The Chancellors (8): Neville Chamberlain

Neville Chamberlain

1923-24, Conservative (under Baldwin); 1931-37 Conservative, National Government (under MacDonald and Baldwin)

Neville Chamberlain was, along with Baldwin, the dominant force in the Conservative Party between the wars. He was Chancellor twice, but only for a short spell in his first stint. When Bonar Law fell ill, and Baldwin became prime minister, his first choice of chancellor, Reginald McKenna, turned the offer down.  Thus Chamberlain was, once more, the second pick. His first time in number 11 was the briefest since 1900 (being just five months), but in it he forged the partnership between with Baldwin. He strongly supported Baldwin’s gamble to go to the country over his father’s beloved tariff reform. When the gamble backfired, Chamberlain also played a role in facilitating the return of the old coalitionists to the front bench. Initially, Austen had been upset by Neville’s joining Bonar Law’s 2^nd XI, but in the end he gave his blessing and returned to government as foreign secretary. Neville, meanwhile, was minister of health once more. The two brothers served in the same cabinet.

In his second spell at the Treasury he was surely one of the most successful of modern chancellors. Chamberlain was the dominant figure in the National Government. He ran economic, social and industrial policy, and the mid-‘30s he was the dominant voice in defence and foreign policy too.

In one sense, Chamberlain got lucky. When the government was forced to abandon the gold standard, it was able to cut interest rates sharply. By 1932, the bank rate was just 2% (it was at 4%, or more, in the ‘twenties). The growth that ensued was at least in part owed to cheap money. It also enabled the government to cut its debt burden by converting war bonds at 5% to new treasury bonds at 3.5%. Chamberlain was committed to balancing the budget, and did so on paper. In practice, the government ran a budget deficit, though its attempts to balance it were broadly deflationary, its failure to do so at least limited the damage.

Chamberlain was no simple free-marketeer. In 1932, he fulfilled his father’s ambition to introduce tariffs, a moment that profoundly affected him and his brother. The Import Duties Act imposed a general tariff of 10% on imports from outside the empire; in the year that followed higher tariffs were imposed upon manufactured goods and luxuries, they were also extended to agriculture. The Agricultural Marketing Act created marketing boards and agriculture. Iron and steel was cartelised. The Special Areas, though not of themselves particularly important, marked the beginnings of a regional policy. Chamberlain carried through the creation of London Transport initiated by Labour’s Herbert Morrison.

The most important thing the government did in the ‘thirties was to provide relief for the unemployed. Chamberlain inherited a system that he had, in part, designed. In the face of the Great Depression, the National Insurance Scheme was unable to finance itself. Thus, in 1932, Chamberlain cut unemployment benefit by 10%. Those not covered by the scheme received transitional relief, now renamed transitional payments, administered locally by Public Assistance Committees. A royal commission had been established under the Labour government and, in 1934, Chamberlain incorporated its findings into the Unemployment Act. The insurance scheme was put under the charge of the Unemployment Insurance Statutory Committee, led by Sir William Beveridge. It was a success: the cuts were reversed, and with unemployment falling the scheme was self-financing (and was extended to cover agricultural workers for the first time). Relief for those not covered by the scheme now came under the aegis of the Unemployment Assistance Board. A national rate of relief was announced, which meant that some would have seen the benefits cut: the government was forced to climb down. The PACs looked, and felt, to the unemployed much like the hated Poor Law Guardians of old. Nonetheless, for all the grim reality of being on the dole, unemployment fell and Britain had the most extensive system of unemployment relief in the world. Chamberlain always proclaimed his liberal inheritance and, in this aspect at least, lived up to it as chancellor.

The other key issue Chamberlain faced as chancellor was rearmament. In 1932, the ten-year rule was abandoned. In 1935, Chamberlain took the leading role in the formulation of defence policy. He was a reluctant, but committed supporter of rearmament. He agreed with the central premise of the Defence Requirements Committee created in 1934, that Germany was the primary threat. However, he disagreed with its conclusions: they had called for the army to get most, but Chamberlain successfully diverted the money to the RAF and, in particular, into bombers. He also accepted the principle of borrowing to fund rearmament, though little was done about it until the Defence Loans Act of 1937. Meanwhile, the shadow factories scheme laid the groundwork for the rapid rearmament of 1938.

If we now accept that the British economy grew in the 1930s Chamberlain, as chancellor, surely gets some credit for that. Just as importantly, he was the most important figure in the national government. His reach went well beyond the Treasury.  He remained loyal to Baldwin, perhaps to his own cost: he could have taken the leadership in 1931 or 1935. He was also very uneasy about Edward VIII, and strongly supported Baldwin in the abdication crisis. By the time Baldwin retired, there was no question: Chamberlain was the obvious successor.

Like Baldwin, Chamberlain was one of the ten chancellors to go on to be prime minister since 1900, and one of twelve to go on to lead their party. He was also one of six to go direct from number 11 to number ten (seven directly to the party leadership). He was one of only three men since 1900 to have been chancellor twice; one of the others was his (step) brother, Austen. The Chamberlains were the only brothers to serve in the same cabinet in the 20^th century (the next would be the Milibands), they are also the only brothers to have both led their party. He was certainly one of the most powerful chancellors of them all, possibly the most powerful (along with Lloyd George, and Gordon Brown, perhaps) and the only great chancellor of the inter-war years. He was, along with Baldwin, the most important politician of the inter-war period. In both cases Mowatt was wrong: Chamberlain was undoubtedly anything but a political pigmy.  Had he never gone to number ten, his reputation might well have been just this: Chamberlain’s was one of the most impressive ministerial careers of the 20^th century.

For Chamberlain’s career as a whole, see the post in the Tory leaders series here.