When Ramsay MacDonald formed his National Government in 1931, Inskip, who had been elected in a by-election for Fareham in February that year, returned to the role of Solicitor General but the following year a vacancy occurred and he once more resumed his work as Attorney General. He was sworn of the Privy Council in 1932. In 1935 he prosecuted the 26th Baron de Clifford for manslaughter, which was the last ever criminal trial of a peer in the House of Lords. Despite an exclusively legal track record, on 13 March 1936 Inskip became the first Minister for Coordination of Defence. His appointment to this particular office was highly controversial. Winston Churchill (who said he "had the advantage of being little known and knowing nothing about military subjects") had long campaigned for such an office and when its creation was announced, most expected Churchill to be appointed. When Inskip was named, one famous reaction was that "This is the most cynical appointment since Caligula made his horse a consul". John Gunther, who described Inskip in 1940 as "the sixty-three-year-old man of mystery", reported the "cruel story" that Prime Minister Stanley Baldwin wanted to appoint someone "'even less brilliant than himself'". Collin Brooks castigated Inskip in his diary as "a second-rate Attorney General." His appointment is now regarded as a sign of caution by Baldwin who did not wish to appoint someone like Churchill, because it would have been interpreted by foreign powers as a sign of the United Kingdom preparing for war. Baldwin anyway wished to avoid taking onboard such a controversial and radical minister as Churchill. Inskip's tenure as Minister for Coordination of Defence remains controversial, with some arguing that he did much to push Britain's rearmament before the outbreak of the Second World War, but others arguing he was largely ineffectual, although his ministry "had no real powers and little staff". In early 1939 he was replaced by the former First Sea Lord, Admiral of the Fleet Lord Chatfield, and moved to become Secretary of State for Dominion Affairs. At the outbreak of war in 1939 he was raised to the peerage as Viscount Caldecote, of Bristol in the County of Gloucester, and made Lord Chancellor, but in May 1940 he once more became Secretary of State for Dominion Affairs to make room for the marginalising of Sir John Simon in the new war ministry of Winston Churchill.