Chapter 9: Government and Industry
(1) Public Ownership and Management
The persistence in war industry of most of the congenital features of British economy may conceal from view the fundamental difference between the management of munitions industry in time of war and the normal conduct of trade and industry in time of peace. Nowhere was the contrast more fundamental than in the relations of Government and industry. The Government was now the sole customer of war industry as well as its chief supplier of raw materials and components. It will presently be shown that, as the war developed, the Government also became the chief source of new industrial capital. In some fields Government agencies designed the articles which industry made. Now and again they took a hand in planning factories, workshops and the layout of the machinery within them. The manner in which all these functions were exercised and the relations between Government and industry which resulted from them were bound to determine the whole ‘climate’ of war production: its methods, its internal relations, its incentives.
Public ownership and management greatly increased, but the share of total production allotted to State factories was not the same in the three supply departments. The method adopted in the Ministry of Supply and, to a smaller extent, in the Admiralty was to allocate to State factories and to private firms distinct and separate roles in production. The Air Ministry and the Ministry of Aircraft Production relied mainly on a closely supervised body of private contractors. In addition, all the departments made use of hybrid form of enterprise—the agency factory—wherein public ownership of factories, plant and machinery was combined with private management.
Industrial establishments owned and managed by the State formed a large part of the total industrial capacity engaged on munitions, but their relative importance varied from department to department. In naval work public ownership was largely confined to naval dockyards and to a few Admiralty factories. Naval dockyards, however, specialised in repair and altogether represented a relatively small proportion of the industrial effort devoted to naval
work. The Admiralty were also few and, measured by the numbers employed, did not account for a large share of the work done under the aegis of the Admiralty. In June 1945 some 35,700 workers were employed in naval dockyards and some 70,000 on engineering, explosives and chemical work in other Admiralty establishments, compared with a total of 667,700 workers employed on Admiralty orders.1 In the industrial effort administered by the War Office, and later the Ministry of Supply, public ownership and management played a very important part indeed. At the peak of the industrial effort there were forty-three2 Royal Ordnance Factories employing over 300,000 people, very nearly twenty percent of the total number which at that time were employed on Ministry of Supply contracts. And it will be shown presently that in certain respects the contribution of the Royal Ordnance Factories to the war effort as a whole transcended the limits defined by their direct share in the total employment and output.
Long before 1914 the Royal Ordnance Factories had become a part of the War Office tradition. In the inter-war period the growth of political opinion opposed to the private manufacture of arms may have induced the War Office to assign to Royal Ordnance Factories a greater part in future plans than they might otherwise have occupied. In this way, tradition and the political climate favoured the full expansion of the Royal Ordnance Factory system. But, in addition, this trend coincided with what the War Office considered were the technical and economic requirements of weapon production.
A technical requirement which favoured the employment of Royal Ordnance Factories was the need for large new factories to produce highly-specialised munitions. The older Royal Ordnance Factories had the technical knowledge essential to the planning and management of factories for the manufacture of explosives, small arms and small arms ammunition. Armament firms also had specialised technical knowledge and were in many respects complementary to the Royal Ordnance Factories. But in some fields the technical resources of the Royal Ordnance Factories were greater than those of the private armament firms. Royal Ordnance Factories alone had the experience and personnel required for the planning and management of new filling factories; and this was a further reason why until 1940 all the new factories for the filling of shell ammunition were Royal Ordnance Factories. I:n 1940 it became difficult to draw
further managerial resources from the Royal Ordnance Factory organisation, and certain selected industrial firms were invited to manage some of the smaller of the new filling factories. This break with tradition and policy was reluctantly accepted by the War Cabinet.
Underlying the War Office policy of developing a large network of Royal Ordnance Factories was also a general principle of industrial policy. It has already bee noted that in deciding the distribution of orders between Royal Ordnance Factories and private industry, the War Office and the Ministry of Supply were at times guided by a classification of munitions according to their affinity to civilian goods.3 Munitions which, either in design or method of production, bore no recognisable relation to marketable civilian commodities were as a rule considered unsuitable for private industry and were earmarked for ‘specialist’ factories, i.e. for the factories of the surviving armament firms and, above all, for the Royal Ordnance Factories. The filling of ammunition was thus thought to be a ‘Royal Ordnance Factory job’ par excellence; the making of most weapons, i.e. the final manufacture of gun barrels and mechanisms and of small arms of traditional types, was also thought to be best suited to the Royal Ordnance Factories and armament factories specially equipped for the work.
As we have seen earlier,4 ‘outside’ firms were gradually, but in the end exclusively, introduced into the manufacture of guns and carriages, shells and fuses. Nevertheless, the new Royal Ordnance Factories were constructed for all these stores: for guns and carriages no less than ten new factories were provided. The ‘outside’ firms introduced to this work took the place of the extension which otherwise might have been added to private armament firms; they did not replace the Royal Ordnance Factories. The latter played an essential role in this field in spite of the introduction of ‘outside’ firms and the role was greater in the second half of the war then in any previous period.
This line of division between private industry and Royal Ordnance Factories did not remain sharply drawn throughout the war. It has already been shown5 how necessity compelled government departments to engage ‘outside’ firms to make weapons which had previously been assigned mainly to the Royal Ordnance Factories and to the armament firms. On the other hand, the production of at least one highly-important weapon had to be shifted across the line of demarcation in the opposite direction. Throughout the years of rearmament and for the greater part of the war, officials at the War Office and the Ministry of Supply assumed that the special features
of the thank made it suitable for production either by motor firms or by firms with experience in the construction of locomotives and railway carriages. The former, it was thought, would bring to the design and construction of tanks their experience of internal combustion engines and their understanding of gear-boxes and transmission systems’ the latter would have the necessary equipment and experience in the assembly of large vehicles made of very heavy metal components. In consequence, the capacity for tank production was from 1936 to 1944 expended almost entirely by the introduction of ‘outside’ firms. Vickers-Armstrongs, with its unbroken tradition in the construction of tanks, continued to play an important part in both design and production up to 1940, but after Dunkirk its activities were almost entirely confined to the production of the Valentine. The Royal Arsenal, Woolwich, which had some part in the development of the pre-war tanks, had ceased producing tracked vehicles in the rearmament period. No Royal Ordnance Factory was given any part in the output of tanks ordered during the first few years of war.
This distribution of responsibilities had to be revised in the last two years of the war. It was not that the ‘outside’ firms failed in the making of tanks. Considering how new they were to the job and how hastily the preparatory work of design and development had to be done, Vauxhall’s experience with the Churchill tank proved more creditable to the firm, and the tank itself proved more of a ‘success’ than critics in 1942 appeared to think possible. Similarly by 1943 two further offspring of the cruiser tank design, the Cromwell and the Comet, emerged from their teething troubles with some credit to their manufacturers. Nevertheless, the protracted and painful difficulties of tank design and tank production throughout the first three or four years of the war demonstrated that both the motor industry and the heavy locomotive firms had everything to learn about tank production. This proved to be a highly-specialised industrial art without parallel in peacetime industry and without any special affinity with any branch of civilian engineering. On the other hand, Royal Ordnance Factories, especially some of the well-equipped heavy engineering shops in the Royal Ordnance Gun Factories, had carried out engineering assignment so varied and difficult that there seemed no reason why they should not be entrusted with the making of tanks. In 1943 they were, in fact, asked to convert the American Sherman tanks to the requirements of the British Army. This necessitated the replacement of the American gun by the British 17-pounder and a through reconstruction and re-equipment of the turret. At about the same time a minister—troubled as he must have been at the delays in the production of tanks—was heard to express his surprise that the Royal Ordnance Factories had not been given the job of making tanks. Thus they were to be given before
long. In 1944 a Royal Ordnance Factory which had been employed on gun production was converted for the manufacture of the Centurion, the latest version of the infantry-cruiser tank to take the field in the war.
The remark attributed to the minister bore witness to the blurring of the demarcation between the functions of Royal Ordnance Factories and private industry. It also reflected his knowledge that the Royal Ordnance Factories were expected to play a role not evident in the original demarcation. This was essentially the role of a pioneering and emergency service. The pioneering part was inherent in the peacetime organisation of the three old-established ordnance factories: the Royal Arsenal, Woolwich, the Royal Small Arms Factory, Enfield Lock, and the Royal Gunpowder Factory, Waltham. They were so organised and staffed as to be able to act as ‘parents’ to the newer Royal Ordnance Factories. The Chief Mechanical Engineer at Woolwich was in charge of the design of buildings and the layout of the new Filling and Engineering Ordnance Factories. The managers of the new Royal Ordnance Factories were frequently recruited from the personnel of Woolwich and of the other two old-established Royal Ordnance Factories; and it was from these factories that there came the nucleus of skilled labour which was to form the backbone of almost every Royal Ordnance Factory in wartime. The manufacturing processes in the new Royal Ordnance Factories were, to begin with, based on the practices at the Royal Arsenal, Woolwich, and the Royal Small Arms Factory, Enfield. The part which the Royal Gunpowder Factory, Waltham played in setting up the new explosives factories has already been indicated.6 The three old-established Royal Ordnance Factories also acted as research and development workshops in collaboration with the various research and design organisations of the War Office and the Ministry of Supply. It was in the Royal Ordnance Factories that the prototypes of most of the field and anti-tank guns were first manufactured and developed. The Royal Small Arms Factory, Enfield, did the necessary development work and adaptation of the Bren, the Sten and the Polsten guns. Technicians from Waltham, together with their opposite numbers at government research departments, were responsible for a very large part of the development of explosives and propellants throughout the years of rearmament and war and also for the development of the manufacturing processes.7 At Woolwich several new special machines for the making of munitions were designed. It was Woolwich engineers who travelled to Switzerland to investigate the equipment required for the making of automatic fuses; and it was engineers from Woolwich who developed and
perfected many of the methods for mass-production of small arms ammunition and evolved the blue-prints for much of the highly mechanised and largely automatic plant which was to operate so successfully during the war.
Some of this pioneering function was later taken over from the three oldest factories by their younger offspring. Throughout the war the Royal Ordnance Engineering Factories were looked to for leadership, assistance and advice. They frequently assumed the duty of making the first batches of new weapons and of carrying the main responsibility for production until most of its initial problems were solved. Needless to say, the specialised armament firms in private ownership performed similar functions in the production of a number of weapons. Elsewhere mention has been made of the part which Vickers-Armstrongs played in the design, development and production of the ‘Valentine’ tank and of the Vickers’ machine gun.8 They were also responsible for the design and development of the 3.7-inch and 4.5-inch anti-aircraft guns. Emphasis has also been laid on the part which BSA played in the initial production of several types of small arms, and on the part which even such a new armament firm as the British Manufacture and Research Company played in the introduction of the Hispano Suiza gun.9 It nevertheless remains true that most war-like stores, with the notable exception of the tank, the role assigned to the Royal Ordnance Factories was that of a first starter. And as the war developed, the Royal Ordnance Factories were called upon to provide what to all intent and purposes was an emergency service. The production directorates in the Ministry of Supply turned to them on the very frequent occasions when a critical component was urgently needed and could not be made in time anywhere else. Several private firms could similarly be called to the rescue, but more often it was the Royal Ordnance Factories that shouldered the main burden of industrial first-aid.
It is difficult to say whether or not special demands were made on the Royal Ordnance Factories merely because they happened to be owned by the nation and were subject to the authority of the Ministry of Supply. These factories were not given over wholly to production for War Office requirements; production for all the Services was an essential part of their tradition and policy. They undertook the filling of ammunition and the supply of explosives to meet Air Ministry and Admiralty requirements; they supplied all the Services with small arms ammunition and to some degree with small arms; an important part of the Admiralty’s supply of guns came from Woolwich and other Royal Ordnance Gun Factories. On the other hand, the administration of the factories was entirely under the Ministry of Supply as
previously under the War Office; and their administrative links with the Ministry were very close. The Director General of Ordnance Factories and the largely autonomous organisation of the Royal Filling Factories were housed at the Ministry’s headquarters at Adelphi. They formed part of the department of the Controller General of Munitions Production10 and their daily contact with the secretariat and the production directors of the Ministry was bound to be more constant and more intimate than that between the Ministry and private firms. They were also directly served by certain branches of the Ministry secretariat, more especially by its labour branch. In general, their dealings with the Ministry were influenced by an assumption, seldom put into words, that the Royal Ordnance Factory organisation was the Ministry’s ‘own show’ and could therefore be required to respond more quickly and more spontaneously to its urgent demands.
This assumption was, of course, at variance with the official doctrine about the position and organisation of Royal Ordnance Factories. According to that doctrine they were contractors to the Ministry in most respects similar to other contractors. They received orders for munitions on conditions similar to the contracts with private firms. They obtained their raw materials and labour on the same terms as the rest of the munitions industry and were subjected to the same system of allocations and controllers. They were also expected to manage their enterprises in the same manner as ordinary industrial undertakings and, above all, to pay their way. When the production of certain munitions happened to be shared and run by a group of manufacturers including the Royal Ordnance Factories, the Royal Ordnance Factories were, in the eyes of the Ministry, in the same position as the other members of the group, even if they happened to play the part of mentors and pioneers.
The doctrine of Royal Ordnance Factories being firms like other firms applied also to the internal organisation and administration of individual Royal Ordnance Factories. Indeed, it is difficult to see how it would have been possible to run the Royal Ordnance Factories as efficient industrial establishments without adhering to the ordinary principles of factory management. There was, and could be, little difference in the nature of the production problems which confronted the managers of the Royal Ordnance Factories and those of private factories. Labour intake, assessment of wage rates, relations with trade unions and shop stewards, were labour problems common to war industry as a whole; just as the break-up of machining tasks into operations, the progressing of production, the management of stores and stocks, the supply of tools and the relations with sub-contractors, were ‘shop-floor’ problems common to all factories in the country.
They had to be tackled and solved by more or less the same methods in both ordnance factories and private firms.
Yet some slight differences between publicly-owned Royal Ordnance Factories and privately-owned industrial concerns were to be noted even here. The superintendents of the Royal Ordnance Factories were, compared with the managers of private firms, lowly-paid civil servants. The size of salaries and economic considerations in general may have influenced the behaviour of the British managerial class during the war far less than in peacetime. Yet the fact remains that the smaller earnings of the superintendents did not pass wholly unheeded. Complaints were few, but comments were frequent.
Moreover, in some other respects as well the position of the superintendents compared unfavourably with that of managers in private firms. The division of functions between the factories and headquarters was a matter of considerable difficulty, and there appeared to be some justification that the functions of the superintendents were unduly restricted.11Some important functions, including financial administration and labour management, were not under the direct control of the superintendents. In addition, there was an increasing number of ancillary services, e.g. hostels and canteens, which were directly subject to specialist directors at headquarters. If, in practice, these arrangements did little to impinge on the administrative authority of the superintendents or to impair the efficiency of the factories, that was due more to the good sense of individuals than to the efficiency and logic of the system.
In general, Royal Ordnance Factories had by the second or third year of the war become surprisingly efficient—surprisingly, because they were new enterprises employing mainly ‘green’ labour. In peacetime the older Royal Ordnance Factories, and more especially Woolwich, had the reputation of producing high quality goods at very high cost. When on a certain occasion after the First World War the Royal Ordnance Factory, Woolwich, made a batch of locomotives, it was soon discovered that while the standards of precision and finish of the Woolwich products were somewhat superior to those accepted by commercial makers,12 the costs were also very much higher. But then Woolwich was to a large extent an establishment for development and experiment, and carried an unusually high proportion of skilled cadres. Its system was no intended for normal quantity production; hence both the quality and the cost of the locomotives it produced in peacetime. The newer Ordnance Factories, on the other hand, were from the start intended for quantity production and
were nearer than Woolwich, both in equipment and in the composition of their labour force, to the new extensions and factories set up and run by private firms. It is therefore, not surprising that the efficiency of individual Royal Ordnance Factories, like that of individual private firms, depended much more on a combination of local circumstances than on the more general advantages or disadvantages of the Royal Ordnance Factory system as a whole.
Local circumstances were mostly in favour of the Royal Ordnance Factories. Their buildings were as a rule new and good; those planned in the early years of rearmament, particularly the Royal Ordnance Filling Factory at Chorley, were built and equipped in a manner which critics sometimes described as ‘palatial’. The bulk of their equipment was, as a rule, highly specialised and integrated, and this in itself was a great advantage in comparison with many private firms. One or two Royal Ordnance Engineering Factories were equipped as ‘general’ workshops, but the quality of their equipment compared very favourably with for industry as a whole. Superintendents were for the most part competent and energetic. There is therefore little cause for surprise that most Royal Ordnance Factories should have proved at least as efficient as the private firms producing comparable types of munitions. The Royal Ordnance Factories whose superintendents happened to be men of ingenuity and resource or young men of the highest technical competence stood out from among the rest of the industrial undertakings in war industry as models of economic and progressive management. When, on the other hand, a superintendent failed to ‘hit if off’ with his subordinates and workers, and was, in spite of his devotion, old-fashioned in his methods, the general efficiency of the factory was no higher than that of similarly managed private firms. Now and again a whole group of Royal Ordnance Factories was able to make striking advances in the efficiency of production. Something has already been said about the great progress made by the Royal Ordnance Filling Factories in the later part of 1941 and 1942.13 That their output rose by at least forty percent above their initial rates of production may, of course, be explained by the low rates of initial output. Nevertheless, the fact remains that the Fillings Factories were among the relatively few industrial undertakings in the country to introduce three-shift working and the various modern devices of scientific management, such as statistical quality controls and ‘time and motion’ studies.
Paradoxically enough this success may in large part have been greatly helped by the ‘green’ character of their labour and the novel character of their work. Trade-union rules and customs of the trade had little time to solidify into a rigid system. But it is also possible that public ownership was of some assistance. Labour relations do not
form part of this study and will be dealt with in a separate volume,14 but it is impossible to leave the subject of the Royal Ordnance Factories without putting on record the conviction of some superintendents that they were helped in their negotiations by being able to claim that private profit would not accrue from greater exertions of their work people. It may well be that the argument itself had little substance; that opportunities for profit in private industry were very limited; that workers in both Ordnance Factories and private firms were mainly concerned with the size of their pay packers and conditions of work. Yet if the claim helped, however slightly, to ease the relations between managers and workers, public ownership gave Royal Ordnance Factories an advantage over private industry.
By no means all the features of the Royal Ordnance Factories were to be found in the Royal Dockyards. Their problems of labour intake and labour relations were no different from those of the Royal Ordnance Engineering Factories and their managers were also moderately paid civil servants, subject to civil servants and procedures. The Royal Dockyards, like the ROFs, served as nurseries of technical personnel. They supplied staffs to the Admiralty design departments, and, above all, the various ‘overseeing’ services, including the Emergency Repair Overseers organisation, were recruited almost entirely from the Royal Dockyards. But here the similarity probably ended. The Royal Dockyards were old establishments and not, like most of the Royal Ordnance Factories, new creations managed and staffed by new people; nor were they, like the old Royal Ordnance Factories, compelled to ‘bud off’ into numerous filial establishments into which the bulk of their skilled cadres had to be transferred. In general, it is also difficult to draw parallels between the Royal Dockyards and private shipbuilders. The former seldom engaged in the building of new vessels and did not very often compete with privately-owned yards in comparable tasks.15
Equally unlike the Royal Ordnance Factories were the hybrid concerns already mentioned, i.e. agency factories. The principle on which they operated was roughly similar to that of the National Factories of the First World War. Their buildings, plant and machinery were supplied by the Government, but private firms were invited to manage them for a fee. This was an obvious expedient for utilising the management and other resources of private firms, and it had been adopted at the height of the industrial effort of the First World War. Some such arrangement was therefore bound to be tried
during the years of rearmament. The additional reasons which prompted its adoption then were, to a large extent, connected with the financing of extensions to private firms. The difficulties and complications of government subventions to privately-owned factories were very considerable. In the summer of 1936 a sub-committee of the Treasury on contact procedure came to the conclusion that when completely new factories were being set up the balance of advantage lay in the Government paying the entire cost and acquiring ownership. Departments were accordingly instructed to do so whenever practicable and to make arrangements with private firms to operate the factories for a fee whenever direct management by the State was impossible or inadvisable.
This method appeared to commend itself from the very outset to the Air Ministry, though their reasons were not quite those of the Treasury. As part of the ‘shadow’ scheme of 1937 the Air Ministry tried to enlist a number of ‘outside’ firms, mostly those in the motor industry; and safeguards against the risks of redundant capital were thought to offer additional inducement. Hence the agency agreements which the Air Ministry made in 1936 for the construction of several new airframe and aero-engine ‘shadow’ factories to be operated by the motor industry. Similar arrangements were also adopted by the War Office from 1937, mainly for new explosives and chemical factories built at government expense but managed by ICI.
From 1938 the principle of agency factories was adopted for a wide range of munitions, and by early 1940 a large number of such factories had been approved. At the outbreak of war a number of agency factories were already making a vital contribution to war supplies, but they were as yet apt to be regarded as a not altogether satisfactory compromise. In 1940 the Air Ministry, which by then had established agency factories for a wide range of products, reported strongly against them to the Interdepartmental Committee on Economic Policy. The system, it argued, failed on the ground of efficiency mainly because the remuneration which it offered to firms did not provide a sufficient reward for economical and energetic management. Above all, it removed the fear of loss as a penalty for inefficient management. The Committee accordingly recommended that agency operation should be resorted to only where unavoidable.
The attitude of the Air Ministry and the consequent recommendation of the Interdepartmental Committee proved somewhat theoretical. Reporting as they did early in the war the officials of the Ministry could not foresee how little purely financial inducements and fear of loss would operate in war industry. They also underestimated the extent to which in time of war managerial exertion would be prompted by a sense of duty and national service.
Indeed, while making their recommendation the Economic Policy Committee themselves admitted that in some agency factories production costs had been lower than in a number of commercial undertakings engaged in comparable work; they were unable to cite any evidence of an agency factory with higher costs or lower efficiency than the average commercial undertaking. The Committee’s recommendation was not in fact followed. As the war progressed the number of firms which had to be asked to undertake work in which they had little or no commercial interest grew rather than diminished, and the new work thrust upon them sometimes required the building of wholly new factories or self-contained extensions. Agency arrangements were an obvious solution of the problem and their numbers steadily grew. At 31st March 1945 the Ministry of Supply had 159 agency factories in operation, the Ministry of Aircraft Production eighty-seven, and the Admiralty nineteen.
(2) Private Ownership and Control
It goes without saying that industrial establishments owned and managed by the State did not represent the bulk of industrial capacity engaged on the manufacture of munitions. Measured by their employment at peak, State enterprises and agency factories, including Royal Dockyards and Admiralty factories but excluding the various research establishments and their workshops, accounted for rather less than a quarter of war industry as a whole. The remainder represented undertakings managed and owned (or partly owned) by private firms or individuals.
The private ‘sector’ was thus very large, but the extent to which it was wholly private must not be exaggerated. Under the conditions of war, when firms did not compete for orders and were all but safeguarded from loss, private enterprise could not be expected to function in the competitive and adventurous manner of the ‘representative firm’ under the ideal conditions of laissez faire. Decisions of individual managements could no longer be as independent and autonomous as in peace. At the same time the responsibilities of the State for the affairs of private firms grew to the same extent to which the independent firms declined.
The extent of Government authority and supervision varied according to circumstances, and in general it was not the same in the three supply departments. Government authority was perhaps felt
most in the aircraft industry, even though the Air Ministry and MAP did not found or manage any State factories. Suggestions for the founding of a State aircraft factory came to the Secretary of State for Air on a number of occasions during the rearmament period, and were carefully considered. But the settled opinion in the Ministry was that the disadvantages of State factories was that they would take a long time to get going; that once they were in operation they would be difficult to close down. The National Aircraft Factories of the First World War,16 even though they were managed by private firms, were mentioned in this connection, though it is doubtful whether the Air Ministry was much moved by arguments from historical evidence.
State ownership of aircraft factories had, of course, its political and psychological attractions. In November 1939 they were formulated in the House of Commons17 by a Conservative member—Col. Moore-Brabazon, who was later to be Minister of Aircraft Production—and were often in the minds of the Public Accounts Committee. To this the Air Ministry’s answer was that its control of prices and profits was a sufficient remedy against political and economic drawbacks of private enterprise.
Whatever the Air Ministry argument, its chief motive was the desire to keep alive in peacetime a large aircraft industry, and more especially to maintain in being the industry facilities for design and development. The Air Ministry and Air Staff were convinced that, however large the State-owned aircraft industry, the design and output of aircraft in war would still largely depend on the resources of private firms. It therefore seemed to them very necessary to sustain in peace a large and viable aircraft industry capable of shouldering the main tasks of aircraft design and production in war.
Hence, not only the Air Ministry’s insistence on the need for giving contracts to private industry, but also the special relations which it established with firms it fostered and protected. Enough has already been said about ‘family firms’ in other parts of this book to make reiteration here unnecessary. What is important to note here is that the relations of the firms to the Ministry were so close as to make ordinary distinctions between private and public enterprise out of place.
Throughout the pre-war years the sixteen aircraft firms and four engine firms composing the ‘family’ enjoyed preferential treatment. The diet of regular orders, lean as it was, had to be reserved for them; their design offices were sustained by projects, some of which had no
other purpose than to keep the designing staffs busy or to attract the attention of designers to certain problems in which the Ministry was interested. At the same time ‘outsiders’ were kept out of the circle of designing firms even though throughout the rearmament period they were welcomed as sub-contractors and were recruited for the ‘shadow’ schemes. In spite of the limited scope of aircraft business before 1936 attempts to enter it were made. In the early stages of expansion, pressure from ‘outside’ firms lead to a certain amount of agitation, and once, in December 1936, it formed the subject of a debate in the House of Lords.18 On that occasion a firm, Airspeed, succeeded in penetrating the Ministry’s defences and established itself on the ‘fringe’ of the family group. It was even seriously considered for a design for the Fleet Air Arm. Other ‘fringe’ firms, such as General Aircraft, Folland Aircraft and Cunliffe Owen Aircraft, which repeatedly tried to have their designs considered, were for a long time kept out, however strongly their claims were pressed.
It was only in the later stages of the war that MAP began to contemplate admitting to the ‘family’ of designing firms such new comers as English Electric, but even then the proposals were not to break the circle, but merely to enlarge it. By that time, however, the ‘family’ had lost some of its exclusiveness, for MAP had established links almost equally intimate with a number of firms outside the original ‘family’. Yet even then the circle remained much narrower than the miscellaneous body of contractors and sub-contractors working for the Ministry.
Within the circle continuous attention was given to ensuring intimate relations with the Ministry by administrative contacts. The practice of installing Resident Technical Officers in the designing firms had been initiated long before the opening of the rearmament period. When, in the war, the system was extended to aero-engine and armament firms, their number rose to over fifty. Their main concern was with design and development, but their functions in the field were very wide. In the words of an MAP report, the Resident Technical Officers were expected
to give general guidance to the firm in the application of technical policy arising out of current research and development work, to take an active interest in maintaining the standards and improving the quality of firm’s business and to see that the ‘daughter’ firms, sub-contractors and repair firms receive the technical assistance they need from the ‘parent’ firm.
The Resident Technical Officer was by no means the only representative of the Ministry at contractors’ works. A considerable number of the larger firms housed both an Overseer and an Aircraft
Production Officer. The Overseer was generally a senior RAF officer, and while he had a special responsibility for maintaining close contact, through the Commands, with Service units, and for acting as the representative of the user, he was also the principal representative of MAP headquarters, to whom the firm was entitled to refer all questions requiring immediate decision and to look for advice and assistance in every way possible. In general, the Ministry have him plenipotentiary powers for use in an emergency. The Aircraft Production Officer did not possess the same senior status, but he was in a position to observe the course of manufacture at close quarters and often possessed an intimate knowledge of the problems, achievements and prospects of output in the factory to which he was attached. He was to prove an effective medium for transmitting to the firms the constant pressure for better production which MAP tried to exercise throughout the war.
So much for the Ministry’s representatives with the firms. Important as their role it was supplied only one of the many links between Government and the aircraft industry. In the field of design and development the MAP establishments, and particularly the Royal Aircraft Establishment and the Aeroplane and Armament Experimental Establishment, played important roles in assisting the designers in the firms. In general it was their policy to ‘wait to be asked’; but they seldom waited for long. In their special fields they were unique repositories of technical knowledge; they seldom dealt with issues in which headquarters might attempt to exercise pressure or authority; their relations with firms were therefore pervaded by an agreeable atmosphere of collaboration between experts.
On the production side individual directorates of MAP were so organised that the affairs of each main aircraft factory were looked after by a special branch in a directorate under an Assistant Directory. There Assistant Directors were in daily contact with ‘their’ firms, regularly visited them and were regularly ‘posted’ about their activities and problems. They were expected to watch the flow of production, to learn in advance of growing difficulties and threatening ‘bottlenecks’. This often enabled them to act as the firm’s unofficial progressing officers engaged in chasing scarce components and supplies. There services were, as a rule, readily received. Even firms which were officially distrustful of government interference were receptive enough to suggestions from personally acceptable officials. Many a small firm was saved from chaos by the devoted nursing of individual officials; many new officials learned their jobs from the practical experience of the first firms they dealt with.
On their part, the representatives of the firms kept in close touch with the Ministry of Aircraft Production. Members of their design staffs were in constant attendance at the technical branches of
MAP, bringing suggestions about future modifications and designs, receiving indications of future trends of official requirements and specifications. So intimate were these contacts that an historian of aircraft will find it impossible to allocate with certainty the initiative for most of the successful designs of aircraft which matured during the war.
This does not, however, mean that MAP consistently tried to insinuate itself into the managerial functions of aircraft firms. When firms appeared to the Ministry to be so inefficient as to endanger the war effort the Minister, under his wartime powers, could appointed ‘administrators’ and even take over the ownership of the firm. The only occasion when these powers were exercised to set aside a board of directors was in March 1943 when MAP took over the ownership and official responsibility for the conduct of a firm. In several other instances the administrators appointed by the Ministry conducted the affairs of the firms without changing their ownership or permanent control. A somewhat different act of intervention occurred at the end of 1942, when the Ministry, in its anxiety for the future of the Sabre engine, encouraged the transfer of the aero-engine business of D. Napier & Son to the English Electric Company. These, however, exceptional instances, neither preceded nor followed by a fundamental change of policy.
Official suggestions when they were made to the firms were made tactfully, even if firmly. The Director of Materials Production might convey to the firms the desirability of replacing scarce types of materials by those more readily available; the suggestion from a production directorate that manufacturers might use rubber dies which had been successful elsewhere was the kind of advice which they could much more easily refuse to accept. The attempt to standardise components was carried forward with some deference to current beliefs and even prejudices; the reduction and systemisation of modifications, being clearly the Ministry’s business, was more firmly handled. And in addition to the advice which production directorates offered to firms in the course of their day-to-day work, the Production Efficiency Board19 of the Ministry was from 1943 onwards ready to help wherever it could.
In all these activities the Ministry kept clear of anything that might be construed as direct intervention into the managerial independence of firms. In general, it did little to supervise or to direct the methods of production in the factories of its contractors. Had it tried to it would probably have been rebuffed by its contractors, and for the greater part of the war it seldom tried. True enough, at an earlier stage in the history of aircraft production, i.e. during the rapid expansion in 1938, attempts had been made to prepare for
a reorganisation of the aircraft industry on more rational lines.20 The attempts, however, had been given up in the course of 1939 and were not resumed again.
The relations between the Ministry of Supply and its private contractors may have been somewhat less intimate than those between the aircraft firms and the Air Ministry or MAP. The War Office, and later the Ministry of Supply, developed furthest the use of State-managed factories and could, at least in theory, afford to concern themselves less with the affairs of their private contractors. In theory, the principle by which the ROFs were entrusted with munitions, which civilian firms could not be expected to manufacture, made it less necessary to watch over the behaviour of civilian firms.
For this, the choice of the Ministry’s contractors was partly responsible. Among them a prominent part was played by a small number of professional makers of armaments, mainly Vickers-Armstrongs and BSA. These were highly experienced specialists who did not require much close guidance from government departments. For the rest, the main body of contractors largely consisted of firms which, unlike the aircraft firms and the makers of the main aircraft components, combined their work for the Ministry of Supply with other contracts. Most of them had not in the past done much work for government departments and continued to produce for the civilian market long after they had received their first contracts under the rearmament schemes. Many of them still worked for more than one supply department even after they had been wholly absorbed into war production. It would have been very difficult and even impossible for the production directorates of the Ministry of Supply to keep a close check upon the way in which these contractors employed their resources or to try to influence the conduct of their business. When a firm in accepting a contract had to ask for additional machine tools, its need would be scrutinised in the production branch and in the machine-tool departments of the Ministry of Supply before the request was passed on to the Machine-Tool Control; when the firm required additional capital this would also be subjected to a careful scrutiny by the production directorates, the finance branches of the Ministry and eventually by the Treasury; and some firms were also given advice and instruction in the initial stages of production. But once they had obtained their additional capital and had passed the initial stages of production, occasions for checks and supervision seldom presented themselves.
The difference between the private contractors of the Ministry of Supply and those of MAP was, however, one of degree and must
not be exaggerated. Above all, it must not be allowed to obscure the real authority which the War Office and, later the Ministry of Supply enjoyed in their relations with private firms. The authority was largely rooted in the technical assistance which their officers had to give the private contractors. In the pre-war period the War Office organisation contained technical branches which functioned as repositories of specialised thought and information about the design and production of weapons. They played a very important part in the initial planning of munitions production and exercised great technical authority in the later contacts with industry.
The technical authority of the War Office and later of the Ministry of Supply in their dealings with private firms expressed itself in many ways. The War Office production manuals were no less important than their more widely-known military manuals in the armed Service. Throughout the rearmament period and the early war years, methods of production and special machines were developed for many types of specialised munitions.21 With the introduction of ‘outside’ firms important contributions to technical development came from a wide range of firms, but as a rule, the technical staff in the departments could be relied upon to assist, and sometimes to guide, private firms in the solution of their technical problems.
Guidance of a more general character often came from the main seats of industrial administration in the War Office and the Ministry of Supply, i.e. their various production directorates. The purely administrative connections between the Ministry and its contractors were not perhaps as elaborate as in MAP but they were not altogether lacking. In all branches of production for which the Ministry of Supply was responsible, a production officer representing the production directorate was within reach of every contractor. A system of resident production and design officers similar to that of MAP was not adopted except for tanks, and even there the officers were usually resident only at the ‘parent’ firms. But manufacturers of tanks, like the manufacturers of most other stores, were served by area production officers, who were in direct and frequent contact with the firms and attended group meetings in their areas. On their part production directorates kept in touch with production at major contractors. Without attempting to prescribe any master plan of production, they played a very important part in working out the methods used for the making of specialised munitions. In many instances, their blueprints of production resulted in marked standardisation of methods; particularly where specialised plant had to be provided.
All these facilities for supervision did not, of course, add up to what is often meant by the term ‘industrial control’. In the Ministry
of Supply the words ‘control of industry’ were hardly ever uttered, and the substance of ‘industrial control’ was never consciously pursued. The firms needed technical assistance and guidance and received it; but the process was not that of prescription and injunction, but one of informal consultation. As a result of this cooperation private firms may have found themselves more dependent on the guidance of the department than is customary in relations of seller and buyer. But the dependence was accepted as part of the war and of industrial mobilisation; and on the whole it did not openly impinge on the autonomy of private management and on its sense of freedom.
The Admiralty’s relations with its contractors were also very intimate. From some points of view they resembled MAP’s relations with the aircraft industry, but they were of more ancient standing and were less concerned with private organisation for design and development. The costly nature of ships and their main equipment was reflected in the large size and small numbers of the Admiralty’s main contractors. In ship construction itself, the Admiralty’s interest, in 1935, was limited to about fourteen yards, known as ‘naval yards’ But even the firms—and there were many—which supplied ancillary equipment had in many cases a long experience of naval work and of collaboration with the Admiralty. In general the chief feature of the Admiralty’s relations both with the shipbuilding industry proper and with the ‘inland’ armament industry was their long historical continuity. Intimate contact with naval shipbuilders and the main armament firms was traditional, and naval requirements had in fact determined the very nature and shape of the industry which provided them. Thus, in the early twenties, there was much discussion in the Admiralty on the extent to which existing gun-mounting capacity should be kept in being, and it was well understood that it must rest with the Admiralty to find means, such as subsidies, of maintaining the capacity. In the event, Vickers was left alone in the field, and the part played by the firm in this field of design and production was such that in the inter-war years the phrase ‘relations with industry’ might be taken as meaning ‘relations with Vickers’. In other branches of naval construction the field was wider, but not so wide as to destroy the intimate links between the Admiralty and its contractors.
The Admiralty’s organisation for posting representatives in or near the works of its contractors had taken shape by the end of the First World War. Each of the Controller’s departments, as a rule, maintained its own ‘outport organisation’, as it was called, and each ‘outport organisation’ followed the geographical layout of the industry with which it was concerned. The distribution of these industries differed widely, and the differences helped to bring out the
autonomous nature of the departmental organisations. In the inter-war period their duties were concerned with inspection rather than production, but as new production problems appeared with rearmament and war, their role underwent some change. By the outbreak of war there were about a dozen different kinds of officers, naval and civilian, representing the Admiralty locally at the works of its contractors. They ranged from Warship Production Superintendents and Principal Ship Overseers, who represented the Director of Naval Construction, to engineer officers, electrical engineers, gun-mounting overseers, and so on. The Admiralty did not maintain—as MAP did—officers who were its plenipotentiaries at the works of particular contractors, but contracts with the most important firms were strengthened by other appointments. Thus, a Warship Production Superintendent was resident in each region and Engineer Overseers were resident with Vickers-Armstrongs and other firms engaged on large contracts for machinery.
Apart from placing this variety of overseers, organisers and advisers in local contact with its contractors, the Admiralty’s guidance and assistance in production took the form of investigating production methods in its own establishments and passing on the results in one or another to its contractors. Thus the work done in, for example, the Central Metallurgical Laboratory or other Admiralty development agencies proved useful in easing production problems. In 1943 there was set up at Rosyth an establishment which later came to be known as the Naval Construction Research Establishment, which devoted separate and specific attention to research in methods of construction.
In the field of naval design and development the picture was very different. The Admiralty, while keeping in closest touch with design and development in private firms, kept in its own hands general responsibility for the outlines and characteristics of naval vessels. A whole range of establishments would to provide the shipyards and industry generally with the designs which they were to undertake: from the Admiralty Research Laboratory with its highly practical experience in the designing of ancillary equipment, such as electrical equipment, to the Admiralty Experiment Works, where the hull lines of new designs were determined on the model scale. In this respect the Admiralty system of liaison with its firms was, as has already been indicated, in many ways very different from that of MAP, whose main contractors were responsible not only for producing, but also for designing, both aircraft and engines.
In addition to all these contacts and controls, the supply departments possessed the technical and industrial links with private firms provided by the various services of inspection. In the Ministry of Supply, following the War Office practice, inspection of specialised
munitions was usually done at the manufacturers’ works and frequently at several stages of manufacture. In consequence, all contractors, with the exception of the smallest, had at least one resident inspector, and at many firms there was a team of inspectors. It was an acknowledged fact that the inspectorates were well informed about the production methods of the firms. The contribution of senior members of the inspectorate to the efficiency of these methods was incalculable. It was only to be expected—and was also sanctioned by tradition—that inspection staffs at the War Office and the Admiralty should exercise considerable control over the contractor’s technical standards; and from authority in technical standards it was but a short step to the consideration of methods of production.
At first sight the inspection of aircraft did not result in equally intimate contacts with private industry. The Ministry of Aircraft Production took over from the Air Ministry the Aeronautical Inspection Department, which had made its initial letters known throughout the whole aeronautical world. The AID, which had severely strained itself by attempts at comprehensive inspection during the First World War, had, quite soon after its close, evolved a scheme of ‘approved firms’. An ‘approved firm’—whether manufacturing airframes, engines, materials, equipment or armament—was required itself to possess an efficient inspection organisation, and the aim of the AID became, so far as possible, one of inspecting the inspectors. The larger ‘approved firms’ had resident AID inspectors; smaller firms were ‘visited’ regularly. The principle of inspecting the inspectors, however, did not mean that the AID representatives were remote from the day-to-day affairs of the firms. Even though their influence on methods of production was indirect and somewhat remote, their authority on technical standards was great.
(3) Prices, Profits and Assisted Investments
The differences here drawn between the private contractors to MAP, the Ministry of Supply and the Admiralty are, of course, true only as broad generalisations. It has already been pointed out that even among the contractors to MAP the great majority were not members of the ‘family’. Some of them, like the two main makers of undercarriages, might stand in as intimate a relationship
to MAP as the main aircraft firms, but in general the miscellaneous contractors to the various supply departments were treated more or less alike. Many of them were in fact working for more than one supply department, and all of them were subject to more or less the same commercial regimen.
The fundamental fact in that regimen was the State’s position as war industry’s sole customer. Thereby the restraints and incentives of competitive marketing were removed. At the same time the State did not, and could not, exploit its monopolistic advantages as commercial buyers enjoying a similar position might have done. Prices were settled by contractual agreement, and had to be ‘fair’, i.e. sufficient to secure from loss the contractor who employed his resources with reasonable efficiency, while preventing inordinate profits.
This does not, of course, mean that prices lost all economic function. The most elementary incentives of private enterprise—the fear of loss and the hope of high profits—may have been removed. So much also have been the power of prices to guide the distribution of resources between alternative uses, since this was now to an increasing extent done by direct allocation of labour and materials. Yet carefully negotiated prices were still able to play a useful economic role in checking the wasteful use of resources. The preoccupation of the contract branches with prices and profits was to some extent political in inspiration and purpose. At a time when everybody was called upon to serve without regard to personal interest and convenience, and when sacrifices and discipline were urged on working people, the political pressure against conspicuous gain was very strong and had to be respected. But for all its political implications, the limitation of profits also served an economic purpose. It was not altogether true to say that the 100 percent Excess Profits Tax, added to income and super tax, was sufficient to deal with the economic evils of excessive profits. Wasteful use of resources could not be prevented by high taxation; it was if anything encouraged by the taxation of profits, especially where munitions happened to be produced on the ‘cost-plus’ terms.22 The economic evils of the ‘cost-plus’ terms were of course less when the profits allowed to the contractor were fixed and not calculated as a percentage of costs. Yet even in that form they contained no encouragement to economic production.
The undesirable features of ‘cost-plus’ prices were well understood in the contracts divisions of the supply departments, and it was the settled Government policy to invite competitive tenders wherever practicable, but in war conditions real competition and competitive
prices could not be easily secure. Other expedients had therefore to be adopted. One of them was that of ‘maximum’ prices, i.e. prices which must not be exceeded but could be reduced on price investigation; another was ‘target’ prices, i.e. prices prescribed in advance of production which were subject to adjustment on price investigation. Yet much as the departments disliked the ‘cost-plus’ terms they were sometimes inescapable. They often had to be allowed then production of a weapon was in its initial stages and the firms had no experience on which to base their quotations; or, again, when new or inexperienced firms had to be engaged. ‘Cost-plus’ charges even crept into contracts ostensibly drawn up on other terms.
The methods by which prices were settled and profits limited differed in detail from department to department, and the contracts divisions of the three supply departments also differed in the extent to which they tried to exorcise or succeeded in exorcising the evil of ‘cost-plus’. But from the point of view of this study the inter-departmental differences in methods of settling prices are perhaps less significant than the relations between the Government and private firms which the fixing of prices helped to establish. For however much the departmental practices differed, they were all bound to make inroads into the autonomy and privacy of private enterprise. In most forms of price-fixing (whether ‘maximum’ prices, ‘target’ prices or ‘cost-plus’ prices) the firm’s actual costs had to be ‘ascertained’. This sometimes meant that the agents of the State had to be given access to the firm’s books and accounts. Frequently it meant that costing officers could, stop-watch in hand, inspect, analyse and estimate a firm’s methods of production and its use of labour and resources, needless to say, the firms, or at least some of them, tried to preserve the privacy of their records from the eyes of the official investigators. Above all, there was a great reluctance to allow the data about costs to be used as evidence of the firm’s technical efficiency or inefficiency. Firms were even more reluctant to see the technical information, disclosed for other purposes, used against them in costing their contracts. Their fears as a rule proved unfounded, and the precautions unnecessary, but they all bring out how insecure and unprotected the privacy of business had become.
The settlement of prices and the limitation of profits were greatly complicated by yet another tie which had grown up between the Government and private firms, i.e. by the various schemes of capital assistance. The problem of financing the additions to the fixed capital of industry arose at the very beginning of rearmament. It was not that the additions required by industry were as yet so large as to be beyond the power of the capital market to supply through the ordinary machinery of capital issues. The main difficulty was not so
much the magnitude of the demand for new capital as the risks of eventual redundancy of investments. In general, during the greater part of the rearmament period firms were willing and able to provide additional fixed capital so long as they were reasonably sure of finding an economic use for it for a long enough period. When the Government announced in 1935 that it was its policy to treble the size of the RAF, some aircraft firms felt certain of being able to employ much additional capital equipment throughout its normal physical life, and raised in the subsequent four years from the capital market and from their suppliers a large volume of new capital.23 Not all the firms in other sections of the munitions industry, not even the aircraft firms when faced with further expansions in 1936, could feel equally sure that the investments necessary for the fulfilment of the munitions contracts would not soon become redundant. They were therefore reluctant to accept contracts requiring much additional investment; and in order to overcome their reluctance the Government had to underwrite its potential losses.
The procedure by which the Government accepted the risks of redundancy was that of the ‘capital clause’ in aircraft contracts as standardised in the First McLintock Agreement of August 1936.24 The capital clause of the agreement laid down that should the contractor find in the two years immediately after the 31st March 1939 that the capacity of his works extended to deal with Air Ministry’s orders was in excess of what he required for the execution of his current orders it would be
open to the contractor within the following twelve months to prefer a claim for the compensation in respect of any loss which the contractor may sustain in the difference between the cost of the above mentioned capital assets written down by depreciation … and the market value of such assets at 31st March 1941.
Much use was made of the ‘capital clause’ in the Air Ministry even though it left the amount of compensation uncertain. By the end of 1939 the Air Ministry underwrote in this manner the risks of an investment slightly more than £8 millions. By that time, however, the ‘capital clause’ had already lost much of its effectiveness. In so far as the amount of compensation was reduced by the accumulated depreciation allowances, the purposes of the clause were largely nullified when the Inland Revenue authorities began to allow relief for exceptional depreciation wholly or mainly attributable to war conditions. Above all, the bulk of the investment which was now required
carried with it risks of a redundancy too great to be dealt with by any scheme which left open the exact amount and the date of compensation.25 The sole remedy now was for the Government to provide the greater part or the whole of the capital.
The first occasion on which Government subvention to provide investment was asked for occurred as early as 1936. In May of that year two large associated firms asked the Admiralty and the War Office for a contribution to their capital expenditure. The firms were anxious not to be left at the end of the rearmament in the same situation which one of them had experienced at the end of the First World War, when it was brought to the verge of ruin by the weight of redundant plant on its hands. After prolonged negotiations a settlement was finally reached with one of the firms under which the Admiralty paid sixty percent of the cost of approved extensions; the firm retained ownership, but the Government was free from any obligation to compensate it for the eventual redundancy of the additional capacity. This was to be the prototype of one variant of capital assistance, the so-called ‘contributory schemes’, by which the Government contributed a proportion of the new investment, and the firms contributed their share and retained the ownership of the assets.
While the Admiralty was developing the contributory arrangements, the War Office and the Air Ministry concluded a number of agreements under which the Government shouldered the entire cost of extensions and retained ownership. It has been repeatedly stressed that the expansion of orders in the Admiralty both before the war and during the war was not as drastic as in other departments; most of its contracts were concluded with firms which had worked for the Admiralty in the past and already possessed considerable productive capacity suited for Admiralty orders. Additional plant was therefore likely to be so mingled with the firm’s own plant as to make it very difficult for the Government to exercise over it an effective ownership. On the other hand, production of munitions for the Army entailed an ever-growing employment of firms which had no previous experience of munitions or special equipment for their manufacture and did not intend to stay in munitions production after the war. The additional equipment provided under these conditions could more easily be owned by a government department.
In fact where these conditions were absent the supply departments made use of ‘contributory schemes’. This was the common way of financing additional investment of firms engaged in the manufacture of vehicles and in the provision of raw materials; both branches of war industry in which firms were doing the same kind of work as they
had done before the war and could be expected to resume after the war. The Ministry of Supply also found it expedient to make wide use of ‘contributory schemes’ to finance building construction, for buildings could more usefully be employed after the war than the specialised munition-making machines.
Table 56: Summary of the Government’s actual annual expenditure on fixed capital for war production, 1st April 1936–31st March 1945
£ millions
| Total | Admiralty |
Air Ministry and MAP26 |
War Office and Ministry of Supply | ||
| TOTAL 1936–45 | 1,029 | 89 | 384 | 556 | |
|
Private operation27 |
767 | 43 | 384 | 340 | |
| Government operation | 262 | 46 | — | 216 | |
| 1936–37 | |||||
| Private operation | 2 | 1 | 1 | * | |
| Government operation | 2 | 1 | — | 1 | |
| 1937–38 | |||||
| Private operation | 11 | 2 | 5 | 4 | |
| Government operation | 8 | 2 | — | 6 | |
| 1938–39 | |||||
| Private operation | 13 | 3 | 6 | 4 | |
| Government operation | 15 | 3 | — | 12 | |
| 1939–40 | |||||
| Private operation | 30 | 1 | 21 | 8 | |
| Government operation | 23 | 3 | — | 20 | |
| 1940–41 | |||||
| Private operation | 170 | 4 | 98 | 68 | |
| Government operation | 78 | 8 | — | 70 | |
| 1941–42 | |||||
| Private operation | 185 | 9 | 73 | 103 | |
| Government operation | 70 | 9 | — | 61 | |
| 1942–43 | |||||
| Private operation | 185 | 8 | 84 | 93 | |
| Government operation | 38 | 6 | — | 32 | |
| 1943–44 | |||||
| Private operation | 113 | 9 | 62 | 42 | |
| Government operation | 16 | 7 | — | 9 | |
| 1944–45 | |||||
| Private operation | 58 | 6 | 34 | 18 | |
| Government operation | 12 | 7 | — | 5 |
* Less than £500,000.
These distinctions were not, however, in any way permanent or fixed. By 1943 many contractors began to show a preference for ‘contributory schemes’. The war appeared to be approaching its end and from the point of view of post-war prospects if often was good business to acquire capital assets by paying only a part of the cost even if rent was also to be paid for a year or two. But, for the same reasons, the departments showed themselves increasingly reluctant to enter into new agreements on these terms. The non-contributory schemes, i.e. those under which the Government paid the total cost of new capacity and retained ownership, remained the main source of the new long-term investment for war industry. They accounted for more than ninety percent of the total Government expenditure on plant and buildings for war production.
Altogether between 1st April 1936 and 31st March 1945 the three production departments invested over £1,029 millions on fixed capital for munitions industry. Of this total £767 millions was for production under private management, including about £250 millions for the construction and equipment of agency factories. The expenditure for the provision of fixed capital at the commercial establishments of private firms was thus at least £500 millions.
The movement of the Ministry of Supply’s investments is interesting not only for its rise in volume but also for some other trends it exhibits. It will be noticed from the table that, whereas during the rearmament period and in the first year of the war, investment in the ROFs represented the bulk of the Ministry’s capital expenditure, investment in privately operated factories almost equalled that in Ordnance Factories in 1940–41 and exceeded it for each of the later years of the war. This is mainly a reflection on financial activity of the general trend discussed elsewhere,28 i.e. of the greater preoccupation with the building-up of a specialised capacity in the early years and of the growing importance during the war of ‘outside’ firms which had not been available for armament work in the pre-war period.
The Government was also called upon to provide industry with its working capital. Participation in the financing of current expenses of industry was gradual and on the whole reluctant. In the years of rearmament and in the early years of the war the Treasury held that it was not the business of the Government to act as industry’s banker. Firms were enjoined to find their own working capital by the various means open to them, i.e. either by raising funds from the capital market, or (the more usual manner) by bank credits. Circumstances were, however, making it increasingly difficult for industry to adhere
to those orthodox methods of industrial finance. Government orders had to be placed with firms selected for their ability to make munitions and not necessarily for their standing with their banks. Some of the contractors playing an important part in munitions production were not ‘credit-worthy’ with their banks to the full extent of their commitments under their munitions contracts. Even firms of the highest commercial standing found themselves operating on a scale far in excess of their pre-war business.
An obvious remedy was sought and found in ‘progress payments’. There was nothing unusual or exceptional in the principle that contractors should be paid some instalments of their final price while the work was still proceeding and long before the official deliveries took place. This had been the normal Admiralty practice for shipbuilding and machinery contracts. Some such arrangements were common in private contracts with builders and civil engineering firms; and they had been adopted in the munitions industry of 1914–18. In the early years of rearmament, the supply departments were prepared to make ‘stage payments’ provided they synchronised with the progress of the work and did not cover the entire cost of each stage. Thus the Air Ministry paid eighty percent of the value of each completed stage after inspection. What was exceptional and novel in ‘progress payments’ under munitions contracts was that the proportion of the total costs thus advanced was very high and that the payments began very early, sometimes in the initial stages of the work. Thus in order to relieve firms of the heavy initial outlay the Air Ministry agreed in November 1935 to make monthly payments of eighty percent of the money spent on the purchase of materials.29 At the same time it increased the maximum amount of ‘stage payments’ to ninety percent. In 1936 the Air Ministry allowed ‘progress payments’ up to ninety percent on some ‘cost-plus’ contracts covering not only materials but also labour and overheads. A year later jigs and tools were brought under the scope of the ninety percent ‘stage payments’. By September 1938 the practice of ‘stage payments’ up to eighty percent was also firmly established in the War Office contracts for tanks.
Before long, however, it became clear that many firms would require assistance in the form of straightforward loans and advances if they were to be saved from serious financial embarrassment.30 Until the middle of 1940 requests for large payments in advance of deliveries were as a rule referred to the banks on the understanding that the latter would be willing to enlarge their credits to firms possessing Government contracts. The departments were also able to
make somewhat more liberal and earlier ‘progress payments’ than hitherto. These measures were proving insufficient for the greater industrial speed-up in the second half of 1940. More especially the Ministry of Aircraft Production which, unlike the Ministry of Supply, did not as a rule use ‘progress payments’ to reimburse its contractors for wages and overheads, found itself under strong pressure to do so now. A seven-day week was being worked in most aircraft factories and multiple shifts in some; and the wage bill of the industry rose much above the pre-Dunkirk level. The Ministry therefore took the initiative in suggesting that the banks might be induced to change their policy so as to provide the industry with the working capital it needed.
The outcome was the so-called Scheme C, arranged after discussions with the Bank of England, representatives of the Treasury, the three war production departments and the clearing banks. The object was to ensure that the banks would readily meet the requirements of Government contractors and sub-contractors for working capital and that the difficulties of finance would cause no impediment to the flow of production. Among other steps taken for this purpose was the appointment by each supply department of a liaison officer specially assigned to deal with these problems. As a corollary to these arrangements with the banks the departments undertook to do all in their power to liberalise ‘progress payments’.
Greatly liberated they in fact were. The system frequently adopted was that developed in the Ministry of Supply. It authorised ‘progress payments’ to be made monthly up to ninety percent of the total expenditure incurred by the contractors at the time of payment. In actual practice the system was applied with a still greater liberality. MAP frequently raised the ‘progress payments’ on account of materials, jigs and tools up to 100 percent of contractors’ outlay; and other ‘stage payments’ were also raised with the result that contractors could received as much as 97½ percent of the price.31 The Ministry of Supply received in August 1940 authority to raise ‘progress payments’ to 100 percent of the total value of the contractors’ expenditure, provided that ten percent of the total value of the contract was kept in hand until the final settlement.
At this point the system of advances on ‘progress payments’ reached the peak of its development beyond which it could not go without gross overpayment and Government losses. Indeed, in 1941 various attempts had to be made to tighten the system somewhat. Yet in spite of the safeguards some £10 millions were owing to the Ministry of Supply in 1943 by its contractors for excess of ‘progress payments’ over the full price of the product. Over £4 millions was still owing for excess advances in 1946.
In MAP and the Admiralty, where the system was not applied in quite so liberal a spirit, the overpayments were very much less. It can, however, be argued that even that the level they reached in the Ministry of Supply overpayments did not form a very high proportion of the total value of the contractors’ work, and were not too high a price to pay for the solution of financial difficulties of great delicacy and complexity.
(4) Programmes and Plans
Thus, in various ways, the Government found itself drawn into intimate partnership with industry. Yet its powers and responsibility were not assumed with the deliberate intention of sharing in the conduct of industry; nor were they manifestations of an industrial ‘plan’. Some such plans took shape during the war, but on the whole they added little to the Government’s powers over the conduct of industry. They as a rule stopped short at the factory gate.
‘Central’ planning in the War Cabinet Committees and later in the Ministry of Production mainly resolved itself into endeavours to relate the scale of industrial effort and its timing to the total supply of manpower, machines and materials on the one hand, and to strategic necessity on the other. Some such ‘plan’ underlay the Government’s decisions on the allocations of raw materials and labour, though it was not until the end of 1942 that the fundamental assumptions of the decisions, both economic and strategic, could be stated with all the necessary definition and consistency and a ‘plan’ took shape. All the subsequent Government decisions varying the volume of industrial activity as a whole were but successive modifications of the central plan. At their best these plans were of necessity a better guide to the immediate problems of supply and allocation than those of the more distant future.32
Planning activities did not, however, begin or end at the centre. Both in logic and in time, the planning decisions of central bodies—the War Cabinet Committees before 1942, the Ministry of Production after that date—had to be preceded by corresponding planning decisions of individual supply departments. The latter had to decide how much labour, capacity and materials they would require in order to meet the demands of their respective Services. From this point of view the planning acts of the central authority were often little more than decisions to reconcile the claims to resources
advanced by individual departments on behalf of the industries and of the munitions for which they were responsible. Having negotiated their allocations, departments had to implement their parts of the ‘plan’ They had to see that the resources allotted to them in fact reached the industry; and they had to reconcile the sum total of orders at any given point of time with the timetable of military needs.
This description of planning is, of course, a rationalised and much idealised version of the wartime Government was able to do. The story of how the various techniques of allocation and control were invented and perfected has been sketched out elsewhere33 and will be told again in greater detail in specialised studies. In general, the instruments of central planning were ready long before their objectives could be combined into a coherent whole. An Order of Battle adjusted to the supply of weapons, the latter adjusted to economic resources, and productive resources in their turn apportioned according to strategic priorities: all these elements of a master plan were not satisfactorily brought together until the third, or even the fourth year of the war. It will, of course, be remembered that before 1942 there were several inquiries into the country’s economic powers in relation to its military needs. In the course of the pre-war discussions on the scale of rearmament and the ‘role’ of the armed forces, certain assumptions about economic potentialities were made and rearmament programmes were fixed accordingly. The assumptions, however, were as a rule very simple and vague and were imperfectly supported by statistical measurement or economic argument. As a rule they were not even put into words. When a Chancellor of Exchequer argued that the country could not afford a large Army as well as a powerful Navy and Air Force,34 he did not, and could not, employed his operated verbs and adjectives in a quantitative sense. ‘Could not afford’ was not a statement carrying with it an estimate of changes in national income or standards of life; the words ‘large’ and ‘powerful’ did not stand for a definite number of squadrons and divisions and the munitions they might not require.35
The Wolfe inquiry at the end of 1939 was perhaps the first attempt at a comprehensive as well as a quantitative approach to the economic problem of rearmament. For all its inaccuracies and over-estimates, it was the forerunner of future ‘plans’. The next occasion for a similar attempt was the inquiry which Lord Stamp conducted in May 1940. Lord Stamp’s brief and the character of strategic
planning at the time made it impossible for him to propose a perfectly coordinated scheme of strategic and economic objectives, but he tried to adjust the military liabilities to his estimates of the country’s economic resources, and he offered a forecast of the scale and timetable of industrial mobilisation. Subsequent approaches to the same problem—above all the Beveridge inquiry of the last quarter of 1940 or the estimates embodied in Mr. Churchill’s directive of March 1941 on the size of the Army—were made mostly from the point of view of supplies of manpower. It was not, however, until the late autumn of 1942 that the ‘labour budget’ took final shape.36 At about the same time the Chiefs of Staff were able to provide the ‘planners’ with an Order of Battle worked out for transmission to the American authorities. By ‘marrying’ the new Order of Battle with their anticipations of the labour prospect in 1942 the Lord President in his report of November 1942 and the Joint War Production staff at the Ministry of Production were able to put down on paper first sketches of a true central plan.37 From new on variants of some such plan invariably figured in all discussions of the allocation and re-allocation of resources between the Services and the supply departments, or between the separate supply departments. It also provided an invaluable frame of reference for the discussion of American supplies and allocations to this country.
Planning activities at departmental level may have grown somewhat faster, but it is doubtful whether the evolution was completed by the end of the war. To the very end planning authorities in supply departments remained somewhat diffused and the plans themselves differed not only in perfection but also in emphasis and purpose. It has already been pointed out that planning in the supply departments was more complicated and a more, so to speak, ‘composite’ activity than the decisions which constituted planning at the centre. Much departmental planning was largely statistical, but much was inextricably bound up with executive action. Whether it happened to be an integral part of executive activity or was conceived as a largely statistical occupation it as a rule fell into two distinct types of activity: ‘programming’; on the one hand and ‘production planning’ in the narrow sense of the term on the other.
No single definition will fit correctly the variety of objects which the makers of programmes pursued but, broadly speaking, ‘programming’ was primarily concerned with munitions and parts of munitions. The requirements of the fighting Services had to be ‘broken up’ and ‘spaced out’. The total had to be ‘broken up’ to lay
bare the balance of programmes, i.e. to establish separate quantities for each weapon, to estimate their equivalents in components, spares and fabricated materials. But before the programme could be brought into inner balance it also had to be ‘spaced out’, i.e. the future flow of individual weapons and of parts and components had to be so calculated as to prevent shortages and ‘bottlenecks’.
As distinguished from ‘programming’, ‘production planning’ was primarily concerned with the flow and utilisation of industrial resources. Whereas planners at the centre, in the War Cabinet Committees or the Ministry of Production, thought of resources in general and in bulk, the industrial planners in the departments had to treat them in their concrete and specific forms. As a rule they thought in terms of factory units capable of certain volume of output; but for some major schemes expansion of capacity had to be computed in terms of machines, labour and factory space.
By the end of the war the work of ‘programming’ had been extended and greatly improved. In the Ministry of Aircraft Production effective ‘programming’ began later than in other departments; nevertheless by VE-day it had grown into a very comprehensive and elaborate activity. In the Air Ministry during the years of rearmament, and in the Ministry of Aircraft Production during the first years of its existence, the planners were mainly interested in problems other than programming in the narrow sense of the term, and the practice of programme-making remained somewhat rudimentary. Future output of aircraft may have been forecast with some accuracy. It has already been manufactured that in the so-called ‘Harrogate’ programme of 1940 the output of aircraft was anticipated more accurately than in the programmes of later years.38 In the two of three programmes which followed it, real expectations gave place to ‘target’ figures displayed in order to stimulate the industry to higher endeavours. When Lord Beaverbrook became Minister formal programming stopped though only for a short time. It was resumed in the autumn of 1940 but the programmes were still conceived as a series of ‘target’ figures for complete aircraft somewhat imperfectly sub-divided into main components.39
If the use of ‘targets’ for complete aircraft could still be justified by considerations of policy, the rough and ready manner in which parts, components, and materials were calculated could only be accounted for by lack of system and statistical skill. Both system and skill came in the second half of 1941 when a new department of Statistics and Programmes was set up in the Ministry of Aircraft Production. In new hands the aircraft programme grew in scope and relevance, and in
the end came to cover the major part of the Ministry’s activities. The forecasts of deliveries of complete aircraft were not, and perhaps could not be, greatly improved. They continued to be based on the promises of industry, tempered by the hunches which the planners may have had about the performances of individual firms. The forecasts were therefore bound to be very approximate and, on the whole, rather optimistic. On the other hand, the break-up of the figures of aircraft into engines, major components, spares and materials, could now be done with an accuracy impossible in earlier years. Much close attention could be paid to stocks, to deliveries from the United States, to the different rates at which engines and other aircraft parts were replaced, to anticipated changes in aircraft requirements and design.
Needless to say, even these figures contained high margins of error and were sometimes no more than makeshift guesses. For programmes could not be more perfect than the highly uncertain data of aircraft production allowed them to be; and the limitations of programme-making were well understood in the Department of Statistics and Programmes. The economists in charge of programmes in the Ministry of Aircraft Production were very far from being planners by choice or persuasion, and set little store by the power of a government department to forecast and to control economic events. In fact, no one has publicised the imperfections of Ministry of Aircraft Production programmes more than the statistician responsible for them in the closing stages of the war.40 Yet viewed in historical perspective and judged by the relative standards of all industrial and social forecasts, Ministry of Aircraft Production programmes at that time passed the pragmatic test of ‘good’ programmes. They provided the data for reasonable anticipations and a basis for the placing of advance orders.
In the Ministry of Supply, programmes took shape much earlier than in the Ministry of Aircraft Production. But although there the history of the programmes was more continuous than in the Ministry of Aircraft Production the exact functions of programmes and of programming departments underwent a number of fundamental changes. Generally speaking, the disputable issues of programme-making in the Ministry of Supply related not so much to the scope and validity of programmes as to the administrative links between the making of programmes and the other activities of the Ministry. The concept of the programme and the methods employed were the same as in the Ministry of Aircraft Production. From the very beginning of organised statistics in the Ministry of Supply (and they were as old as the Ministry itself) statisticians not only recorded past
orders and current deliveries, but also, in doing so, tried to match the quantities and the time-schedules of orders. The deliveries of gun-barrels and mechanisms had to be ‘married’ with those for carriages, the supplies of ammunition had to be brought into agreement with the supplies of guns and, at one stage of the war, even with the storage facilities in the country.
This work of reconciliation may at first sight appear no so complex as that of aircraft components, for, with the exception of the tank, no weapon ordered by the Ministry of Supply embodied as many components and instruments as those of an aircraft. In general, the flow of production controlled by the Ministry of Supply was not canalised towards a single series of composite weapons. There was, therefore, little danger of miscalculation at one point of the programme upsetting the entire balance of the Ministry’s production. But if the administrators and the statisticians at the Ministry of Supply were spared the intellectual conundrums of composite assemblies, another problem of balance equally complex and difficult invariably claimed their attention. In analysing requirements and in making forecasts they had to keep in sight the needs of the military formations for which the munitions were intended. And a badly-balanced flow of production—excessive production of some munitions, insufficient production of others—could delay or upset the equipping of a military formation as effectively as a shortage of a components could upset the assembly of an aircraft.
In theory, the balancing of equipment of military formations was the concern of the War Office; but, in practice, the Ministry of Supply could not afford to neglect it. For not only was it the Ministry’s business to synchronise the carrying-out of the different parts of the programme, but it was also impossible for the War Office to detect and to judge the lack of balance in the flow of munitions without full knowledge of the industrial conditions and prospects. The sequence of orders and the fluctuations in the output of munitions had therefore to be watched from this point of view, and the balance of approved army requirements had to be scrutinised accordingly. As a result, the statisticians in the Ministry of Supply found themselves drawn into discussion to the War Office requirements at a very early stage. Before their official submission to the Ministry the army programmes as a rule underwent a course a prolonged preparation, jointly conducted by the technicians of the War Office and the statisticians of the Ministry of Supply.
The part which this statistical activity played in the preparation and analysis of War Office requirements raised the problem of its exact locus in the constitution of the Ministry. In the days when the departments of the Director General of Munitions Production was part of the War Office machine, the munitions programmes were
settled by the Director General and were worked out in detail by the branch of the secretariat attached to him. This continued to be the procedure in the first eight or nine months of the Ministry of Supply. The small statistical service which the Ministry at that time possessed formed part of the Director General of Munitions Production’s secretariat. In the summer of 1940 the reconstruction of the Ministry of Supply brought to the department Sir Walter Layton, as he then was, as Director General of Programmes.41 In that capacity, and later (in July 1941) as chief of the Executive Committee of the Supply Council, Sir Walter Layton assumed general control of programme-making, and the statistical branch became his principal tool. It will be shown presently that Sir Walter Layton conceived the function of planning very widely, and raised issues which went beyond the scope of programmes narrowly defined. On the other hand, the new branch did not, and could not, appropriate every activity which went into the making of programmes. Detailed negotiations leading up to the settlement of the individual items of the programmes were often conducted by separate production directorates and coordinated by the secretariat of the Director-General (after August 1941 the Controller General) of Munitions Production, who also kept in his hands current discussions with the War Office about the design and quality of the munitions the Army required.
The dualism was finally resolved in 1942 with Sir Walter Layton’s translation to the Ministry of Production.42 With his departure the entire task of programme-making was reabsorbed by the Controller General of Munitions Production. The statistical department again became the main tool of the secretariat in its negotiations with the War Office and in the detailed formulation of programmes. By that time the process of ‘programming’, with its periodical revision meetings, with its circulars and its note, had crystallised into something of a routine (the secretariat, true to its War Office ancestry, preferred to call it a ‘drill’), which enabled it in the later stages of the war to tackle the problems of reduction and demobilisation with an ‘expertise’ acquired in the years of expansion.43
The ‘programming; of naval construction presented a problem similar to that of the making of programmes in MAP and the Ministry of Supply, but it was a less complex problem. In naval construction, as in aircraft construction, the entire output culminated in the assembly of large composite units. But vessels were as a rule larger than individual aircraft, fewer in number, and therefore more, so to speak, individualised. When it came to major vessels, ‘programming’
and forecasting in the Admiralty consisted not in tracing trends of large series of standard units, but in keeping a continuous and a highly individual record of the progress of separate ships through the various stages of construction and fitting-out. This could in the main be done by production officers looking after the construction of the individual vessels; the more purely statistical services could be smaller and less elaborate than those of MAP and the Ministry of Supply. The problem of components was also one of ordinary progressing, i.e. settling for each vessel separately the times at which the various components would be required and ordering them accordingly. This was as a rule done either by the firms themselves, or by the corresponding production branch in the Admiralty. It was in the production of small escort vessels and landing craft that the problems of quantity production were for the first time encountered. But even there the numbers were much small and, in the case of landing craft, the assembly was much simpler than in aircraft production. The statistical problems were therefore comparatively simple. The real problems of forecasting arose only in relation to raw materials and labour, but these were outside the scope of ‘programming’ in the narrow sense of the term.
The story of ‘programming’ is thus one of uneven progress, but of progress nonetheless. Whether the technique of ‘production planning’, in so far as it can be distinguished from the making up of programmes, advanced equally far, or indeed advanced at all, is more difficult to say. In theory the purpose of ‘production planning’ was to ensure the efficient distribution and use of resources. The efficient distribution of labour, materials and machine tools was served by allocation, and by the end of 1942 the various techniques of allocation were fully worked out. The manner in which the distribution was done at the centre, i.e. the by the Materials Committee and by other bodies under the War Cabinet and the Minister of Production, has already been described. Within the departments the work was part of the executive functions of the directorates and the secretariats and thought to be inseparable from their current administrative preoccupations. Yet in performing it the departments carried out an essential function of forward planning. Continuous estimates of current requirements and consumption had to be kept, forecasts of future demands had to be made, and applications to central authorities for allocations had to be formulated. In order to cope with the necessary statistical work the directorates concerned with ‘resources’ maintained statistical services of their own. The statistical branch of the Directorate of Materials Production at MAP was a well-staffed and well-conducted organisation; the branch of the secretariat concerned with labour did its planning work in a section headed by an economist.
There was no lack of specialised expertise in the branch of the Admiralty concerned with the requisition and distribution of raw materials. In the Ministry of supply some of this work was canalised through the department of statistics.
‘Production planning’ did not, however, end with the distribution of resources. The critics of official action and the officials who insisted on the need for ‘proper planning’ had in mind a service which went beyond the allocation of resources to their use in industry. In the first place distribution of industrial effort, i.e. the balance between different classes of munitions, could be subjected to an economic test as well as to the purely military test of tactical and strategic necessity. It was an economic as well as a tactical or strategic question whether the quantity of shells in the army programmes compared with that of other infantry weapons was such as to employ national resources in the most economic fashion. Similar questions could be asked about rockets compared with other anti-aircraft defences, bombers compared with bombers, radar aids compared with other items in MAP programmes; and from the early twenties the same questions were being regularly asked about battleships compared with other types of naval vessels. Some critics, and even some officials, also felt that greater economies of production could be achieved by better utilisation of resources in private firms, and that it was the function of planning to ensure that the most economic production methods were employed in industry and that orders went to firms capable of efficient production.
Planning in this sense never became the policy of the British Government. In taking decisions about separate items of Service programmes or about individual factories, the supply departments and the Treasury could not, and did not, ignore the need for the most economic use of resources. But the composition of munitions programmes and the flow of industrial production taken as a whole were not organised in accordance with an objective plan for the most economic utilisation of natural resources. For, of necessity, the Service programmes and war industry had taken their shape long before the need or the possibility of such planning became apparent. The War Office and the Ministry of Supply had begun to place large orders and to build up a large industrial capacity long before they were compelled to function within the allocations of labour and raw materials. Finance was at first the limiting factor, and the orders then placed were spaced out in accordance with approved rates of expenditure. In the later years of rearmament, in 1938 and 1939, the flow of munitions for the Army and the Air Force, though not yet for the Navy, was held back by the pace at which new capacity, more especially Ordnance Factories, could be brought into operation. Planning of resources at that time could have meant little more than
taking care that new factories and extensions were being laid down in the numbers and in the order which would make it possible to meet the approved requirements of the Army by the allotted dates. The size of the problem greatly increased in 1939, and with the outbreak of war a large number of new factories and new extensions were approved.44 But even then it was not yet the planners’ business to make sure that the economic resources available—labour, materials, tools—were sufficient to meet all the new demands.
The emphasis changed in the second half of 1940. In general, the problems of this period were suited to—indeed called for—’overall’ planning of production. The military requirements, especially those of explosives and ammunition, were at their maximum, and the nation’s ability to meet them had to be constantly assessed and reassessed. Some such assessment underlay the decision to make large ‘capital’ provision for new explosives capacity overseas. But the revisions of the Army scales for ammunition which took place that the turn of 1940 and 1941 were perhaps the most prominent examples of the planning decisions thus considered and made.45 These decisions had been preceded by a great deal of ‘planning’ deliberation in the Ministry of Supply. The new Director General of Programmes made it his business to bring the factory programme and future output into a demonstrable relationship with the military position on the one hand and with national resources on the other, and for a time this aspect of planning figured very prominently in the deliberations at high levels, in the Minister’s Executive and elsewhere.
Later, the emphasis shifted again, and ‘planning of resources’ was merged into more purely executive activities. But, though no longer segregated into a department of its own, ‘planning of resources’ could not be dispensed with. The Ministry of Supply was reaching the end of its expansion and was soon due to carry out a reduction in its programmes and output. The problem before it now was not how to create new capacity in the most economic fashion possible, but how to cut its labour force and output with the least harm to army supplies. And while cuts were being discussed and negotiated, problems of the economical use of resources had to be kept in the forefront even though overt references to a ‘plan’, or the very mention of the word, was very rare.
In the Air Ministry, and later at MAP, this type of planning played a less conspicuous part than it did in the Ministry of Supply. In the history of aircraft production during the war occasions for a drastic revisions of production to ensure a more economic use of resources seldom presented themselves. This does not mean that the problems of economic utilisation of resources did not arise at all.
They appeared on several occasions, mostly in connection with the programmes of bombers, but their appearances were somewhat sporadic. They were not as a rule raised by the planners and statisticians, and did not necessarily form part of the general planning activity in the Ministry. Nor did they threaten the fundamental assumption of the aircraft programmes.
Thus the decision to devote a very large proportion of resources to the production of the bomber dates from the early years of rearmament. It was based on a chain of strategic and tactical reasoning which cannot be discussed here. The purely economic argument, i.e. whether concentration on the manufacture of bombers represented the most effective use of the nation’s productive resources, did not figure very prominently in the pre-war discussions. Nor was it much discussed at the time when the general trend of specifications was modified in favour of large four-engined bombers. Most of the arguments then employed were also tactical and technical. The economic issues first obtruded itself at all conspicuously in the middle of 1943, when it occurred to a few persons connected with the Prime Minister’s statistical branch46 and the Ministry of Production to inquire whether the strategic and tactical results expected from the planned bomber force of four-engined aircraft might not be achieved with much less expenditure of national resources by making the Mosquito bomber the standard equipment of the bomber force.
Nothing, of course, came of the inquiry, partly because its findings were inconclusive, partly because it had little backing either in the Air Ministry or in MAP. Much more serious turned out to be the series of inquiries into the distribution of industrial effort between the different types of four-engined bombers. By the middle of 1943 it became apparent that on purely military grounds the Lancaster bomber was the most efficient and the Stirling the least efficient of the heavy bombers in service. But, to begin with, the opinion was not backed by any agreed measurement of fighting efficiency of bombers. During 1942 some sort of measurement of fighting efficiency—weight of bombs dropped per aircraft lost—had been worked out. It was only necessary to relate this measurement to the comparative production costs of each type of bomber in terms of man-hours (this was done by early in 1944 on the simultaneous initiative of people in the Ministry of Production, MAP, the Air Ministry and elsewhere) to arrive at a clear and fairly exact conclusion that the efficient use of national resources required the substitution of the Lancaster bomber for the others in service. This in fact became the official view of MAP, even though little could be done to carry the policy into effect. The loss in production during the period when the factories making the Halifax and the Stirling would be retooling for the
Lancaster would be greater than MAP and the Air Ministry could accept. All that could be done than was to replace a proportion of the Stirling output, leaving that of the Halifax comparatively untouched.
A different aspect of the bomber programme was raised by the progress of radar. It will be recalled that by the end of 1942 the scientists at the Telecommunications Research Establishment had developed in H2S a very valuable equipment for guiding bomber aircraft to enemy targets during the night. But, to begin with, Bomber Command hesitated to adopt and to install the new device. It was apparently reluctant to agree to anything that might slow down the output of bombers, and feared a delay in their delivery through retrospective modification to take H2S. The representatives of the Telecommunications Research Establishment and their advocates could argue that without H2S and other device the efficiency of the bomber force—the weight of bombs dropped in the right places—would suffer to an extent far greater than it would be by sacrificing some bombers in favour of H2S. Here again the ‘planning’ argument, however conclusive, prevailed only in part. H2S equipment was made and installed, but not in such numbers as to have a noticeable effect on the supply of bombers.
Similar issues, mostly those of detail, occurred on several other occasions in the later years of the war. But, like those of the bomber occasions in the later years of the war. But, like those of the bomber and H2S, they were raised separately, sometimes almost accidentally, by individuals and sections in MAP, the Air Ministry of the Ministry of Production. The fact that they had to be raised at all bears witness to the reality of the economic issues underlying the strategic balance of programmes. But if, nevertheless, the balance of programmes was not periodically ‘re-planned’, this was not due to the lack of awareness of the economic issues among the economists or civil servants. The main reason for the apparent neglect was that the pattern of MAP’s activities and the general distribution of effort among the various parts of the aircraft programmes had taken shape long before the possibility and necessity of planning by resources became apparent. The inertia of the pattern throughout the war was such as to make it impossible to introduce major changes at short notice without unsettling the entire flow of aircraft production. At no stage was it ever possible to compile an aircraft programme which was theoretically desirable at that juncture. Changes in the programmes could only be marginal.
On the other hand, aircraft production was the only branch of munitions industry in which, at least for a while, officials at the Ministry attempted to ‘plan’ the organisation of production by industry. Detailed decisions about the ‘layout’ of production, about improvements
in machines and industrial methods were of course regularly made in the production directorates, especially on occasions when new weapons had to be ordered, or new capacity had to be found. These decisions were, however, taken piecemeal and were never related to the economic problem of war production as a whole. They were certainly not conceived as steps towards a general reform of industrial methods. The only occasion on which plans to ‘rationalise’ production began to be made occurred in the second half of 1938 in the Air Ministry. When in June 1938 Sir Ernest Lemon and his assistants took charge of ‘planning’, or of what stood for planning, in the Air Ministry, they approached the problem from the point of view of production engineering, which was natural to them.47 What made the approach more natural still was that the aircraft industry at that time offered an obvious subject for examinations by industrial consultants. In the course of the preceding two years it had grow out of its handicraft scale and methods, but, on the whole, had not yet fully mastered the methods of quantity output. The fundamental problem of aircraft production en masse still appeared to be awaiting examination, and the planners in the Ministry took it upon themselves to examine them.
Thus nothing appeared to be known about the economics of serial production, i.e. the extent to which, and the points at which, real costs per aircraft, could be expected to fall when large quantities of aircraft were in production. The planners, therefore, tried to assemble the man-hour costs of aircraft at different phases of mounting production, and to draw curves of falling real costs comparable with those which a well-known aircraft engineer in the United States had compiled on grounds largely theoretical.
Another problem to be examined was that of production capacity. Continuous demands for new floor space and machining capacity were being made on the Ministry and vast sums were being invested in new factories and extensions. Yet there was very little knowledge of what output could be expected from a given unit of investment. So the planners set about computing ‘densities’ of workers per unit of floor space and the loadings of machine tools.
Yet another cost problem was that of variation in design. Designs of aircraft were being made and aircraft were being ordered without clear ideas about the comparative costs of different shapes and different methods of production of aircraft parts, which were made necessary by differences in design. So Sir Ernest Lemon’s principal adviser in this field set about comparing the costs of producing wings of different types with a view to establishing standard wing costs, or even designing a standard wing.
The investigations were as yet very fragmentary and inconclusive.
To begin with, relevant information was scarce and difficult to collect. Now and again it was willingly provided by the aircraft factories, but the bulk of its came from investigations carried out on behalf of the planning department of the Technical Costs Officers. The latter were a body of accountants with engineering qualifications and experience, who had previously been attached to the Admiralty and whose function it was to assist the contracts department in assessing the contractors’ costs of production. The Service was now made available to the contracts branches of the Air Ministry, but its employment by the planning department could be no more than a temporary device. The Technical Costs Officers had undoubtedly acquired a minute and intimate knowledge of the industrial processes in the factories they visited and could produce highly reliable and, from the engineering point of view, highly expert advice. But the service was under-staffed, and its main business lay elsewhere.
The fragmentary character of the evidence made the researches somewhat inconclusive.. It is possible that had this service been allowed to develop the Ministry might in the end have possessed itself of a blueprint of an ‘ideal’ aircraft industry, in which a few types of the most economical aircraft were made in industrial units where buildings, plant and machinery were utilised in the most economical fashion. A planners’ blueprint of this kind might have been used as a standard by which to judge the performances of industry. That some such plan was possible, that it was also capable of being imposed upon some branches of the munitions industry, was later to be proved by a number of examples. At home, the Royal Ordnance Factories, and more especially the Filling Factories, were good examples of large munitions industries made up of more or less standardised factory ‘units’ all employing the same or largely the same equipment and methods of production. Abroad, the organisation for the production of fighters which Alfred Speer built up in Germany during 1944 was something of an ‘ideal’ engineering scheme worked out by methods not very different from those employed by Sir Ernest Lemon’s assistants. So was much of the wartime planning of industrial production by great industrial enterprises in the United States; Mr. Kaiser’s handling of the shipbuilding orders was a case in point.
There is, however, very little doubt that nothing short of a catastrophic collapse of aircraft production would ever had enabled the industrial planners at MAP to enforce from above uniform methods of aircraft production. As it turned out the experiment of industrial planning did not develop sufficiently far to justify any ‘blueprint’, however modest. By the spring of 1940 Sir Ernest Lemon and his principal collaborators had left the Air Ministry. One or two production engineers on the headquarters staff continued to collect and to analyse production data for a few months, but the men in charge of
statistics and planning confined themselves mostly to other activities.
When in the late summer of 1941 the new department of Statistics and Programmes came into existence it did not include ‘on its agenda’ industrial planning as the term was understood in the days of Sir Ernest Lemon. The economists and economic statisticians who staffed it concentrated on ‘programming; in the proper sense of the term, with the results which have already been described.48 Inquiry into industrial processes and into the use of resources within aircraft factories appeared to them both impossible and unnecessary. The main yardstick of the production engineers—standard man-hours—appeared to them too crude and too unreal a measurement to apply to aircraft production. In general, the margin of error in the industrial inquiries of 1938 could not have commended themselves to the statisticians now in charge. In their view the inquiries could have served only one purpose, i.e. that of showing which firms were, and which were not, efficient, and this they believed could be discovered in an easier and more direct manner.
Some of these arguments undoubtedly were relevant and true. It is, nevertheless, impossible to escape the impression that the reason which led the statisticians of later years to neglect the production data of the engineers who preceded them was the same as that which had prevented the engineers from working out a satisfactory system of programmes. These were two groups of specialists, each expert in the use of certain techniques and methods of analysis peculiar to its occupation. The same occupational specialisation which nowadays accounts for the economic naïveté of ‘technocratic’ literature and also makes the writings of some economists about industry appear to engineers and industrialists to be unreal and irrelevant, also prevented a simultaneous development in MAP of both ‘programming’ and ‘industrial planning’. In the end ‘programming’ developed almost as fully as could be wished. The failure of ‘planning’ to develop equally far may or may not have left some of the shortcomings of the munitions industry unobserved and uncorrected. But it has at least prevented Government planning from penetrating at all deeply into the managerial autonomy of private business.