The first party to try and tackle the economic problems was the Labour party led by Ramsey McDonald. Labours approach to tackling the economic problems was to follow the traditional line of the classical economists which was to balance the budget and use laissez faire. Laissez faire meant that the government did not get involved in the economy. Their immediate response was to introduce 10% wage cuts for those working in the public sector e.g. teachers. Another change they introduced involved withdrawing about 200,000 women from being eligible to receive benefits. These steps clearly show that the labour party were tackling economic recovery the wrong way. Labours financial advisors called the May Committee wanted Labour to take reform even further. They wanted labour to reduce benefits and introduce a scheme called means testing. Means testing meant families incomes would be examined before any benefit would be handed out. However many of labours party members opposed furth!.
er reform as they felt that they were elected to help the poor and the working class. By introducing the May Committees proposals the opposing members felt that they would be breaking their promises. Due to the mixed reaction occurring within the labour party and people having different ideas on how to tackle the economic problems the labour party split.
Overall it can be seen that the labour party set out to try and solve the economic problems but could not go to the extent needed. It can also be seen that labour took the wrong direction when trying to tackle the problems. The split of the labour party showed that lots of people had different ideas on how to combat the economic problems.
As a result of the labour party splitting a National Coalition Government was formed. This party consisted of the whole Conservative party and a minority of the Labour party. The coalition party was led by the ex labour prime minister Ramsey McDonald.