The Statement Relating to Defence (more commonly known as the White Paper) of March 1935 was a watershed in the history of defence between the wars, at least insofar as it finally put rearmament and deficiencies into the public domain. In terms of the background to its publication, there had been little movement from the National Government since Manchuria towards publicly announcing an intention to rearm. Although the Admiralty had constantly warned of the Japanese threat from the second half of the 1920s, the CID had harboured deep concerns about the Far East and Germany as far back as 1930, and the PSOC had highlighted the supply and labour bottlenecks connected with future defence schemes from 1933, the National Government had remained outwardly reluctant to support rearmament or industrial mobilisation. This position did not change in 1934. The reason for this is not hard to locate: public support for any form of defence spending had been extremely low since the end of the Great War, and any hint of armed conflict thereafter usually resulted in some sort of outcry against British involvement. Although there was a growing feeling of insecurity about developments in Germany, this had not managed to overcome the strong pacifist sentiments that still existed. At best, the German situation had reaffirmed public support for the concept of “collective security,” primarily through the League of Nations, but until that point events such as Manchuria and the talks in Geneva had only served to highlight to the British government just how strong was the distaste for war. Thus, this was a period where deficiencies were not hard to spot, but nevertheless they were not remedied.

Politics, Pacifism and “Going Public,” November 1934–March 1935

The pacifist sentiment is borne out by almost all polling between Manchuria and the first White Paper. “Peace candidates” had performed particularly strongly in by-elections between October 1933 and December 1934 – in Fulham the National Government majority of more than 14,500 was replaced by a Labour majority of nearly 5000, while in Lambeth and Putney the swing away from the National Government was even higher. A straw-poll in a London newspaper had more than seventy-five percent of respondents desiring Britain to stay out of any Franco-German conflict, regardless of the circumstances.

The 1920s began for industry with a wave of optimism about the future for global trade and a construction boom as markets reopened and ships of all kinds lost to the war were replaced. The Admiralty also had reason to be optimistic: Britain still possessed the world's largest navy, it was preparing to celebrate the launch of its new flagship and largest ever vessel, HMS Hood, and had awarded a small – but significant – number of new construction contracts to private yards, including four for new large battlecruisers. This naval work, coupled with the boom in merchant and passenger construction, amply filled the gap left by the conclusion of emergency wartime programmes. Indeed, even in the absence of wartime orders, the naval arms manufacturers managed near-record levels of profit, output and employment into the second half of 1921. This prosperity, however, was short lived. Thereafter, the outlook changed dramatically. For industry, the increase in global trade failed to live up to the wildly optimistic forecasts, leading to significant supply overcapacity in the merchant marine and the subsequent drying up of further ship orders. For the Admiralty, the Treasury's will to cut costs was forcefully imposed upon it: the desire for a tightening of the government purse strings led to international agreements towards arms limitation which abruptly cancelled even the modest naval replacement work in hand.

Part Two of this book examines the relative fortunes of the British naval arms industry and the Admiralty from 1920 until the formation of the National Government and the Japanese invasion of Manchuria in the second half of 1931. The overriding theme is of decline: shrinking financial resources brought about by war debts and the disastrous return to the Gold Standard led to strict controls on expenditures and exacerbated the declining health of the private naval arms industry. The core argument is that the main developments in the relationship between, and relative status of, the Admiralty and industry in this period can be viewed to a large degree as a series of responses to crises, either the Treasury's financial controls or the collapse of global trade.

While events after 1939 lie, in the main, outside the remit of this book, the general questions throughout have been to consider the role of industrialists and the private naval arms industry within supply planning, and to assess how they influenced, and were affected by, government policy. More generally, it has sought to examine decision-making processes and the effectiveness of the supply planning machinery in the CID and related bodies throughout their development in the 1920s and 1930s. Therefore, the early phase of the war and the culmination of years of planning and organising (and price-fixing) serve as the best place to conclude this work, rather than the outbreak of war itself.

Bearing this in mind: there are some overarching points to be made. The first concerns the role of an industrial elite within the state. This book has shown that in the case of naval arms there was both an elite group of “insiders” and a defensive ring of “outsiders” before 1936. There was no “web” of well-connected individuals conspiring with government to profit from the standard kind of “Military-Industrial Complex” that subsequent theories have sought to find. In the 1920s, the Admiralty and private industry certainly shared interests in the preservation of capacity, and as such jointly devised methods to protect facilities as best they could in the circumstances. This was, however, the result of a lack of power and influence, not evidence of it. At any rate, the schemes were small-scale and extended no further than a work-sharing rota or minor subsidies. Indeed, before Manchuria in 1931, the Admiralty struggled to articulate the need for more or newer vessels in the face of Treasury opposition, leading to the decline of the Royal Navy as an effective global fighting force and to the unquestionable decline of private manufacturing capability.

In the case of the “insiders,” their story was in some ways not unlike the 1920s Admiralty-industry relationship that brought about the WSBC. Again, it was not a vast shadowy network of industrialists influencing state decision making. The Supply Board turned to a handful of tried and trusted individuals, names which appeared and re-appeared in a variety of situations between 1920 and 1940.

By the end of 1935, Britain's international security looked far less certain than it did in the spring of 1931 because now there were three credible adversaries: Japan, Germany and Italy. As a direct result of these developments, the tentative work of the CID to explore, if not tackle, industrial and material deficiencies that began after Manchuria took on even greater meaning and urgency. By the time that Mussolini's forces had invaded Abyssinia (modern-day Ethiopia) in October 1935, a two-front war in Europe and Asia requiring a renewed navy and an expanded air force was considered by the CID to be a very real possibility. Moreover, the idea of a major rearmament effort entered, finally, into in public consciousness.

Political Background

Of course, the first indications of a two-front threat during this time came not from Italy but from Nazi Germany, which had emerged as a force under Hitler in early 1933 and withdrew from the Geneva disarmament conference that October. The deterioration of relations with Germany prompted the CID to formally plan based on a twin German-Japanese threat by the beginning of 1934. Cabinet responded to the CID's concerns with the largely Hankey-led initiative known as the Defence Requirements Committee – another CID subcommittee. The decision by Cabinet to grant the DRC approval to examine the “worst problems in British defence” has been characterised by some historians as the “first major step” in war planning since 1918 and the “beginning of rearmament.” As to the first of these contentions, it was nothing of the sort. While it may have been an incremental change in top-level foreign policy insofar as it was a clear recognition by Cabinet of the need to improve the condition of British defences, as far as planning is concerned it was only a continuation of the work of the supply subcommittees. Deficiency hypotheses had been circulated since 1931, so while the recognition of the German threat at the end of 1933 – and the formation of a committee with an explicit remit to discuss deficiencies – has perhaps understandably been taken as a point of departure for the study of rearmament policy, in terms of industrial deficiencies and planning the work was already well under way, as evinced by the long process which led to the establishment of the Advisory Panel.

The missed opportunities before and during 1936 were painfully apparent in 1937. Inskip was certainly conscious of the supply problems that arose, but he continued the theme of taking too long to do anything about them. The issues in the naval armaments sector clearly warranted special attention and did finally prompt some badly-needed action. But the impetus did not come from Inskip. It came from the unsung former chairman of SC III, Sir Harold Brown. A naval engineer and vice admiral, Brown is not a particularly well-known figure in histories of rearmament, but he oversaw a series of innovations in the second half of 1937 and into 1938 that better utilised industrial expertise and finally overcame the barriers to progress that had slowed the earlier work of the CID's supply planning framework. As such, the work of Brown and his colleagues cannot go unmentioned.

Brown, the Boilermakers and the Shipbuilding Consultative Committee, 1937–1938

Leading on from Lithgow's concerns over the future usage of Beardmore, Inskip was in increasingly regular contact with Brown in 1937. It will be recalled that Brown had served as the Chairman of SC III (Shipbuilding) until September 1936 and as the Director General of munitions production in the War Office. He also played a significant role in the discussions to form the Advisory Panel of Industrialists in 1933. In 1937, Brown was given latitude to work on a raft of proposals to turn over factories to armaments production, which included proposals for the restructuring of vacant space on the Clyde for gun mounting work for both the Admiralty and the War Office.

Brown was keen to put the Beardmore plants to full use, but he complained of a series of obstacles in his way which, perhaps predictably, had been raised by his own committee at Supply Board level in previous years but had not been properly rectified. In the case of Beardmore, Brown noted that the vacant Dalmuir yard had been stripped of equipment before 1933 and now required a complete re-tooling, but he found the backlog on machine tool orders to be prohibitive.

To be generous to the National Government's track record on defence policy between 1931 and 1935, the desire to keep publicity of deficiency and rearmament plans to a minimum was not wholly irrational. The issue was that the political and economic case for limited rearmament progressively strengthened from mid-1934, and not doing so began, by 1935, to badly hamper the development of an industrial skills and facilities base. Nevertheless, it was not entirely negative. A more welcome side effect of “planning without spending” was the involvement of Weir, Lithgow and Balfour with the CID, although this advantage could arguably have been better used by implementing policies like educational orders at an earlier stage. Of course, Lithgow used his involvement to take calculated risks for himself, so the net result was still the preservation of at least some industrial capacity that might otherwise have been lost.

If one can provide reasonable excuses for government inaction until 1935, it becomes harder from 1936. That year should, in theory, have been when planning and action finally came together, when much red tape was cut, when industrial deficiencies were properly rectified, and when rearmament began in earnest. Yet the National Government – following the Second White Paper's publication – still took several months to get a firm grip on rearmament policy and made some inexplicable mistakes that negated much of the positive work in earlier years.

Appointment of Minister for Coordination of Defence and DPR Developments

The National Government's first major step following the March announcement of rearmament was to appoint a new minister to oversee the increasingly complex and gargantuan CID organisation. Sir Thomas Inskip was installed as the newly-created Minister for Coordination of Defence” (MFCD) ten days after the White Paper was announced in Parliament. In principle, this was a sensible move, although it was at least a year too late. Moreover, just as the content of the Second White Paper had only taken shape in the weeks preceding publication, the decision that a new minister was necessary was similarly hurried.

In the event, the men picked were not “merely financiers:” they were Lord Weir, Sir James Lithgow and Sir Arthur Balfour, three extremely powerful businessmen from engineering, shipbuilding and steel, respectively. Weir's background has already been discussed in the context of the PSOC, but by this point had further established G&J Weir Ltd. of Glasgow as a truly global enterprise. Weir's firm had also turned rapidly and with great effect from civilian production to war materiel, including boiler pumps for naval vessels in the Great War. As one of the architects of the PSOC structure that he was now being asked to assist, Weir was held in extremely high regard for blending business acumen and leadership with technical knowledge, distinguishing him as a rare breed. During the latter stages of the Great War he had served for eight months as Lord President of the Air Council and had subsequently been chosen to serve on the committee which investigated the role of the Fleet Air Arm in 1921. Arguably his most important contribution had been his work in the Ministry of Munitions in the Great War, and it was this that underscored his credentials for the PSOC. Weir had since cemented close connections with high-ranking members of the Conservative party; after serving on the Salisbury committee in 1923, he kept frequent private correspondence with, among others, Stanley Baldwin and Neville Chamberlain – the latter referring to him in an unusually friendly manner in letters as “My Dear Willie” – both of whom stayed at his Eastwood Estate in Glasgow on several occasions. He was extraordinarily well respected, well connected, and an obvious choice to assist the Supply Board.

Colonel Sir James Lithgow has also been discussed in earlier chapters. Like his friend and mentor Weir, he was a successful business owner with a track record of government service during the war; Lithgow served both at the front and as the Director of Merchant Shipping. Furthermore, although he had no experience in armaments manufacture – his Port Glasgow firm was a leading provider of merchant and passenger vessels – he had founded and led the NSS scheme since 1930 and served for three years as the President of the Federation of British Industry.

When in 1948 Winston Churchill published the first of his six-volume history of the Second World War, The Gathering Storm, he was in no doubt as to how Britain had ended up in such an awful conflict so soon after the Great War of 1914–1918. “How the English-Speaking peoples through their unwisdom, carelessness, and good nature allowed the wicked to rearm” was the theme – and the subtitle – of the book. The Second World War, like the First, had cost the British Empire scarcely imaginable lives and driven it to the brink of bankruptcy. In Churchill's mind, this catastrophe had been avoidable. To him, the blame lay squarely at the feet of “guilty men,” including Conservative Prime Ministers Stanley Baldwin and Neville Chamberlain, for not stamping out Adolf Hitler's belligerence while Nazi Germany remained weak, and with the National Governments of 1931–1935 and 1935–1939 for failing to adequately prepare British defences for a major war despite repeated warnings of impending crisis.

Churchill had, of course, been marginalised by these administrations, and thus settling a political score was no doubt part of his agenda. Less subjective histories in more recent decades have viewed the actions of these “appeasers” in a more sympathetic light. While rarely apologising for them, the severe political and financial constraints under which policymakers operated, including – but not limited to – the economy, industry, and public opinion have become an enduring part of the interwar narrative.

It is often forgotten, however, that during the 1930s an entirely different and mutually contradictory line of thinking developed. The so-called “Merchants of Death” concept argued that shady arms dealers could influence the direction and timing of armed conflict, that Britain and other major powers had uncomfortably close relationships with armament manufacturers for too long, and that private profit in weapons led directly to war. The concept – some would call it a “myth” prompted Royal Commission enquiries, mass petitions with millions of signatures, and even freakish by-election results. Since that point the legend has become bundled with Cold War-era warnings of a “Military-Industrial Complex” and has taken on a life of its own. Today, theories of state-military cooperation retain a powerful allure and have been told and re-told for successive generations of conventional and nuclear weapons.