CHAPTER III

FROM PEACE TO WAR, OCTOBER 1938 TO JUNE 1940

(1)

The Munich Inquests

A new epoch in the history of rearmament began in the autumn of 1938 and ended in the summer of 1940. In the year and a half separating Munich from Dunkirk the nation was preparing for a 'show-down', but was not yet exposed to the rigours of a full-fledged war and was not yet putting out its highest effort. Though rearmament was no definitely geared to eventual military action and war industry rapidly expanded, the needs of war did not yet dominate the life of the nation, and economic resources were not yet fully mobilised.

War had not become the sole object of rearmament until the Czechoslovak crisis. In the Government circles nearest to the fighting Services—the Chiefs of Staff, the Service Ministries and the Committee of Imperial Defence—the conviction that war was inevitable had been hardening for some time before Munich, but the public and the Government were as yet loath to resign themselves to so hateful a prospect and continued until the winter of 1938–39 to nurse hopes of a happy ending. And as long as these hopes survived, preparations for war could not be the only, or even the main, purpose of rearmament. It has been shown that in 1936 and 1937 the Government had conceived its reequipment schemes as a safeguard of peace or even as a prelude to rearmament, and it is therefore no wonder that it hesitated to sacrifice the essential interests of Britain at peace to the unsettling demands of a hypothetical war, or that the purpose of rearmament remained uncertain, its method of half-hearted and its progress leisurely. But with the Czechoslovak crisis the uncertainties of the previous four years began to dissolve. By the time Prague was occupied preparations for war had become the single purpose of rearmament and had established a prior claim on national resources—a claim which may have fallen short of the 'reckless abandon' of the war effort to come, but without which that effort might well have been in vain.

From this point of view the concluding phase of peace merged

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without a break into the opening phase of war. The 3rd of September 1939 is one of the greatest dates in the history of the western world: a day of irrevocable decision, symbolic of all that the subsequent six years were to bring. Yet in the history of war production it was much less than either Munich or Dunkirk. The scale of industrial activity grew more or less as heretofore; its tempo did not accelerate sufficiently to mark off the period of disturbed peace from that of dormant war.

The continuity of war production reflected the underlying strategic principle of a 'long war'. The principle was apt to be taken for granted in all the pre-war discussions on rearmament, but it was not explicitly stated until the Anglo-French conversations of the spring of 1939. By then both the French and British Governments had more or less resigned themselves to the imminence of war. Their community of interests in a war with Germany was never in question; formal discussions on common strategy were therefore bound to follow. Out of the discussions on common strategy were therefore bound to follow. Out of the discussion a new view of the British role eventually emerged, and in so far as this affected the Army more will be said about it later.¹ What is important to note at this stage is that the main strategic plan then worked out rested upon that principle of military gestation which was to dominate the behaviour of the Allies until the summer of 1940. Their immediate strategic object was to build up their strength until it matched the might of Germany. This, they agreed, would take a long time, but however long it took, the build-up of forces was not to be disturbed by premature military action. The Allies were to bide their time, for time was on their side.

For political reasons and in fulfilment of the pledges to Poland the Allies were compelled to accept the challenge of war in the autumn of 1939 and to adopt an attitude to Germany which was openly and formally belligerent. But the nature of the strategic plan was not thereby affected. The military preparations on which the country had been engaged continued on a scale previously decided, and even the timetable remained more or less the same. Indeed one of the earliest decisions of the War Cabinet in this country was that plans should be based on the hypothesis that the war might last three years. In the language of dates this meant that the preparations for war on which the country embarked with every show of determination at a turn of 1938 and 1939 might continue until 1942.

The new attitude was thus not one of hurry. Indeed its very birth was marked by a momentary hesitation. For, at first, Mr. Chamberlain's action in Berchtesgaden and Munich stimulated the hope of peace—'peace in our time'—almost as much as it strengthened the will to rearm; and in the light of this hope the ghosts of disarmament

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again made their appearance in high quarters. But for all its hesitancy and compromises the purposes of the post-Munich policy was not to be mistaken. In spite of the Chancellor of the Exchequer's obvious interest in disarmament, its chances were now too ephemeral to influence official plans. Its last trace had disappeared from official papers by the end of the year, and by the spring of 1939 the new attitude had already borne of its progeny of revised and accelerated Service programmes.

The genesis of the new programmes somewhat antedated the spirit which animated them, and goes back to the earliest days of the Czechoslovak crisis. During the crisis the gaps in British defences and equipment revealed themselves to the naked eye of the public, and on the morrow of Munich even the uninitiated understood to what extent Mr. Chamberlain's concessions to the Führer were due to Britain's military weakness. The Government was certainly under no illusions. The notions about the state of British armaments which Mr. Chamberlain took with him to Munich erred little on the side of optimism, and subsequent information did nothing to brighten them. Early in October the Cabinet called for a thorough survey of the deficiencies disclosed by the crisis. The replies from the Services disclosed wide gaps, even though the gaps were not at their widest at point on which public attention was at the time focused.

In view of the general preoccupation with the danger in the air, it is perhaps not very surprising to find that the deficiency which impressed the Prime Minister and Parliament most was that of anti-aircraft equipment.² Of the 352 3.7-inch guns approved under the current programme only 44 were available, and the medium anti-aircraft artillery consisted largely of refurbished 3-inch guns, of which 298 (out of a planned number of 320) could be deployed in a crisis. Supplies of other anti-aircraft equipment were even scarcer: 50 two-pounder barrels out of a programme of 992; 1,430 searchlights out of a programme of 4,128; 140 barrage balloons out of 450. The War Office moreover estimated that even by April 1939 only fifty percent of the anti-aircraft guns and sixty percent of the searchlights under the current programme would be available.

Air weapons also appeared insufficient. The Air Ministry reported that it was six squadrons short of requirements; that its satellite aerodromes were not ready (sixteen out of sixty-three were available); that the defence of aerodromes was deficient. From other sources it was known that there had been delays in the development of new types, by which so much store was set. In September 1938, out of thirty operational fighter squadrons, only one was equipped with Spitfires and five were in process of being equipped with Hurricanes,

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while the first Wellington squadrons were not to be available until the turn of 1938 and 1939. Above all, there was the obvious fact that the L programme of 12,000 aircraft was only five months old.³ The bulk of the output under that programme—about ninety percent—was still to come.

The significance of these figures must not be exaggerated, although exaggerated it probably was. The inevitable tendency in the Government and among the public was to magnify the terror of air attack and to expect immense destruction and decisive military results from the first 'knock-out' attack in the air. German strength in the air was also somewhat exaggerated, but not quite to the same extent as the German ability to deliver the decisive blow. The exaggerations varied from an excess of fifteen percent (for first-line strength) to twenty-five percent (for current output of military types),⁴ and in addition the prospects of British output were somewhat under-estimated.

According to contemporary Air Staff estimates German first-line strength in August 1938 was 3,200 aircraft rising to 4,030 by August 1939 and 5,450 by April 1940. The actual figures, as they became known after the war, were 2,847 in August 1938, 3,609 at the beginning of September 193 and 4,119 by the end of June 1940. Germany's monthly output in the autumn of 1938 was estimated at 600 military machines a month, whereas the real output turned out  to be 436. The monthly output was expected to rise to 800 in August 1939 but it actually rose to 691. The differences in the estimates of German strength were due not only to insufficient information by also to the difficulty of defining first-line strength and of estimating German the depth of German reserves. The disparity between actual output and current British estimates would also be reduced if transport aircraft, which this country did not produce, were included in the figures of Germany output.⁵ However, the important fact was that the best estimates of German and British aircraft production available at the time gave a terrifying picture of British inferiority. The real figures had they been known would have revealed an inferiority in monthly output figures until 1939; and this was bad enough. But the estimates current in 1938 with their slight exaggeration of German strength and slight under-estimate of British potentialities gave the impression that Germany was twice as strong numerically and was expected to retain that lead. The opinions prevailing among the better informed

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critics in Parliament were even more unfavourable. Sir Hugh Seely, who initiated the great debate in the House of Commons on air strength on 12th May 1938 and Lord Lothian, who took part in the debate in the House of Lords,⁶ appeared to assume that Germany might within a year possess a front-line strength of 8,000 aircraft. No wonder all political and military calculations were built on the assumption that Britain was utterly unprepared to face the devastating power of German attack in the air.

If air defences appeared somewhat poorer than they need have done, the other defences were quite as inadequate as the inquest revealed them to be. The Admiralty in its report emphasised mainly the deficiency in destroyers, trawlers and other small craft, but it reported that the coastal defences were far from complete and that the anti-aircraft defences of the ports were also rudimentary. Greatest of all, of course, were the deficiencies in the equipment of the Army. In view of the persistent neglect of the Territorial Army, it was not surprising to find that it was greatly underprovided—there were not enough clothes or stores, other than armaments in the narrow sense of the term, to equip the few Territorial units that could be mustered in an emergency. But in relation to its responsibilities the Regular Army was not much better off. Under the decision of 1937 it was being reequipped on a 'colonial warfare' basis⁷ and was not backed by Territorial reinforcements, but even on this scale its supplies were insufficient. The evidence made it clear that the stores than available to the Army would be barely sufficient to equip more than two divisions for service on the Continent.

The deficiencies exposed by the October crisis gave an approximate measure of British weakness; they have no measure of the task ahead. The supplies of weapons were set against current programmes, but the current programmes themselves were insufficient to ward off another humiliation or to secure the country against a crushing defeat in the coming war. The Navy and the Air Force could perhaps equip themselves in time for the coming emergency without a drastic increase in their plans, and might not be called upon to do more than to accelerate the pace of their preparations and, above all, to concentrate their efforts on the immediate requirements. The Army, on the other hand, could not be made ready without radically recasting the entire scale of its equipment or, indeed, the very principle of its rearmament. And this indeed was the shape in which the plans of the Services emerged from discussions between the Committee of Imperial Defence and the Cabinet following the Munich crisis.

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(2)

The Two-Power Navy and Emergency Programmes

As a result of the crisis and of the new mood which it induced the Admiralty was at last able to grasp the final object of its desires and to plan for a 'two-power standard'.⁸ The discussions which went on throughout the late months of 1939 and the first half of 1939 culminated in July 1939 in a decision of the Committee of Imperial Defence authorising the development of additional machine tools in preparation for a new scale of construction. After August financial objections to the attainment of a 'two-power standard' rapidly disappeared, and broadly speaking the Admiralty then set out to attain that standard as a long-term policy.⁹

The main issue of the Admiralty's battles was thus won, yet at the time of its winning it had lost much of its immediate value. The 'two-power standard' from now on remained the long-term programme of the Navy, but in the months following Munich, and still more in the opening phases of the war itself, long-term programmes were very much a matter of theory. Their emphasis was on fleet units, in which this country had a great superiority over Germany, whereas what was urgently wanted was small vessels for convoy-escort and anti-submarine duties, of which the Navy was very short. Although plans for ocean convoys were far advanced by April 1939 they were not as yet put into operation. The prevailing assumption still was that the enemy would keep the Hague Convention, would limit mining warfare to moored mines and would not resort to unrestricted submarine warfare. On these assumptions anti-submarine convoys would be required only in coastal waters and in a few focal areas. Yet even so, the Navy, according to Admiralty estimates, would still need as a minimum some 1,110 trawlers and 300 escort vessels and minesweepers of which only about two-thirds were provided for in the current programmes. The small ships were therefore bound to be become the first charge on the immediate programme, and in its emergency plans the Admiralty accordingly laid down that in the first year of war shipbuilding resources should be so employed as to leave enough for the small ship programme as well as for an annual output

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of 1.2 million gross tons of merchant shipping. And to make this possible the building of fleet units was to be considerably slowed down.¹⁰

With the outbreak of the Navy's emergency plans had to be carried a stage further, and provision had to be made for a still larger number of small vessels. The need could to some extent be met by converting merchant vessels and by employing mercantile yards, but some small vessels had to be constructed in naval shipyards, and their number could not be increased without prejudicing the output of fleet units. Towards the end of the first month of war the Admiralty realised that its requirements of small vessels had been somewhat unrealistic. Not only were fewer auxiliary vessels capable of being diverted from their civilian uses, but the need for small vessels was more exacting than it had appeared a year earlier. Magnetic mines demanded ships differently equipped from any previously built German submarines were more active around the coast, and this led to a higher demand for small anti-submarine boats and anti-submarine vessels of the trawler type. But the chief new factor was the activity of German ocean-going U-boats along the Atlantic routes, and this meant that at least another 100 additional escort vessels of longer range than the corvettes were needed to operate them both ends from the middle of the Atlantic and thus to provide a continuous convoy across the ocean. Requirements of other small craft also rose—the Admiralty now wanted more submarines (about 100), more M.T.B.s (about 84), more boom defence vessels, salvage vessels, and tugs. In contrast to these short-term requirements of trade protection vessels, requirements of fleet units were much less urgent and did not materially increase, with the important exception of destroyers. Indeed, in order to provide for additional minesweepers and anti-submarine flotillas and to release steel for the merchant shipbuilding programme, and Admiralty agreed in March 1940 to sacrifice the whole of the 1940 share of the long-term programme of naval construction. The only major fleet units still to be built were the Vanguard (because of the shortage of fast battleships) and two flotillas of destroyers—and the latter could of course be considered as part of the short-term programme.

The programmes of naval construction as well as its problems remained in essence the same until the end of 1941; the differences were merely those of scale. Above all, the emergency programmes of small vessels continued to be the main preoccupation of the Admiralty and of the shipping industry for a number of years. It will consequently be convenient to carry the story of naval construction to Pearl Harbor without a break.

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Although the Admiralty was compelled to devote much of its time and attention to the emergency programmes, its hopes for larger units were not lightly abandoned and attempts to resume the 'long-term' programmes of naval construction were made from time to time. The fall of France and the extension of war to the Mediterranean threatened to wipe out what had hitherto been a comfortable superiority over the enemy in fleet units. British superiority in large ships over the combined Italian and German fleets was only assured until the summer of 1942. There was also the possibility of the French fleet joining the enemy; and in addition the situation in the Far East was very uncertain. It was obviously becoming dangerous to neglect the large ships altogether in favour of light craft, and both the Admiralty and Mr. Churchill's Government could be relied upon to see the danger.

Nevertheless hopes of resuming the construction of large vessels were to prove illusory, for even while the doctrine of a balanced fleet was reviving in high quarters, the emergencies on the high seas were compelling further diversion of resources to the small vessel programmes. In the autumn of 1940 and the spring of 1941 it was found necessary to provide escorts for troop convoys to the Middle East by the long Cape route and to counteract new enemy techniques and weapons such as the laying of improved types of mine, the use of E-boats in the Channel and of midget submarines in the Mediterranean. No wonder small vessel programmes failed to tail off as they were expected to do. Requirements between Dunkirk and Pearl Harbor varied with the development of enemy tactics, and for one class of vessels, i.e. trawlers, requirements actually fell. But the estimated requirements of most other classes of small vessels grew in the course of 1940 and 1941 and stood higher in the autumn of 1941 than in the summer of 1940.¹¹

It was not, however, the emergency programmes alone that prevented the resumption of a 'balanced fleet' programme. Even before the Admiralty took over direct responsibility for the construction of merchant ships¹² the needs of merchant shipbuilding were very heavy and interfered with some parts of the naval programmes. At least as burdensome and in very way as urgent were the mounting totals of repairs and conversions.

the burden of repairs was perhaps all the heavier for being somewhat unforeseen, or to be exact, greater than the planners could foresee. From the very outbreak of war the dockyards found themselves overwhelmed with ships sent for refit or repairs. In the

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opening months of war the accident rate, chiefly caused by weather and collisions (by the end of 1939 one hundred and eleven ships had bee damaged by accidents compared with twenty by enemy action), was very high indeed and, on the average, well over 100 naval vessels were in hand for refit or repairs at any one time. In 1940 damage from weather and accidents declined, but in the end the decline was more than made up for by a very steep rise in the damage rate from enemy action—a rate which began to grow in the Norwegian campaign, was greatly swelled by Dunkirk, and was kept high by hostilities in the Mediterranean. During 1940 470 naval ships were damaged, nearly half from enemy action, and in 1941 the rate of damage from enemy action, especially in the Mediterranean, rose still higher. On the average about 146 naval vessels were in hand for refit or repair at the end of each months in the first quarter of 1941, and the figure rose to 166 in the last quarter of the year. Added to this, a large number of French and Allied ships and the fifty American destroyers¹³ had to be partly or wholly refitted.

Average number of naval ships of corvette size and above in hand for large refit and repair, at the end of each month April
1940–December 1941

TABLE 6
Period	Number of vessels			Percentage of total labour force engaged on naval vessels
	Under refit and repair in British yards	Under refit and repair in U.S. yards	Conversions
1940
April to June	80	0	23414	37% April
July to September	73	0	212	35% Sept.
October to December	136	0		37% Dec.
1941
January to March	146	0	156	39% March
April to June	144	7		36% June
July to September	132	17	62	33% Sept.
October to December	166	19		33% Dec.

The work of repairing and refitting was also made heavier by the passage of time. As months rolled by, the time taken to refit British ships increased. Ships in continuous war service had to be drastically reequipped to keep them in fighting trim. They had to be provided with close-range anti-aircraft weapons, splinter protection, radar equipment, degaussing coils, acoustic minesweeping gear, and other types of installation requiring extensive rewiring and fitting of

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new electrical equipment. This was often in itself a major problem of design and production.

To all this work was added the conversion programmes which also turned out to be disconcertingly slow and heavy. Although small patrol vessels often took less than a month to convert, auxiliary anti-aircraft ships took from eight to eleven months, destroyer depot ships about seventeen months. It was not before the summer of 1941 that the number of ships for conversion and the general burden of the work began to decline. Altogether the work of refit, repair and conversion absorbed more than one-third of the total labour force engaged on naval vessels in 1940; and its share rose to nearly forty percent of the total in the first quarter of 1941.

Finally there were also the requirements of merchant shipbuilding. The wartime emergency programme in its pre-war version was so conceived as to allow an annual output of 1.2 million gross tons of merchant shipping, and the orders placed by the winter of 1939 were calculated to secure an output of a million tons in the following twelve months. In the spring of 1940 the 'target' figure was increased to 1.5 million tons, but after Dunkirk the shortages of steel and of marine engineering capacity and the large additions of neutral tonnage to the merchant fleet led to the annual merchant shipbuilding programme being reduced to 1.1 million gross tons. This was raised in September 1940 to 1.25 million gross tons. Actual annual output did not reach the planned figure, but no relief resulted there from, for the merchant tonnage under repair rose and remained very high. It had reached a peak of 2.5 million gross tons in February 1941¹⁵ and was still a little below two million gross tons at the end of 1941. To meet the needs of merchant repairs the Government in March 1941 again lowered the 'target;' for merchant ship construction and ruled that no merchant vessel should be proceeded with which could not be completed by the end of 1941.¹⁶ Nevertheless between September 1940 and October 1941 the combined building and repair mercantile programmes, i.e. new building and repairs taken together, enjoyed a priority in the labour market over naval shipbuilding. As a result the labour force employed on naval new construction rose by 8.7 percent while that on mercantile new construction rose 29.7 percent: in 1941 when the labour force employed on merchant vessels increased by 17,000 that on naval work increased by 1,000 only. Moreover there was no hope of restoring to naval work the capacity lost to merchant shipbuilding until American mass production of merchant ships began to take full effect.

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As the pre-war planners had foreseen, all these 'emergency' requirements could be satisfied only at the expense of 'long-term' fleet programmes. To this sacrifice the Admiralty had to agree more or less against its own earlier views and expectations. Some three months after the decision of the spring of 1940 to suspend long-term construction in favour of the most urgent work for anti-invasion and anti-submarine defence,¹⁷ the Chiefs of Staff recommended that the long-term programme should be resumed as soon as possible. And in the autumn of 1940 the emergency programme which originally only included one battlecruiser and sixteen destroyers received the addition of an aircraft carrier, four cruisers and sixteen more destroyers. Early in 1941 the Naval. Staff wished to resume construction of the 16-inch battleships, the Lion and the Temeraire, and to add a number of other vessels, including two aircraft carriers, ten cruisers and forty to fifty destroyers. These wishes, however, were not to be realised. On 26th March 1941 came the Prime Minister's instruction that no naval vessels that could not be completed in 1942 should be undertaken. By that time circumstances would in any case have made it very difficult to add to the number of fleet vessels under construction. The claims of merchant shipping and of escort vessels; supplies of armour plate had to be diverted to the making of tanks; and labour shortages were becoming serious.¹⁸ By the autumn of 1941 the Naval Staff had to reduce their requirements to one aircraft carrier, six destroyers and forty destroyers.

The decision represented a compromise with the emergency programmes, but one of the results of the compromise was to jettison important new extensions of long-term plans. There was in Admiralty circles a growing body of opinion which favoured the construction of more fleet aircraft carriers and was prepared to conceded them a priority second only to destroyers. It had been suggested that two should be laid down in 1941 and two more in 1942 to make up the deficiency as soon as possible, since the course of the war in the Atlantic and the Mediterranean had conclusively demonstrated the effectiveness of aircraft with the fleet both for defence and offence. But during discussions of the 1941 programme and of the supplementary proposals in the autumn, it was concluded that the building of more cruisers and the completion of the Vanguard were of more fundamental importance than the construction of fleet aircraft carriers. Not only were not more of the latter ordered, but the laying down of the carrier in the supplementary programme was postponed. The fleet aircraft carrier was the only class of naval vessel in which no

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new ships at all were laid down between the spring of 1939 and that of 1942.

The pruning of the 'balanced fleet' programme was not the only consequences of the mounting demands on the shipbuilding resources. The execution of the approved programmes, indeed of the emergency programmes themselves, was impeded and delayed. At the outbreak of war it was expected that 213 ships of 264,000 tons would be completed within a year, but by October 1940 only 126 ships of 172,000 tons had been completed. By the end of 1941 the delay in the planned naval programme was at the rate of three of four months for each year's construction, and output was lagging far behind operational requirements. During the first half of that year only sixty-eight percent of the naval tonnage, down to and including trawlers, scheduled for completion by the end of the period, had in fact been completed; the comparable figure for the last six months was seventy-eight percent.¹⁹

For this backlog a number of factors were responsible. Air-raid damage dislocated production here and there. The 'teething troubles' of a much-expanded industry also affected the rate of production, for some delays were inevitable while the firms and the government departments were still new to the task of forecasting the progressing the work of shipbuilding in wartime. Over-optimistic estimates of rates of production were repeatedly made by firms and by the production departments, and this meant that berths and slips were not vacated on the expected dates, and ships approved in one programme could not be ordered before the next programme became due. It was largely for this reason that in the spring of 1941 there were sixteen corvettes and twenty-one trawlers outstanding from previous programmes.

Low priority for materials and labour was responsible for the delays in at least one class of warships. Under the Priority of Production Direction of May 1940²⁰ naval needs came within the third degree of priority if they were for ships due for completion by the 1st May 1941. All the larger ships were outside this limit; consequently difficulties were experienced in obtaining scarce materials, particularly special steels, and naval contractors found difficulty in obtaining and retaining labour.²¹ Earlier in the year steel for merchant shipbuilding had been given the same priority as steel for warship construction, and twelve escort destroyers, twenty 'whalers'²² and nineteen submarines

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had been deleted from the 1940 naval programme to free additional steel for the merchant shipbuilding programme. In the summer of 1940 a proportion of the existing capacity for armour plate reserved the Admiralty was diverted to supply the army tank programme. the reduced allocation to the Navy of 16,500 tons of armour plate proved in practice sufficient for the truncated naval programmes, but it remained on of the controlling factors in restricting the size of the 1941 programme of capital ships, aircraft carriers and cruisers.

The fundamental cause, however, was the one already dealt with: the total volume of urgent work was too great for all of it to be accomplished in time. Forced by the accumulation and conflict of urgencies, the Government found it necessary to establish priorities within the naval programme; and while this helped to clear some of the most troublesome or most dangerous arrears it also delayed still further the carrying out of the other shipbuilding tasks.

From the outbreak of war the conversion of auxiliary vessels for naval purposes was given a high priority, both as regards labour and materials, over long-term naval new construction, since only in that way could vessels speedily be made available in the early months of the war.²³ By the end of 1941 about 2,000 vessels had been converted for war service, the bulk of the work being completed by the end of 1940.

Number and types of vessels converted for war service, 1939–41

TABLE 7		Number of vessels
Conversions to:	Total	1939	1940	1941
Minesweeping trawler and drifter	667	298	289	80
A/S trawler, whaler, drafter and yacht	290	200	85	8
Boom-working and boom-defence vessel	95	42	52	1
Fishery protection trawler	57	45	12	nil
Miscellaneous services	235	105	113	17

Essential and urgent as this work was, and important as it was to 'get it out of the way' for the sake of other shipbuilding tasks, it necessarily competed with new construction for berths and labour. The effect was felt as early as the autumn of 1939 when, as a result of diversion of labour to urgent conversion work for magnetic minesweeping, it was seen that certain long-dated ships would be delayed. In the following spring the completion date of many small vessels ranging from trawlers and corvettes to destroyers was postponed

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for the same reason, and delays of from one to five months resulted. In April 1940 seventy such vessels were affected and the position did not improve until the end of the year. But no sooner did the work of conversion tail off than the burdens of repair work began to absorb much of the attention and of the resources of the shipbuilding industry. By the late spring of 1940 the claims of repair work were sufficiently strong and urgent to prevent naval shipbuilding from gaining any relief from the lessening of conversion work.

The diversion of resources, and above all ,labour, from longer-term construction to repairs, conversions and other work of higher priority was especially serious in its effect on items such as gun mountings and electrical fittings which were in short supply. For example, the laying down of cruisers was delayed in 1941 because sufficient labour was not available to begin work on the gun mountings. Not only was a least one-third of the total naval labour force not available for new construction work throughout this period,²⁴ but at the time of the crisis in the repair yards of February to June 1941 a further check was put on the construction of fleet vessels, and labour had to be diverted from naval construction to merchant repair work.²⁵

(3)

Aircraft Production 'To The Limit'

So much for the Navy. The reaction of the Air Ministry to the crisis was somewhat different, for its new measures followed more naturally from the earlier programmes and had more distant objectives in view. The current aircraft programmes were not directly affected. A concerted drive to speed up the rate of production which had been going on since the summer months of 19389 was now beginning to show results, and the actual output under the current programmes was now fulfilling all expectations. It in fact rose from a monthly average of slightly under 200 in the first six months of 1938 to about 630 in the first six months of 1939 and to about 780 in September 1939.²⁶ This output already stretched the resources of the aircraft industry to the furthest limit possible in peacetime; immediate increases in the current programme would therefore have been impracticable, and the Air Ministry did not try to force through a further change in the current scale of orders. On the other hand, provision had to be made for the more distant future; a great deal still remained to be done to prepare for the expansion of production

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under wartime conditions; and it is towards these objectives that the Air Ministry now turned its attention.

The problems of war potential were at first focused on the existing plans for 2,000 aircraft per month. It has already been shown that under the aircraft programme of 1938 the Air Ministry was building up a war potential for a much expanded output,²⁷ and in the late summer of 1938 the production departments gave much thought to the various hypothetical estimates of aircraft production in war. These discussions, as yet largely theoretical, came to a head after Munich. At the end of the year a new office, that of the Director of Planning of War Production (D.P.W.P.) was set up, and under the new Director the plans for war production finally crystallised.

The dimensions of the problem were by that time more or less clear. In July 1938 the Production Department of the Air Ministry estimated that if war were to break out in October of the following year the war potential than in existence or in the course of construction would be sufficient to produce 2,000 aircraft per month within eighteen months of the beginning of hostilities.²⁸ At that level the war potential was, in the opinion of the Air Staff, sufficient to meet operation wastage until the peak of production was reached—most probably within a year of the outbreak of war—and this became the actual target of the Ministry's preparations.

In January 1939, however, it also became clear that the agreed target could not be attained without certain additions to the existing war potential. The discussions revealed that labour and capacity might exist for many more airframes than could in fact be built from planned output of components and materials. Thus the wartime output of aircraft, as calculated by the new Director, would be March and April 1940 outrun the maximum supply of alloy sheet, extrusions and forgings, which the existing capacity could provide. Tighter still was the prospective supply of engines and of certain other main components. The manufacturing capacity of enginemakers had not expanded quite as quickly as that of airframe manufacturers, and in addition, the general trend of requirements of engines could be expected to rise faster than that of airframes owing to the coming introduction of four-engined bombers. The Director of Engine Production also drew the attention of the planners to the special difficulties of mobilising the war potential of the engine firms. So complicated were their requirements of certain special machine tools and equipment and so greatly did they vary with the type of engine, that only small increases could be brought about by working the existing machine tools, jigs, gauges, test houses, etc., all round the clock.

An improved balance of industrial capacity thus became the

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principal objective of the emergency planning of early 1939. Immediate instructions went out from the Air Ministry to increase fabricating capacity for light alloys from the 40,000 tons under the existing plans to 63,000 tons; something was also done to increase capacity for the production of turrets; before long further expansions also took place in the war potential of the enginemakers. Yet on the whole the measures then taken were neither wholesale nor drastic. By the beginning of 1939 the main core of the war potential had already been formed and did not appear to need much enlarging. The very technique of estimating the potential by computing the wartime activity of existing airframe capacity assumed that the necessary floor space, plant and machinery were already available or at least could be made available under current programmes. Indeed, writing at about that time the Air Member for Development and Production was able to assure the Secretary of State that the existing potential, if working at full capacity, could produce nearly 2,000 airframes a months and that there was, therefore, little need for more airframe factories.

Thus as long as the final aim of the current programmes remained fixed at 12,000 aircraft by the spring of 1940, and the war potential at 2,000 aircraft per month, relatively little had to be added to the existing provisions. Before long, however, both the figure of 12,000 aircraft and that of the monthly output in war came to be reconsidered. The programme as planned was to be completed in March 1940, and in the months immediately preceding the outbreak of war the Air Ministry asked the Cabinet to authorise immediate 'follow-on' orders. Eventually the Ministry obtained the agreement of the Treasury to the raising of the total number of aeroplanes on order from 12,000 to 17,500 on the understanding that the additional 5,500 were to be delivered after 1st April 1940. But this was obviously not enough. The Air Staff had been nursing plans for following up Scheme L with a further programme in order to keep pace with continued German expansion, and it was also necessary to maintain the operational quality of the Royal Air Force. A number of new aircraft, principally heavy bombers, had been under development since 1936, and a new programme to embody them was now thought both necessary and possible. With the outbreak of war the Air Ministry had to consider the possibility of still further extensions in fulfilment of the War Cabinet decision to plan for a war of three years' duration.²⁹ The War Cabinet had also before it projects for an all-round increase of the Army to fifty-five divisions, and that alone would have necessitated additional aircraft for army cooperation with the field forces. There were also other arguments to commend the proposals to the Air Council. A higher target would be necessary as an insurance:

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bombing and other war hazards might reduce the planned output and wastage might also turn out to be higher than expected.

For all these reasons, no sooner was war formally declared than the Air Council opened up again the question of the maximum rates of monthly output under war conditions. On 9th September it decided that the objective of the R.A.F. requirements should be increased so as to raise the production of aircraft in war from 2,000 to 3,000 per month with all ancillary equipment, the increased rate of production being attained as quickly as possible, based on a war of three years' duration. The ambition was indeed very high. The Secretary of State had discussed the implications of the new figure with the Minister of Labour³⁰ and the Minister of Supply and there had obviously been a certain amount of criticism inside the Air Ministry. A smaller programme was therefore worked out for submission to the War Cabinet. On the assumption that 240 aircraft per month would be available from the Dominions, the 'target' for the third year of the war was set at 2,550 aircraft per month. In this form the proposals received the approval of the War Cabinet on 22nd September 1939. But the hopes of a 3,000 programme were not thereby buried, and the Air Member for Development and Production gave something in the nature of an advance notice of its eventual revival. Although he agreed to plan to produce 2,550 aircraft per month by June 1942 he felt that the year after it might be possible to reach a figure of 3,000. This opinion, however, did not find much support outside the Ministry and was not wholly supported even within the department, and the eventual decisions were merely to examine every means of accelerating production and to endeavour to increase the 2,550 fire.

With this hopeful addendum the programme of 2,550 which came to be known as the 'Harrogate' programme formed the basis of wartime planning and was indeed to prove the most stable and most permanent of all the estimates of future output ever made in the Air Ministry or in the Ministry of Aircraft Production.

(4)

The Size of the Army

Much more drastic was the transformation of the Army. By the time of the Munich crisis a revision, and perhaps a radical one, of the current army programmes was long overdue. A rearmament policy

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which called for a Regular Army, however small, but failed to provide it with reserves, could not prevail indefinitely; nor could the policy of equipping the Army on a scale insufficient for the one theatre of war in which everybody expected it to fight and for which it was in fact being trained. The issue was therefore bound to come up as soon as suitable occasion occurred, and in the autumn of 1938 the suitable occasion would in any case have presented itself. By that time the five-division 'deficiency' programme was due to be completed, and the question of the size of the Army and the scale of its armaments would inevitably have arisen. The Munich crisis merely made it certain that the army programme would be recast more drastically than it might otherwise have been. What came up for reconsideration was not only the size of the Army but the fundamental assumptions of the programme, and in the first place the doctrine of 'limited liability'.

When in the course of 1936 and 1937 the Government by a series of consecutive decisions decided to concentrate on the reequipment of the Air Force and Navy, it assumed that war, though probable, was not imminent, and that if a war were to break out Britain's continental allies would bear the whole burden of the land fighting. In 1938 these comfortable assumptions no longer held. Not only did war with German now appear more or less certain, but there was also the possibility that France alone might not be able to prevent her territory from being overrun and the Channel ports from being occupied. This possibility the Chiefs of Staff were now bound to take into account, and in doing so to find that the German occupation of France would so endanger the safety of Britain as to justify recasting in favour of France the entire order of strategic priorities. What they did in fact was to extend to the defence of France Britain's defence priority number one, as defined in the current Cabinet directive, i.e. that the security of the United Kingdom was the 'cornerstone of Imperial defence policy'.

The French themselves now made no secret of their need of British Army contingents for the defence of France. If in the earlier discussions between the military representatives of the two countries, in 1936 and early 1938, no such clear demands had come from the French, this was merely because at that time the prospect of a war was as yet hypothetical and the negotiations were conducted on a rather low official level and were on the whole somewhat informal and vague. But after Munich the French offered, and the British agreed, to enter into full-fledged military conversations at staff level, and, in accepting this offer the British Government was fully aware that the French would now ask for a British expeditionary force and might even press for a force large enough to compensate them for the loss of Czechoslovakia's thirty-five divisions.

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Faced with the new facts the Government had to abandon the earlier conception of the Army. In preparing for the conversations with the French the Committee of Imperial Defence undertook a full-scale review of British commitments and from the very outset came up against the main problems of the size and role of the field forces. The War Office at first proposed a series of piecemeal increases which were obviously insufficient but which nevertheless impinged on the doctrine of 'limited liability'. At the beginning of 1939 the Secretary of State for War (Mr. Hore-Belisha) supported by the Foreign Secretary (Lord Halifax) proposed that the doctrine of 'limited liability' should be formally revoked. On that occasion nothing definite could be decided, but the absence of a decision did not signify the intention of shelving the issue. On the contrary, there is every indication that at the time of its eruption in the Committee of Imperial Defence the question was already under discussion in the highest quarters. So when on 2nd February the Secretary of State for War submitted to the Cabinet a set of concrete proposals, containing one for equipping ten divisions on a continental scale, the Cabinet was almost ready for a final decision. On the suggestion of the Prime Minister the proposals were submitted for further consideration to an informal committee of the Cabinet.³¹ By the middle of February they were in substance accepted by the Prime Minister. On 22nd February he recommended proposals to the Cabinet,³² and in doing so made it clear that the new scale of equipment meant a radical break with past policy.

The Prime Minister recalled that hitherto the Cabinet had not been asked to agree to any commitment that the field divisions would be sent to the Continent. The situation had, however, been changed by the events of the previous autumn, and France now had to face the possibility of a far stronger German force. There was also a feeling in France that Great Britain would not be playing an adequate part until she made some contribution on land. The Prime Minister therefore considered it necessary to depart from the conception of an army available for service anywhere, and to envisage one army equipped for service on the Continent and a second army equipped for service in the colonies and elsewhere overseas.

Limited liability was now dead—more completely than only a few months ago its fiercest critics could have hoped, though not so

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completely as not to leave behind a few lingering ghosts. A Reader of official documents with senses attuned to Whitehall spirits will find notions of 'a little army' continuing to haunt confidential files for another year or two. But except for one conspicuous apparition in the early phases of the war (about which more presently)³³ the ghosts no longer manifested themselves in official discussions or acts. Henceforth the War Office could plan on the assumption the assumption that in the defence of the country and in the general conduct of the war the Army's share would be as full as that of the other two Services.

The actual demands which the War Office made on the spur of the moment may not have been very large—a Regular Army of ten divisions and Territorial reserves to march. But the actual size of the programme was fluid, was soon to change again, and, viewed in retrospect, was unimportant. What was important was that in the coming negotiations with the French, British representatives would be able to promise participation in land operations in France. And once this was understood the size of the Army was bound to be adjusted to what the French thought was the least they needed and the British the most they could do. This is what in fact happened. The conversations took place while German troops were marching into Prague, and it was therefore very fitting that the size of the British expeditionary force should have been fixed at a level very nearly equal to that of France's lost ally. The French had to accept that in the opening phase of war British participation would be confined to the air and sea. But Britain undertook to make ready for service wherever required a field army of thirty-two divisions.

This the thirty-two-division programme came into being. It was not formally approved by the Cabinet until 19th April 1939, but a series of measures, all designed to give it effect, were being taken and made public through late March and early April. On the 29th March the Prime Minister announced the decision to bring the Territorial Army up to war establishment, and that done, to double its numbers.³⁴ The twenty-six Territorial divisions thus formed, together with the six Regular divisions, made up the complement of the thirty-two-division force agreed with the French. The other contribution to the new Army was the militia. The Prime Minister announced its formation on the 26th April,³⁵ and thereby not only was conscription for the first time in the history of the country introduced in what nominally was still peacetime, but a further step was taken to give reality to the programme of thirty-two divisions.

The outbreak of war did not introduce any radical changes in the plans for the Army. War scales of equipment replaced those of

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peacetime—and in some fields, notably in the provision of wastage of ammunition and guns, war scales were very high indeed, as will appear from Table 8.

War Office requirements of certain items, December 1938 and April 1940 respectively

TABLE 8		Units
	War Office requirements
	December 193836	April 194037
Tanks	5,025	7,096
Carriers		11,647
Motor vehicles and motorcycles	25,545	376,299
Field and anti-aircraft guns (including conversions)	2,226	12,677
2-pdr. tank and anti-tank guns	nil	13,561
Shells (excluding anti-aircraft)	14.8 million	64.4 million

Yet there was nothing in these scales that was new and unexpected, for some such scale of war demands had been in the minds of the War Office planners when the figure of thirty-two divisions had been fixed as a maximum of British effort on land. And it remained thus fixed. True, the Chiefs of Staff appeared to view the thirty-two divisions as part of a wider plan of some fifty-five divisions, and in September 1939, soon after the outbreak of war, the War Cabinet assured the head of the French Army that thirty-two divisions were not the final limit to Britain's effort on land and that she would go beyond that number of and when she found herself in a position to supply the additional divisions. But nothing was as yet done in the War Cabinet or by the General Staff or the Ministry of Supply to give substances to this promise, and no definite proposal to extend the Army came from the Chiefs of Staff. Nor was the timetable of preparations in any way altered. Ten divisions were to be in France by the end of February 1940 as arranged in the pre-war discussions between the General Staffs. A total of twenty divisions was to be reached by September 1940, and a total of thirty-two divisions was to be ready for service in France by September 1941. Beyond that date there was no commitment and definite plan.

This does not of course mean that the Army plans did not come in for criticism. From the very beginning of the war some of the members

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of the War Cabinet, and more especially the First Lord of the Admiralty (Mr. Churchill) and the Secretary of State for War (Mr. Hore-Belisha), wished to commit the country to fifty-five divisions and to a faster rate of despatch. At the first meeting of the Land Force Committee of the War Cabinet on 7th September 1939 Mr. Churchill proposed that the immediate objective should be the equipment of at least forty divisions within a year and of at least fifty-five divisions within two years, while the Secretary of State for War at one point in the discussion appeared to envisage an army greater still. These views, though pressed very hard, did not prevail. The Ministry of Supply protested that the existing programme were hard enough to cope with. In September 1939 the programme of thirty-two divisions was still young.³⁸ And relatively to the industrial capacity immediately available the requirements now turned out to be so large as to make further additions to army programmes appear unrealisable. The Ministry estimated that all it would be able do within a year would be to equip a Regular contingent of from four to six divisions and fourteen Territorial divisions, and it refused to promise more than supplies for twenty divisions in the course of a year. The C.I.G.S. (General Ironside) also expressed preference for a smaller programme for fear lest the Ministry of Supply 'were pushed too far and too fast'. Other members of the War Cabinet and the Prime Minister among them refused to consider any army plans that might interfere with the priority of the air programme.

The balance of views was thus in favour of the smaller programme. As a nominal concession to the advocates of a larger army the War Cabinet decided on 9th September 1939 to instruct the Ministry of Supply (Dr. Leslie Burgin) 'to do his utmost' to increase supplies beyond the twenty divisions limit, but the programme of fifty-five divisions was postponed until the effects on the other Services had been investigated and until both financial and labour aspects of the proposal had been thoroughly investigated.

Some of the results of these investigations, especially on the question of labour, will be discussed elsewhere.³⁹ Their immediate effect was to relegate the fifty-five division programme to a much later date. In December 1939 the War Office sent in its requirements for about sixty principal stores for the second year of the war, based on the assumption that by the end of that period there would be a field force of fifty-five divisions. But these figures were submitted only as an indication—one is almost inclined to say a threat—of what a larger army might involve and were not apparently meant to

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be acted upon. No action was in fact taken. The Treasury and the Ministry of Supply interpreted the instructions to plan for fifty-five divisions, which the War Cabinet had issued to the Ministry of Supply, in the most restricted sense of which the term 'plan' is capable. At a meeting of the Military Coordination Committee on 10th January 1940 the Minister of Supply pointed out that the existing Cabinet decision gave him full authority to arrange supplies for thirty-two divisions but only to plan for fifty-five divisions, and that consequently any proposals which he placed before the Treasury for expenditure on capacity to meet requirements beyond those of thirty-two divisions were refused.

Discussions in the autumn of 1939 and through the succeeding winter centred upon the highest practicable rate of recruitment and training of the new Forces and the rate of wastage (i.e. expenditure of ammunition, loss of equipment of all kinds in training and in active operations). Thus calculated the programme agreed between the War Office and the Ministry of Supply came to thirty-two divisions: twenty by the end of the first year and a further twelve by the end of the second.⁴⁰ The decision was influenced by the desire of both the War Office and the Ministry of Supply to maintain a balanced flow of supplies. Shortages of materials and capacity were still widespread, and the two departments though it unwise to consume materials in producing large quantities of easy items while the formations which would have used them could not be equipped through the lack of other essential supplies. This concern for a proper balance may have kept the 'targets' somewhat lower then they would otherwise have been.

Nevertheless it was largely an academic question whether the ultimate 'target' should be thirty-two, thirty-six or fifty-five divisions. It was as yet difficult to gauge the full productive capacity of the country's economy, and it was even more difficult to assess what supplies would come from the United States. The Ministry off Supply therefore concentrated on providing as quickly as possible the equipment and maintenance requirements of thirty-two divisions—a task which it knew to be within the powers of war industry so far mobilised. At a meeting on the 13th February 1940 the War Cabinet finally decided that while the objective should continue to be a full programme of fifty-five divisions, the aim of the Ministry of Supply by September 1941 should be a slightly augmented thirty-two division programme: in fact thirty-six divisions. The only practical measure definitely authorised for the fifty-five division programme was authority for the erection of factories requiring eighteen months or more for their construction.

Little more was heard about the larger army until early summer.

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Broadly speaking, the effective scale of Army expansion and equipment in the first nine months of the war remained materially the same as that laid down in the summer of 1939, when the Ministry of Supply was first set up. The immediate objective was raised from thirty-two divisions to thirty-six but as the date of completion was postponed from the spring of 1941 to the autumn of the same year the scale of rearmament was not thereby enlarged. The preparations so far permitted for the fifty-five division programme were too few and too slow to have made any appreciable difference to industrial plans and activities. As already said⁴¹ the real difference which the outbreak of war made to the production programmes was to substitute wartime scales of equipment and wastage for those which were deemed sufficient in peacetime.

(5)

The Blueprint of War Production

The transitional character of the Service programmes on their way to wartime peaks was matched by the equally transitional and tentative character of the economic policies and administration. The principles and the machinery of government, as they affected war production, now definitely served the urgent needs of the war and were thus far removed from the uncertain policies and half-hearted measures of the mid-thirties. Yet full-fledged war mobilisation was not yet. The country was moving towards the economic policies of total war, yet neither after Munich, nor even after the outbreak of war, did the Government attempt anything that might smack of economic regimentation. The all-embracing war industry of later years was not to be born overnight. In the period here described it was being merely coaxed into existence.

Of the several elements of war administration, the administrative machinery of production was one of the earliest to appear. The first war department to arise—the Ministry of Supply—ante-dated the war by a month, and had in fact been launched at the same time as the thirty-two division Army plan. It was intimately involved with the new Army, and to this extent at least its conception was a novel one. A specialised department or departments for the manufacture of munitions had always been part of the plans of the Committee of Imperial Defence; the notion of a Ministry of Supply had also formed part and parcel of the popular agitation in favour of more

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energetic rearmament. But neither the plans of the Committee of Imperial Defence nor in the parliamentary agitation did the Ministry of Supply figure as a department specially linked up with the army programme. Most of the administrative blueprints which the Committee of Imperial Defence drew up in the mid-thirties envisaged that in wartime the production of munitions would be the concern of two departments roughly corresponding to the bifurcation of the Principal Supply Officers' Committee. One, a Ministry of Munitions, would take over the manufacture of weapons for the three Services, while the other, a Ministry of Material Resources, would take charge of raw materials and possibly some other supplies common to the three Services. There was also an idea that a special department might be set up to deal with the mobilisation of manpower for military recruitment and for war industry.

The whole plan was thus an 'inter-Service' one. So was the idea of a Ministry of Supply which its various non-official advocates had in mind; and so was also the bogey of a Ministry of Supply which underlay the Government resistance to popular agitation. For over a year the Cabinet resisted all pressure to set up a Ministry of Supply in peacetime, partly from fear of adding thereby to interferences with industry, but chiefly because in its view the existing machinery was sufficient. It believed that the production departments of the Admiralty and the Air Ministry were adequate to deal with their respective expansion programmes, while the rearmament of the Army was sufficiently modest to be well within the capacities of the department of the Director General of Munitions Production at the War Office. In so far as these departments had to be coordinated, this was done by the various sub-committee of the Committee of Imperial Defence,⁴² by the Treasury and, later still, by the Minister for Coordination of Defence. In fact one of the political functions of the office of the Minister for Coordination of Defence, when it was created in 1936, was to make some concession to the parliamentary demand for a coordinated effort in rearmament.

With the inception of the thirty-two division plan, the Cabinet rapidly moved away from its earlier attitude towards a peacetime Ministry of Supply and also from its previous conception of the functions of such a Ministry. On the one hand, the suddenly expanded programmes raised vast administrative and industrial issues, and it was the Secretary of State for War himself who in April 1939 expressed a desire for a Ministry of Supply to whom the War Office could pass the execution of the new plan. On other grounds, both

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political and psychological, the Cabinet was now more inclined to make concessions to the parliamentary demands and was less afraid of disturbing the normal process of industry. But as soon as it became known that the Government was prepared to set up a Ministry of Supply, it also became obvious that the new department would not be formed in the image either of the Ministry of Munitions of 198 or of the departments forecast by the Committee of Imperial Defence.

To begin with, the Admiralty 'dug its toes in' against all attempts to take away from it the control of naval construction. The building of ships, it argued, was so intimately bound up with design, and the latter was so much part and parcel of the strategic planning and tactical experience of the Naval Staff, that the Admiralty could not possibly part with responsibility for naval construction. Moreover, the naval programmes in peacetime were sufficient to enable the Admiralty to maintain a fully-staffed production department, a corps of naval constructors and a network of naval dockyards: in fact all the organisation, all the men and all the experience necessary for naval construction in wartime.

Their Lordships' arguments were put with customary force and apparently struck the Cabinet as cogent; so that from the very beginning it became clear that Ministry of Supply, if set up, would not be in charge of naval construction. But once that was admitted, the way was open for a similar argument by the Air Ministry. In principle the Air Ministry was not prepared to allow its authority to be narrowed down in comparison with the authority which the Board of Admiralty enjoyed in naval matters. And in fact the arguments which held goo on naval construction also applied to aircraft production—the intimate connection between production, design, tactical lessons and strategic planning, the accumulating technical competence within the Ministry, the close contact with firms. The Air Ministry therefore had to be allowed the 'contract out', and in the end the authority of the new departments in the production of weapons came to be largely confined to the army programme. It was at that stage that the Cabinet decided that the Ministry of Supply was so truncated that it could without overburdening itself also take over the responsibility for raw materials, and thus make it unnecessary to establish a separate Ministry of Material Resources. In this shape the blueprint of the 'mule' Ministry of Supply finally took shape in July 1939, and the Ministry itself started operations in August of the same year.

On the eve of the war the setting up of the Ministry of Supply was as yet the only important development in the administrative machinery of military production. Other administrative innovations were still in the blueprint stage and were not to be introduced until the actual beginning of hostilities. They were, however, brought in

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and in some ways supplemented, within the first month of war. One of the first administrative acts of the Government was to set up a War Cabinet, consisting partly of departmental ministers and partly of ministers without departmental duties, and a number of new ministries.⁴³ Among them one—the Ministry of National Service, administratively joined to the Ministry of Labour⁴⁴—was to be in charge of labour problems and consequently also of supplies of labour for war industry, and indeed was to become a linchpin in the administration of war production. Almost simultaneously the War Cabinet called into being a network of committees for interdepartmental consultation and coordination, most of which were directly or indirectly concerned with war production. At the ministerial level the War Cabinet established, at the end of October, the Military Coordination Committee to provide for a regular exchange of views between the ministers primarily responsible for defence and the Chiefs of Staff and to consider reports to the Chiefs of Staff on their way to the War Cabinet. Generally speaking it was expected to deal with problems of strategy and military organisation, and in so far as strategy determined the armament programmes of the Services, munitions were also within the competence of the committee. The allocation of production resources was to be controlled by the Minister Priority Committee, which in its turn budded off into sub-committees for materials, production, manpower, works and building and transport. And to crown the edifice the War Cabinet established in October 1939 the Ministerial Committee on Economic Policy to unify and coordinate all the activities of the various departments which affected the war economy of the country as a whole. Most of the ministerial committees had their counterparts on the official level, and of these the Interdepartmental Committee on Economic Policy with Lord Stamp as its chief functionary was conceived as the 'Economic Staff' from which the War Cabinet expected to obtain expert advice on the main subjects of economic and industrial policy.

Thus an elaborate machinery for the management of national resources came into existence by the second month of the war. In theory it was sufficient to cover the entire field of economic policy and industrial administration; whether it was equally sufficient in practice was more doubtful. Executive action on the departmental level in the Air Ministry, the Admiralty and the Ministry of Supply, developed more or less smoothly. Though greatly expanded and diluted, the

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production departments were merely continuing the work which had already been in full swing and for which experience had been accumulating since 1936. The newest of the departments—the Ministry of Supply—incorporated the nucleus of the Production, Contracts and Inspectorate branches of the War Office and was therefore able to get into its stride with relatively little delay.

More uncertain were the first stages of the Raw Materials Department of the Ministry and most uncertain of all were the activities of the central machinery for control and coordination. The various committees concerned with economic and industrial matters attempted little and achieved even less. The sub-committees of the Ministerial Priority Committee were fairly active but proved useful in little more than exchange of information between departments on topics in which their interests met. the Military Coordination Committee found itself tackling one or two problems of fundamental importance to war production, about which something has already been said.⁴⁵ The Economic Policy Committee alone succeeded in asserting itself over and above the rest of the coordinating machinery, but such authority and power as it possessed was largely derived from the powers which the Treasury exercised through it.

Here indeed will be found the main feature of the industrial administration of the time. The state of continued crisis which came with Munich did little to modify the controlling part which the Chancellor of the Exchequer and his department played in general control of economic policy and war production. from this point of view the outbreak of war and the elaborate system of committees it ushered in made little difference.  It was in so far as the economic Policy Committee was an instrument of Treasury control that it grew in importance in the autumn and winter of 1939 to 1940. The  Chancellor was the only member of the War Cabinet concerned with economic matters; he was also chairman of the Ministerial Economic Policy Committee, while on the official level the Permanent Secretary of the Treasury acted as its chairman and was in fact its virtual director. The two men doubtless owed some of their influence to their personalities, and above all the weight which throughout the concluding months of peace and in the early phase of war the Prime Minster attached to their advice. By the pre-eminence also reflected the fundamental principle of Government policy, and more especially the continued supremacy of financial controls in economic matters.

Needless to say Treasury control had changed and was still changing. The financial limits were no longer as narrow and seemingly unsurmountable as before, and Treasury procedure was becoming speedier and more pliable. This change was in fact sufficiently important to deserve fuller treatment in the next section.

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(6)

The End of Financial Limitations

It will presently be stressed that the economic reasons for financial limitations was no longer that of 1935, even though the theme of finance as the 'fourth arm' still made an occasional appearance in official discussions. One such anachronistic event took place on the very first day of the war when the War Office representative on the Treasury Inter-Service Committee volunteered his department's willingness to work to any system of financial control which might be adopted if for financial reasons it was necessary to wage war on a limited scale. By itself the statement was of little importance, but it betrayed an outlook which was still capable of influencing the attitude of the Chancellor of the Exchequer during a discussion of the new army programmes. Even at that late hour he could argue that the country was already spending £210 millions per month which was more than at peak periods of the last war and more than it could afford; and the same argument in a more particular form could also at time be brought forward in detailed discussions on individual proposals of expenditure.

Generally speaking, however, the view that the 'country could not afford it' and the corresponding budgetary limitations no longer determined the scale of war production. It has already been shown⁴⁶ that the R.A.F. shook itself free of financial limitations early in 1938 and was the first Service to rearm more or less regardless of cost. The other two Services attained their financial releases in the course of 1939. When in November 1938 the War Office tabled its first modest and post-Munich programme—as yet nothing more than a request that the existing establishment of six divisions⁴⁷ be allowed full equipment—the Chancellor still appeared unbending. But as the discussions on the role of the Army progressed so his opposition waned; and when the deliberations of the Prime Minister's Committee ended in revoking the principle of 'limited liability',⁴⁸ the Chancellor finally gave way. His comments on the Prime Minister's proposals of the 22nd February 1939 were that other aspects of the matter outweighed finance and that therefore he had no alternative but to agree to those proposals.

The army was thus released from the financial bounds set in 1937; and the greater freedom reflected itself in the detailed schedules of requirements for the thirty-two division scheme with their generous

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scales of equipment and rates of wastage. On the other hand, the Navy did not surmount the financial objections to its programme until somewhat later; its plans incorporating the 'two-power standard' continued to content with objections which were largely budgetary till August 1939.⁴⁹

So, on the whole, at the outbreak of war the financial limits to rearmament became so wide as no longer to limit. This does not however mean that war production could now expand unchecked by any financial obstacle of general application. For as the fears of general insolvency were weakening their place was being taken by the special argument of hard currencies. Concern about means of payment abroad and more especially about gold and dollars began to colour the financial policies of rearmament some time before war broke out. It appeared once or twice in the general discussions of military plans in the summer of 1939, and was on one or two occasions invoked at the meetings of the Treasury Inter-Service Committee. In May 1939, for instance, expenditure on the extension of a propeller 'shadow' factory under the new war potential scheme was approved after protracted discussion but only on the discussion that dollar expenditure on machinery would be drastically cut. In July a draft contract for the supply of guns by a Swiss firm was rejected out of hand because the prince was quoted in terms of gold. The theme became more and more pronounced as the plans and prospects of the war took shape and as all the implications of the American policy of 'cash and carry' revealed themselves.

On the whole, the effect of the dollar shortage on war supplies turned out to be even greater than the early estimates indicated. Envisaged over the entire period of three years the supply of hard currencies threatened to place a strict limitation on military purchases abroad and corresponding limitations on rearmament at home. A rough statistical inquiry at the Bank of England and the Treasury showed that the realisable reserves of foreign exchange would not allow expenditure of gold, dollars, or other hard currencies to exceed £150 millions per year for three years. This would in itself have set a limit on rearmament narrow to the point of constriction. What made it more constricting as time went as was that in the opening months of the war the country appeared to be spending foreign exchange at more than its annual dole, and, worse still, was disbursing dollars on non-munitions goods on a scale which left little for munitions and for essential industrial supplies. Rationing was slow in coming and civilian consumption was buoyant: and by the spring of 1940 employment and earnings in the country were improving rapidly. Food and raw materials for civilian requirements were therefore being purchased in large quantities than the Treasury had

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allowed for in its early calculations. In addition, an alarmingly large proportion of the purchases (much larger than expected) had to be diverted from sterling areas to the United States in order to economise shipping. Dollar reserves were thus being stretched to an extent which left very little room for large munitions orders and made it necessary for the Treasury to keep a close watch over all programmes which might lead to additional demands for American steel, non-ferrous metals and machine tools.

Judged by this standard drastic increases in the scale and speed of rearmament were indeed ;much more than the country could afford', and the build-up of the armed forces was bound to slow down to a rate of progress which would spread the dwindling dollar reserves over a three-year war. It was not until February 1940 that the Allied Governments showed signs of accelerating their military purchases abroad beyond the pace dictated by dollar prudence, and agreed to spend their foreign exchange more quickly than the dollar rations would allow. But the change of mind was not complete even then and was not immediately followed by a corresponding expansion of the industrial plans at home or of foreign purchases abroad. The balance of payments policy was in fact not wholly abandoned until the Churchill Government took office.

The economy of foreign payments thus provided a new principle and a new justification for financial checks on the expansion of war industry in certain directions. The check was not, however ,as powerful and as general as the financial policy of old, and it did not affect the day-to-day control which the Treasury exercised over rearmament. The routine of Treasury control could still occasionally be held responsible for delaying the progress of preparations, but with war drawing near the Treasury tried to relax its procedure as far as this could be done without defeating the main objects of its supervision over expenditure.

One of the earliest relaxation of financial procedure primarily affected the powers of Parliament. With the outbreak of war the defence and supply departments and all special war services ceased to be financed under the peacetime procedure of departmental estimates and votes and were able to draw on a vote of General Credit. This decision was taken in the interests of security, but it also permitted greater flexibility in war expenditure and it meant that detailed estimates did not have to be prepared in advance, passed by the Estimates Committee and approved by the House of Commons. This also meant that finance could now be switched from department to department and from object to object to suit the needs of war.

As yet less sweeping were the changes in the procedure of financial scrutiny by the Treasury itself. At no time between the autumn of 1938 and the end of the war was there any question of Treasury

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renouncing its watch over public expenditure—for one thing that Public Accounts Committee would have refused to condone any conspicuous lapse in the Treasury's vigilance.⁵⁰ The Treasury therefore continued to scrutinise individual projects of expenditure as before and could refuse consent for proposals which appeared to be inadvisable, excessive or ill-timed.

The effects of the scrutiny need not however be exaggerated. The documents leave a clear impression of greater liberality, and the machinery of the Treasury Inter-Service Committee appeared to respond to the spirit of the times. It worked smoothly, it sanctioned at almost ever meeting large items of expenditure and showed every anxiety not to hold up projects of special urgency. What is less clear is whether on the lower levels the changes were equally marked and the financial scrutiny equally speed or equally liberal. Throughout the period there were still complaints of the length of time projects of expenditure took to pass through all the stages. As in the earlier years of rearmament some delays occurred while the projects were being 'groomed' in the financial branches of the Service departments for submission to the Treasury Inter-Service Committee. At one time in the spring of 1938 the procedure was altered to suit the newly-launched L scheme of 12,000 aircraft,⁵¹ but the change proved purely local and temporary. On that occasion the Air Ministry and the Treasury agreed to speed the preliminary discussion of aircraft orders and set up for that purpose the Air Ministry Supply Committee which contained among its members a Treasury representative. The latter was given the power to signify his concurrence with any proposal which in his opinion deserved a speed sanction, and acting in this spirit he was able during the summer of 1938 to concur without seeking individual sanction from his department in a series of rapid decisions involving very large sums. This system, however, though highly expeditious and to that extent welcome to the Air Ministry, reduced the actual financial control of the Treasury far below the level that the Treasury normally considered safe. It was not extended to the other departments, and even in the Air Ministry it petered out by the autumn of 1939.

Needless to say, the supply departments from time to time renewed their demand for a speedier process of financial control, but nothing of importance could as yet be done to meet the demand. In the agitated days of the Munich crisis the Treasury and the supply departments worked out an emergency scheme under which each department would receive block allotments for miscellaneous expenditure of small amounts and could in cases of great emergency

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issue authority for work to proceed without previous sanction from the Treasury. But as the immediate emergency lifted, the procedure was never put into operation, and subsequent discussions of the problem centrally almost entirely upon the changes which might be necessary under war conditions.

Such wartime plans as emerged were not, however, far-reaching. The departments wanted powers to authorise expenditure on production orders or capital projects. The Treasury on its part was willing to raise the limits of the expenditure which the departments could incur without its previous approval, but was anxious to keep the limits very low. A compromise between the need for speedy action and the requirements of Treasury control was achieved by raising the limits within which the supply departments were allowed to sanction within their own expenditure. In the first week of the war the Air Ministry received a block authorisation to cover the estimated expenditure on the current programme of aircraft production and was thus freed from the necessity of referring to the Treasury individual orders. Its capital expenditure on other items up to £50,000 each was similarly met from another block grant, the Ministry subsequently reporting details to the Treasury Inter-Service Committee for approval. From December 1939 all the supply departments had power to approve capital expenditure on individual production items of not more than £50,000:⁵² all approved schemes estimated to cost over £2,000 were listed in periodical reports to the Treasury.

To sum up: in the concluding months of peace as in the opening phase of  war, military preparations were no longer hemmed in by narrowly-set financial obstacles. Nevertheless, finance remained something of a limiting factor especially in so far as it invoked considerations of dollar economy; and something of a regulator (not to say a check) in so far as the routine of financial scrutiny still influenced the timetable of war production. But the main significance of this phase in financial history is more general and in a sense more relative. In view of the changes which were to follow, the remarkable feature of the period was not that financial control continued but that an alternative based on broader economic considerations had not yet made its appearance. The problems of war economy, the limits of the industrial effort and the timetable of industrial mobilisation were not yet evaluated, as they were to be later, in terms of economic resources—labour, materials, industrial capacity. Now and again, as in the report of the Stamp Survey of May 1940⁵³ or in one or two general memoranda in the Ministry of Supply, labour and

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machine tools might figure as the limiting factors of war production and be used as yardsticks for what the country could and could not do. But in ministerial discussions of economic policy and in the day-to-day scrutiny of individual projects the yardstick was still that of finance.

(7)

The Beginning of Controls, Priorities and Stockpiling

It has already been suggested that the purely financial controls persisted largely because national resources were not yet completely mobilised. A far greater proportion of labour and capacity was now engaged in the manufacture of munitions; yet industrial capacity, labour and to some extent raw materials were still available in employments which by wartime standards were no longer essential. this does not of course mean that 'business as usual' remained the official doctrine of the Government, for it will be shown presently that by the time of Munich that doctrine was already a thing of the past. But whatever may have happened to the doctrine, the practice still persisted, and the Government had as yet done relatively little to impose the overriding claims of war production on all fields of economic activity.

The story of the official demise of the principle of 'business first' is briefly told. It ceased to operate as a Cabinet instruction to the defence departments somewhat earlier then the period covered in this chapter⁵⁴ and was abrogated as a result of prolonged and concerted pressure from several quarters. The main impetus, however, as well as the immediate pretext came from the Air Ministry. When in the autumn of 1937 the Cabinet considered further expansion of the Air Force in response of reported additions to the Luftwaffe (it will be remembered that the discussions eventualy led to the L programme of 1938) the Secretary of State for Air took the opportunity to point out how difficult it was to expand the production of aircraft while 'business' remained 'as usual'. In recommending to the Cabinet the Air Ministry's proposals in their 1937 versions (the so-called programme J) he warned it that so long as the Government did not allow rearmament to interfere with the normal processes of industry the programme could not be completed by the end of 1939 but would have to be spread over a another eighteen months or two years. The note thus sounded was soon to be amplified by other voices. The Foreign Secretary came out in support of the Air Ministry; then at

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the very beginning of 1938 the Secretary of the Committee of Imperial Defence wrote to the Minister for Coordination of Defence in the same sense, and in February the argument received the massive reinforcement of the Chiefs of Staff. In assessing the situation they argued strongly against the policy of non-interference with normal trade, which in their opinion could not fail to be a serious handicap when Britain was competing with potential enemies whose whole financial, social and industrial system had in fact been mobilised on a war footing for at least three years.

All these arguments related to the rearmament programmes as a whole; the Chiefs of Staff, if anything, meant to draw special attention to delays in executing the army programme. But in the conditions of early 1938 it was the argument of the Air Ministry that had the most effect, and it was the need of the aircraft industry that eventually decided the issue. It has been shown in an earlier chapter⁵⁵ that the discussions of the aircraft programmes made it obvious that in 1938 the limiting factor was the productive capacity of the aircraft industry, and that this in turn depended on the industry's ability to find the necessary resources. So when the Government finally decided to remove the financial limits to aircraft programmes and to order all that the industry could produce it was also bound to reconsider the entire system of industrial priorities. On the 22nd March 1938 the Cabinet decided that the assumption on which the reconditioning of the Services had been based, namely, that the course of normal trade should not be impeded, should be cancelled. On the 24 March in announcing the decision to the House of Commons the Prime Minister made its purpose quite clear. Existing plans, he said, must be accelerated and there must also be an increases in some parts of the programme. From this it followed that 'men and material will be required, and rearmament work must have first priority in the nation's effort. The full and rapid equipment of the nation for self-defence must be its primary aim'.⁵⁶ Freed from the necessity of accommodating itself to the needs of civilian trade, the Air Ministry was now ready to expand its air programme to the furthest limits of the aircraft industry's capacity, and was able to embark on those negotiations with the aircraft firms from which the L programme of 12,000 aircraft was soon to emerge.

The precedence conferred on the munitions industry was thus at once reflected in aircraft production. And although the programmes of the Navy and Army were not immediately affected (for a while they were still limited by financial allocations) in the spring and summer of 1939 they too could benefit from the new priority rule. An important landmark was thus passed; yet its importance must

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not be exaggerated. The end of non-interference with business did not signify the beginning of an economic emergency. Though 'business as usual' was now pronounced to be untimely, 'life as usual' still went on. The very problem of priorities vis-à-vis civilian demands—now so much in the forefront—bore witness to the strength of the older attitude. For when in March 1938 the Cabinet absolved the Services and their contractors from the obligation to respect the requirements of civilian economy, it did not thereby establish anything more than a rough and superficial system of priorities. As far as it is now possible to judge the Cabinet decision enabled the Treasury to sanction armament orders when they threatened to draw capacity and take away labour from important civilian trades. In a more general way the new rule encouraged manufacturers to accept armament orders at the expense of their ordinary business. But other encouragements or inducements were very few and ineffective. Many manufacturers were now rapidly changing over to military manufacture from a sense of patriotic duty, but the main practical inducement—that of greater profits to be earned on armament contracts—was largely nullified by the various taxes on profits which culminated in an Excess Profits Tax of 100 percent.⁵⁷ There was as yet no question of denying raw materials or labour to inessential business or of organising (still less forcing) a transfer of firms to work work or of reducing whole branches of civilian industry in order to release plant and labour. Broadly speaking, civilian demands continued to compete with war needs for production resources on more or less equal terms, and until the initial months of the summer of 1940 little was done to check competition by political and administrative measures.

The persistence of civilian demands and their pull on the supply of resources reflected the reluctance of the Government to precipitate the hardships of full-fledged war economy. Yet as the first phase of the war was drawing to an end it was becoming obvious that without some such hardships an unnecessarily large proportion of scarce materials inevitably escaped into inessential uses, and within war industry itself materials were not distributed in the quantities and in the order which the national need demanded.

The problem of raw materials in war as it affected Government preparations was of course wider than that of controls.⁵⁸ During the closing months of peace the Government considered a number of proposals dealing with raw materials, and now and again was even able to take immediate action to fulfil them. One of the schemes was

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concerned with the further development of the earlier projects for the accumulation of reserves of important materials. The policy goes back to the early years of rearmament,⁵⁹ but in October 1938 it was still limited to purely 'strategic' materials. Purchases were to be confined to essential materials of which normal stocks in the country were not large. These were by definition relatively few in number and the quantities concerned were small. The general problem of war reserves of raw materials was not thereby greatly affected. But, as war approached, the broader aspects of the problem began to obtrude themselves on the planning authorities. The initiative came from Sir Arthur Salter who in June 1939 presented a memorandum proposing that the Government should accumulate stocks of raw materials and food as a means of ensuring adequate supplies and of economising shipping and foreign currency in wartime. He recommended purchases equivalent to eight million tons of shipping space, i.e. half the 197 imports, costing about £100 millions. The Board of Trade considered the proposal and, in the main, turned it down on grounds which were largely practical. They argued that some commodities, e.g. pit-props, could not be bought in large quantities at short notice and that a sudden influx of raw materials bought for reserves would dislocate the ordinary programme of essential imports and strain port facilities. These arguments, however, would not apply to purchases on a more modest scale, and a modest scheme was in the end adopted. At the end of July the Government authorised the Board of Trade to purchase for war reserves 150,000 tons of American cotton, 1,000,000 tons of iron ore, 120,000 tons of pit-props, 100,000 tons of phosphate rock, 40,000 tons of copper and 17,000 tons of hemp. These purchases could not be completed before the outbreak of war, and the country entered the war with a general level of stocks only a little higher than in a normal year. Yet if several important commodities, such as bauxite, zinc concentrates, wool, flax, rubber, were on the 3rd September available in quantities sufficient for nearly six months of the estimated annual requirements at war, the credit for this must be due to the measures taken in the previous couple of years, including the last-minute purchases of 1939.

Equally important, especially from the long-term point of view, were the pre-war schemes for the bulk purchase of raw materials in the Empire. The project of securing for this country in wartime the prior claim to supplies from other parts of the Empire goes back to the earliest discussions in the Principal Supply Officers' Committee in the later twenties. The first practical step, however, was not taken until 1937 when the Principal Supply Officers' Committee tried to pilot through the Imperial Conference of that year an agreement with Canada about wartime supplies of bauxite and aluminium. The

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Conference pronounced against any commitments in peacetime for the supply of raw materials in war, but the plan was not abandoned. In July 1938 the Committee of Imperial Defence revived the earlier proposals, and in the autumn the Board of Trade entered into negotiations with Empire producers for the bulk purchase of a number of commodities—in the first place, lead, zinc and wool. The contract for the latter, involving the purchase of the entire wool clip of Australia and New Zealand, was finally concluded in October 1939.

Among the plans worked out in the concluding phase of peace were also various schemes for rearranging the sources of supply to suit the expected changes in international trade and communications; to develop home supplies of commodities like timber, iron ore, flax; to secure greater economy in the use of scarce materials and their substitution by other materials. Most of these proposals, in the nature of things, remained in the project stage⁶⁰ and did not bear fruit till much later, but their value in war was indisputable.

Nevertheless, these miscellaneous preparations did not affect the future of war industry an intimately as the more purely administrative projects for the future control of raw materials. The controlling organisation was to be erected at the outbreak of war almost overnight, for there was no question of establishing and operating control over raw materials while peace, however nominal, was still on. Similarly the policy, which the pre-war planners had laid down for the future controls and which the controllers at first followed, could not be any more thorough than the rest of the economic policy of the transition period. To put it paradoxically, the main feature of the pre-war plans was their studied avoidance of too clear-cut a principle. But this very avoidance set the tone for the future history of raw materials.

In the first place no attempt was made to establish a uniform organisation. The planners assumed that the separate problems of individual materials would in each case determine the character of the controlling organisation, and that in the course of war the changing supply position would lead to change in the organisation of the controls. Most, but by no means all, of the control were to be given statutory powers to control prices and to lay down conditions of purchase, sale and use. Compulsory government controls were to be imposed on some materials, but where a material, though essential for the national effort, was not expected to be critical, e.g. rubber, asbestos, silk, the control was to be organised on a voluntary basis: as a rule by the corresponding trade association under the supervision of the Raw Materials Department of the Ministry of Supply.

The administrative plan was thus far from rigid or uniform; so was also the supervision which the controls were to exercise. It was

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not part of the pre-war plans to entrust any government agency with the distribution among industrial users of all the raw materials needed for war industry. All that was recommended was that, for a limited number of raw materials which might from time to time be in short supply, statutory controls should be set up; and that when this happened, ad hoc directions about use and priority should suffice. The instrument of policy would be licensing system and not allocations.

Such were the principles of the projected controls as they took shape in 1938 and 1939. The Munich crisis gave the Board of Trade an opportunity for a 'trial run', and at its conclusion the Board of Trade reaffirmed the plans in their main outline. According to the instructions then worked out the 'short-term' policy in the opening phase of war would allow manufacturers to proceed in the usual way with stocks in their possession, but would prohibit except under licence new purchases or sales of raw materials. Long-term policy was not closely defined and was expected to vary from commodity to commodity. In general the plans assumed that the central priority organisation would issue to the individual controls general directions enabling them to discriminate between users, but that in most cases it would rest with the individual control to determine in accordance with the supply position of each material whether, in what quantities and in what order the material should be released for uses not directly related to the war and war production.

The main features of this system thus fitted well into the semi-mobilised economy of the opening phase of the war. If anything, its tentative and experimental character came out even more clearly in practice than it appeared in the blueprint. Such machinery as the pre-plans had in mind came into existence smoothly. The Raw Materials Department of the Ministry of Supply was set up at the same time as the rest of the Ministry, i.e. more than a month before the actual outbreak of war; the Ministerial Priority Committee appeared on the scene, together with the rest of the central machinery of the War Cabinet, by the end of October 1939.⁶¹ By that time the network of individual controls was also taking shape more or less according to plan. A group of 'essential' commodities—iron and steel, some non-ferrous metals, wool, leather, timber, hemp, flax, jute, paper and aluminium—which were scarce or were in danger of becoming scarce were placed under full-fledged controls; and once of the earliest enactments of the war gave controls the statutory powers of licensing, purchase and distribution. Another group of commodities, including rubber and mica, was subjected to the voluntary control of its trade associations, and still another group, including plastics and some non-ferrous metals, was left uncontrolled.

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In the later stages of the war, with the general tightening of the system, individual materials were gradually transferred from the second group to the first, and materials not previously controlled were brought under control. But between the outbreak of war and Dunkirk the tentative system of September 1939 persisted more or less unaltered.

The other feature of the pre-war plans—the autonomy of individual controls—turned out, in operation, to be even greater than the planner had intended it to be. The controllers were expected to act in accordance with the general directives of the central priority organisation. But in the first few months of the war the central directives, such as they were, had little influence. They were so general and so unrelated to the requirements of consumers that the controllers largely disregarded them. Generally speaking, some of the powers which in theory should have been exercised by the central priority organisation devolved upon the officials (often junior officials) of the Raw Materials Department of the Ministry of Supply, and some were appropriated by the controllers themselves.

The shape which the controls now took affected the development of war production in several ways. In the first place the claims of different branches of war industry and of individual firms engaged in war production came to be adjudicated in a manner liberal to the point of being disorderly. The executive officers of the Raw Materials Department determined priorities by the issue of licences. But in the case of materials like steel the procedure was of little value as long as the government departments themselves were exempt from compulsory licences. This mean that the Service ministries and supply departments were able to issue priority directions to individual producers more or less as they pleased. No wonder that the controls and the firms soon found that contrary instructions arrived that the same time from different departments, and that a general inflation of priority claims was developing very fast.

By the spring of 1940 it was becoming clear that priorities could not be continued as before. All the drawbacks of the system of priorities, some of which had been foreseen and foretold, now became apparent. In the first place it proved too crude a  method of discriminating between objects of greater and lesser importance. It implied that no requirement of lower priority could be met as long as any requirement of higher priority remained unsatisfied. From the administrative point of view the system was highly inefficient in that it led to the accumulation and conflict of requirements to which high priority had been given. As a result, the final sorting out of relevant urgencies was often left to accident or to the decision of the firms themselves.

Most of these difficulties could be overcome by allocations. Under

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a system of allocations each requirement could assessed in the order of its importance and be given a corresponding share in the supply of materials. This was now well understood and the machinery of priorities was therefore gradually wound up, and such arrangements for allocations as already existed were tightened and new arrangements for allocations were made. Those materials which were under the jurisdiction of the Materials Priority Sub-Committee were now allotted to each department in more or less firm quotas, and the germ of an orderly system of allocations was created. The period for which the allocations were made was reduced from a year to six or even three months, and the departments had to ensure that the allocations they sponsored did not exceed the total amounts allocated to them by the Materials Priority Sub-Committee. Production of munitions was still subject to priorities, and departments could still direct firms to execute certain individual orders before others; but this was not, however, to affect the distribution of raw materials between main uses.

From the point of view of war production as a whole even more telling was the difficulty of differentiating essential needs of war from inessential civilian requirements. The War Cabinet and the ministerial committees agreed that priority belonged to war industry, to essential civilian requirements and to the export trade, but they were not yet able to define the principles by which the demands of war industry could be set against the demands of the export trade and essential civilian needs. Occasionally they might indicate the relative urgencies in the field of munitions production, but as a rule controllers had to rely upon their own judgement; and most of them, with th