Anderson was later posted to Ireland where he served as joint undersecretary. In 1922 he was promoted to permanent undersecretary at the Home Office. In 1926 he was chairman of the committee that dealt with the problems caused by the General Strike. In 1932 he was appointed governor of Bengal in India.

After returning to Britain in 1938 Anderson was elected to the House of Commons. In November 1938, Neville Chamberlain placed Anderson in charge of the Air Raid Precautions (ARP). He immediately commissioned the engineer, William Patterson, to design a small and cheap shelter that could be erected in people's gardens.

Within a few months nearly one and a half million of these Anderson Shelters were distributed to people living in areas expected to be bombed by the Luftwaffe. Made from six curved sheets bolted together at the top, with steel plates at either end, and measuring 6ft 6in by 4ft 6in (1.95m by 1.35m) the shelter could accommodate six people. These shelters were half buried in the ground with earth heaped on top. The entrance was protected by a steel shield and an earthen blast wall.

Anderson shelters were given free to poor people. Men who earned more than £5 a week could buy one for £7. Soon after the outbreak of the Second World War in September 1939, over 2 million families had shelters in their garden. By the time of the Blitz this had risen to two and a quarter million.

Anderson joined the War Cabinet in October 1940 as Lord President of the Council. In this post he he organizing civilian and economic resources. He was also responsible for suppressing the Communist Party supporting Daily Worker. In October 1943 he became chancellor of the exchequer where he introduced the PAYE system for income tax payment.