In August 1931, MacDonald's minority government fell, as a direct result of the world-wide financial situation. His decision to remain at the head of a National government had grave repercussions for both domestic and foreign policies, including the disarmament question. Henderson, the committed disarmer and President-elect of the Disarmament Conference, was not only out of office, but his already difficult relationship with MacDonald was exacerbated by the sense of betrayal felt by the majority of the Labour Party. The reluctance of former Labour Ministers to serve in the new National government meant that it contained a much greater proportion of Conservatives than of the more pro-disarmament Labour and Liberal members. With the Disarmament Conference now only six months away, any possible cohesion of British disarmament policy appeared to be remote.
Three months after the formation of the first National government, in November 1931, a general election enabled MacDonald to select the Cabinet which was to be responsible for British policy towards the Disarmament Conference. Only three Labour Ministers remained in the government; Snowden 1 became Lord Privy Seal, Sankey 2 was Lord Chancellor, and Thomas became Dominions Secretary. There were two Liberals in the Cabinet, Sir John Simon as Foreign Secretary and Sir Herbert Samuel as Home Secretary, though the latter was to resign in September 1932, to be replaced by the Conservative Sir John Gilmour. With the exception of these five members, and MacDonald as Prime Minister, the remaining Cabinet members were Conservatives: Baldwin became Lord President of the Council, Neville Chamberlain, Chancellor of the Exchequer, and Sir Philip Cunliffe-Lister Colonial Secretary. The armed services were represented by the Marquess of Londonderry, Secretary of State for Air, Lord Hailsham, Secretary of State for War, and Sir Bolton Eyres-Monsell, First Lord of the Admiralty. The choice of personnel did not augur well for the negotiations at Geneva.