Kennedy G. Imperial Defence. The Old World Order, 1856-1956

Подождите немного. Документ загружается.

the estimates with previous years’ expenditure. The defence departments

were brought into line with civil departments after the Cabinet agreed in

1919 that it would not consider new proposals for expenditure until the

Treasury had approved them or until the responsible minister had indi-

cated his intention to appeal to the Cabinet against a Treasury decision.

The Chancellor did not have the power of veto, but he could warn

Cabinet colleagues of the consequences of increased expenditure. In prac-

tice, the power of the Treasury rested on the convention of the balanced

budget. So long as an increase in one department’s expenditure meant

either an increase in taxation or less money for other departments, the

Chancellor was not short of allies among Cabinet ministers. However, if

Parliament authorized borrowing for expenditure, as in wartime or for

some speciﬁc purpose, as for example, warship construction under the

Naval Defence Act of 1892, or for rearmament before the Second World

War, it was harder for the Treasury to impose restraint.

The estimates were set out in considerable detail and were divided into

a series of ‘votes’: for example, in the case of the Admiralty, there would be

one for pay, one for stores, one for new construction and so on. Under-

spending in one vote could be used to balance overspending in another,

provided that the Treasury granted the power of virement. Otherwise, when

a department wished to exceed its estimates during the ﬁnancial year, it had

to ask the Treasury for a supplementary estimate which would then be sub-

mitted to the Cabinet and Parliament for approval. Since not all proposals

included in the annual estimates could be examined in detail before they

were submitted to Parliament, the Treasury would reserve some matters for

further consideration, and if it later found that a proposal was wasteful or

did not conform to government policy, it would withhold approval, and the

money could not be spent, even although already voted by Parliament,

unless the minister in question appealed successfully to the Cabinet.

Detailed examination of the estimates usually secured some economies, but

the Treasury’s most effective approach was to limit the total amount of

money available for a department’s estimates, thereby forcing the experts

within that department to cut out the less-essential proposals.

Prior to the First World War, the Treasury did not claim the right to

question policy when examining the estimates, and Treasury control was

concerned solely with ﬁnancial prudence. The Chancellor could discuss

policy, as a member of the Cabinet or its sub-committees, but it was only

after the First World War that ofﬁcials began systematically to brief

the Chancellor with arguments as to what policy should be. By then the

Treasury was evolving from being purely a ministry of ﬁnance to being

concerned with the economy as a whole, and Treasury control had become

concerned with making the best possible use of resources, including

industrial capacity, as well as with money. In 1919, when the Cabinet

was concerned about reducing high levels of wartime expenditure, the

Permanent Secretary of the Treasury, Sir Warren Fisher, argued that major

72 G. Peden

economies could be achieved only by making changes in policy. He tried to

make the Treasury the central department of government, coordinating

policy through ﬁnancial control, and from 1933 he took an active interest

in the formulation of defence and foreign affairs. While he did not wish

the Treasury to supplant the spending departments, he thought that Treas-

ury ofﬁcials should form ‘constructive views on policy questions’.

theory, defence policy was coordinated by the Committee of Imperial

Defence, ﬁrst created in 1904, and which in the interwar period had repre-

sentatives of three independent defence services, the navy, the army and

the air force, plus the Foreign Ofﬁce (FO) and the Treasury. In practice,

the lack of a Ministry of Defence left the Treasury with an important

coordinating role through the control of expenditure. Even when a Min-

istry of Defence was established in 1947, the three defence services retained

considerable autonomy until the Sandys reforms of 1957–8, and even

later.

Chancellors, briefed by their ofﬁcials, continued to have an input

into the formulation of policy for as long as the combined demands of the

services were too great for the national economy to bear.

The subsections of this chapter follow the evolution of Treasury control

over defence expenditure. The next section deals with the period

1856–1914, when the Treasury was concerned solely with ﬁnancial pru-

dence. Further sections deal with the period 1914–1939, when the Treas-

ury lost control of expenditure during the First World War, then regained

it, and then with a similar cycle over the period 1939–1956.

1856–1914

Although the Treasury’s parsimony was expressed in ﬁnancial terms down

to 1914, it had an economic basis. Government expenditure on non-pro-

ductive activities, like defence, was believed to divert money from private

enterprise, the source of the increasing wealth (and taxable capacity) of

the community. In a memorable dictum, Gladstone declared that ‘money

should be left to fructify in the pockets of the taxpayer’.

The recent

debate between historians on the costs and beneﬁts of the British Empire

has some bearing on the wisdom or otherwise of Treasury parsimony.

Lance Davis and Robert Huttenback, in a seminal work, calculated that

the costs, particularly the taxation necessary for imperial defence, out-

weighed the beneﬁts.

Patrick O’Brien has supported this point of view,

arguing that imperial defence led to an ‘inﬂated military establishment’

and diverted military resources from the principal threat to British secur-

ity by the early twentieth-century Germany.

On the other hand, Paul

Kennedy and Avner Offer have countered that the cost of imperial

defence was not particularly burdensome when compared with the

defence establishments of other powers, given that Britain had a higher

income per capita than other European countries. Moreover, Kennedy

has pointed out that France and Russia, not Germany, were the principal

Treasury and defence of empire 73

threats to British security in the nineteenth century, and Offer has drawn

attention to the fact that the empire was a strategic asset that served

Britain well in the First World War, both in terms of raw materials and

manufactures and in terms of military manpower.

For the purposes of an

examination of the Treasury’s inﬂuence, one may conclude that defence

of empire was at least potentially a burden on the British economy and that

there was a case for Treasury parsimony to minimize that burden.

Defence expenditure was higher after the Crimean War than it had

been before: £24.9 million in 1860 compared with £15.1 million in 1850.

The suppression of the Indian mutiny (1857–9) and war with China

(1856–60) had delayed economies in the defence of empire. However,

Gladstone embarked on an economy campaign, and by 1870 defence

expenditure was down to £21.5 million. It became harder for the Treasury

to continue downward pressure on the defence estimates thereafter, as

revenue rose and the cost of servicing the national debt was reduced,

partly by debt redemption but mainly through a conversion operation in

1888 that reduced the interest rate payable on Consols, the most import-

ant gilt-edged stock. It was thus difﬁcult for the Treasury to resist demands

for increased expenditure during the naval scare originally got up by the

journalist W. T. Stead in the Pall Mall Gazette in 1884, and by 1898 defence

expenditure had reached £40.2 million. The Boer War proved to be very

expensive, the cost peaking in 1902 at £123.3 million, and the defence

estimates never returned to their 1898 level. In 1904, the Conservative

Chancellor, Austen Chamberlain, told the Cabinet that ‘we must frankly

admit that the ﬁnancial resources of the United Kingdom are inadequate

to do all that we should desire in the matter of Imperial defence’.

However, a naval arms race with Germany frustrated the Treasury’s efforts

to reduce defence expenditure, which rose from £58.2 million in 1908 to

£72.5 million in 1913.

It is difﬁcult to work out how much was spent on the defence of empire,

as opposed to the defence of the United Kingdom or its trade routes.

About half of the army was deployed overseas, maintaining or expanding

the empire, and the money voted for the army or the ordnance exceeded

the money voted for the navy until 1896 and also during the Boer War and

its aftermath. The Victorian and Edwardian navy tended to be expensive

because it had different functions that, after the adoption of steam for

major warships in 1850 and the introduction of the ironclad in 1860,

required largely incompatible types of ships. Armoured vessels, with

limited range without refuelling, were required in European waters. On

the other hand, imperial policing was carried out mainly by unarmoured

vessels, with longer range. Some ships, frigates or cruisers had a dual

purpose, being suitable for scouting for the ﬂeet, trade protection, and

defence of empire, but there is no doubt that Britain’s world-wide commit-

ments necessitated a much larger navy than those of powers whose inter-

ests were more concentrated. Gladstone argued in 1864 that steamships

74 G. Peden

and the expanding electric telegraph system made it unnecessary to main-

tain as many ships overseas as hitherto, and the number was cut from 135

to 120 by 1868.

Even so, as late as December 1904, an Admiralty paper

submitted to Parliament admitted that ‘the principles, on which the

present peace distribution of HM ships and the arrangements of their sta-

tions are based, date from a period when the electric telegraph did not

exist and when wind was the motive power’.

The Treasury, as the guardian of the British taxpayer, tried to impose as

much of the cost of the defence of empire as possible on the colonial tax-

payer and thereby provoked frequent disputes with the Colonial Ofﬁce

and between the British government and the colonies. It proved to be pos-

sible to extract contributions towards the cost of British forces from

dependent colonies like India, Ceylon, Hong Kong and the Straits Settle-

ments, but the self-governing colonies like Australia, New Zealand, Natal

and Cape Colony contributed less, and Canada not at all. Even dependent

colonies might be too poor to pay much towards the cost of military opera-

tions on their territory: for example, Sierra Leone paid only two-thirds of

expenses incurred in 1898–9, and then only after a delay of several years.

In the cases of Australia, New Zealand and Canada, the solution was to

withdraw British troops, the process being initiated in the 1840s and com-

pleted by 1871; not even a Maori war could stay the Treasury’s demand for

economy. India alone made a contribution to the defence of empire

outside its own territory or adjacent waters.

Two other factors impeded the Treasury’s quest for economy in the

defence of empire. There were frequent wars: the Zulu War (1879), the

second Afghan War (1879–81), the ﬁrst Boer War (1880–1), the occupa-

tion of Egypt (1882), the conquest of the Sudan (1898) and the second

Boer War (1899–1902), all of which were ﬁnanced largely out of loans,

with the cost to the taxpayer following only at an interval through servic-

ing the national debt. From the 1860s, technical developments such as

the introduction of the breech-loading riﬂe, machine guns, and greatly

improved artillery made it difﬁcult to argue against War Ofﬁce proposals

for re-equipment. On the other hand, the need to keep the annual esti-

mates within what could be afforded within a balanced budget could

force soldiers to make choices as to priorities. Considerable gains in efﬁ-

ciency seem to have been made between 1905 and 1912, while

R. B. Haldane was Secretary of State for War, without any increase in the

estimates.

In the case of the Admiralty, continuous innovation in naval

technology from 1860 meant that major warships were obsolescent about

ten years after they had been built, and again it was difﬁcult to argue

against the need for new construction even if there were frequent battles

over how many ships should be laid down. The Admiralty was not above

trying to pull wool over the Treasury’s eyes. One ofﬁcer, who had been

on the staff of Naval Intelligence, recalled that he had been asked to

compile a statement of the combined strengths of the French and

Treasury and defence of empire 75

Russian navies, with a view to wringing more money out of the Chancel-

lor of the Exchequer. He therefore included obsolete and useless vessels,

but on that occasion the Chancellor, Sir William Harcourt (1892–5), was

not deceived and struck out these vessels with his blue pencil.

The

Treasury’s parsimony appears to have led to better value for money in the

1860s and 1870s, when obsolete ships were decommissioned to release

funds for new construction, than in the naval scares of the 1880s and

1890s, when the estimates increased rapidly. When Sir John Fisher was

appointed ﬁrst sea lord in 1904, with orders to reduce the estimates, he

was able to identify no fewer than 154 ships that were too old to ﬁght or

too slow to run away and which he recommended should be scrapped.

1914–1939

During the First World War, defence expenditure was ﬁnanced out of votes

of credit, the Treasury being empowered by Parliament to borrow as much

as was required over and above tax receipts. The defence departments were

thereby released from the constraint of balanced budgets and the Treasury

exercised little control over war-related expenditure. As a consequence,

prices of munitions rose by more than they need have done as different ser-

vices competed for the same scarce industrial resources. In the long run,

the Treasury’s position in Whitehall was to be strengthened after the war,

when balanced budgets and severe economy in public expenditure became

politically necessary, both to curb inﬂation and to cut taxes.

During the

war, although the Chancellor took part in Cabinet discussions of strategy,

he was unable to prevent a radical shift away from pre-war plans, whereby

Britain’s military effort would have been limited to sending the existing

expeditionary force to France, and, as in previous wars, her wealth would be

used to ﬁnance her allies’ armies. In the First World War, Britain attempted

to maintain both a mass army and to subsidize her allies. Opposition to con-

scription was led by the Chancellor, Reginald McKenna, and the President

of the Board of Trade, Walter Runciman, on the grounds that further diver-

sion of labour from industry than had already occurred through voluntary

recruitment would limit Britain’s ability to produce munitions and would

cripple exports, and thereby Britain’s ability to ﬁnance essential imports.

The arguments used by McKenna when presenting his case to a Cabinet

committee on war policy in August 1915 had been drafted by a young econ-

omist, John Maynard Keynes, who had been recruited from Cambridge to

serve as a Treasury ofﬁcial. The Treasury case was that Britain could wage

war for ten years if industry were not depleted of labour, but that conscrip-

tion would lead to national bankruptcy. The Minister of Munitions, Lloyd

George, and his supporters believed that an enlarged army of 70 divisions

was necessary to prevent defeat, and hoped that victory could be won by the

end of 1916, before bankruptcy occurred.

The conscriptionists’ case pre-

vailed, with the consequence that Britain became increasingly dependent

76 G. Peden

upon imports of munitions from the United States, for which she could only

pay by the temporary expedient of borrowing dollars, ﬁrst from the Amer-

ican public and then, after the entry of the United States into the war in

1917, from the American government. Over the world as a whole, Britain’s

overseas assets were reduced and short-term indebtedness increased, leaving

sterling vulnerable to a loss of conﬁdence. Moreover, Britain lost export

markets, some of them permanently, with long-term damage to the

economy.

After the war, the Treasury’s view that industrial investment and

exports must have ﬁrst call on national resources was accepted by the

Cabinet, reinforcing the pressure for economy in all forms of public expen-

diture, including defence.

In August 1919, the Cabinet, at the urging of the Chancellor of the

Exchequer, Austen Chamberlain, decided that the defence departments

should assume when preparing their estimates for future expenditure that

‘the British Empire will not be engaged in any great war during the next

ten years, and that no Expeditionary Force is required for this purpose.’

Historians for long commonly assumed that, as a result of this decision, the

Treasury held the ‘whip hand’ in disputes with the defence departments

whenever any request for increased expenditure was put forward.

However, John Ferris has convincingly argued that, in the cases of

the Admiralty and the Air Ministry, it was only after 1924 that service pol-

icies came to be dominated by the Treasury.

The War Ofﬁce intended to

reproduce the pre-war army at an estimated annual cost of £62 million in

1920; the Treasury managed to bring this ﬁgure down to £45 million,

following a Cabinet decision at the end of 1920 to evacuate Iran and to

halve the garrisons in Egypt, Palestine and Iraq.

On the other hand, the

search for economies in imperial defence gave the Royal Air Force (RAF)

the opportunity to show that air power could maintain order in Iraq and

elsewhere more cheaply than ground forces alone could do.

The

Cabinet’s decision in 1919 that the size of the navy should not exceed that

of the pre-war, one-power standard (which excluded comparison with the

United States) was interpreted six different ways by the Admiralty between

1919 and 1925, each interpretation pointing towards a different policy,

and the net result of which was that Britain maintained a battle ﬂeet equal

to that of the United States and 167 per cent of that of Japan.

It fell to Winston Churchill, as Chancellor of the Exchequer from 1924

to 1929, to attempt to curb the expenditure of the department that he

had headed as ﬁrst lord from 1911 to 1915. Following the decision not to

renew the Anglo-Japanese alliance in 1922, the Admiralty’s plans assumed

that the main British ﬂeet might have to move to the Far East to protect

British interests there, and that therefore there should be a large, forti-

ﬁed, naval base at Singapore, together with adequate stocks of fuel along

the route from Britain, as well as a submarine base at Hong Kong.

Churchill professed in 1924 to believe that there was not the ‘slightest

chance’ of war with Japan ‘in our lifetime’ (a prophecy that did not ﬁnd

Treasury and defence of empire 77

its way into his memoirs) and argued that the only war worth ﬁghting in

the Far East would be one to prevent an invasion of Australia. In

Churchill’s view, a war with Japan over Hong Kong would last for years,

reducing Britain to bankruptcy and exposing the empire to threats from

unfriendly powers.

He thought that it was not necessary for the defences

at Singapore to be complete for another 15–20 years and believed that ‘a

squadron of battle-cruisers or a fast division of battleships’ could act as an

effective deterrent; in the event of war, this force would avoid battle until

the superior Japanese forces had been reduced by submarines, mines, air-

craft or coastal defences. These ideas helped to shape Treasury views on

the Singapore strategy for the rest of the interwar period, besides antici-

pating Churchill’s policy in 1941.

Meanwhile, in March 1925, Churchill

secured a ruling from the Committee of Imperial Defence that the navy

should not prepare for a campaign in the Far East before 1935; in 1927

and 1928, he cut the cruiser programme; and in the latter year he per-

suaded the Committee of Imperial Defence and the Cabinet to restate the

ten-year rule so that, at any given date, it would be assumed that there

would be no major war for ten years.

This ten-year rule was not abro-

gated until March 1932, after Japan had invaded Manchuria the previous

September. Meanwhile, although work at Singapore had proceeded

slowly, delayed in part by disputes over whether the base should be

defended by guns or aircraft, construction was too far advanced for the

incoming Labour government and its impeccably orthodox Chancellor of

the Exchequer, Philip Snowden, to cancel it in 1929. However, the domin-

ions were persuaded at the Imperial Conference in 1930 to accept a post-

ponement of further work on the docks and on the base’s defences,

pending a further review in 1935.

Even when agreeing to end the ten-year rule, the Cabinet accepted the

point made by the Chancellor of the Exchequer, Neville Chamberlain,

that defence expenditure should not be increased without regard to the

risk to the country’s ﬁnancial stability. The slump and international ﬁnan-

cial crisis of 1931 had brought about the fall of the Labour government

and the election of a National Government committed to taking Britain

safely through the economic crisis. The balanced budget remained the

test of good ﬁnancial housekeeping, leading to severe economy in all

forms of government expenditure: 1932 was the low point in the defence

estimates, and the 1929/30 level of defence expenditure, £113 million,

was not reached again until 1934/5. The pace of rearmament thereafter

was restricted by the Treasury so long as it was Cabinet policy to give eco-

nomic stability priority over armed defence. Policymakers had to balance

two risks: if rearmament were too rapid it might undermine the economy

by diverting production away from exports; if it were too slow Britain

might not be ready for war if and when it came. The report of the Chief-

of-Staff’s (COS) sub-committee on planning for a war with Germany had

assumed in 1937 that Germany would be less well placed than Britain and

78 G. Peden

France to ﬁght a long war, and for this reason the Treasury claimed that

ﬁnancial stability was a ‘fourth arm of defence’. It was expected that

Britain would have to rely more on her own ﬁnancial resources than in

the First World War, because during the depression she had failed to

maintain full repayments on war debts to the United States and she had

been included in the provisions of the Johnson Act of 1934 which prohib-

ited new loans to any government that was in default. From 1937,

however, a rowing adverse balance of payments on current account, fol-

lowed from 1938 by a fall in the gold reserves and depreciation of sterling

against the dollar – all indicated a strain on the economy and a decline in

foreign conﬁdence in Britain’s ﬁnancial stability. Treasury control over

the defence departments’ expenditure began to weaken in 1937, with the

passage of the Defence Loans Act, which removed the constraint of the

balanced budget, but it was not until the spring of 1939 that the Treasury

ceased to be a major inﬂuence shaping strategy.

Fisher and Chamberlain took active parts in a review of the defence

policy in 1933 and 1934, Fisher in the ofﬁcial Defence Requirements Sub-

Committee, generally known by its acronym, the DRC, and Chamberlain

in the ministerial committee which considered its report. The DRC com-

prised the Cabinet Secretary, Sir Maurice Hankey (chairman); the COS of

the three defence services: Sir Ernle Chatﬁeld, the ﬁrst sea lord; Sir

Archibald Montgomery-Massingberd, the Chief of Imperial General Staff,

Sir Edward Ellington, the chief of air staff; Sir Robert Vansittart, perman-

ent under-secretary of the FO, and Fisher. According to a recent study, the

recommendations of the DRC ‘largely determined the path that British

strategic policy took until 1939’.

The DRC identiﬁed Germany as the ulti-

mate potential enemy against whom long-term defence policy should be

planned, while recommending immediate defensive measures against

Japan.

However, it is difﬁcult to accept that it determined the path of

defence policy, particularly as it related to the defence of empire, what-

ever the report’s signiﬁcance for foreign policy. As Table 4.1 shows, the

DRC’s recommendations would have preserved the existing pattern of

annual defence expenditure on the air force, army and navy, with the air

force having the smallest share and the navy the biggest. Actual expendi-

ture over the ﬁnancial years 1934/5 to 1938/9 was much greater than

what had been envisaged in 1934, owing to increasing awareness of the

extent of the danger posed by potential enemies and the urgency with

which the country should rearm. There was also a striking shift in the dis-

tribution of expenditure between the armed services, with the air force

emerging as the clear winner.

This change of emphasis reﬂected mainly widespread fear in Britain of

air attack.

However, Treasury inﬂuence also helped to shape the course

of defence policy. Chamberlain was an exceptionally powerful chancellor,

being heir apparent of the Conservative party, besides having a strong

personality and a clear, logical mind. During the DRC’s discussions Fisher

Treasury and defence of empire 79

and Vansittart had unsuccessfully urged greater expansion of the RAF

than Ellington had asked for, and the DRC report had recommended ten

additional squadrons to complete the 52-squadron Home Defence scheme

of 1923; ten additional squadrons of aeroplanes and four of ﬂying boats

for service in the Far East, and 20 additional squadrons for the Fleet Air

Arm. The report stated that a further 25 squadrons would be necessary to

meet ‘all eventual requirements’, but these were not part of the ‘worst

deﬁciencies’ to be remedied by 1939, although they should be reconsid-

ered if Germany carried out rapid expansion of her air force.

When the

DRC report was discussed by ministers, Chamberlain produced an alterna-

tive proposal for 38 additional squadrons instead of ten for the Home

Defence Force, but with only three additional squadrons for the Far East,

and with Fleet Air Arm requirements being met by making Home Defence

and Fleet Air Arm squadrons interchangeable. A Cabinet sub-committee

on the allocation of air forces concluded in July 1934 that this last sugges-

tion was impracticable and instead recommended 33 additional squadrons

for Home Defence, four for the Far East and four and a half for the Fleet

Air Arm.

On balance, the Treasury view that air force expansion should

be for home defence rather than the defence of empire was accepted, and

this pattern was subsequently reinforced as British air rearmament lagged

behind Germany’s. For its part, the Treasury exercised much lighter

80 G. Peden

Table 4.1 Distribution of expenditure by defence departments from 1933/34 to

1938/39

Financial year Annual total (£ms) Percentage shares

Air Force Army Navy

DRC report

1934/5 118.5 14.9 37.7 47.5

1935/6 124.6 15.0 36.0 48.9

1936/7 128.9 15.8 35.1 49.1

1937/8 130.6 16.3 34.8 48.9

1938/9 132.0 16.1 34.6 49.3

Actual expenditure

1933/4 107.9 15.6 34.8 49.6

1934/5 113.9 15.5 34.9 49.7

1935/6 137.0 20.0 32.6 47.3

1936/7 186.1 26.9 29.5 43.6

1937/8 262.1 31.4 29.7 38.9

1938/9 382.5 35.0 31.7 33.3

Sources: First Defence Requirements Report, 28 February 1934, CAB 16/109, TNA, and Sta-

tistical Abstract for the United Kingdom for each of the ﬁfteen years 1924 to 1938 (Cmd.

6232), P.P. 1939–40, x, 367.

Note

Because of rounding up or down, the percentage ﬁgures do not always add up to 100.

control over Air Ministry expenditure than over that of the Admiralty or,

much more so, of the War Ofﬁce. The Air Ministry was even able to persist

with the development of strategic bombers despite instruction from

the Cabinet at the end of 1937 to give priority to ﬁghter defence.

Chamberlain had intended to ﬁnd extra money for air force expansion

by cuts or delays in the army and navy programmes. In particular, echoing

Churchill’s earlier ideas, he thought that, while the navy base at Singapore

must be completed, it should be used at present only for submarines and

other light craft, and the idea of sending out a ﬂeet of capital ships capable

of containing the Japanese ﬂeet or meeting it in battle must be

postponed.

Fisher and Chamberlain believed that Britain must try to

restore good relations with Japan, but the Admiralty and the FO doubted

whether this could be done without offending the United States, with

whom good relations were paramount, and Treasury attempts to inﬂuence

foreign policy in the direction of securing an understanding with Japan

failed.

Work on the naval base at Singapore went ahead, with Treasury

support from 1934, and plans to send capital ships to the Far East in the

event of war with Japan continued to be drawn up. Although the Admiralty

was unable to secure Treasury or Cabinet agreement to a two-power stan-

dard, shipbuilding and gun-making capacity, not ﬁnance, determined the

speed with which the navy’s new construction programmes were carried

out from 1936, although, of course, industrial capacity would have been

greater had naval expenditure not been reduced by Churchill and

Snowden between 1924 and 1931.

Under the terms of the London Naval

Treaty of 1930, Britain could not lay down new capital ships until January

1937. However, the Treasury agreed to steps being taken to speed the con-

struction of the new King George V class, two being laid down in the last

three months of the ﬁnancial year 1936/7 and three more at the begin-

ning of the ﬁnancial year 1937/8, or ﬁve in all in the calendar year 1937,

compared with one, admittedly very large, capital ship laid down that year

by Japan.

Admiralty expenditure almost doubled between 1933/4 and

1937/8, from £53 million to £102 million.

One consequence of the rapidly expanding air and naval programmes

was to put pressure on the army. In 1934, Chamberlain secured a cut in

the army’s DRC programme from £40 million to £20 million, with the

result that the army’s deﬁciencies would take more than ﬁve years to

repair.

Then, in January 1937, faced with defence programmes that were

getting ahead of industrial capacity, the Treasury advised Chamberlain

that Treasury control should be restored by setting a maximum ﬁgure for

defence expenditure over the next ﬁve years, ﬁxing a ‘ration’ for each

defence department. The outcome was a major review of policy con-

ducted by Sir Thomas Inskip, who had been appointed minister for

coordination of defence the previous year, with Hankey drafting much of

Inskip’s interim report of 15 December 1937. Chatﬁeld, who was chair-

man of the COS Committee as well as ﬁrst sea lord, was another major

Treasury and defence of empire 81