The 1929 the American stock market crash set off global economic shock waves. British exports, already falling in the 1920s, fell by half again and unemployment rose to three million. The National Government of 1931 cut benefits of insured workers by ten per cent. The Prime Minister, Ramsay MacDonald, faced the prospect of millions of workers relying on 'poor law relief', paid for by local ratepayers, who were hard pressed themselves. It became clear that the unemployed had to be supported from national taxation and not local rates - a process that was completed by 1934.
In order to qualify for dole, a worker had to pass a means test. The Public Assistance Committees (PACs) put the worker's finances through a rigorous investigation before they could qualify for benefit. Officials went into every detail of a family's income and savings. The intrusiveness of the means test and the insensitive manner of officials who carried it out frustrated and offended the workers.
The government gave up the Gold Standard in 1931. The gold standard was a way of making sure that the pound kept its value and Britain did not suffer from the inflation that had ruined Germany's economy in 1923 and 1924. Unfortunately, it also made it difficult for businesses to borrow money for expansion because interest rates were high. Similarly it made British exports expensive, depressing staple industries further. Removing the gold standard helped, but the millions of unemployed in the traditional industries noticed little improvement in their lives.
The 1934 Unemployment Act separated dole and insurance benefits, and the 10 per cent cut in dole was reversed. From 1936 an Unemployment Assistance Board (UAB) looked after workers who had used up their insurance benefits. The UAB took over some of the work of the Labour Exchanges and continued to administer the dole and means test. UAB officials were less severe than officials from the Public Assistance Committees, although reports from the Trades Union Congress (TUC) in the 1930s show that there was still a great deal of discontent with the low levels of benefit. The UAB set up training schemes and provided help to workers who wanted to move to another area to find work. Older unemployed men were sometimes given allotments to grow vegetables or raise poultry and rabbits. Society went some way towards accepting that unemployment was not a failing of the people, dispelling the notion that the poor could work if they really wanted to.
In 1934 the government passed the Special Areas Act. The Act identified South Wales, Tyneside, West Cumberland and Scotland as areas with special employment requirements, and invested in projects like the new steelworks in Ebbw Vale. Success of the Act was limited because the level of investment was not high enough and it was not until the late 1930s that the shadow of unemployment lifted from Britain, thanks in part to government investment in rearmament. Despite the failings of government action, few people actually starved to death as a result of unemployment - the dole was intended to keep the unemployed alive and it had done exactly that. Some commentators, such as the novelist George Orwell, believed the limited level of assistance was a key reason why there was no major social unrest in the period, and explained why extremist political parties made little headway in Britain even though they prospered in Germany.
In October 1932 there was a large-scale march on London by 2500 workers from all over the country. Trade unionists played a major role in organising the march and in arranging food and shelter for the marchers. They presented a petition to Parliament demanding the abolition of the means test and protesting about the 10 per cent cut in benefits.
Probably the most famous march was the Jarrow Crusade of 1936. In October, 200 men chosen from hundreds of volunteers began a 300-mile march to London to present a petition to the Prime Minister, Stanley Baldwin. Again, unions helped to organise the march, providing food and shelter. The radical Labour MP, Ellen Wilkinson, led the march and presented the petition to parliament. The government was pressed on why it did not give Jarrow contracts for Royal Navy ships (which would have created much needed work) but no answer was given. The marchers returned to Jarrow by train, empty handed. To add insult to injury, the Unemployment Assistance Board officials in Jarrow docked the dole of the marchers because they had not been available for work. After the Jarrow March the Cabinet resolved to convince organisers that marches were unhelpful and caused unnecessary hardship to those taking part.
Despite their treatment, the Jarrow marchers achieved their aim of raising public awareness and generating sympathy. The town gained new engineering and ship breaking work later in the decade. In the next few years the government looked hard at the future of its citizens, and laid plans for the next great step in fighting poverty - the Welfare State.