The fundamental disequilibrium that undermined confidence in sterling is typically sought in the government budget. The argument is that by stimulating absorption, Britain’s budget deficit, in conjunction with the collapse of foreign demand for British exports, weakened the balance of trade. Although the second Labour government fell in 1931 precisely because of its failure to agree on measures to reduce the size of the budget deficit, historians disagree over whether
the budget contributed significantly to the balance-of-payments deficit. The trade
balance, after all, was only one component of the balance of payments.