From 1922, the economy made a slow recovery and unemployment rates gradually declined. The Conservative government of 1922 continued to minimise expenditure while maintaining public work schemes to alleviate unemployment. In 1923, Cabinet discussed the problem of unemployment and related economic problems. It was agreed that British producers should be assisted by import tariffs.
The short-lived Labour Cabinet of 1924 established an Unemployment and Housing Committee and an Unemployment Sub Committee. Existing measures to alleviate unemployment were continued. The Labour Cabinet voted for £13.5 million to be spent on the construction of trunk roads. The incoming Conservative government of November 1924 was opposed to use of public works to alleviate unemployment. Instead it concentrated on stimulating the economy in order increase the overall number of jobs. The Unemployment Grants Committee (UGC) was permitted to continue, although its activities were reduced. In November 1925, the Standing Committee on National Expenditure proposed the complete withdrawal of government spending on relief work.
Following Britain's return to the gold standard, associated high bank rates and the 1926 General Strike, unemployment increased again. Nevertheless, the government continued to seek cuts in expenditure on relief works. In 1926, the Minister of Labour, Sir Arthur Steel-Maitland, considered the question of abolishing the UGC but decided to allow it to continue on a limited scale. In 1927, Cabinet decided that given the severity of unemployment, relief works must continue. Before the general election of 1929, some Cabinet members became critical of the effect of the government's financial policies on unemployment.
Ramsay MacDonald's Labour government was committed to a programme of public works and support for depressed industries. Soon after its election, the Great Depression swamped the government. Unemployment increased rapidly, peaking at around 3 million in 1933, when close to 24 per cent of the workforce was unemployed.
The government immediately passed the Development (Loan Guarantees and Grants) Act of 1929. This subsidised local authorities and public utilities to undertake capital development work. It led to a large-scale relief programme, which employed over 100,000 workers in 1931. By mid-1930, however, the government believed that relief alone could not solve the problem of unemployment. It now concentrated on the reorganisation and rationalisation of industry with the aim of increasing profits.
The Labour government considered incorporating the ideas of the other parties into their unemployment policy, including increased spending and import tariffs to boost industry. In June 1930, Ramsay MacDonald proposed a conference between the parties to discuss unemployment. By mid-1931, however, the government was in serious financial difficulties. The majority report of the May Committee recommended cuts in unemployment relief, and the government resigned over the matter in August 1931.
The Conservative-dominated National Government was formed in 1931, and strongly influenced policy. The public works schemes were rapidly scaled down and abandoned as the government sought savings. From 1932, Britain began a slow recovery from depression. By the mid-1930s, however, the government believed that relief alone could not solve the problem of unemployment. It now concentrated on the reorganisation and rationalisation of industry with the aim of increasing profits.
A reduced road fund was maintained through the National Economy Bill but was abolished in 1936. Instead the government concentrated on promoting economic recovery by various methods, such as imperial preference tariffs and industrial reorganisation. The numbers of unemployed workers fell to just over 1.5 million by 1937