Page "Arthur Henderson" Paragraph 20

The crisis began in 1931 when a key committee discovered that the budget was facing a serious deficit.

This generated a crisis of confidence in the British financial system which threatened the Pound's position on the Gold Standard.

The Labour Cabinet agreed that it was essential to maintain the Gold Standard and that the Budget needed to be balanced, but divided seriously over some of the measures proposed.

Henderson found himself at the head of a minority of nearly half the Cabinet who could not accept a cut in unemployment benefit.

With the Cabinet so clearly divided it decided to resign office.

On 24 August 1931 it was announced that MacDonald was forming an emergency National Government with members of all parties in order to tackle the crisis.

However the Labour Party repudiated this government, and the National Executive expelled from the party MacDonald and all other Labour members who supported him ( Henderson cast the only vote against this ).

Henderson now became leader of the party as it became ever more hostile to the Government.

With the economic and political situation still uncertain, the National Government decided to call a general election, and in the largest landslide in British political history, it won an overwhelming majority.

Labour was reduced to just 46 MPs, and yet again Henderson lost his seat.

The following year he relinquished the party leadership.