National Government
The dispute over spending and wage cuts split the Labour government: as it turned out, beyond recovery. The resulting political deadlock caused investors to take fright, and a flight of capital and gold further de-stabilised the economy. In response, MacDonald, on the urging of King George V, decided to form a "National Government" with the Conservatives and the Liberals.
On 24 August, MacDonald submitted the resignation of his ministers and led his senior colleagues in forming the new National Government. MacDonald and his supporters were expelled from the Labour Party and adopted the label "National Labour". The Labour Party and some Liberals, led by David Lloyd George, went into opposition. The Labour Party denounced MacDonald as a "traitor" and a "rat" for what they saw as his betrayal.
Soon after this, a General Election was called. The election resulted in a Conservative landslide victory, with the now leaderless Labour Party winning only 46 seats in Parliament. After the 1931 election the national government became Conservative-dominated, although MacDonald continued as Prime Minister until 1935.
Read more about this topic: Great Depression In The United Kingdom
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