Unemployment was the dominant issue of British society during theinterwar years.[1] Unemployment levels rarely dipped below 1,000,000 and reached a peak of more than 3,000,000 in 1933, a figure which represented more than 20% of the working population. The unemployment rate was even higher in areas includingSouth Wales andLiverpool.[1] The Government extended unemployment insurance schemes in 1920 to alleviate the effects of unemployment.[2]
There were several reasons for the decline in industry after the First World War. The end of the war brought a boom. In the shipping industry, businesses expanded rapidly in order to take advantage of the increase in demand. However, the boom was short-lived and this rapid expansion caused a slump from oversupply.[3] Structural weaknesses in the British economy meant a disproportionate number of jobs were in the traditional industries. A combination of a lack of pre-war technological development and post-war competition damaged the economy and the new industries which emerged employed fewer people. At the same time, Britain began to lose its overseas markets due to strong foreign competition.[4] Some have argued that an overly generous unemployment insurance system worsened the state of the economy.[5] TheWall Street crash in 1929 was responsible for a worldwide downturn in trade and led to theGreat Depression.
Apart from the major pockets of unemployment, Britain was generally prosperous. HistorianPiers Brendon writes:
As the Government had funded the Great War largely through borrowing, Britain had run up a large national debt. A boom in the economy occurred in 1919 causing unemployment rates to decrease. The boom stopped in 1920 when unemployment began to rise, and by the time that the Liberal-Conservative coalition lost power at the1922 general election, the unemployment rate had reached 2,500,000. A committee on unemployment was set up in 1920 and recommended public work schemes to ease unemployment, leading to the establishment of theUnemployment Grants Committee. As unemployment was not uniform across Britain, it was decided to concentrate schemes in areas of the country that were particularly affected by the economic downturn.[7] However, the government also wished to return to thegold standard, a move that would have required cuts in public spending.[7] TheUnemployment Insurance Act 1920 extended unemployment benefits to cover all workers who earned less than £250. The "Seeking Work Test" was introduced in 1921, which stipulated that to receive full employment benefit, there had to be evidence that the recipient was looking for work.
TheUnemployment Insurance Act 1927 returned to the principle that workers had to contribute to insurance schemes in order to be a part of them. Theworkhouse system was abolished and replaced with a system ofpublic assistance committeess.
Ramsay MacDonald's Government passed theDevelopment (Loan Guarantees and Grants) Act 1929 (20 & 21 Geo. 5. c. 7).
In 1931, a National Government formed after Cabinet splits resulting from the financial crisis. National Governments would stay in power from 1931-1940 until Winston Churchill became Prime Minister of a Coalition Government during the Second World War.
Local government was reorganised so that local authorities provided school dinners and health services, means testing was introduced and theUnemployment Assistance Board was set up in 1934. Economic measures included the devaluation of the pound and taking Britain's currency off of the gold standard, borrowing also increased. TheSpecial Areas Act 1934 attempted to inject finance into depressed areas and British industry was protected by protectionist measures such as state subsidies and import quotas. TheUnemployment Act 1934 increased the numbers covered by unemployment insurance.
There were several examples of unrest during this period, most notably theGeneral Strike of 1926 and theJarrow March of October 1936. There were also protests against the introduction of means testing and hunger marches organized by theNational Unemployed Workers Movement.