

Further, picking up a point mentioned in section 4.5.2, although this fiscal squeeze clearly combined high political drama with some very long-lasting party-political effects, it is much less clear that it produced any significant once-for-all reshaping of the state or of the way public services were delivered. As we have seen, the 'emergency cuts' focusing on reductions in unemployment benefits and public officials' salaries were reversed after a few years. Some cherished policy initiatives ground to a halt for some time, such as the provisions of the minority Labour Government's 1930 Housing Act that required local authorities to draw up plans for slum clearance (Mowat (1968): 340-2). But the relationship between central and local government and between business and the state did not fundamentally alter, and nor did the basic structure of the developing welfare state or the bureaucracy. For example, in contrast to the 2010s, no plans were announced for increasing the age of old-age pension entitlement or for widespread privatization or outsourcing.

It is true that in the archive records of discussions about economies, there are one or two references to automation and new technology in public services as a possible route to lowering costs, for example, by traffic lights to replace the earlier and costlier system of police officers on 'point duty' directing traffic by hand at busy road junctions24 and a Treasury injunction to government departments to reduce costs by making more use of the infant office- automation technology of that era.25 But if necessity is the mother of invention, not much invention, in the sense of dramatically new ways of delivering public services, seems to have ensued in this period.

In short, the clearest consequence of this squeeze episode seems to have been political, in the sense of a serious split in the Labour Party, with effects that lingered for decades, as we shall see in later chapters—for instance, in the choice of the Bank of England as the first institution to be nationalized by the first majority Labour Government in 1945 (following the 'bankers' ramp' narrative of the 1931 crisis developed by George Lansbury and others), in the battles over that Labour Government's fiscal squeeze in the late 1940s, and even over the handling of social security benefits in the fiscal squeeze applied by a later Labour Government in the 1970s.

  • 24 Minutes of a meeting of the Consultative Committee of the Police Council on Administrative Measures of Economy, held at the Home Office on 21 October 1931, item 6. 'Point Duty', MEPO 5 294, Reduction of Police Expenditures.
  • 25 Treasury Circular No 12/32, 15 July 1932, 'Administrative Costs'.
 
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