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Arms, Economics and British Strategy




This book integrates strategy, technology and economics and presents
a new way of looking at twentieth-century military history and Britain™s
decline as a great power. G. C. Peden explores how, from the
Edwardian era to the 1960s, warfare was transformed by a series of
innovations, including dreadnoughts, submarines, aircraft, tanks,
radar, nuclear weapons and guided missiles. He shows that the cost
of these new weapons tended to rise more quickly than national income
and argues that strategy had to be adapted to take account of both the
increased potency of new weapons and the economy™s diminishing
ability to sustain armed forces of a given size. Prior to the development
of nuclear weapons, British strategy was based on an ability to wear
down an enemy through blockade, attrition (in the First World War)
and strategic bombing (in the Second), and therefore power rested as
much on economic strength as on armaments.

g. c. peden is Professor of History at the University of Stirling. His
publications include British Rearmament and the Treasury, 1932“1939
(1979), and The Treasury and British Public Policy, 1906“1959 (2000).
Cambridge Military Histories



Edited by

HEW STRACHAN, Chichele Professor of the History of War,
University of Oxford and Fellow of All Souls College, Oxford
GEOFFREY WAWRO, Major General Olinto Mark Basanti
Professor of Military History, and Director, Center for the Study of
Military History, University of North Texas


The aim of this new series is to publish outstanding works of research on warfare
throughout the ages and throughout the world. Books in the series will take a
broad approach to military history, examining war in all its military, strategic,
political and economic aspects. The series is intended to complement Studies in
the Social and Cultural History of Modern Warfare by focusing on the ˜hard™
military history of armies, tactics, strategy and warfare. Books in the series will
consist mainly of single author works “ academically vigorous and groundbreak-
ing “ which will be accessible to both academics and the interested general
reader.

Titles in the series include:
E. Bruce Reynolds Thailand™s Secret War: OSS, SOE and the Free Thai Underground
During World War II
Robert T. Foley German Strategy and the Path to Verdun: Erich von Falkenhayn
and the Development of Attrition, 1870“1916
Elizabeth Greenhalgh Victory through Coalition: Britain and France during the First
World War
Arms, Economics and
British Strategy
From Dreadnoughts to Hydrogen Bombs


G. C. Peden
CAMBRIDGE UNIVERSITY PRESS
Cambridge, New York, Melbourne, Madrid, Cape Town, Singapore, São Paulo

Cambridge University Press
The Edinburgh Building, Cambridge CB2 8RU, UK
Published in the United States of America by Cambridge University Press, New York
www.cambridge.org
Information on this title: www.cambridge.org/9780521867481

© G. C. Peden 2007


This publication is in copyright. Subject to statutory exception and to the provision of
relevant collective licensing agreements, no reproduction of any part may take place
without the written permission of Cambridge University Press.
First published in print format 2007

eBook (EBL)
ISBN-13 978-0-511-29474-7
ISBN-10 0-511-29474-3 eBook (EBL)
hardback
ISBN-13 978-0-521-86748-1
hardback
ISBN-10 0-521-86748-7




Cambridge University Press has no responsibility for the persistence or accuracy of urls
for external or third-party internet websites referred to in this publication, and does not
guarantee that any content on such websites is, or will remain, accurate or appropriate.
Contents




List of tables page viii
Acknowledgements x
List of abbreviations xi

Introduction 1
1 The dreadnought era, 1904“1914 17
2 The First World War 49
3 Retrenchment and rearmament, 1919“1939 98
4 The Second World War 164
5 The impacts of the atomic bomb and the Cold War,
1945“1954 229
6 The hydrogen bomb, the economy and decolonisation,
1954“1969 272
Conclusion 344

352
Select bibliography
367
Index




vii
Tables




1.1 Defence expenditure as percentage of GDP,
1904/5“1913/14 page 35
1.2 Distribution of defence expenditure by
departments, 1904/5“1913/14 38
1.3 Cumulative totals of dreadnought battleships
and battle-cruisers completed at end of
each year, 1906“16 39
2.1 Aircraft production, 1914“18 69
2.2 GDP and government and consumers™
shares of GDP, 1913“20 74
2.3 Balance of payments on current account, 1914“18 75
2.4 Balance of payments on capital account,
1914“18 76
3.1 Costs of aircraft, 1924“39 117
3.2 Defence departments™ expenditure as percentage
of GDP, 1919/20“1939/40 127
3.3 Indices of GDP for United Kingdom,
France, Germany, Italy, Japan and the
USA, 1913“37 129
3.4 Balance of payments, 1930“8 136
3.5 Military aircraft production in Britain,
France, Germany, Japan, the USA and
the USSR, 1933“40 138
3.6 Major warships launched (or conversions
to aircraft carriers begun), 1922“35 and
1936“40 141
3.7 Commonwealth navies in 1931 and 1939 149
3.8 Expenditure by the defence departments,
1924/5“1939/40 151
3.9 Distribution of expenditure by the defence
services, 1933/4“1938/9 152


viii
List of tables ix

4.1 Capital ships and aircraft carriers launched
or converted, 1936“45 178
4.2 British and German aircraft production, 1939“44 186
4.3 Production of tanks and self-propelled artillery
on tank chassis, 1939“44 187
4.4 Numbers of days lost in strikes and lockouts in all
industries and services, and the percentage of these
that were in coal-mining, 1914“18 and 1939“45 192
4.5 Percentage shares of national income (NNP),
1938“45 194
5.1 Navies in 1954: numbers of ships (with
numbers completed since war in brackets) 243
5.2 Strength of armed forces and women™s
services, 1945“54 250
5.3 Defence expenditure as a percentage of GDP,
1946/7“1953/4 250
5.4 Planned and actual rearmament expenditure
on products of metal and engineering industries,
1950/1“1953/4 252
5.5 UK share of export of manufactures from
eleven industrial countries, 1937, 1948, 1950“8 258
5.6 Defence expenditure of leading NATO countries
as a percentage of GNP at factor cost, 1949“55 259
6.1 UK share of export of manufactures from
eleven industrial countries, 1954“69 298
6.2 Comparisons of GNP of various countries with
UK at current prices and exchange rates, 1954“69 300
6.3 Populations of various countries, 1959 and 1970 301
6.4 Defence personnel overseas and
balance-of-payments cost, 1955,
1961 and 1967 305
6.5 Defence expenditure of leading NATO
countries as percentage of GNP at factor
cost, 1954“69 306
6.6 Strength of armed forces and women™s
services, 1954“69 307
6.7 Defence expenditure as a percentage of
GDP, 1954/5“1969/70 308
6.8 Index of defence expenditure at constant prices,
1955“69 309
Acknowledgements




I am particularly grateful to Gill Bennett, David Edgerton, David
French and Hew Strachan for reading and commenting on earlier drafts
of this book. I have also bene¬ted over the years that I have been
working on economics and defence from conversations with William
Ashworth, Simon Ball, Christopher Bartlett, Kathleen Burk, Alec
Cairncross, David Dilks, Norman Gibbs, Roger Middleton, Phillips
O™Brien, R. A. C. Parker, Donald Cameron Watt and Tom Wilson.
Responsibility for errors or omissions is mine alone.
I thank Birmingham University Library; the Bodleian Library, Oxford;
the British Library, London; Churchill College, Cambridge; the Hartley
Library, Southampton University; the National Archives of the United
Kingdom: Public Record Of¬ce, London; the National Library of
Scotland, Edinburgh; and the National Maritime Museum, Greenwich,
for access to documents and other material. All the staff concerned gave
friendly assistance. I also thank Birmingham University; the Trustees of
the Broadlands Archives; the Trustees of Harold Macmillan™s papers; the
Chief Executive of the National Archives of the United Kingdom;
the Trustees of the National Library of Scotland; and the Clerk of the
Records, the Parliamentary Archives, with the agreement of the
Beaverbrook Foundation; and the following publishers: Edward Arnold
(Table 4.5) and Palgrave Macmillan (Tables 2.3 and 2.4) for permission to
reproduce or publish passages based on copyright material. The image on
the cover ¬rst appeared in The British Navy Book, published by Blackie and
Son Ltd in 1915. Every effort has been made to secure necessary
permissions to reproduce copyright material but in some cases it has
proved to be impossible to trace copyright holders. If any omissions are
brought to my notice, Cambridge University Press will be happy to include
appropriate acknowledgements on reprinting.
The British Academy and Stirling University provided ¬nancial
assistance to cover research expenses and the Arts and Humanities Research
Council funded a semester™s study leave in which to complete the project.
Finally, I owe my wife, Alison, more than I can say for her support.
x
Abbreviations




TEXT
BAC British Aircraft Corporation
BAOR British Army of the Rhine
BEA British European Airways
BEF British Expeditionary Force
BOAC British Overseas Airways Corporation
CAS Chief of Air Staff
CDS Chief of the Defence Staff
CENTO Central Treaty Organisation
CID Committee of Imperial Defence
CIGS Chief of the Imperial General Staff
CND Campaign for Nuclear Disarmament
DEA Department of Economic Affairs
DMO Director of Military Operations
DRC Defence Requirements Sub-Committee
EPT excess pro¬ts tax
FAA Fleet Air Arm
GATT General Agreement on Tariffs and Trade
GDP gross domestic product
GNP gross national product
h.p. horse-power
ICBM intercontinental ballistic missile
IMF International Monetary Fund
IRBM intermediate-range ballistic missile
MP member of Parliament
m.p.h. miles per hour
NATO North Atlantic Treaty Organisation
NDC national defence contribution
NEDC National Economic Development Council
NNP net national product
OEEC Organisation for European Economic Co-operation

xi
xii List of abbreviations

OR operational requirement
RAF Royal Air Force
RFC Royal Flying Corps
RNAS Royal Naval Air Service
RTC Royal Tank Corps
SACEUR Supreme Allied Commander Europe
SAM surface-to-air missile
SEATO South-East Asia Treaty Organisation
SOE Special Operations Executive
UCS Upper Clyde Shipbuilders
UK United Kingdom
US United States
USAAF United States Army Air Force
USAF United States Air Force
USSR Union of the Soviet Socialist Republics
VTOL vertical take off and landing
WEU Western European Union

REFERENCES
ADM Admiralty records
AIR Air Ministry records
AVIA Ministry of Supply records
c. or cc. column(s)
C Cabinet paper
CAB Cabinet Of¬ce records
Cd, Cmd, Cmnd Command papers
CHT Lord Chat¬eld papers
CID Committee of Imperial Defence
CLRK Sir Richard Clarke papers
COS Chiefs of Staff Committee paper
CP Cabinet paper
D Defence Committee paper
DBFP Documents on British Foreign Policy
DBPO Documents on British Policy Overseas
DC Defence Committee paper
DCM Ministerial Committee on Disarmament paper
DCOS Deputy Chiefs of Staff paper
DEFE Ministry of Defence records
DO Defence and Overseas Policy Committee paper
DP(P) Defence Plans (Policy) Committee paper
List of abbreviations xiii

DPR Defence Policy and Requirements Committee
paper
DPR(DR)C Defence Policy and Requirements
(Defence Requirements) Committee
DRC Defence Requirements Sub-Committee
DSND Duncan Sandys papers
FISR Fisher of Kilverstone papers
FO Foreign Of¬ce records
HC Deb. House of Commons Debates (preceded by
volume number)
HMSO Her Majesty™s Stationary Of¬ce
LG David Lloyd George papers
MB Mountbatten papers
MC Military Committee (NATO) paper
NC Neville Chamberlain papers
n.d. no date
NLS National Library of Scotland
OPD Defence and Overseas Policy Committee paper
PP Parliamentary Papers
PREM Prime Minister™s Of¬ce records
s series
T Treasury records
TNA The National Archives of the United Kingdom:
Public Record Of¬ce
UK United Kingdom
WO War Of¬ce records
Introduction




The starting point for this study of British defence policy between 1904
and 1969 is the tendency for the costs of new weapons systems to rise
more rapidly than the national income.1 Three main insights are offered.
First, British defence policy was based upon technological innovation.
Second, reductions in the size of the armed forces to accommodate new
weapons systems in defence budgets were not evidence of a decline in
power. Third, British grand strategy, incorporating economic as well as
military responses to external threats, was much more ambitious than is
commonly believed.
I ¬rst approached the relationship between economics and strategy in
my book British Rearmament and the Treasury, 1932“1939, which showed
that Treasury attempts to in¬‚uence strategy re¬‚ected concern about
Britain™s ability to sustain a long war, and were related to trade and
industry as well as money.2 Since then there have been a number of case
studies of interaction between economics and strategy. For example,
David French and Avner Offer have described how British strategic
planning before 1914 assumed that naval blockade would cause the
German economy to collapse, while Britain™s access to raw materials
and her industrial power would enable her to supply continental allies
with munitions.3 David Edgerton has challenged assumptions about
British military backwardness by putting forward a broad-arching thesis
of Britain as a pioneer of technologically focused war, possessed of a
powerful military-industrial-scienti¬c complex that emerged in the ¬rst
decades of the twentieth century and was cut back only in the late 1950s


1
See Philip Pugh, The Cost of Seapower: The In¬‚uence of Money on Naval Affairs from 1815
to the Present Day (London: Conway Maritime Press, 1986).
2
G. C. Peden, British Rearmament and the Treasury, 1932“1939 (Edinburgh: Scottish
Academic Press, 1979).
3
David French, British Economic and Strategic Planning 1905“1915 (London: Allen and
Unwin, 1982); Avner Offer, The First World War: An Agrarian Interpretation (Oxford:
Clarendon Press, 1989).

1
2 Arms, economics and British strategy

and the 1960s.4 The time seems ripe for an interdisciplinary study of the
interaction between technology, economics and strategy over a similar
period.
This book addresses three major questions that confront every gov-
ernment: how to compete internationally in military technology; what
proportion of national income to devote to defence; and how best to
deploy the armed forces. British governments had to relate defence
policy to a world role that re¬‚ected economic and strategic interests
acquired when Britain had been the leading industrial nation, but which
was increasingly dif¬cult to maintain as other countries caught up with
or overtook the British economy. The idea that there is a relationship
between a nation™s economic fortunes and its importance as a military
power is a familiar one, thanks to Paul Kennedy™s Rise and Fall of the
Great Powers. Kennedy emphasised that the historical record only
supports this thesis in the long run. Far from being a proponent of
economic determinism, he showed that some powers chose not to use
economic power to build up armed forces. For example, the United
States preferred in the inter-war period to withdraw into isolationism.
Likewise, when Britain experienced economic decline relative to other
powers, politicians had some degree of choice in grand strategy. He
noted the importance of ability to afford increasingly expensive weapons
systems, but saw the main dynamic of change as technology that
increased the output of an economy and altered its relative size com-
pared with other economies.5 In contrast, this book focuses on the
related, but distinct, dynamic of changes in military technology.
Both economic decline and military technology feature in Correlli
Barnett™s four-volume account of the ˜collapse™ of British power between
the First World War and the Suez crisis of 1956.6 Barnett used a con-
cept of total strategy which encompassed all factors that he believed to
be relevant to a nation™s ability to preserve or extend its power: edu-
cation, literature, religion and national myths, for example, as well as
armed forces and economic and technological resources. His work may

4
David Edgerton, England and the Aeroplane: An Essay on a Militant and Technological
Nation (Basingstoke: Macmillan, 1991); ˜Liberal militarism and the British state™, New
Left Review, 185 (1991), 138“69; Warfare State: Britain, 1920“1970 (Cambridge
University Press, 2006).
5
Paul Kennedy, The Rise and Fall of the Great Powers: Economic Change and Military
Con¬‚ict from 1500 to 2000 (London: Unwin Hyman, 1988).
6
Correlli Barnett, The Collapse of British Power (London: Eyre Methuen, 1972); The Audit
of War: The Illusion and Reality of Britain as a Great Nation (London: Macmillan, 1986);
The Lost Victory: British Dreams, British Realities 1945“1950 (London: Macmillan, 1995);
The Verdict of Peace: Britain between her Yesterday and the Future (London: Macmillan,
2001).
Introduction 3

be seen as the combination of two Anglo-American historiographical
traditions. The ¬rst attempts to explain Britain™s relative decline as an
industrial economy by asserting that economic performance was
undermined by anti-industrial and anti-scienti¬c biases in British cul-
ture, broadly de¬ned. The second attributes relative military decline to
shortcomings in the doctrine and equipment of the British armed forces,
and technical backwardness in the industries supplying them, all usually
judged by comparison with an idealised Germany, if not perfection. In
fact the British elite was very interested in exploiting science and tech-
nology for military purposes and, as Edgerton has pointed out, the
British aircraft industry was more ef¬cient than its German counterpart
for most of the Second World War.7
Power has to be related not only to resources but also to commit-
ments. Barnett argued that the British Empire, far from being an asset,
was a political and military liability that policymakers failed to tackle
with clear-sighted, strategic calculation.8 Sir Michael Howard, in his
seminal work, The Continental Commitment, stated more cautiously that
his thesis that the Empire brought Britain no strength in her dealings
with Germany in the 1930s was intended to be a starting point for
further discussion.9 Colonies and dominions that together covered
about a ¬fth of the world™s land mass at the beginning of the twentieth
century, a proportion raised to about a quarter as a result of mandates
acquired after the First World War, would certainly seem to have
represented strategic overextension in terms of Britain™s own resources.
However, as I have argued elsewhere, the Empire represented assets in
the form of naval bases, control of access to raw materials, and reserves
of manpower, and did not in fact divert very signi¬cant defence
resources overseas in the 1930s.10 Phillips O™Brien has shown that the
Royal Navy was so concentrated in European waters in the years
immediately before 1914 that it would not have been much smaller even


7
David Edgerton, ˜The prophet militant and industrial: the peculiarities of Correlli
Barnett™, Twentieth Century British History, 2 (1991), 360“79. The contributors to Bruce
Collins and Keith Robbins (eds.), British Culture and Economic Decline (London:
Weidenfeld and Nicolson, 1990), deal critically with Barnett™s thesis and also the work
of Martin J. Wiener, English Culture and the Decline of the Industrial Spirit 1850“1980
(Cambridge University Press, 1981), pointing out that cultural differences between
Britain and Germany were less signi¬cant than is often supposed.
8
Barnett, Collapse of British Power, pp. 74“83, 123“4, 133“40, 163“233; Lost Victory,
pp. 51“69; Verdict of Peace, pp. 146“50, 487.
9
Michael Howard, The Continental Commitment: The Dilemma of British Defence Policy in
the Era of the Two World Wars (London: Temple Smith, 1972), p. 7.
10
G. C. Peden, ˜The burden of imperial defence and the continental commitment
reconsidered™, Historical Journal, 27 (1984), 405“23.
4 Arms, economics and British strategy

had there been no colonies to defend.11 Orest Babij, John Ferris, Greg
Kennedy and Keith Neilson have taken a very different tack from
Barnett and Howard by emphasising that the defence of Britain was tied
to the defence of the Empire and trade routes. From their perspective,
there was a failure after 1929 to maintain the naval superiority, and the
naval and air bases and army garrisons, necessary to defend Britain™s
world-wide interests.12

Arms
Assessment of Britain™s technological backwardness or otherwise in
armaments has to be made against a background of a series of innovations
that transformed warfare. At the beginning of the twentieth century the
wireless telegraph, as radio was then called, was a novelty; subsequently,
electronics were applied not only to communications, but also to
detecting the enemy with radar and to enabling warships, aircraft or
guided missiles to ¬nd their targets. At sea Britain took a technological
lead in 1906 by launching HMS Dreadnought, which set a new standard
for ships armed with big guns. However, submarines and aircraft soon
posed threats to surface warships and merchant ships, and battleships
were eventually displaced by aircraft carriers. On land, the ¬repower of
armies was greatly increased by improved artillery and machine guns, and
the tank, originally designed in the First World War to support infantry in
breaking through barbed wire and trenches, displaced cavalry as the
mobile military arm from the 1930s. The development of air power ended
Britain™s insular security as early as the First World War, and in the 1950s
Britain came to be regarded as indefensible against a nuclear attack. From
the foundation of the Royal Air Force (RAF) in 1918 to the 1960s the
strategic bomber was the principal justi¬cation for the existence of a
service independent of the navy and army, but in 1969 the British nuclear
deterrent was transferred from Bomber Command to submarine-
launched Polaris missiles. The transfer was signi¬cant not only as regards

11
P. P. O™Brien, ˜The titan refreshed: imperial overstretch and the British navy before the
First World War™, Past and Present, 172 (2001), 145“69.
12
John Ferris, ˜˜˜The greatest power on earth™™: Great Britain in the 1920s™, International
History Review, 13 (1991), 726“50; John Ferris, ˜˜˜It is our business in the Navy to
command the seas™™: the last decade of British maritime supremacy, 1919“1929™ and
Orest Babij, ˜The Royal Navy and the defence of the British Empire, 1928“1934™, in
Greg Kennedy and Keith Neilson (eds.), Far Flung Lines: Studies in Imperial Defence
(London: Frank Cass, 1997), pp. 171“89 and 124“70 respectively; Keith Neilson, ˜The
Defence Requirements Sub-Committee, British strategic foreign policy, Neville
Chamberlain and the path to appeasement™, English Historical Review, 118 (2003),
651“84.
Introduction 5

the balance between the services but also because British-designed
bombers were being replaced by an American-designed weapons system.
Britain, it would seem, was no longer a technological leader.
If Britain™s armed forces were to be up to, or in advance of, con-
temporary standards, growing investment in research and development
was required to produce increasingly sophisticated equipment. There
were three possible responses to growing costs: the size of the armed
forces could be reduced; obsolescent equipment could be made to last
longer; or the proportion of national income devoted to defence could
be increased. Some examples of the rising cost of armaments may
convey the scale of the problem. The last conventional cruiser built for
the Royal Navy, HMS Blake, completed in 1961, cost £14,940,000;
HMS Cornwall, an armoured cruiser of similar size completed in 1904,
cost £756,274. Most of the difference in price is accounted for by the
changing value of money, but the relative costs in terms of what the
nation could afford can be compared by measuring them as percentages
of national income in 1904 and 1961 at current prices. Thus, Cornwall
cost 0.046 per cent of national income, but Blake cost 0.067 per cent.13
If the navy had taken the same share of national income in both years,
and had been equipped solely with cruisers of just under 10,000 tons, it
could have afforded only two-thirds as many ships in 1961 as in 1904.
This example understates the problem: the ¬rst dreadnought battleships
cost about 0.1 per cent of national income; forty years later an aircraft
carrier cost twice that percentage, or more than twice including its air-
craft. Moreover, from 1918 the navy had to share the defence budget
with the air force as well as with the army. The navy was bound to
become smaller over time.
Comparison of costs of most weapons systems is dif¬cult, for whereas
ships can be priced as individual items, the cost of a tank or an aircraft
depends upon how many are produced. Costs of research and develop-
ment, and of industrial plant, per item of equipment are lower according
to the number built, and the longer the period of production the greater
are the opportunities to raise productivity (through learning by doing)
and therefore to reduce the amount of labour and capital embodied in
each item. However, it was estimated in 1951 that, whereas it had taken
1,100 machine hours to make a pre-war Hurricane ¬ghter, the Hunter jet
¬ghter ¬rst ¬‚own in that year took 8,000 machine hours to make.14 The

13
The ¬gures used for national income in the calculation are for gross national product at
factor cost, compiled by Charles Feinstein and published in B. R. Mitchell, British
Historical Statistics (Cambridge University Press, 1988), p. 829.
14
Progress of Defence Programme, minutes of meeting between the Minister of Defence
and the Secretary of State for Air, 11 Dec. 1951, PDP/M (51) 1, Ministry of Defence
6 Arms, economics and British strategy

average cost of a Canberra bomber, which was manufactured between
1949 and 1961, was £250,000, but in 1964 it was estimated that the
production cost of its successor, the TSR-2, would be £2.8 million, plus
£2 million for research and development, for each of the aircraft that the
RAF wished to order.15 It is true that more advanced weapons systems
were more effective than the ones they replaced, but similar technical
advances were being made by potential enemies, and any relative
advantage gained by adopting new technology tended to be short-term.
The great powers were in the position of Alice and the Red Queen, in
Through the Looking-Glass, of having to run very fast merely to maintain
their relative position.
The problem was compounded by the tendency of the costs of paying,
clothing and feeding service personnel, and employing civilians in
depots, dockyards, design of¬ces and research establishments, to rise in
line with national income. As weapons systems became more complex,
they required more maintenance: for example, a Lightning jet ¬ghter
squadron in the 1960s required twice as many men to service its aircraft
as a wartime Spit¬re squadron had required.16 Thus the proportion of
the services™ manpower devoted to support front-line units tended to
rise. Consequently, any cuts in the size of the armed forces tended to be
disproportionately at the expense of front-line units. One way to keep
personnel costs down was to use conscripts, who could be paid less and
kept in cheaper accommodation than long-service volunteers. Con-
scription was continued after the Second World War until it was phased
out in the early 1960s, but was not popular with the services on account
of the time required to train men who would serve only for a short
period.
The costs of weapons systems could be cut if they were mass pro-
duced, which required standardisation, but with three armed forces
carrying out a wide variety of roles there were limits to the extent to
which the range of equipment could be reduced. Research and devel-
opment costs could be shared by importing technology, either by buying
equipment abroad or by producing foreign designs under licence.
Imported equipment could be cheaper than home-produced equipment
if the exporting country had larger-scale production, as was the case in
the United States from the 1940s. Importing technology was not always

records, series 7, ¬le 970 (DEFE 7/970), The National Archives of the United
Kingdom (TNA).
15
Sir Richard Clarke to Sir William Armstrong, 3 Nov. 1964, Sir Richard Clarke papers
(CLRK), 1/3/3/2, Churchill College, Cambridge.
16
Guy Hartcup, The Silent Revolution: The Development of Conventional Weapons 1945“85
(London: Brassey™s (UK), 1993), p. xxiv.
Introduction 7

popular with British armaments ¬rms, or even with patriotic historians:
the adoption in the late 1930s of the American Browning machine gun
by the RAF, and the Czech Bren light machine gun and the Swedish
Bofors light anti-aircraft gun by the army, all for production under
licence in Britain, was taken by Barnett as evidence of the ˜partial
decrepitude™ of Britain™s arms industry.17 However, from the point of
view of economising on research and development costs, it made sense
to import some designs, while exporting others.

Economics
The relative decline in Britain™s economy, compared with other indus-
trial countries, during the ¬rst eight decades of the twentieth century
was clearly a factor limiting her ability to compete as a military power.
Even so, output per person remained above French and German levels
until the 1960s. Since Britain spent a higher proportion of her national
income on defence than other Western European countries after 1945,
her military expenditure remained greater than France™s until 1968 and
West Germany™s until 1970. The disparity between Britain, on the one
hand, and the United States and the Soviet Union, on the other, as
regards ability to produce the full range of weapons systems was not
obvious until the 1950s. From 1950 to 1969, however, total British
defence expenditure averaged about 9.4 per cent of the American level
and her attempt to match the superpowers™ range of research and
development with much more limited numbers of scienti¬c and tech-
nological personnel resulted in high unit costs and cancelled projects.18
The connection between arms and wealth was ¬rst noted by Thucy-
dides, who commented in the ¬fth century BC that ˜war is a matter not
so much of arms as of money, which makes arms of use™.19 The money
to which Thucydides referred to was gold and silver, which could be
used to purchase supplies abroad as well as at home. In fact, what he
called money was identical to what we would now call foreign exchange.
Britain could supplement her reserves of gold and foreign exchange by
exporting goods and services, by selling overseas assets (in which there
had been large-scale investment before 1914), or by borrowing from
abroad. The availability of loans depended on the credit-worthiness of
the British state and on the foreign policies of other countries, of which
the most important was the United States. Pounds could be used for
17
Barnett, Collapse of British Power, p. 477.
18
Figure calculated from table in Kennedy, Rise and Fall, p. 495.
19
Thucydides, The History of the Peloponnesian War, ed. and translated by Sir Richard
Livingstone (Oxford University Press, 1943), book I, section 83.
8 Arms, economics and British strategy

purchases only in the United Kingdom and in the sterling area, the latter
comprising countries that tied the value of their local currencies to
sterling and banked their reserves in London. Insofar as these countries
could be persuaded to add to their reserves of sterling, Britain could
import from them without increasing exports of goods and services.
However, lack of industrial development in the sterling area outside
Britain meant that such imports would be largely con¬ned to food and
raw materials. Ability to spend pounds on munitions depended upon
what British industry could produce, and an attempt to spend more
would push up prices, as clearly happened in both world wars, and could
happen at other times. What mattered most as regards output of
munitions were Britain™s natural resources (very limited; mainly coal,
prior to the development of North Sea oil in the 1970s), and the pro-
ductivity of her labour force, the latter being strongly in¬‚uenced by
investment in industrial plant and new technology, as well as by the
quality of management and the state of industrial relations.
Economists have put forward a number of reasons why defence
expenditure may have an adverse effect on the economy. Malcolm
Chalmers lists three: ¬rst, it tends to be at the expense of investment,
and therefore of capacity for future production; second, it diverts
scienti¬c and technical resources away from commercial production;
third, it harms the balance of payments by absorbing resources that
might otherwise have been used to produce exports.20 The idea that
defence expenditure would crowd out investment in the civil sector was
accepted by the Ministry of Defence by the 1950s (and much earlier by
the Treasury), but international comparisons in the 1980s by Keith
Hartley and John Singleton showed that the crowding out effect was felt
unequally in different countries.21 This result is not surprising since
crowding out is less likely to occur if there are unemployed resources
(such as labour with appropriate skills). A fourth possible way in which
defence expenditure can harm the economy is the effect of contracts on
industry. Mary Kaldor has argued that the defence services were con-
servative in their requirements, and wanted more powerful versions of
existing weapons systems rather than completely new ones. Her thesis is
that over-elaboration of existing technologies produced what she called
a ˜baroque arsenal™. In her view, ¬rms that became accustomed to
contracts that had higher speci¬cations than would be required for civil
goods, and which neglected costs, became less able to compete in
20
Malcolm Chalmers, Paying for Defence: Military Spending and British Decline (London:
Pluto Press, 1985), p. 114.
21
Keith Hartley and John Singleton, ˜Defence R and D and crowding out™, Science and
Public Policy, 17 (1990), 152“6.
Introduction 9

markets for commercial products.22 This tendency, although dif¬cult to
quantify, may be added to the long list of reasons that have been put
forward for Britain™s relative economic decline.23
Taxation is another factor that has to be taken into account. Normally
chancellors of the exchequer tried to balance their budgets, either
because that was what was expected of them in peace, down to 1939, or
because the consequence of too great a gap between expenditure and
revenue was a tendency for prices to rise, imports to exceed exports, the
balance of payments on current account to move into de¬cit, the gold
and foreign exchange reserves to fall, and for sterling to depreciate
against other currencies, thereby raising import prices. In war, bor-
rowing and its adverse effects would be accepted, just as a runner in a
race will use up his or her reserves of strength in a ¬nal sprint, but
normally borrowing was limited to what international ¬nancial markets
would accept as sustainable. Even balanced budgets could have adverse
economic effects if high tax rates discouraged enterprise or risk-taking
on the part of businessmen, or effort on the part of workers, as may well
have happened during and after the Second World War.
It should be emphasised that defence expenditure was only one of
many factors that may have tended to hold back the growth of the
national economy, and it was probably not one of the major ones, except
in wartime. On the other hand, unlike most factors in¬‚uencing the
performance of the private sector, such as the structure of ¬rms and the
training of management, industrial relations, the productivity of labour
or the design and marketing of products, it was something that gov-
ernment could act on directly. It should also be made clear that defence
expenditure can have economic bene¬ts, in the form of scienti¬c and
technological advances that may have applications within the civilian
economy. Nor is all of the expenditure a net burden on the Exchequer:
some of the money will return in the form of taxes paid by contractors

22
Mary Kaldor, The Baroque Arsenal (London: Deutsch, 1982). Seymour Melman, The
Permanent War Economy: American Capitalism in Decline, rev. edn (New York:
Touchstone, 1985), argues that American experience shows that lack of effective
competition results in unnecessarily expensive products.
23
Defence expenditure is not mentioned in Nicholas Crafts™ comprehensive analysis in his
Britain™s Relative Economic Performance 1870“1999 (London: Institute of Economic
Affairs, 2002), but may have been a contributory factor to some of the reasons that he
does give: cartelisation and poor productivity in ¬rms that were kept going instead of
being allowed to fail (defence departments tried to keep contractors going, often
peddling out small orders, so that these ¬rms would be available in war) and poor
productivity in nationalised industries (which include the royal dockyards and royal
ordnance factories, and one major aircraft ¬rm, Short Brothers, taken over in 1943, and
kept going on account of the employment it offered in Northern Ireland long after it
would have otherwise been closed down).
10 Arms, economics and British strategy

and their workers, and unemployed or underemployed resources may be
activated by the increase in demand originating from the government
expenditure.24 Given all the uncertainties about the interaction between
defence expenditure and the economy, the best litmus test of whether
defence expenditure is too high to be sustained inde¬nitely is whether
the balance of payments on current account is in de¬cit. However, this
test is not infallible as it may be possible to correct the de¬cit by cutting
civil expenditure, both public and private.
A warning about statistics used in the chapters that follow is in order.
There was no series of of¬cial statistics of British national income before
the 1940s, although revenue per penny in the pound of income tax gave
chancellors of the exchequer some idea of how the economy was pros-
pering. Earlier ¬gures for national income are estimates by economic
historians. There is a bewildering variety of statistics for defence
expenditure as a percentage of national income. Data for defence
expenditure were compiled by the Central Statistical Of¬ce and the
North Atlantic Treaty Organisation (NATO) according to different
de¬nitions. For national income, or product (which should in theory be
equal), there are different data depending upon whether it is measured
at market prices or factor cost. Gross domestic product (GDP) excludes
net income from abroad; gross national product (GNP) includes that
income. Figures in different tables may not be directly comparable, and
should be regarded as showing trends rather than precise measurements.

Strategy
Turning to the third of the principal questions posed in this book, how
best to deploy the armed forces, we come to strategy. Recently the term
˜strategy™ has often been used by politicians as a synonym for ˜policy™,
but in this book strategy retains its military meaning, and policy covers
the setting of political goals by ministers, the mobilisation of research
and industrial resources, and the distribution of these resources between
the services.25 Traditionally strategy was concerned with the larger
movement of armed forces in a campaign, on land or sea, in contrast
with tactics, which dealt with manoeuvring in the presence of the
enemy. However, by the twentieth century war was seen as involving all
those parts of an economy that sustained the armed forces, justifying
blockade to reduce imports of raw materials and other inputs required to
24
Clive Trebilcock, ˜Science, technology and the armaments industry in the UK and
Europe, with special reference to the period 1880“1914™, Journal of European Economic
History, 22 (1993), 565“80.
25
See Hew Strachan, ˜The lost meaning of strategy™, Survival, 47, Autumn 2005, 33“54.
Introduction 11

produce munitions, and even food. Blockade was only one aspect of
economic warfare designed to reduce an enemy™s ability to supply his
armed forces with munitions or fuel, or to maintain his morale. The
strategic air offensive in the Second World War was another aspect, as
was sabotage by the Special Operations Executive (SOE). Strategy came
therefore to be concerned with all aspects of coercion used in support of
foreign policy, a fact recognised by the inclusion of the Board of Trade
(the predecessor of the Department of Trade and Industry) and the
Treasury in discussions on defence.
Clausewitz famously de¬ned war as a continuation of political activity
by other means.26 The same might be said of grand strategy. Prime
ministers regarded war as too serious a business to be left to the pro-
fessionals in the armed forces. In the First World War, David Lloyd
George engaged in debates with generals on whether to seek alternatives
to victory on the Western Front. In the Second World War, Winston
Churchill took an even more active role, meeting the professional heads
of the armed forces, the Chiefs of Staff, almost daily. The primary
purpose of grand strategy may be to deter an aggressor rather than to
wage war. Before both world wars there were those in Britain who hoped
that Germany might be deterred by the prospect of blockade enforced
by British sea power, and maintained over a longer period than
Germany could stand owing to superior British economic strength.
Germany was not deterred, but the hope was not wholly irrational:
Hitler referred in Mein Kampf to the advantage of an alliance with
Britain that would give Germany the assurance of being able to import
food and raw materials.27 A strategy of deterrence could shape defence
policy along different lines from what might be required in war. In the
1930s the Chamberlain government gave higher priority to the air force
than to the army because it thought that Germany was more likely to be
deterred by the prospect of blockade if she knew that an attempt to land
a ˜knock-out blow™ from the air would fail. In the post-1945 period the
nuclear deterrent was given ¬rst priority in the hope that, in conjunction
with the much larger American nuclear deterrent, it would prevent a
major war. There was an additional political reason for possessing
nuclear weapons: it was believed in London that they were the means of
securing a seat ˜at the top table™ where Britain could in¬‚uence American
foreign policy.

26
Carl von Clausewitz, On War, ed. and translated by Michael Howard and Peter Paret
(Princeton University Press, 1976), p. 87.
27
Adolf Hitler, Mein Kampf, trans. J. Murphy (London: Hurst and Blackett, 1939),
pp. 541“2.
12 Arms, economics and British strategy

There has been much debate about whether there was a distinctive
British way of warfare, exploiting Britain™s insular position to create a
larger navy than other powers, while using a relatively small army to
support allies, mainly through operations on the periphery of Europe. In
the eighteenth and early nineteenth centuries such a strategy allowed
Britain™s ¬nancial wealth and industrial output to be used to subsidise
and equip allies, while blockade weakened enemies. However, the
development of railways reduced the advantage in mobility that
amphibious forces had previously had over land forces, and the devel-
opment of air power in the twentieth century further restricted the
possibilities of a purely maritime strategy.28 Howard and other military
historians have supported the alternative strategy of committing a strong
British army to support France and Belgium.29 Hew Strachan has
pointed out that the debate is based on a false antithesis, since sea and
air power were as necessary as land power to a balanced strategy in the
twentieth century: secure sea communications were essential to a con-
tinental commitment of the army, and in 1914 and 1939 the navy and
the army could agree that the defence of Belgium was crucial to the
security of the United Kingdom, and therefore of the Empire.30 Even so,
at any given time, choices had to be made as to strategic priorities, in the
light of developments in weapons systems and of the economic
resources available. Edgerton has argued that technical change led to
three phases in the British way of warfare: traditionally the Royal Navy
was the principal expression of British power, but the rise of air power
led to the RAF taking on this role and the nuclear deterrent was the
centre-piece from the 1950s. The large, conscript armies raised in the
world wars, and for about ¬fteen years after the Second World War,
were exceptional. Normally Britain planned to rely mainly on techno-
logically advanced, ˜capital-intensive™ sea and air power to bring pres-
sure to bear on an enemy™s economy and civil population as well as his
army.31
The criteria for judging whether British policy took proper cognisance of
technical, economic and strategic factors are dif¬cult to establish. Great
military thinkers, such as Clausewitz (1780“1831) and Antoine Jomini
(1779“1869), and naval historians, such as Alfred Mahan (1840“1914)
28
See David French, The British Way in Warfare 1688“2000 (London: Unwin Hyman,
1990).
29
Howard, Continental Commitment, p. 146. See also Barnett, Collapse of British Power,
p. 581; Brian Bond, British Military Policy between the World Wars (Oxford: Clarendon
Press, 1980), pp. 337“9.
30
Hew Strachan, ˜The British way in warfare revisited™, Historical Journal, 26 (1983),
447“61.
31
Edgerton, ˜Liberal militarism™, 141“50.
Introduction 13

and Sir Julian Corbett (1854“1922), laid down general principles.32
However, there was a lack of theory to guide policymakers when they came
to allocate resources. Although Adam Smith had drawn attention in 1776
to the tendency for armaments to become more expensive over time, other
major economists showed no interest in war prior to 1914. John Maynard
Keynes, while an of¬cial at the Treasury, applied macroeconomics to
debates in Whitehall on strategy in 1915“16. During the Second World
War economists were concerned with the administration of war production
or were engaged in producing statistical summaries for Winston Church-
ill™s guidance, both when he was ¬rst lord of the Admiralty and when he
was prime minister.33 However, operational research “ that is the quanti-
tative analysis of how best to achieve strategic objectives “ was dominated
by scientists. Henry Tizard chaired the Air Ministry™s Committee for the
Scienti¬c Survey of Air Defence in the late 1930s, and during the war
scientists were engaged in wide-ranging operational research, which had
some impact on major debates on anti-submarine warfare and strategic
bombing.34
The concept of cost-effectiveness did not enter the discourse of
British policymakers until the 1960s, and was then imported from the
United States. In 1960 the economists Charles Hitch and Roland
McKean published The Economics of Defense in the Nuclear Age, which
was described in the British Treasury in 1965 as ˜the standard work on
cost-effectiveness™. Hitch, who was comptroller of the United States
Department of Defense, was involved in 1963 in talks with British
Treasury of¬cials, who encouraged the Ministry of Defence to adopt
cost-bene¬t analysis, sometimes against the opposition of the armed
forces.35 The 1960s were the high point of the in¬‚uence of economists
on American defence policy, enjoying as they did the patronage of

32
See Azar Gat, A History of Military Thought: From the Enlightenment to the Cold War
(Oxford University Press, 2001).
33
John H. Whitaker, ˜The economics of defense in British political economy, 1848“1914™,
in Crauford D. Goodwin (ed.), Economics and National Security, supplement to History
of Political Economy, 23 (1991), 37“60; Robert Skidelsky, John Maynard Keynes, 3 vols.
(London: Macmillan, 1983“2000), vol. I: Hopes Betrayed 1883“1920, pp. 309“15; D. N.
Chester (ed.), Lessons of the British War Economy (Cambridge University Press, 1951),
chs. 2, 4 and 7.
34
Maurice Kirby, Operational Research in War and Peace: The British Experience from the
1930s to 1970 (London: Imperial College Press, 2003).
35
Sir Richard Clarke to Sir Leslie Rowan, 21 Jan. 1965, and Clarke to Sir William
Armstrong, ˜Insight on defence costs™, n.d., CLRK 1/3/4/1, Churchill College,
Cambridge. In addition to The Economics of Defense in the Nuclear Age (Cambridge,
Mass.: Harvard University Press, 1960), Clarke also recommended McKean™s ˜useful
essay™, ˜Cost-bene¬t analysis and British defence policy™, in Alan Peacock and D. J.
Robertson (eds.), Public Expenditure: Appraisal and Control (Edinburgh: Oliver and
Boyd, 1963), pp. 17“35.
14 Arms, economics and British strategy

Robert McNamara, the secretary of defense, and few policymakers in
London could have remained unaware of the concept of opportunity
cost when considering the long-range resource implications of new
projects for weapons systems.36 Opportunity cost, represented by
alternative uses to which resources employed in research and develop-
ment, or production, or strategic deployment, could be put, and cost-
effectiveness of weapons systems and strategies, provide the conceptual
bases of this book.

Policymaking in context
Defence policy was not shaped solely by technical, economic or strategic
considerations, nor was it the product of pure reason. The navy and
army had long been accustomed to operating as independent services,
co-operating from time to time in combined operations to land troops
on an enemy shore, but normally pursuing their own strategic aims.
There had also long been competition between the Admiralty and War
Of¬ce for the funds from the chancellor of the exchequer™s budget.
Interdepartmental competition was intensi¬ed when the Air Ministry
was created in 1918. Naturally each department pressed the advantages
of expenditure on its particular service: the Admiralty would stress the
importance of the protection of trade routes for an island nation
dependent upon imports of food and raw materials; the War Of¬ce
would point to the need to support allies on land; and the Air Ministry
would conjure up the prospect of war being decided by bombers before
navies or armies could have a decisive impact. Inter-service rivalries
were part of wider bureaucratic politics in which the Treasury defended
the interests of the taxpayer and a sound ¬nancial system; the Board of
Trade tried to reserve suf¬cient industrial capacity to maintain export
markets; and various departments concerned with civil expenditure on
education, social services, health and housing made their claims for
funds from the Exchequer. The Foreign Of¬ce, for its part, hoped that
diplomacy could be backed by armed force. Normally an individual™s
perspective on defence policy re¬‚ected his position in bureaucratic
politics, the classic example being Churchill, who was a strong advocate
of expensive naval building programmes when he was ¬rst lord of the
Admiralty before the First World War, but a stern critic of the naval
estimates when he was chancellor of the exchequer in the 1920s. An
apparent exception was Sir Warren Fisher, permanent secretary of the

36
Robert J. Leonard, ˜War as a ˜˜simple economic problem™™: The rise of an economics of
defense™, in Goodwin (ed.), Economics and National Security, pp. 261“83.
Introduction 15

Treasury from 1919 to 1939, who urged ministers to rearm against Nazi
Germany, but Fisher nevertheless approached strategic foreign policy
from a Treasury perspective and looked for ways to make Britain secure
without undermining her economic strength.37 It was not only normal,
but right, that policymakers should, in the ¬rst instance, see problems
from the perspective of their own department, but it was important to
have effective ways of co-ordinating the different departments™ activities
to serve an agreed strategy. The methods adopted to achieve such co-
operation developed over time, but even in the 1960s strategy was
strongly in¬‚uenced by inter-service rivalries.
Policy was, of course, also shaped by the threats that Britain faced and
by Britain™s changing role in the world. Defence of the United Kingdom
and its trade routes were the principal priorities, explicitly or implicitly,
until the nuclear age, when prevention of war through the deterrent
became ¬rst priority. Britain™s traditional concern with the balance of
power in Europe, and with the danger of invasion from the Low
Countries, gave her common interests with France, even if the course of
Anglo-French relations was rarely smooth. Britain was never strong
enough on her own to protect her world-wide imperial, economic and
strategic interests against more than one hostile great power. In the early
twentieth century she relied upon the Anglo-Japanese alliance to protect
her interests in the Far East. During the First World War she resorted to
importing munitions from the United States, even while the latter was
neutral, and became dependent upon American loans to pay for them.
During the Second World War Britain came to rely upon the United
States strategically as well as economically, and saw her as the only
power that could counterbalance the armed forces of the Soviet Union
after 1945.38
Each chapter includes a section on the principal policymakers and the
government machinery for taking decisions on an inter-service basis.
There follow sections dealing with the development of weapons systems
(including their tactical application); the economic resources available
for their production; and the strategic choices taken in the period cov-
ered by the chapter. These themes are inter-related and inevitably there

37
See G. C. Peden, ˜Sir Warren Fisher and British rearmament against Germany™, English
Historical Review, 94 (1979), 29“47.
38
There is a huge literature on Anglo-American relations. Particularly useful for
background to this book are: John Baylis, Anglo-American Defence Relations, 1945“84:
The Special Relationship (London: Macmillan, 1984); W. Roger Louis and Hedley Bull
(eds.), The Special Relationship: Anglo-American Relations since 1945 (Oxford University
Press, 1986); and B. J. C. McKercher, Transition of Power: Britain™s Loss of Global
Pre-eminence to the United States, 1930“1945 (Cambridge University Press, 1999).
16 Arms, economics and British strategy

is some overlap between sections. Indeed, the point of the book is that
the three themes are parts of a connected whole. The questions
addressed in each chapter include: were the services conservative in their
arms requirements and was British industry backward in developing
military technology? Did Britain strike the right balance between
building up armed and economic strength? Was strategy optimal from
the point of view of making the most of Britain™s assets?
1 The dreadnought era, 1904“1914




Introduction
The years before the First World War saw radical changes in Britain™s
international relations, and consequently in defence policy. In 1902 the
Cabinet™s Committee of Imperial Defence (CID) identi¬ed the following
priorities: ¬rst, defence of the United Kingdom from invasion, with
France being seen as the main threat; second, defence of Britain™s empire
in India against a possible invasion from Russia; and third, defence of the
route to India through the Mediterranean, against France and Russia.1
These priorities re¬‚ected the prevailing imperial rivalries, and it was
against the French and Russian navies that the Royal Navy™s two-power
standard had been designed in 1889 and reaf¬rmed in 1893. The
German Reichstag passed a naval law in 1900 providing for a larger ¬‚eet,
the purpose of which was to give Germany bargaining power over Britain
in the event of the latter™s navy being weakened in a war with France and
Russia, but it was not until after the destruction of most of the Russian
navy in the Russo-Japanese War of 1904“5 that Germany clearly became
Britain™s principal naval rival. Britain™s traditional foreign policy objec-
tives had been a balance of power in Europe, the independence of the
Low Countries and the security of her trade routes and overseas interests,
but so long as German military power was balanced by the Franco-
Russian alliance of 1894, Britain could avoid European commitments.
The origins of the tension that developed with Germany can be traced
back to nineteenth-century commercial and colonial rivalries, but ten-
sions with Russia and France were greater. British statesmen had long
looked askance at Russia™s expansion in Central Asia towards India.
France resented Britain™s occupation of Egypt, and Anglo-French rivalry
on the Upper Nile led to a war scare over the Fashoda incident in 1898.
Control of the sea enabled Britain to defy European opinion during
the Boer War (1899“1902), but the growing burdens of empire led

1
Howard, Continental Commitment, p. 13.

17
18 Arms, economics and British strategy

Joseph Chamberlain to compare Britain in 1902 to ˜a weary titan under
the too vast orb of its fate™.2 While one has to remember that Cham-
berlain was colonial secretary and speaking at a conference of prime
ministers from the self-governing colonies “ the future dominions “ who
he hoped would contribute more to imperial defence, there was good
reason to improve relations with other powers. It seemed to the Foreign
Of¬ce and the Admiralty to be expedient to avoid provoking American
antagonism: the Hay-Pauncefote treaty of 1901 recognised American
supremacy in the Caribbean; Britain agreed to the Americans building
and fortifying the Panama Canal on their own, contrary to the Clayton-
Bulwer treaty of 1850; and the Alaskan boundary dispute was resolved
in 1903 at the expense of Canadian claims. Admiralty fears that the
Royal Navy would be unable to match a Franco-Russian naval combi-
nation in the Far East led Britain to conclude an alliance with Japan in
1902, whereby each signatory agreed to support the other if it was
attacked by more than one power. Anglo-French tensions were eased by
an entente in April 1904, the basis of which was an agreement to
recognise each other™s respective predominant interests in Egypt and
Morocco. An attempt by Germany to exploit Russia™s weakness in
defeat in 1905 by putting pressure on France over Morocco led to
Anglo-French staff talks on what might be done in the event of war, but
Keith Wilson has argued that the makers of British foreign policy were
more interested in the Empire than in Europe, and saw an Anglo-
Russian entente, such as was achieved in 1907 as their primary goal.3
Nevertheless, Germany™s naval programme and erratic diplomacy led
the Foreign Of¬ce to identify her as a threat even before a second
Moroccan crisis in 1911 seemed to bring Europe to the brink of war.
Although the ententes did not commit Britain to give more than diplo-
matic support, military and naval practicalities required prior planning if
diplomacy was to be backed by armed force. Anglo-French staff talks in
December 1905 and January 1906 agreed arrangements for landing a
British army at French ports in the event of war. Subsequent conversations
led to substantial agreement on logistical problems by January 1908. Full-
scale staff talks were resumed in 1910 and the detailed plans that were in
place in 1914 had been agreed by 1913. Meanwhile, from 1907, French
admiralty plans concentrated on the Mediterranean, tacitly depending on
the British to handle the German navy, and following Anglo-French naval
conversations in 1911 and 1912, Britain concentrated her navy in the
2
Quoted in Aaron L. Friedberg, The Weary Titan: Britain and the Experience of Relative
Decline, 1895“1905 (Princeton University Press, 1988), p. 116.
3
Keith M. Wilson, The Policy of the Entente: Essays on the Determinants of British Foreign
Policy (Cambridge University Press, 1985).
The dreadnought era 19

North Sea. Thereafter the British ¬‚eet in the Mediterranean was restricted
to the equivalent of the navy of one of Germany™s partners in the Triple
Alliance, Austro-Hungary or Italy. Since France had the largest ¬‚eet in the
Mediterranean, the reduced British presence there was still suf¬cient to
ensure the predominance of the Entente powers.4
This chapter considers the following questions. Was Britain a tech-
nological leader in naval armaments? Did she lag behind other European
nations as regards her army and her attitude to the possibilities of air-
craft? What constraints were there on defence expenditure? Did the
British government have a clear idea of what strategy would be pursued
in a European war, and if not, why not?

Policymakers
Defence policy before 1914 was very much in the hands of the
Admiralty and the War Of¬ce. No minutes were taken at Cabinet
meetings, the sole record of the proceedings being a letter written by the
prime minister to the king. Such interdepartmental co-ordination as
took place was done through the CID, which was formed in December
1902, with the older Colonial Defence Committee and the Joint Military
and Naval Committee as sub-committees. From May 1904 the CID had
a permanent secretariat, and became an important forum for strategic
debates, with sub-committees studying a wide range of issues. Only the
prime minister was a permanent member, and in practice he could
restrict consideration of defence policy to a small inner cabinet, along
with their professional advisers. On the other hand, the CID was not an
executive body; its recommendations became instructions only if
endorsed by the Cabinet, and implementation was left to the depart-
ments concerned.5
A. J. Balfour, the Conservative and Unionist prime minister from July
1902 to December 1905, was credited by Winston Churchill as having
˜a marvellous gift of comprehension and receptivity™ and being able to
˜adjust to all new phenomena™.6 It had been Balfour who had created the
CID, and he took a keen interest in strategic issues. Remarkably, he was

4
Samuel R. Williamson, The Politics of Grand Strategy (Cambridge, Mass.: Harvard
University Press, 1969).
5
John Gooch, ˜Adversarial attitudes: servicemen, politicians and strategic policy in
Edwardian England, 1899“1914™, in Paul Smith (ed.), Government and the Armed Forces
in Britain 1856“1990 (London: Hambledon Press, 1996), pp. 53“74; Nicholas
d™Ombrain, War Machinery and High Policy: Defence Administration in Peacetime Britain,
1902“1914 (Oxford University Press, 1973).
6
Winston S. Churchill, Great Contemporaries (London: Thornton Butterworth, 1937),
p. 204.
20 Arms, economics and British strategy

invited, as leader of the opposition from 1905 to 1911, to attend CID
meetings, as an occasional adviser, and then from 1912 as a regular
member. Thus he could criticise the Liberal government™s defence
estimates in Parliament, while helping to form the policies on which the
estimates were based. The Liberal prime minister from 1905 to 1908,
Sir Henry Campbell-Bannerman, had had experience of the defence
departments as ¬nancial secretary to the War Of¬ce from 1871 to 1874;
secretary to the Admiralty from 1882 to 1884, and secretary of state for
war in 1886 and from 1892 to 1895. He seemed to be primarily inter-
ested in reducing the defence estimates, in line with Liberal party policy.
In 1907 he published an article in the Nation, before the second Hague
conference on disarmament that year, calling for a stop in the arma-
ments race, while stressing the purely defensive reasons why Britain
maintained the largest navy.7 Nevertheless, it was Campbell-Bannerman
who sanctioned staff talks with France without consulting the full
Cabinet, thereby beginning the practice of excluding the more paci¬-
cally inclined members of the government from defence and foreign
policy. Campbell-Bannerman was dying by the time he resigned in April
1908, handing over to H. H. Asquith. Asquith had a barrister™s ability to
master a brief, and as prime minister he would listen patiently to
Cabinet debates until he saw an opportunity to intervene effectively, a
practice that made him seem detached and dilatory.8 His principal
quality was his ability to hold his disparate party together.
Ministers in charge of the Admiralty and War Of¬ce were not
expected to be defence experts; instead their role was to bring political
judgement to bear on the issues presented to them by their professional
advisers. Churchill, who was ¬rst lord of the Admiralty from October
1911 to May 1915, was exceptional in having his own ideas on strategy.
King Edward VII took an active interest in the armed forces and was, in
effect, represented on the CID by Lord Esher, a courtier and con-
´
troversial eminence grise. It was Esher who chaired a committee on the
reorganisation of the War Of¬ce in 1903, following the critical report of
the Royal Commission on the War in South Africa, of which he had
been a member. Esher™s recommendations led to the creation in Feb-
ruary 1904 of an Army Council, comprising the secretary of state for
war, along with his senior military advisers, similar to the Board of
Admiralty, and a General Staff whose head would be responsible for
three directorates: military operations, staff duties and military training.
The War Of¬ce was subsequently raised to an unprecedented level of

7
˜The Hague conference and the limitation of armaments™, Nation, 2 March 1907.
8
Roy Jenkins, Asquith (London: Collins, 1964), pp. 279, 300.
The dreadnought era 21

ef¬ciency by a reforming secretary of state, Richard Haldane, who held
the post from December 1905 to June 1912. The fact that Haldane had
no preconceived ideas and was willing to listen to professional advice
made him a popular minister. He could argue from ¬rst principles,
having read Clausewitz and other authorities, but it was in combination
with Douglas Haig, director of military training (1906“7) and director of
staff duties (1907“9) that he was most effective.9
Interdepartmental strategic planning was inhibited by the fact that the
senior professional adviser at the Admiralty from October 1904 to
January 1910, Admiral Sir John Fisher, the ¬rst sea lord, believed that
war plans must be prepared in greatest secrecy and only communicated
to the army on the outbreak of war. Within the Admiralty, the Naval
Intelligence Department had acted as a de facto planning staff since 1887,
but from 1906 Fisher established his own hegemony in planning matters
by setting up ad hoc committees, including a Strategy Committee in 1908
under his own chairmanship, and ¬nally a Naval War Council in 1909
which effectively sidelined the Naval Intelligence Department. Naval
planning was for a time unsystematic and it was not until after Churchill
had become ¬rst lord that a War Staff was created in January 1912.10
Fisher™s in¬‚uence was still felt after he retired as he acted as Churchill™s
unof¬cial adviser through extensive correspondence.
Apart from the Admiralty and the War Of¬ce, the departments most
concerned with defence policy were the Foreign Of¬ce, the Colonial
Of¬ce, the India Of¬ce, the Board of Trade and the Treasury.
Foreign Of¬ce papers were frequently circulated to the CID, and a
Foreign Of¬ce of¬cial chaired one of its most important sub-commit-
tees, that on Neutral and Enemy Merchant Ships. Sir Edward Grey,
who was foreign secretary from December 1905 to December 1916, and
was described by Asquith as ˜sound, temperate and strong™,11 played a
major part in identifying the risks that Britain faced. The secretary of
state for the colonies nominated an assistant secretary to the CID
secretariat to service the Overseas Defence Sub-Committee, and the
secretary of state for India nominated an assistant secretary to deal with
problems relating to the defence of the sub-continent. Most assistant
secretaries, however, were drawn from the ¬ghting services. The most
in¬‚uential proved to be Maurice Hankey, a captain in the Royal Marine
Artillery, who had served in the Naval Intelligence Department before

9
Dudley Sommer, Haldane of Cloan (London: Allen and Unwin, 1960), pp. 165“9;
Edward M. Spiers, Haldane: An Army Reformer (Edinburgh University Press, 1980).
10
Shawn T. Grimes, ˜War planning and strategic development in the Royal Navy, 1887“
1918™, Ph.D. (University of London, 2004).
11
Jenkins, Asquith, p. 195.
22 Arms, economics and British strategy

becoming naval assistant secretary of the CID in January 1908. He was
appointed secretary to the CID in March 1912, a post that he held until
his retirement in July 1938.12
Although the chancellor of the exchequer, as a senior member of the
Cabinet, often took part in CID discussions, the Treasury™s of¬cial role
was to act purely as a ¬nancial check on defence expenditure. Each year
government departments were required to submit to the House of
Commons detailed estimates for the coming ¬nancial year (running
from 5 April), and the estimates were subject to prior criticism by the
Treasury to ensure that the proposals in them were economical for their
intended purposes. Treasury criticism could secure minor economies
but the chancellor™s most effective weapon was to point out that a given
increase in expenditure would mean so much on the income tax.
Although the broad outlines of defence policy were discussed in the
CID, the question of what could be afforded was a matter for the
chancellor of the exchequer. If he and the minister in charge of a
spending department could not agree on estimates for the coming year,
the Cabinet would have to adjudicate. Inevitably there were major
battles in Cabinet between the chancellor and the ¬rst lord of the
Admiralty as a naval arms race with Germany developed.13

Naval weapons
In the early years of the twentieth century naval warfare was being
transformed by rapid technological change, including improved gun-
nery, torpedoes and mines, and the introduction of submarines, radio
and oil-powered turbine engines. Naval history has long focused on
battleships, which were used as the principal yardstick in contemporary
debates on naval strength. However, Nicholas Lambert has identi¬ed
the torpedo and the submarine as the most dynamic technical forces for
change, allied to ¬nancial stringency which forced Fisher to look for
economical solutions to strategic and tactical problems. Fisher devel-
oped a theory of ¬‚otilla defence in coastal waters by submarines and
surface craft armed with long-range torpedoes, while large armoured
vessels, which came to be called battle-cruisers, would control the
Empire™s trade routes and communications. Lambert is aware that
Fisher™s ideas were not shared by all of his colleagues at the Admiralty,
but believes that the seal of approval for Fisher™s ˜revolution™ came with

12
Stephen Roskill, Hankey, Man of Secrets, 3 vols. (London: Collins, 1970“4).
13
For more detailed account of Treasury control, see G. C. Peden, The Treasury and
British Public Policy, 1906“1959 (Oxford University Press, 2000), pp. 6, 49“56.
The dreadnought era 23

Churchill™s decision to economise in the estimates for 1914/15 by
substituting submarines for some battleships.14 The revolution was,
however, incomplete. For another thirty years admirals would claim that
battleships could be protected from hazards such as torpedoes and,
later, bombers.
Battleships were heavily armed and armoured vessels whose purpose
was to establish command of the sea by destroying the enemy™s main
battle ¬‚eet, or by bottling it up in its harbours. HMS Dreadnought,
constructed in 1905“6, represented a major advance in armament and
speed, so much so that all battleships and battle-cruisers built to similar
or higher standards were known as ˜dreadnoughts™, while earlier bat-
tleships were termed ˜pre-dreadnoughts™. The ¬rst battle-cruisers, the
˜Invincible™ class, were constructed in 1906“8 with guns as large as those
of a battleship, but with lighter armour and more speed. Battle-cruisers
were designed to be able to overtake and keep in touch with an enemy
battle ¬‚eet, and perhaps slow it down by damaging some of its ships,
thereby enabling the British battle ¬‚eet to catch up.15 They would also
out-class the armoured cruisers that the French had designed to prey on
commerce. Collectively battleships and battle-cruisers came to be
known as capital ships.
Dreadnoughts represented a major increase in expense as well as
¬ghting power. Pre-dreadnoughts completed between 1895 and 1904
had cost about £1 million each; the Dreadnought cost nearly £2 million,
and the ¬rst battle-cruisers £1.75 million. However, the upward trend
had been established before Dreadnought. In December 1913, when the
Chancellor of the Exchequer, Lloyd George, and Churchill were in
dispute over the 1914/15 estimates, the Treasury complained that the
Admiralty had forced the pace in introducing improvements in war-
ships. In particular, the ˜King Edward™ class of pre-dreadnoughts,
completed between 1905 and 1906, had cost fully 25 per cent more than
the preceding ˜Queen™ class.16 Churchill™s response was that it was
appropriate for the power that depended upon naval supremacy for its
life to maintain leadership in warship design. Fisher was much criticised,
both inside and outside the navy, for building dreadnoughts, on
the grounds that he thereby did away with Britain™s overwhelming

14
Nicholas A. Lambert, Sir John Fisher™s Naval Revolution (Columbia: University of South
Carolina Press, 1999).
15
˜Report of the Committee on Designs, 1905™, Feb. 1905, Fisher of Kilverstone papers
(FISR) 8/4, Churchill College, Cambridge.
16
˜Naval Estimates, 1914“15™, December 1913, circulated for the use of the Cabinet by
the Chancellor of the Exchequer, Lloyd George papers, Parliamentary Archives,
London, LG/C/24/3/26.
24 Arms, economics and British strategy

superiority of about three to one over Germany based on pre-dread-
noughts. The Manchester Guardian spoke for many when it claimed that
a policy of conservatism in naval design would have been more appro-
priate.17 On the other hand, as the First Lord of the Admiralty, Reginald
McKenna, argued in 1909, pre-dreadnought ships were not yet obso-
lete, in that they could still give a good account of themselves in a ¬‚eet
action.18 Pre-dreadnoughts were used extensively in the First World
War in the Mediterranean, and the Germans had a squadron of them at
Jutland. To ¬nd out where the balance of the argument between Fisher
and his critics lies, one has to look in some detail at the novel technical
features of dreadnoughts and the circumstances in which they were

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