By 1931, Britain was in the throes of an ecomic crisis brought on by the world-wide "Great Depression."  At this point with devalued currency, high inflation, etc., the UK had amassed a budget deficit of approximately £170,000,000.  In an attempt to to slow if not reverse the rising deficit, the government appointed the "Commission on National Expenditure."  After reviewing government finances, the Committee made it's recommendations.  Among these were tax increases and a proposal to decrease the wages of military service personnel.

As it applied to the Royal Navy, the pay cuts would be by @10% for all officers and men.  All would be forced to be paid by the 1925 (or newer) pay scales- including the men who had joined prior to that year.  The problem with this scheme was that although the reductions were uniform in percentage, they were by no means proportionate.  That is, a 10% decrease for a well-paid officer would be no more than a "drop in the bucket."  To the lower ranks, who were not well paid to begin with, the decrease would be devastating- especially for the married matelots supporting families.

The news broke in September 1931 just as warships of the Atlantic Fleet gathered at Invergordon (known as "InverG" to matelots), Scotland, for fleet manoeuvers.  Unfortunately, a number of newspapers released the story before most of the men had been properly briefed on it.  To make matters worse, some papers did not have all the facts straight, and published wildly exagerrated or confusing reports (i.e., some papes announced the pay cuts would be as high as 25%!).  Needless to say, many matelots were not at all happy.

It was to this climate that Read Admiral Wilfred Tomkinson arrived.  Tomkinson, who had been Hood's first captain, was temporarily in charge of the fleet while the commander-in-chief, Admiral Sir Michael Hodges was taken ill and hospitalized.  Rather than go into any more detail, perhaps it would be best to "hear" the rest of the story directly from RADM (later Vice Admiral) Tomkinson himself.  What follows is an extract from ADM178/110:

H.M.S. Hood at Portsmouth
19th September 1931

No.3/R.P.1
 

Sir,

Be pleased to lay before the Board the following report of proceedings of ships of the Atlantic Fleet under my command during the period 11th to 16th September 1931.

2. The Commander-in-Chief having been discharged to Haslar Hospital, temporary command of the Atlantic Fleet had been assumed on 8th September by the Rear Admiral Commanding, Battle Cruiser Squadron, in H.M.S. Hood, as "Senior Officer", Atlantic Fleet.

3. The Fleet consisting of:-

Hood (Captain JFC Patterson, OBE), flying the flag of Rear Admiral Commanding, Battle Cruiser Squadron - Senior Officer, Atlantic Fleet..

Rodney (Captain RMB Bellairs, CB, CMG)

Warspite (Captain St. AN Wake) flying the flag of Rear Admiral, Second Battle Squadron.

Valiant (Captain CA Scott)

Malaya (Captain JSC Salmond)

Repulse (Captain EO Cochrane)

Dorsetshire (Captain AJ Power) flying the flag of Rear Admiral Commanding, Second Cruiser Squadron.

Norfolk (Captain CB Prickett)

York (Captain WN Custance)

Adventure (Captain ADH Dibben, OBE)

Arrived at Invergordon at 1500 on Friday the 11th September.
 

4. On arrival at Invergordon newspapers were received giving the Government's decision with regard to reduction of pay in the Services. In the case of officers the nature of the reductions appeared in detail, but with regard to the men it was stated only that the 1925 rates would be applied to all personnel.
On Saturday 12th September Admiralty Fleet Order No. 2339/31 was received in the ships.

5. At about 1930 on Sunday 13th September I was informed that WARSPITE, the ship having the guard, had received a signal from the Officer of the Patrol ashore at Invergordon, "Trouble in the Canteen; request larger patrol", and that the Commander of WARSPITE and an additional patrol had been landed. It appeared that the disturbance commenced in the Canteen, the cause being due to a few men who were making speeches about their reduction in pay. Order was restored, the Canteen bar was closed at 2000, and the men left in an orderly manner to return to their ships; and although further speeches were made when the libertymen arrived at the pier, and singing was continued through the town, all libertymen returned to their ships by 2115.

6. After receiving a report from the Commander of WARSPITE, and an account of the incident from my Chief of Staff who had landed at my direction to observe the situation, it appeared to me that no importance need be attached to the incident from a general disciplinary point of view, And I reported to the Admiralty accordingly in my telegram Nr. 799.

7. H.M.S. Nelson (Captain FB Watson, DSO) arrived at Invergordon on the evening of 13th September.8. On arrival of Nelson I first became aware of the issue of Admiralty letter C.W. 8234 of 10th September, addressed to all Flag and Commanding Officers, stating the principles on which the reduction in pay had been based and explaining the views of Their Lordships. Assuming that this letter had been received by all ships, I made a signal at 1002 on Monday 14th September, directing that paragraphs 1 and 4 were to be explained by Commanding Officers to their officers and ships' companies without delay. It then transpired that the letter had only been received by Flag Officers and RODNEY and ADVENTURE. Copies were made and distributed, but it was not possible in some ships to comply with my order until late on Monday or the following day.

9. The non receipt of this letter had been reported to the Secretary of the Admiralty in Atlantic Fleet submission No. 1516/AF841 of 14th September.

10. At 0800 on Monday, 14th September, WARSPITE and MALAYA left harbour for practices in accordance with the Weekly Programme, and during the course of the day the following ships arrived:-

CENTURION (Captain RAA Plowden, DSO)

SHIKARI (Commander RFB Swinley)

SNAPDRAGON (Commander AWJ Finlayson)

TETRARCH (Lieutenant-Commander MS Thomas)

11. The fleet was berthed as follows:

Invergordon - in two lines:-

Southern Line

TETRARCH
SNAPDRAGON
YORK
ADVENTURE

Northern Line

CENTURION
RODNEY
HOOD
DORSETSHIRE
NORFOLK
WARSPITE
VALIANT
MALAYA
NELSON
 

Cromarty

REPULSE12. On the evening of Monday, 14th September, I entertained at dinner on board HOOD the Rear Admiral Commanding, Second Cruiser Squadron, the Chief of Staff, Atlantic Fleet, the Captain of the Fleet, and the majority of the Captains of the ships present.

13. Shortly before dinner it had been reported to me that disturbances had again broken out in the Canteen and that additional patrols, under the command of a Lieutenant Commander from HOOD had been landed from HOOD and VALIANT. Further reports were received that the disturbances  were of a disorderly nature, that meetings were being held in both the Canteen and in the open air, and that there was much speech-making, cheering and singing. I was also informed that two civilians had been observed among the men. The Officer of the Patrol (a report from whom has already been sent to their Lordships in the care of the Chief of Staff) addressed the men in the Canteen, and was given a hearing, but without effect.

14.The libertymen returned to their leave, but in a very disorderly and noisy manner, and having returned on board, in several ships remained on the forecastles, speech-making, cheering and singing until a late hour.

15. The Captains dining with me dispersed to their ships' having been directed to report immediately on the state of affairs on the ship under their command; and at 2315 I reported the circumstances briefly to the Admiralty by telegram (message Nr. 800), adding that the cause of complaint seemed to be the drastic reductions in pay of ratings below petty officer who were on the pre-1925 scale of pay.

16. On receiving the reports of the Captains it became evident that, although the situation in the cruisers appeared to be satisfactory and there was no trouble in REPULSE, there was a considerable number of men in RODNEY, HOOD, VALIANT and NELSON who intended to prevent their ship sailing the next morning in accordance with the practice programme.
The general attitude of the men appeared that they were prepared to take their own ship to sea but that if they did so they would be deserting their companions in other ships.
Reports showed that the trouble was confined to the ratings below leading rate, and that there was no feeling of any sort against the officers. The position with regard to the Royal Marines was uncertain.

17. I discussed the matter on board HOOD with Rear Admiral Astley-Ruston, Rear Admiral Colvin (Chief of Staff), Captain Evand (Captain of the Fleet), and interviewed the Officers of the Patrol and the Commanders of HOOD and NELSON, and having considered the desirability of issuing an order cancelling the next day's programme in order that the complaints might be fully investigated in each ship and reported to me without delay, I eventually decided that it would be preferable at this stage to adhere to the arrangements already made and to carry out the programme if possible. It appeared probable that certain ships would proceed, and it was anticipated that if they did others would follow.
I then informed the Fleet by signal at 0059 on 15th September that I was aware that cases of hardship would result in consequence of the new rates of pay, and I directed Commanding officers to investigate and report typical cases to me so that I could represent the matter at once to the Admiralty. I also informed the Admiralty by telegram (Nr. 801) that I thought that it would be difficult to get ships to sea next morning, and of the signal I had made to the Fleet.

18. In accordance with the programme for Tuesday, 15th September, REPULSE was due to leave harbour at 06.30, VALIANT at 08.00, and subsequently NELSON, HOOD and RODNEY. The cruisers were to remain in harbour.
At 06.30 REPULSE sailed in accordance with the programme.
At 07.31 VALIANT reported that a large proportion of the ship's company had refused to fall in, but that she had unmoored with a limited number of men and proposed to sail when ready. At 08.47, however, she reported that there were only sufficient hands to keep steam for slow speed, and that she could not proceed at present.
At this time large numbers of men were massed on the forecastles of HOOD, RODNEY and DORSETSHIRE, and there was a considerable amount of cheering. I was informed that the men on the forecastle of HOOD had refused to allow any work to be done to commence unmooring, and it became evident that neither HOOD nor RODNEY could go to sea.
I therefore directed by signal at 09.31 that ships were not to proceed for exercises until further orders, that WARSPITE, MALAYA and REPULSE were to return to harbour and that the reports previously called for were to be hastened.
Leave to officers and men was stopped until further orders.
It was subsequently reported that the men in NELSON had refused to weigh anchor.