What If: Ramsay MacDonald forms a Labour-Liberal coalition in July 1931

From the entry for MacDonald in the Oxford Dictionary of National Biography:
By spring 1931 MacDonald, Lloyd George and their leading colleagues were holding weekly talks. Though the evidence is fragmentary, it seems clear that by July 1931 MacDonald was seriously exploring the possibility of an early Liberal-Labour coalition with himself as prime minister and Lloyd George in a senior cabinet post.
See http://www.oxforddnb.com/view/article/34704 - the final two sentences in the section Marking Time.

In July 1931 there were 283 Labour MPs and 54 Liberal MPs. The Labour Party would have overwhelmingly agreed to such a coalition. I expect the Liberal Party would have been divided but most probably a clear majority would have agreed, so that the coalition would have a majority in the House of Commons.

What would have been the economic and financial policies of such a government? Would the National Government which was formed on 24 August 1931 be butterflied away? Would MacDonald have called a general election for September or October 1931 with Labour and Liberals in alliance against the Conservatives, and a Liberal National type right-wing breakaway from the Liberals? Or would he have waited until winter 1933/1934 or spring 1934 before calling an election? It had to be held before June 1934.

There were 21 ministers in the cabinet in July 1931. Lloyd George would have insisted on at least three, perhaps four, Liberal ministers, with probably himself as Chancellor of the Exchequer.
 
You'd have to win Ramsay McDonald away form Philip Snowden and the orthodox economists in the civil service, and into agreement with J M Keynes and Lloyd-George to go for their plan of public works, deficit financing and devaluation - something that would be a radical and very controversial move for the time.
You'd also have to work out how McDonald's failing Health would affect the coalition - who would succeed him?
And most importantly - what would be the government attitude to appeasement and re-armament?
 
First, with what would in all probability be a majority government, I don't think MacDonald would see the need to form a National Government - especially if he has everybody but the Conservatives on his side.
Making Lloyd-George Chancellor of the Exchequer would oust Snowden, hopefully making the cabinet more amenable to deficit spending / Keynesian AD stimulating measures. If the new Labour-Liberal cabinet is able to avoid the resulting budget crisis / deadlock, MacDonald might have felt strong enough in his position to avoid calling a new election until the end of his ministry's term in 1934. As long as the government gets off of the gold standard (and with Snowden out of the Treasury), interest rates should fall, British exports would thus be cheaper and international AD for British goods would increase (if Keynesian policy is followed). Along with instituting a reformed unemployment system and other Liberal ideas, I could see Britain recovering from the depression more quickly and more effectively.
Another thing I was thinking - if this coalition forms a split between the pro-Labour Liberals and the more conservative ones (the Liberal Nationals of OTL?), could this lead to the former group formally joining the Labour party on a line similar to the Lib-Dem merger? (Forming an actual Lib-Lab party?)
 
Originally posted by rcduggan
if this coalition forms a split between the pro-Labour Liberals and the more conservative ones (the Liberal Nationals of OTL?), could this lead to the former group actually joining the Labour party on a line similar to the Lib-Dem merger? (Forming an actual Lib-Lab party?)

I think that is unlikely as the Liberals who support the coalition, which would be the majority of the party, would want to maintain their party's independence.

However they would demand the enactment of the Representation of the People Bill which provided for the alternative vote for elections to the House of Commons and abolished the business premises vote, except in the City of London. In OTL it received its third reading in the House of Lords on 21 July 1931 and was returned to the Commons.

So a general election in spring 1934 would be fought under the alternative vote. Liberal candidates would get the second preference votes of third placed Labour candidates. The book The Electoral System in Britain 1918-1951 by D. E. Butler, Oxford University Press 1953, has a table giving the estimated consequences of the alternative vote in general elections from 1923 to 1951. In 1929 the Liberals would have won 137 seats to 301 for Labour, 167 for the Conservatives and 10 others.

Also if there is not a general election until 1934 Oswald Mosley, the leader of the New Party, would continue to be an MP until then, unless he resigns. In OTL he was defeated in the general election of October 1931 and visited Italy the next year. On his return he renamed the New Party the British Union of Fascists (BUF). He might not visit Italy if he was an MP. So perhaps the New Party does not become the BUF until after his defeat in a 1934 general election.
 

Thande

Donor
I always thought it was a bit strange that a Lib-Lab coalition didn't materialise, given the circumstances.
 
I always thought it was a bit strange that a Lib-Lab coalition didn't materialise, given the circumstances.
I think Ramsay Macdonald preferred to eliminate the Liberals once and for all as a competitor for the centre-left votes, and therefore preferred to lose an election if it would cement the two party system in place. Hence the 1924 general election.
 
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