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Interwar unemployment and poverty in the United Kingdom describes a period of poverty in Interwar Britain between the end of World War I in 1918 and the start of World War II in 1939. Unemployment was the dominant issue of British society during the interwar years Unemployment levels rarely dipped below 1 million and reached a peak of more than 3 million in 1933, a figure which represented more than 20% of the working population. The unemployment rate was even higher in areas including South Wales and Liverpool. The Government deployed unemployment insurance schemes in 1920 to alleviate unemployment.
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Causes
There were several reasons for the decline in industry after the First World War. The end of World War I brought a postwar boom. In the Shipping industry businesses expanded rapidly in order to take advantage in the increase in business. However the boom was short lived and this rapid expansion caused a slump from oversupply. Structural weaknesses in the British economy meant a disproportionate number of jobs were in the traditional industries. A lack of pre-war technological developments and post war competition damaged the economy and the new industries which emerged employed fewer people. At the same time Britain began to lose her overseas markets due to strong foreign competition. Some have argued than an overly generous unemployment insurance system worsened the state of the economy. The Wall Street Crash in 1929 was responsible for a worldwide downturn in trade and led to the Great Depression.
Apart from the major pockets of unemployment, Britain was generally prosperous. Historian Piers Brendon writes:
Historians, however, have long since revised this grim picture, presenting the devil's decade as the cradle of the affluent society. Prices fell sharply between the wars and average incomes rose by about a third. The term "property-owning democracy" was coined in the 1920s, and three million houses were built during the 1930s. Land, labour and materials were cheap: a bungalow could be purchased for £225 and a semi for £450. The middle class also bought radiograms, telephones, three-piece suites, electric cookers, vacuum cleaners and golf clubs. They ate Kellogg's Corn Flakes ("never miss a day"), drove to Odeon cinemas in Austin Sevens (costing £135 by 1930) and smoked Craven A cigarettes, cork-tipped "to prevent sore throats". The depression spawned a consumer boom.Liberal Party
As the Government had funded World War I 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 increase, by the time that the Liberals lost power in 1922 the unemployment rate had reached 2.5 million. A committee on unemployment was set up in 1920 and recommended public works schemes to ease unemployment, this led to the establishment of the Unemployment 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 downturn. However the government wished, also, to return to the gold standard, a move which would have required cuts in public spending. The Unemployment Insurance Act 1920 extended unemployment benefits to cover all workers who earned less than £250. The "Seeking Work Test" was introduced in 1921, it stated to receive full unemployment benefit there had to be evidence the recipient was looking for work.
Conservative policy
The Unemployment Insurance Act 1927 returned to the principle that workers had to contribute to insurance schemes in order to be a part of them. The workhouse system was abolished and replaced with a system of Public Assistance Committees.
Labour Policy
Ramsay Macdonald's Government passed the Development (Loan Guarantees and Grants) Act of 1929.
National Government
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 World War II.
Local government was reorganized so that local authorities provided school dinners and health services, means testing was introduced and the Unemployment 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. The Special Areas Act of 1934 attempted to inject finance into depressed areas and British industry was protected by protectionist measures such as state subsidies and import quotas.The 1934 Unemployment Act Part I increased the numbers covered by unemployment insurance and the Special Areas Act 1934 increased support for those areas of Britain which were considered to be worst hit by the depression.
Prime ministers
All three of the major political parties held power during this period. The first Labour Government came to power in 1924 and a National Government was formed in 1931.
Legislation
Unrest
There were several examples of unrest during this period, most notably the General Strike of 1926 and the Jarrow March of October 1936. There were also protests against the introduction of means testing and hunger marches organized by the National Unemployed Workers Movement.