. 11
( 14)


and ˜Record of conversation between the Minister and the CDS on 15 November
1960™, MB 1/J311, Hartley Library, Southampton University.
Healey, Time of My Life, p. 273; Sean Straw and John W. Young, ˜The Wilson
government and the demise of TSR-2, October 1964“April 1965™, Journal of Strategic
Studies, 20 (1997), no. 4, 18“44; Wynn, RAF Nuclear Deterrent, pp. 501, 504, 523“43.
The hydrogen bomb, the economy and decolonisation 291

There were other examples of cancelled projects and of the RAF and
FAA having to rely upon obsolescent aircraft. Despite growing emphasis
on air mobility for the army as an alternative to reliance on ¬xed bases
abroad, the RAF lacked a satisfactory long-range transport aircraft until
Healey bought the American Lockheed Hercules ˜off the shelf™ in 1965
at a third of the unit cost of the British HS-681 project. For maritime
reconnaissance and anti-submarine warfare the RAF continued to use
the Avro Shackleton, a piston-engined descendant of the Lancaster
dating from the 1940s, which only began to be replaced by the Hawker
Siddeley Nimrod, a development of the Comet airliner, in October
1969. The cancellation of the P.177 in 1957 left the FAA relying on the
subsonic Sea Vixen all-weather ¬ghter in the late 1960s, by which time
the Soviet Union had supersonic strike aircraft in service. The P.1154
supersonic vertical-take-off-and-landing (VTOL) ¬ghter project was
cancelled in 1965 and replaced by the conventional American Phantom,
but the latter™s entry into service was delayed by the decision to ¬t it with
a British engine. The FAA did receive a new shipboard strike aircraft in
1962, the Blackburn NA-39 Buccaneer. Designed in 1954 and ¬rst
¬‚own in prototype form in 1958, the Buccaneer was subsonic and relied
upon ¬‚ying low to evade radar detection. Mountbatten tried to persuade
the RAF to adopt the Buccaneer instead of the more advanced,
but much more expensive, TSR-2, but the Air Staff believed that the
Buccaneer did not offer a suf¬cient improvement on the Canberra.48

Naval weapons
The Buccaneer, with its capacity to carry nuclear weapons, was central
to the Admiralty™s vision of the aircraft carrier as the modern equivalent
of the capital ship. In a remarkable paper, dated 2 March 1954, the
Admiralty set out its views on expected trends in naval weapons down to
the end of 1965.49 The news of the American hydrogen-bomb tests
came too late to in¬‚uence the paper, which, however, assumed that
atomic weapons would be plentiful; that the importance of air attack
would increase; but that long-range detection of submarines and tor-
pedo countermeasures would reduce the underwater threat to surface
ships. It was predicted that by the 1960s carrier-borne aircraft would
carry nuclear weapons and would contribute to the strategic air offen-
sive; aircraft and 200-mile-range anti-ship missiles would have begun to

Healey, Time of My Life, p. 272; Wynn, RAF Nuclear Deterrent, pp. 505“14; Ziegler,
Mountbatten, pp. 553, 586“8.
˜The Navy of the future™, 2 Mar. 1954, ADM 205/102, TNA.
292 Arms, economics and British strategy

replace guns as offensive weapons; and new light ¬‚eet carriers would
carry VTOL ¬ghters to supplement ship-borne anti-aircraft missiles and
to attack enemy air¬elds. It was expected that the number of aircraft
carriers in commission would increase from the current total of six to
nine in 1965: seven able to operate all naval aircraft, and two light ¬‚eet
carriers for VTOL aircraft, with two more light ¬‚eet carriers building. In
the event, there were only seven aircraft carriers in 1965, of which two
were commando carriers, equipped with helicopters only, and VTOL
aircraft with ¬xed wings had yet to enter service.
In line with the navy™s long-standing preference for offensive rather
than defensive measures against submarines, the paper predicted that
the importance of convoy escort would decline over the next decade.
Instead, the emphasis would be on the interception of enemy sub-
marines by offensive patrols by surface vessels or anti-submarine sub-
marines, and on air and missile attacks on enemy submarine bases.
There was little in this vision for the traditional battleship, or even
cruiser. It was expected that the total of these big-gun vessels, including
those in reserve, would be reduced from twenty-eight in 1954 to seven
in 1965. In the event there were no battleships and only ¬ve cruisers in
1965. The numbers of destroyers and escort vessels were also expected
to fall, from a total of 257 in 1954 to between 160 and 185, including a
new class of ¬‚eet and convoy air-control and air-warning ships. In the
event, there were only ninety destroyers and frigates in 1965. The one
category of ship that the 1954 paper predicted would increase markedly
in numbers was coastal anti-mine vessels, but, as will be noted below,
the Admiralty had to sacri¬ce this planned increase for ¬nancial reasons,
and numbers fell from 214 in 1954 to 134 in 1965. It was expected,
rightly, that ship-borne helicopters would come into service by the
1960s for both anti-submarine and anti-mine work.
In a particularly prophetic passage, the paper noted that the deploy-
ment of nuclear weapons at sea would present the Soviets with harder
targets than vulnerable bases in the United Kingdom, and put forward
˜the possibility of the development of ship-launched ballistic rockets of
considerable range which will carry atomic warheads and land accu-
rately™. These rockets might be launched by surface ships or submarines
but, ˜if the launching ship were submersible, her vulnerability to enemy
attack would be reduced™. Nuclear-powered submarines might be
operational by 1965. In presenting this vision of what the Polaris system
was to achieve, the Admiralty was careful not to trespass too much on
Air Ministry preserves. It was noted that seaborne ballistic missiles
might have a range of 1,000 miles or less, and that ˜the strategic air
offensive will thus still primarily be conducted by aircraft™.
The hydrogen bomb, the economy and decolonisation 293

Aircraft carriers were large, expensive ships, and the cost of the FAA,
£70 million in 1954, was of the same order as Fighter Command (£80
million in 1957). Unsurprisingly, both carriers and the FAA were the
targets of economisers in Whitehall. In 1954 the Swinton Committee,
which had been set up by Churchill to scrutinise the defence budget in
the light of the advent of the hydrogen bomb, recommended that air-
craft carriers be manned and equipped for an escort role only, and
suggested an investigation into the future strategic role of the FAA and
longer-term plans for the development of new types of naval aircraft.
The Admiralty riposte was that only heavy ¬‚eet carriers, with their full
complement of early-warning, anti-submarine, ¬ghter and strike air-
craft, could counter the threat to shipping from the Soviet surface ¬‚eet.
The NA-39, the future Buccaneer, with its proposed 800-mile range for
high-level anti-ship attacks and 400-mile range for low-level attacks on
land targets, was ideal for both a major war and a limited war. It fell to
Macmillan, who became minister of defence in October, to decide
whether to support the carriers, and he did so, after the Admiralty had
conceded economies by cutting its minesweeper programme.50 Never-
theless, the growing size of naval aircraft and the need to ¬t SAM sys-
tems meant that replacement carriers would have to be larger and more
expensive than the navy™s existing carriers, and considerable dif¬culties
were encountered between 1960 and 1966 in designing vessels that
could be afforded with the funds likely to be available.51
Battleships survived the search for economies for longer than might
have been expected. Perhaps in deference to Churchill™s predilection for
big guns, the Swinton Committee recommended that a reduction in the
number of cruisers in commission from ten to eight be made to allow
Vanguard to have a full crew complement. The Defence Committee
decided in November 1954 that Vanguard should be retained in com-
mission, and a long, active service seems to have been envisaged because
she was sent for a major re¬t. However, it was the Admiralty that took
the initiative in recommending in August 1955 that she be placed in
reserve. The navy was short of manpower, and ratings with electrical
skills were needed for HMS Girdleness, the ship that was to conduct
trials for the ˜all-important™ Sea Slug SAM system. It would only be
possible to bring Vanguard into commission by transferring the crews of
two anti-submarine frigates, and the Admiralty advised against this

See Grove, From Vanguard to Trident, pp. 111“15, for a fuller account of this
bureaucratic battle.
Anthony Gorst, ˜CVA-01: a case study in innovation in Royal Navy aircraft carriers,
1959“66™, in Richard Harding (ed.), The Royal Navy 1930“2000 (London: Frank Cass,
2005), pp. 170“92.
294 Arms, economics and British strategy

course. Any sentimental attachment for battleships did not outweigh the
priority given to anti-aircraft and anti-submarine warfare. The Admir-
alty advised the Defence Committee that Vanguard had ˜undoubted™
value against ˜Sverdlov™-class cruisers and would still be available in
reserve for this role. The future of battleships came up again at the
Defence Committee in March 1956, when it was decided that the four
˜King George V™-class battleships would be kept in extended reserve,
but that three of them would have to be scrapped in a few years and only
one would be preserved for longer by being ˜cocooned™.52 It was only
after the advent of Sandys as minister of defence in 1957 that the bat-
tleships succumbed to budgetary restrictions. The King George V and its
sister ships were scrapped in 1957“8, and Vanguard followed in 1960.
The French navy took the same view about the cost-effectiveness of
battleships: its last two were paid off in 1959 and 1961 respectively.
With no battleships available, cruisers were the only big-gun vessels
that could be used for ˜showing the ¬‚ag™ in overseas stations. However,
in discussion in the Defence Committee in November 1955 one min-
ister (not identi¬ed in the minutes) asked whether modern destroyers
were much less impressive than cruisers for this purpose.53 The ˜Dar-
ing™-class destroyers completed in 1952“4 displaced 2,800 tons, about
half the size of a light cruiser of the ˜Dido™ class. The counter-argument
offered by the Admiralty was that cruisers would be indispensable for
launching ship-to-ship guided missiles. Britain had not completed any
cruisers since 1945, but work had been resumed in 1954 on the 9,500-
ton ˜Tiger™ class, using hulls launched in 1944“5. The Admiralty also
wanted four completely new guided-weapons cruisers costing £15
million each. In the event the ˜Tiger™ class, completed in 1959“61, were
the last big-gun ships built for the Royal Navy, armed with 6-inch
automatic weapons, and as early as 1965 work was begun to convert
them to helicopter carriers. The projected 18,000-ton missile cruisers
were too expensive to ¬nd a place in the naval estimates. As the older
cruisers were scrapped, general-purpose frigates of 2,300 tons were used
for showing the ¬‚ag. Considering that Sir John Fisher had thought in
1904 that ocean-going destroyers of about a third of that displacement
would be adequate for the purpose,54 it is hard to see this particular
economy as evidence of decline. Moreover, once the Suez crisis in 1956
had shown the need for a maritime force capable of rapid reaction to

˜Defence policy™, C (54) 329, 3 Nov. 1954, CAB 129/71; Defence Committee minutes,
25 Aug. 1955, CAB 131/16, and 2 Mar. 1956, CAB 131/17, TNA.
Defence Committee minutes, 4 Nov. 1955, CAB 131/16, TNA.
Sir John Fisher, ˜Naval necessities™, 21 Oct. 1904, FISR 8/4, Churchill College,
The hydrogen bomb, the economy and decolonisation 295

events, the navy converted two aircraft carriers as helicopter-equipped
commando carriers and acquired up-to-date landing craft.55
Escort vessels showed a tendency to increased size and sophistication
that limited the numbers that the navy could afford. Most striking were
the 5,200-ton ˜County™-class destroyers laid down from 1959 to provide
platforms for Sea Slug SAMs. These ships were light cruisers in all but
name. In addition to missiles, they carried anti-submarine helicopters
and 4.5-inch guns for shore bombardment. Anti-submarine warfare was
being revolutionised by improved Sonar and by 1957 the Admiralty
believed that hunter-killer submarines were the best means of destroying
other submarines.56 Submarine warfare was also revolutionised by the
development of nuclear propulsion, which allowed vessels to undertake
long cruises without refuelling or surfacing. The US Navy commis-
sioned the Nautilus, the world™s ¬rst nuclear-powered submarine in
1954, and one of the bene¬ts of Anglo-American nuclear collaboration
was the early transfer of this new technology. The ¬rst British nuclear
submarine, HMS Dreadnought, laid down in 1959 and commissioned in
1963, used an American reactor and an American-designed propulsion
system, but British reactors and British-designed machinery were used
subsequently. Dreadnought was a ˜hunter-killer™, but it opened the pos-
sibility of the navy contributing to the nuclear deterrent along the lines
envisaged in the navy™s paper of 1954, in the form of the Polaris system.
Unlike the land-based, liquid-fuel Thor or Blue Streak, Polaris was
largely invulnerable to a pre-emptive strike when at sea. When the
Polaris agreement was made with the Americans in 1963, four ˜Reso-
lution™-class submarines, each capable of carrying sixteen missiles, were
ordered, but a projected ¬fth boat was cancelled by the Labour gov-
ernment in 1965. Allowing for maintenance and re¬ts, only one or two
of the four could normally be kept on station at any given time.
According to an unof¬cial estimate, two Polaris submarines could
destroy ten Soviet cities, whereas the Air Staff™s view in the 1950s had
been that an adequate deterrent would have to be capable of destroying
40 of 131 major Soviet centres.57 The Royal Navy™s Polaris submarines
appear to have fallen some way short of being an adequate deterrent on
this de¬nition, but they were in line with the concept of interdependence
with the United States. The Admiralty was aware that Polaris would
provoke a bureaucratic battle with the Air Ministry and crowd out the

Ian Speller, ˜Amphibious operations, 1945“1998™, in Harding (ed.), Royal Navy 1930“
2000, pp. 213“45.
MISC/M (57) 91, minutes of meeting of 12 Aug. 1957, DEFE 7/968, TNA.
Robert H. Paterson, Britain™s Strategic Nuclear Deterrent: From Before the V-bomber to
Beyond Trident (London: Frank Cass, 1997), pp. 45“6.
296 Arms, economics and British strategy

navy™s surface ships, given budgetary pressures on the services. Conse-
quently the Admiralty was unenthusiastic when the adoption of Polaris
was ¬rst mooted in 1960, and the question of the price of the missiles
was a central concern. However, the British were able to buy American-
produced missiles at cost price plus a contribution of 5 per cent towards
research and development. The construction of the ˜Resolution™-class
submarines went ahead rapidly: the ¬rst was laid down in 1964, and was
on operational patrol in June 1968; the fourth was completed in
December 1969, six months after the navy had of¬cially taken over the
deterrent role from the RAF.58

Army weapons
The problem of ¬nding the right balance of weapons systems appro-
priate to a ˜hot™, nuclear war and to a limited, conventional war was
particularly acute in the case of the army. A Chiefs of Staff working
party on the operational use of atomic weapons had concluded in 1952
that low-yield atomic weapons could be used to attack troop con-
centrations and thereby counter the Soviet advantage in land forces.
The Americans deployed short-range Honest John and medium-range
Corporal surface-to-surface nuclear missiles in Europe in the late 1950s
and the British Army of the Rhine (BAOR) received these ˜tactical™
weapons in 1960, although the warheads remained under American
control. Britain had begun to develop a tactical nuclear missile, known
as Blue Water, but it was cancelled on ¬nancial grounds in 1962, despite
successful tests. It was always unlikely that ministers would take the
decision to embark on a nuclear war on account of a limited act of
aggression. American, British and other NATO forces consequently
found it dif¬cult to incorporate tactical nuclear weapons into their plans
because of uncertainty whether they would be allowed to use them.59
Even in Europe there was a case for conventional forces that would
delay Soviet land forces while resort to the nuclear option was
suspended during negotiations. Conventional forces were in any case
required for limited wars overseas.

Clark, Nuclear Diplomacy, pp. 283“90, 380“2; Grove, From Vanguard to Trident,
pp. 240“1.
Lawrence Freedman, Britain and Nuclear Weapons (London: Macmillan, 1980), pp. 20“
1; Martin S. Navias, Nuclear Weapons and British Strategic Planning 1955“1958 (Oxford:
Clarendon Press, 1991), pp. 88“90. For decisions in favour of acquiring American
tactical missiles and warheads, see Kaoru Kikuyama, ˜Britain and the procurement of
short-range nuclear weapons™, Journal of Strategic Studies, 16 (1993), no. 4, 539“59.
The hydrogen bomb, the economy and decolonisation 297

The prospect of nuclear warfare had implications for conventional
artillery, and these were addressed by the War Of¬ce from 1955. Troops
would have to be dispersed much more widely, and the 25-pounder gun,
dating from the Second World War, lacked the necessary range for close
support in attack or defence in depth. A high degree of ¬‚exibility would
be required in either a nuclear or limited war. The number of new
weapons systems was restricted, both to reduce unit costs in production
and to simplify logistics.60 All ¬eld and heavy artillery was converted in
the 1960s to armoured self-propelled models. Likewise the 17-pounder
anti-tank gun, which had been introduced into service in 1943, was
supplemented and then replaced by guided missiles. The late 1950s also
saw the development of a mobile SAM system, Thunderbird, for the
Considerable attention was paid to ensuring that British tanks could
match Soviet models in combat. The Centurion proved to be capable of
being upgraded with heavier armour and new, larger-calibre guns, and
remained in production until 1962, by which time 4,423 had been
made, of which 57 per cent were exported. The 105-mm L7 series gun
used on later Centurions was so good that it was widely adopted by
other countries for their tanks. The Centurion was supplemented in
1955 by the Conqueror, which had an American 120-mm gun to enable
it to deal with the latest Soviet heavy tank. Only 180 Conquerors were
built, and both it and the Centurion were replaced from 1967 by the
Chieftain medium tank, which featured a new 120-mm gun. The
development of the Chieftain was protected from defence cuts in 1963
on the grounds that the Centurion was by then obsolescent and orders
for Chieftains might encourage other countries to adopt it. Subse-
quently over 900 were exported to Iran as well as small numbers to
Oman. The Chieftain was described in the technical literature as having
the most powerful armament and the best armour protection of all the
tanks developed in the 1950s and produced in the 1960s.61
Most of the actual ¬ghting by the army in a series of minor overseas
con¬‚icts, such as the confrontation with Indonesia, was done with small
arms and required a high level of professionalism. The phasing out of
conscription in the early 1960s “ the last person on National Service
returned to civilian life in 1964 “ and the return to a long-service,
professional army, albeit a small one, was also appropriate to an age of
increasing sophistication in weaponry. The new-style army required the
˜The close support artillery weapon in the infantry division™, n.d. but 1956, and ˜Future
re-equipment of the Army™, 30 May 1956, WO 32/15709, TNA.
Defence Committee minutes, 10 July 1963, CAB 131/28, TNA; Jane™s Armour and
Artillery 1984“85, pp. 87, 95.
298 Arms, economics and British strategy

Table 6.1. UK share of export of manufactures from eleven
industrial countries, 1954“69.a

1954 20.5
1957 17.9
1960 16.3
1963 15.1
1966 13.2
1969 11.2

Note: a USA, Canada, UK, West Germany, France, Italy,
Belgium, Netherlands, Sweden, Switzerland and Japan.
Source: London and Cambridge Economic Service, The British
Economy: Key Statistics 1900“1970 (1971), p. 17.

mobility conferred by air transport and helicopters, and was certainly
not a cheap option.62

The economy: relative decline and the
weakness of sterling
Britain™s economic problem in the 1950s and 1960s had three related
aspects: ¬rst, a loss of share of world trade in manufactures (see table
6.1); second, a lower rate of growth of national income than other
industrial countries; third, a balance of payments on current account
that was not strong enough to sustain sterling™s role as an international
currency. The overall problem was how to make Britain suf¬ciently
competitive in the international economy to enable her to maintain her
in¬‚uence in world affairs not only through armed strength but also
through leadership of the Commonwealth and the sterling area.
The government™s Economic Survey for 1954 commented on the keen
competition in world trade in manufactured goods and the fact that
West Germany was expanding her exports more rapidly than Britain.
While rearmament had been a problem in 1950“3, the survey now
identi¬ed the major factor affecting Britain™s performance as the low
level of demand in the sterling area, where countries producing primary
goods had been adversely affected by the decline in prices after the
boom caused by stockpiling during the early stages of the Korean War.63
Previously Britain™s connections with producers of primary products,
through the Commonwealth and the sterling area, had seemed to be a

Carver, Tightrope Walking, pp. 62“8.
Economic Survey, 1954 (Cmd 9108), PP 1953“54, xxvi. 431, para. 71.
The hydrogen bomb, the economy and decolonisation 299

source of strength, enabling London to acquire dollars at a time of a
world dollar shortage. By the mid-1950s the dollar shortage was easing.
Moreover the fastest growing world markets were in trade between
industrial countries. This trend proved to be a long-term one, partly
because of post-war liberalisation of international trade through the
General Agreement on Tariffs and Trade (GATT) and the Organisation
for European Economic Co-operation (OEEC), and then, from 1958,
the European Common Market; partly because industrial processes
were becoming more economical in their use of raw materials, some-
times providing man-made substitutes (for example, arti¬cial ¬bres for
textiles); and partly because rising real incomes created faster-growing
demand for manufactured consumer goods, such as cars or television
sets, than for food. Despite the failures of Britain™s applications to join
the European Common Market in 1961“3 and 1967, the proportion of
British exports going to Western Europe rose, and there was a marked
reorientation of trade away from the Commonwealth after 1960, which
may have made it easier for British governments to give up overseas
defence commitments.
Economics and politics also intersected in Whitehall™s perception in
1956 of the Soviet Union as a threat to Britain™s share of international
trade. In May of that year, when arguing that Britain could not afford a
policy of perfection in defence, Eden noted that there was evidence that
the Russians intended to concentrate on industrial exports. In order to be
able to meet this competition, part of the burden placed on British
industry by defence orders must be reduced, so as to release resources for
civil production. In present circumstances, he said, economic failure was
a more serious risk than global war, and defence plans had to be adjusted
to this revised political assessment. He added that a recent report from
the ambassador in Washington showed that President Eisenhower was
thinking along the same lines.64 The Russians made no secret of their
intentions. In November 1957 Nikita Khrushchev, the Soviet leader,
declared in a visit to the United States: ˜in the peaceful ¬eld of trade we
declare a war. The threat to the United States is not in the inter-
continental ballistic missile but in the ¬eld of peaceful production. We
are relentless in this and will prove the superiority of our system.™65
˜Cabinet: aircraft programme™, note of meeting of ministers, 31 May 1956, Gen 514/
2nd meeting, PREM 11/1712. Macmillan had sent a copy of an of¬cial steering
committee report on ˜The Soviet economic offensive™ to Eden the previous month, and
the report had been approved by the Foreign Secretary: Foreign Of¬ce records, series
371, ¬le 120804 (FO 371/120804), TNA.
Sir Leslie Rowan, Arms and Economics: The Changing Challenge (Cambridge University
Press, 1960), p. 15. Rowan had been a senior Treasury of¬cial and was expressing a
departmental view.
300 Arms, economics and British strategy
Table 6.2. Comparisons of GNP of various countries with UK at current prices and exchange
rates, 1954“69 (UK ¼ 100)

France West Germany UK USA

1954 64.0 74.0 100 730.0
1957 69.4 82.3 100 716.1
1960 83.3 98.6 100 709.7
1963 96.5 109.9 100 686.0
1966 100.9 115.0 100 699.1
1969 129.1 137.3 100 846.4

Note: The ¬gures should be read horizontally, to compare total GNP (not per capita) in
each year with the UK. The vertical ¬gures do not measure growth, only change relative to
British GNP. The sharp increase in the rate of relative decline of British GNP between
1966 and 1969 re¬‚ects the effects of devaluation of sterling on international comparisons
based on current exchange rates.
Source: Calculated from ¬gures in International Institute for Strategic Studies, The Military
Balance 1973“1974 (London: Chatto and Windus, 1974), p. 79.

Britain™s economic problem was far greater than competition from
any one particular country. The British economy was becoming rela-
tively less important as other economies expanded more rapidly. The
¬gures in table 6.2 comparing the size of the British national income
with the size of other countries™ incomes have to be treated with some
care. They are calculated from a table published by the International
Institute for Strategic Studies showing GNP in dollars at current market
prices and exchange rates, and are for the whole economy. The ¬gures
thus re¬‚ect the growth of populations as well as of output per person. In
the period 1950“73 British GDP per person grew by an annual average
of 2.5 per cent, higher than at any time previously, but other economies
enjoyed higher rates: 5.0 per cent in the case of West Germany and 4.1
per cent in the case of France.66 The diminishing importance of Britain
as a world power was also a consequence of a relatively slow growth in
population (see table 6.3). As a result of these trends, the West German
and French economies became bigger than the British in 1961 and 1966
A large part of the discrepancy in international growth rates of GDP
per person could be explained by the fact that in the late 1940s the
average British worker™s productivity was closer to the American level
than the average continental European worker™s productivity was. In the
1950s and 1960s there was a convergence of productivity as ¬rms fol-
lowed best American practice, and continental countries had more

Maddison, Phases of Capitalist Development, p. 44.
The hydrogen bomb, the economy and decolonisation 301

Table 6.3. Populations of various countries, 1959 and 1970


France West Germany UK USSR USA

1959 45.2 54.9 52.2 208.8 177.8
1970 50.8 60.7 55.5 241.7 204.9

scope for improvement. Unlike Britain, European economies had large,
backward agricultural sectors from which workers were released into
higher-productivity employment in industry and services by moder-
nisation of farming. However, there was more to the story of relative
economic decline than convergence to a common level of productivity.
By the late 1960s output per person employed in Britain was somewhat
lower than elsewhere in Western Europe, and it has been argued that
this difference re¬‚ected greater resistance to change in institutions and
work practices than on the Continent.67
From the late 1950s the publication of international league tables of
economic growth heightened political awareness of Britain™s relatively
poor economic performance.68 In 1961 Macmillan adopted what was
thought to be the French system of indicative planning for promoting
growth in a capitalist economy, creating the National Economic
Development Council (NEDC). It was hoped that the NEDC, by
bringing representatives of employers™ organisations and the Trades
Union Congress together with ministers and their of¬cials, would be
able to identify obstacles to investment and improved productivity, and
that employers and trade unionists would co-operate in removing these
obstacles with a view to mutual bene¬t through higher economic
growth. In fact the French Commissariat General au Plan exercised less
authority than British of¬cials supposed, and in any case the British state

Charles Feinstein, ˜Bene¬ts of backwardness and costs of continuity™, in Andrew
Graham and Anthony Seldon (eds.), Government and Economies in the Postwar World:
Economic Policies and Comparative Performance 1945“85 (London: Routledge, 1990),
pp. 284“93; N. F. R. Crafts, ˜The golden age of economic growth in Western Europe,
1950“1973™, Economic History Review, 48 (1995), 429“47. For resistance to change, see
M. W. Kirby, ˜Institutional rigidities and economic decline: re¬‚ections on the British
experience™, Economic History Review, 45 (1992), 637“60. For a critical review of the
debate among economic historians and a wide range of data, see Michael J. Oliver,
˜British economic policy and performance since 1950: an early twenty-¬rst-century
assessment™, in Michael J. Oliver (ed.), Studies in Economic and Social History: Essays in
Honour of Derek H. Aldcroft (Aldershot: Ashgate, 2002), pp. 152“200.
Andrew Shon¬eld, British Economic Policy since the War (Harmondsworth, Middlesex,
1958), esp. p. 14; Jim Tomlinson, ˜˜˜Inventing decline™™: the falling behind of the British
economy in the postwar years™, Economic History Review, 49 (1996), 731“57.
302 Arms, economics and British strategy

lacked the powers necessary to impose its will on the business board-
room or the shop ¬‚oor.69 What the chancellor of the exchequer could do
was to set a target for growth, and then adjust the balance between
taxation and public expenditure so as to increase domestic demand in
the hope that micro-economic reforms agreed by the NEDC would lead
to higher output. In the 1962 Budget, Selwyn Lloyd set a target of 4 per
cent. In 1964 the Labour government established a new Department of
Economic Affairs (DEA) which produced a national plan in 1965 for a
25 per cent increase in GDP between 1964 and 1970. However, the
targets set by both the Conservative and Labour governments were
beyond what an economy suffering from labour shortages could achieve,
especially as any productivity-improving changes resulting from the
NEDC™s or DEA™s consensual deliberations fell far short of what was
required to match the increase in demand. The consequences were what
one would expect: an in¬‚ationary boom, balance-of-payments crises,
and de¬‚ation from July 1966 in an unsuccessful attempt to avert
devaluation. De¬‚ationary measures inevitably included curbing public
expenditure, as it would have been politically unacceptable to place the
whole burden on the private sector.70
There had been sterling crises in 1947, 1949 and 1951“2, and they
came with increasing frequency from the mid-1950s: in 1955, 1956,
1957, 1961“2, 1965, 1966 and 1967. Overseas sterling balances made
the currency vulnerable to speculation. Between 1954 and 1958, in
order to facilitate multilateral trade, exchange controls were relaxed and
sterling held by non-UK residents was made readily convertible at the
rate ¬xed in 1949 ($2.80), so that sterling balances represented short-
term liabilities, whereas earlier in the post-war period they had been
partially blocked or were inconvertible. In the late 1930s Britain™s
reserves of gold and foreign exchange had been roughly equal to short-
term liabilities, but in the 1950s sterling liabilities exceeded reserves in
the ratio of about 4:1. Moreover, whereas the original sterling balances
had been held by central banks as reserves, in the 1950s and 1960s
overseas sterling holdings were increasingly in the hands of commercial
banks or trading companies that would not hesitate to convert them into
another currency if there was any indication that sterling might be
devalued. A balance-of-payments de¬cit, putting pressure on Britain™s

Hugh Pemberton, ˜Relative decline and British economic policy in the 1960s™, Historical
Journal 47 (2004), 989“1013; Astrid Ringe and Neil Rollings, ˜Responding to relative
decline: the creation of the National Economic Development Council, Economic History
Review, 53 (2000), 331“53.
Sir Alec Cairncross, Managing the British Economy in the 1960s: A Treasury Perspective
(Basingstoke: Macmillan, 1996).
The hydrogen bomb, the economy and decolonisation 303

convertible currency reserves, acted as such a signal.71 In most years the
balance of payments was in surplus, but there were de¬cits in 1955,
1960“1, 1964“5 and 1967, and there would have been a de¬cit in 1966
had de¬‚ationary action not been taken by the government. The
Treasury urged that economic policy should aim at a substantial surplus
in the balance of payments on current account to strengthen the
reserves, but a booming domestic economy tended to suck in imports
and consume products that might otherwise have been exported. The
surplus reached the annual target of £300 million set by the Treasury in
1956 only once between then and devaluation in 1967, and the ¬gure of
£450 million that the Treasury believed in 1959 would be a desirable
annual average was not achieved until 1969.72
The sterling area was, none the less, seen in Whitehall as a source of
strength. Ministers were told in June 1956 by an interdepartmental
working group of of¬cials, headed by Sir Norman Brook, that sterling
was an important Commonwealth link. All the dominions, except
Canada, used sterling as a reserve currency, as did the colonies. The
Treasury believed that devaluation, following on so closely that of 1949,
would break up the sterling area; members would turn to more
dependable currencies for their reserves and the effect on the political
cohesion of the Commonwealth would be disastrous. Sterling was also
used for about 40 to 50 per cent of all world trade, and it was believed
that instability in exchange rates would cause confusion. From this
perspective, preserving the international value of sterling was, according
to Brook™s working group, ˜the greatest single contribution™ Britain
could make to the maintenance of her position in world affairs.73 When
the Eden government was making military plans in August and Sep-
tember to respond to Colonel Nasser™s nationalisation of the Suez Canal
Company, Treasury of¬cials warned the Chancellor, Macmillan, that
foreign con¬dence in sterling was weak and that it was vital that Britain
should not act in Egypt without the ˜maximum United States™ sup-
port™.74 However, Macmillan apparently failed to convey to his Cabinet
colleagues the full signi¬cance of sterling™s weakness. He believed,
mistakenly, that the Americans were as keen as the British to bring
Nasser down and would do nothing to endanger sterling. Nasser
(Radcliffe) Committee on the Working of the Currency System, Report (Cmnd 827),
Aug. 1959, PP 1958“59, xvii. p. 389, paras. 613“28, 634“43.
˜The future of the United Kingdom in world affairs™, PR (56) 3, 1 June 1956, para. 17,
CAB 134/1315, TNA; Cmnd 827, para. 734; London and Cambridge Economic
Service, The British Economy: Key Statistics 1900“1970 (1971), p. 17.
PR (56) 3, 1 June 1956, CAB 134/1315, TNA.
Bridges to Macmillan, 8 Aug. and 7 Sep. 1956, and T. L. Rowan to Macmillan, 25 Sep.
1956, T 236/4188, TNA.
304 Arms, economics and British strategy

responded to the Anglo-French invasion on 5 November by blocking the
canal with sunken ships; the effect was to reduce the ¬‚ow of oil from the
Middle East, raising prices, and British exports were also expected to
suffer. Con¬dence in sterling fell, leading to a run on Britain™s gold and
dollar reserves, and the American government was able to hold up
support from the International Monetary Fund (IMF) until Britain and
France agreed to withdraw their troops. The alternative would have
been to allow sterling to depreciate, but the advice of the Bank of
England, after consultation with Commonwealth central banks, was that
such action so soon after the devaluation in 1949 would probably cause
the break up of the sterling area.75
When Wilson became prime minister in 1964 he was very conscious
of the danger that Labour would come to be regarded as the party of
devaluation if he followed the example of the Attlee government. The
Chancellor of the Exchequer, James Callaghan, regarded devaluation as
unjust to countries which held their reserves in sterling, and made plain
that he would resign if devaluation were forced on him. On the other
hand, pressure on the exchange rate was almost continuous from 1964
to 1967 and the de¬‚ationary measures taken in July 1966 involved not
only acceptance of a lower growth rate than that set out in the National
Plan but also reductions in expenditure plans for hospitals and local
authority housing as well as for defence. The American government,
concerned that sterling devaluation would lead to speculation against
the dollar, organised international loans to Britain from November
1964, but loans could only buy time. Even after devaluation in
November 1967 there was doubt on foreign exchange markets whether
the new rate, $2.40, could be maintained. A standby credit from the
IMF was required to deal with speculation, and the IMF required a
letter of intent regarding cuts in public expenditure. Moreover, as usual,
devaluation raised the price of imports more quickly than the volume of
exports. Continued de¬‚ationary measures were required in 1968 and
1969 to curb public expenditure and domestic demand so as to release
resources to produce exports.76
Why was defence expenditure a prominent target for economies from
the mid-1950s? The most obvious reason was that military personnel
had to be maintained abroad and were a direct charge on the United
Kingdom balance of payments. As table 6.4 shows, there was a marked
reduction in the numbers of personnel overseas between 1955 and the

Diane B. Kunz, The Economic Diplomacy of the Suez Crisis (Chapel Hill: University of
North Carolina Press, 1991), pp. 128“52.
Cairncross, Managing the British Economy, pp. 195“8, 202“4, 211“12, 230“1.
The hydrogen bomb, the economy and decolonisation 305
Table 6.4. Defence personnel overseas and balance-of-payments cost, 1955, 1961 and 1967

Defence personnel (™000) Balance-of-payments cost (£ m.)

1955 1961 1967 1955 1961 1967

Total overseas 372 206 200 152 225 281
Europe 108 67 64 30 ” 89
Elsewhere 265 139 136 122 ” 192

Source: Richard N. Cooper, ˜The balance of payments™, in Richard E. Caves and
associates, Britain™s Economic Prospects (Washington: The Brookings Institution, 1968),
p. 169.

1960s, but the cost rose. The increase partly re¬‚ected the higher stan-
dards of living required for long-service volunteers with wives and
children, following the ending of conscription, and partly the fact that
after the evacuation of the Suez base, new bases were built in Cyprus,
Kenya and Aden. However, defence imposed a much smaller burden on
the balance of payments than gross ¬gures suggested. For example, the
cost of maintaining the British troops in Germany was offset by
arrangements whereby each year the West German government would
purchase supplies in Britain, the total agreed in 1967 being £70 million.
Likewise, Britain earned £40 million a year from dollars spent by
American forces stationed in Britain. Moreover, it was calculated in
Whitehall in 1967 that if all the British forces overseas were to be
brought home and demobilised, they would still spend about £26 mil-
lion in foreign exchange since, like civilians resident in Britain, they
would spend part of their incomes on imports. Even if the £120 million
that Britain currently earned by exporting arms were not included as an
offset, the real burden of defence on the balance of payments was only
about half of what it appeared to be.77 Cutting overseas expenditure
would help, but the key to the balance-of-payments problem was to
increase the proportion of national output devoted to producing mar-
ketable goods for export or as substitutes for imports.
As table 6.5 shows, Britain devoted a higher proportion of her
national income to defence than any other European country, except
France at the height of the Algerian war. It was not dif¬cult to establish
in the minds of ministers a correlation between a relatively high level of
defence expenditure, on the one hand, and a falling share of
world exports of manufactures, a lower growth rate than other Western

Ministry of Defence, ˜Notes on the government achievement in cutting defence
expenditure™, 21 June 1967, PREM 13/1385, TNA.
306 Arms, economics and British strategy

Table 6.5. Defence expenditure of leading NATO countries as percentage of GNP at factor cost,

France UK West Germany Total Europe USA

1954 8.5 9.9 4.7 7.1 12.7
1955 7.4 9.2 4.8 6.5 11.0
1956 8.8 8.8 4.2 6.6 10.7
1957 8.4 8.0 4.7 6.3 10.9
1958 7.8 7.8 3.4 5.7 10.9
1959 7.7 7.4 5.0 5.9 10.3
1960 7.4 7.3 4.6 5.7 9.9
1961 7.3 7.0 4.6 5.6 10.0
1962 7.1 8.0 5.5 6.0 10.2
1963 6.5 6.9 6.0 5.7 9.7
1964 6.3 6.8 5.4 5.5 8.9
1965 6.1 6.6 5.0 5.3 8.3
1966 5.9 6.5 4.7 5.1 9.2
1967 5.9 6.5 5.0 5.2 10.3
1968 5.5 6.2 4.1 4.8 10.2
1969 4.9 5.8 4.1 4.5 9.6

Source: NATO Information Service, NATO Facts and Figures (Brussels, 1976), pp. 294“5.

European countries, and the weakness of sterling on the other. Eden
thought that Britain was trying to do more things in the ¬eld of defence
than resources would allow without economic strains and shortcomings
in the forces themselves. After the General Election of 1955 he decided
that economies must be made, and the hydrogen bomb offered the
opportunity to do so without a loss of striking power.78 At his
prompting, the new Minister of Defence, Selwyn Lloyd, asked in May
for forecasts of planned expenditure over the next seven years, although
at the time the normal planning period was three years. The forecasts
showed that, if nothing was cut from the defence department™s pro-
grammes, expenditure would rise from £1,527 million in 1955/6 to
£1,939 million in 1959/60, before falling to £1,860 million in 1962/3.
Lloyd told the Chiefs of Staff that the ¬gures were too high and asked
them to assume that the basic annual ¬gure would be £1,580 million.
They returned in October with ¬gures of £1,610 million for 1956/7,
£1,595 million for 1957/8 and Lloyd™s ¬gure of £1,580 million for
1958/9. By the time that the programme was being discussed in the
Defence Committee in the following month, however, Lloyd had to

Anthony Eden, The Memoirs of Sir Anthony Eden: Full Circle (London: Cassell, 1960),
pp. 368“70.
The hydrogen bomb, the economy and decolonisation 307

Table 6.6. Strength of armed forces and women™s services, 1954“69 (™000)

Total RN Army RAF

1954 839 133 445 258
1957 702 114 367 220
1960 519 97 258 164
1963 426 96 188 142
1966 417 98 193 125
1969 380 88 177 113

Note: Owing to rounding, the combined numbers for the individual services do not always
equal the total in column 1.
Source: Central Statistical Of¬ce, Annual Abstract of Statistics

admit that the latest estimate for the cost of research and development
in 1958/9 was £20 million higher on account of measures taken to
speed up the introduction of new weapons. The Chancellor of the
Exchequer, Butler, said that at a time when there was a need to free
more resources for exports (there was an ongoing sterling crisis) it
would be wrong to adopt a programme that would result in government
demand taking a higher share of GNP.79 Eden agreed, and led the
Defence Committee in a review of the programmes that, as already
noted, resulted in him thinking in terms of economising on ¬ghters for
the RAF (see p. 284).
Eden wanted to abolish conscription to ease industry™s labour short-
age.80 In the event, he resigned before the new shape of the forces was
¬nalised and it fell to Macmillan to take the ¬nal decision. The 1957
Defence White Paper pointed out that 7 per cent of the working
population was either in the defence services or supporting them; 12.5
per cent of the output of the metal-using industries, on which export
trade largely depended, was devoted to defence orders; and a high
proportion of scientists and engineers were engaged in military work
although there was a shortage of scientists and technicians in civil
industry.81 The ending of conscription resulted in the transfer of hun-
dreds of thousands of servicemen into civil employment, chie¬‚y at the
expense of the army (see table 6.6).
The arguments in the 1957 White Paper resurfaced in more tech-
nocratic prose in Labour™s National Plan of September 1965. Defence

˜UK defence programme: memorandum by the Minister of Defence™, DC (55) 43, 14
Oct., and Defence Committee minutes, 4 Nov. 1955, CAB 131/16, TNA.
Eden, Full Circle, p. 373.
Cmnd 124, paras. 7, 58.
308 Arms, economics and British strategy

Table 6.7. Defence expenditure as a percentage of GDP, 1954/5 to

Financial year

1954/5 9.0
1955/6 8.2
1956/7 8.3
1957/8 7.4
1958/9 7.3
1959/60 6.9
1960/1 6.9
1961/2 6.9
1962/3 6.8
1963/4 6.5
1964/5 6.4
1965/6 6.4
1966/7 6.2
1967/8 6.3
1968/9 5.8
1969/70 5.3

Sources: Central Statistical Of¬ce, Annual Abstract of Statistics;
Mitchell, British Historical Statistics, p. 830.

pre-empted ˜a large part of the productive potential of some of the most
important and technologically advanced industrial resources™ and used 5
per cent of the labour force. Defence was taking up more resources than
Britain™s total investment in industrial plant and machinery did, and
between a third and two-¬fths of research and development was
defence-related.82 The recasting of defence policy was not simply a
matter of reducing the strain on the balance of payments but was also
intended to be part of a major effort to modernise Britain.
A comparison of table 6.7 with the comparable ¬gures in tables 1.1,
3.2 and 5.3 shows that in the post-war period defence took up a higher
proportion of GDP down to 1968/9 than had been the case in the ten
years before the First World War or in the years 1920/1 to 1936/7
inclusive. Moreover, whereas the rise in defence expenditure in the late
1930s had been at a time of high unemployment, the competition
between civil and military use of labour and capital was much greater in
conditions of full employment after the Second World War. In these
circumstances economic analysis suggests that defence expenditure
contributed to Britain™s slower economic growth compared with coun-
tries that devoted less of GDP to defence. A study of fourteen advanced
The National Plan (Cmnd 2764), PP 1964“65, xxx. 1, ch. 19, para. 3.
The hydrogen bomb, the economy and decolonisation 309

Table 6.8. Index of defence expenditure at constant prices, 1955“69

1955 108.2
1956 105.5
1957 99.4
1958 97.2
1959 97.0
1960 100.0
1961 99.9
1962 100.9
1963 102.8
1964 106.5
1965 106.2
1966 105.2
1967 108.5
1968 106.2
1969 99.5

Source: Greenwood, ˜Defence and national priorities since
1945™, p. 191.

Western countries for the years 1954 to 1973 showed that reduced
investment was a major opportunity cost of defence expenditure.83
While there is no simple correlation between investment and economic
growth, since the return on investment varies, up-to-date plant and
transport are necessary conditions of progress.
Although defence expenditure fell as a proportion of national income
after 1952/3, national income was rising, and consequently a lower pro-
portion of national income did not necessarily imply a lower level of
expenditure. Greenwood used statistics compiled by the Stockholm
International Peace Research Institute to show that British defence
expenditure was much more stable than the ¬gures in tables 6.5 and 6.7
suggest (see table 6.8). The Stockholm Institute calculated defence
expenditure at 1970 prices, and table 6.8 shows by how much defence
expenditure varied at constant prices compared with 1960. Eden and
Macmillan (down to 1959) come out as the most successful economisers.
After 1961, rapidly rising development costs for TSR-2 and other
advanced weapons systems led to higher defence expenditure in real terms
down to 1964, and although Labour™s defence review on taking of¬ce
temporarily reversed the trend, there was a further upward surge in 1967,
the year of devaluation. In real terms, defence expenditure was maintained
Ronald P. Smith, ˜Military expenditure and investment in OECD countries 1954“73™,
Journal of Comparative Economics, 4 (1980), 19“32.
310 Arms, economics and British strategy

at or above the 1960 level, but rising costs of new weapons systems made it
necessary to reshape the defence forces to keep within budget.

The economy: the defence industries
Rising costs of research and development also had implications for the
shape of the defence industries. The Cabinet™s Economic Policy
Committee had been assured in 1952 by the Ministry of Supply that
Britain had a remarkable technical lead over competitors in aircraft
manufacture and that there was enormous potential for the industry.84
The industry was the third largest in the world and was highly con-
centrated. In 1955, the top six ¬rms: Vickers-Armstrong, Hawker Sid-
deley, Rolls-Royce, Bristol, English Electric and de Havilland,
accounted for 80“90 per cent of output. On the other hand, some of
these ¬rms maintained more than one design team. Smaller ¬rms, like
Boulton Paul and Saunders-Roe, were kept going with research con-
tracts. The industry bene¬ted from considerable expenditure by the
Ministry of Supply on research and development, which almost mat-
ched what ¬rms spent themselves, but the money was spread round too
many projects.85 The trouble was that Britain was trying to carry out
fundamental research on such things as delta wings and at the same time
produce the whole range of military and civil aircraft required for the
RAF, the FAA and the nationalised airlines, BEA and BOAC. Yet, as
the 1961 Defence White Paper pointed out, the United States and the
Soviet Union each spent on research and development alone larger sums
than the entire British defence budget.86 The consequences were
lengthy delays in development of aircraft and guided missiles. The
navy™s Sea Slug SAM ¬rst ¬‚ew in 1950 but did not complete its
development trials until 1961. In 1960 the Public Accounts Committee
strongly criticised the Sea Slug programme, noting that it was costing
more than twice earlier estimates and commenting that delays in its
entry into service were ˜inexcusable™.87
By January 1956 the Secretary of State for Air, Birch, believed that
amalgamations of ¬rms were needed to prevent growing competition for
a limited number of skilled technicians. The Minister of Supply, Regi-
nald Maudling, disagreed, on the grounds that amalgamating ¬rms
would not increase the number of technicians. He was at one with Birch

Economic Policy Committee minutes, 29 May 1952, CAB 134/842, TNA.
Edgerton, England and the Aeroplane, pp. 90“2, 96.
Report on Defence (Cmnd 1288), PP 1960“61, xxiv. 463, para. 29.
Eric Grove, ˜The Royal Navy and the guided missile™, in Harding (ed.), Royal Navy
1930“2000, pp. 193“212, at pp. 195“9.
The hydrogen bomb, the economy and decolonisation 311

on the need for a greater concentration of effort, but argued that the
remedy lay in reducing the number of projects, as it was in the devel-
opment phase, not during production, that delays occurred. A number
of projects were dropped and Eden asked the Minister of Defence, Sir
Walter Monckton, to undertake an internal inquiry into the supply of
military aircraft.88 In September the steering committee of of¬cials
appointed by Monckton from the ministries of Air, Defence and Supply
had produced a ¬rst report that identi¬ed a number of problems, mainly
in procurement procedures. It was noted that a major project now took
something like ten years from inception to completion, but planning of
the research and development programme was virtually on a year-to-
year basis. The of¬cials recommended that the programme should be on
the basis of a ten-year forecast of requirements and resources. It was
recognised that changes in defence policy or strategy would continue to
lead to cancellation of some projects, but it would be impossible to
complete projects on time unless the total programme was related to the
supply of scientists and engineers. The shortage of skilled technicians
was acute and could not be expected to disappear for many years to
come. The major problem in the relationship between the government
and the industry was reported to be inadequate competition between
¬rms. Whereas in the United States there was real competition because
there were suf¬cient resources for more than one type of aircraft or
guided missile to be developed for a given role, in Britain resources were
so limited that normally competition did not extend beyond the design
study stage.89 The idea of inviting foreign ¬rms to tender for contracts
for British requirements does not seem to have occurred to the of¬cials.
The 1957 Defence White Paper made clear that there would be fewer
research and development projects and production orders for military
aircraft in future. In July 1957 a ˜background™ paper was circulated to
the Cabinet listing a number of well-known aircraft ¬rms where workers
were likely to be made redundant as a result. It was expected that over
the next four or ¬ve years the numbers employed in the manufacture of
airframes, aero-engines and related equipment, excluding electrical
equipment, would fall by about 100,000 to about 150,000, or what had
been the level before the Korean War.90 The programmes for guided

˜Aircraft programme™, Gen 514/1st meeting, 23 Jan. 1956, Gen 514/2nd meeting, 31
May 1956, PREM 11/1712, TNA.
˜First report to ministers by Steering Committee on Aircraft Supply™, 20 Sep. 1956,
DEFE 7/1128, TNA.
˜Defence programme™, memorandum by the Minister of Supply, 28 June 1957, C (57)
155, CAB 129/88; Brook to Prime Minister ˜Defence programme™, 8 July 1957, PREM
11/1773, TNA.
312 Arms, economics and British strategy

weapon development were not expected to absorb much of the redundant
labour: in 1957 about 2,000 people were employed upon such work and
the total was not expected to rise above about 10,000.91 Macmillan had
wanted to set up a Cabinet committee on the future of the aircraft
industry, but he was advised by Brook in May 1957 that a detailed
inquiry would have to deal with the ef¬ciency of the industry and would
require more time than ministers could give. On the other hand, an
outside inquiry was likely to undermine public con¬dence, and Brook
suggested that the work be given to of¬cials. ˜We should need to mask
the fact that the enquiry was concerned with ef¬ciency™, he added. This
could be done by framing their terms of reference along the lines of: ˜the
effects of the new defence policy on the future of the aircraft industry™.
Some ministers, nevertheless, wanted an outside inquiry, and the
Chancellor of the Exchequer, Thorneycroft, was asked to consider what
the scope and nature of the inquiry should be. Thorneycroft took the
view that an outside inquiry might lead to some embarrassing dis-
closures about the poor return for the large sums of public money spent
in the civil as well as the military ¬elds, and the outcome was a working
party of senior of¬cials from the Air Ministry, the Board of Trade, the
Ministry of Supply, the Ministry of Transport and Civil Aviation, and
the Treasury, with a Treasury chairman, Sir Thomas Padmore.92 The
working party reported in April 1958 in favour of continuing govern-
ment support for research and development for both military and civil
aircraft, on condition that the industry reorganised itself to meet the
changed conditions with which it was now faced.93
Meanwhile the Permanent Secretary of the Ministry of Supply, Sir
Cyril Musgrave, had told the heads of the major aircraft manufacturers
at a meeting in September 1957 that only one major military project had
survived the Sandys White Paper, a multi-purpose aircraft to replace the
Canberra (the future TSR-2), and that the design contract would not be
placed with any one ¬rm, but with a consortium. He advised them that
there was unlikely to be a need for more than three airframe ¬rms for
military requirements in future and that the government hoped that the
industry would rationalise itself through amalgamations. Sandys, who
became minister of aviation in October 1959, aimed at two airframe
groups and two aero-engine groups. The outcome of much wheeling

Aircraft Industry Working Party, AI (WP) 1st meeting, 20 Sep. 1957, DEFE 7/1128,
Brook to Prime Minister, 14 May 1957, and Thorneycroft to Prime Minister, 31 July
1957, PREM 11/2214, TNA.
˜Future of the aircraft industry: aeronautical research and development™, EA (58) 32, 24
Apr. 1958, CAB 134/1679, TNA.
The hydrogen bomb, the economy and decolonisation 313

and dealing was that by the early 1960s most of the thirteen ¬rms that
had produced military aircraft in the 1950s had been absorbed into
Hawker Siddeley or a new ¬rm, British Aircraft Corporation (BAC),
and all helicopter work had been put into Westland Aircraft. Westland
had come to dominate the British helicopter market by acquiring in-
house expertise through licensed production of American Sikorsky
designs, which had proved to be superior to government-sponsored
indigenous projects. Aero-engine work was concentrated in two ¬rms:
Bristol Siddeley and Rolls-Royce.94 Employment in the industry had not
fallen since 1957. In 1965 Hawker Siddeley employed 123,000 workers,
making it the second largest manufacturing ¬rm in the United King-
dom, and BAC employed 42,000. After Rolls-Royce took over Bristol
Siddeley in 1966 it employed 88,000 workers. In comparison, total
employment in the French aircraft industry was 85,000.95
The Labour government also undertook a major inquiry into the aircraft
industry by a committee chaired by Lord Plowden, who had been chief
executive of the Ministry of Aircraft Production during the war. Plowden
reported in 1965 that a reduction in the size of the industry was desirable as
it received far more government support than any other, and he recom-
mended collaboration with European countries in order to be able to
compete with American ¬rms.96 An American study in 1968 noted that
the British aircraft industry was characterised by lower labour productivity
and higher costs than in the United States, but doubted whether colla-
borative projects would reduce overall costs, citing the already expensive
Concorde project as evidence. A better alternative might be for a slimmed-
down, cost-conscious British industry to concentrate on a limited range of
projects which had been chosen on economic grounds, including export
prospects. Some types would have to be imported but the fact that the
option of domestic production existed would strengthen the hand of
British negotiators dealing with foreign ¬rms.97
The decision to terminate the development of ¬ghter projects in 1957
was bitterly resented in the aircraft industry. Hawker Siddeley was
able to secure of¬cial support for a revolutionary, if subsonic, VTOL

Charles Gardner, British Aircraft Corporation (London: B. T. Batsford 1981), pp. 17“19,
23“8; Matthew Uttley, Westland and the British Helicopter Industry, 1945“1960 (London:
Frank Cass, 2001).
Edgerton, England and the Aeroplane, pp. 96“7; R. de Narbonne, ˜French challenge™,
Royal Air Force Flying Review, 18 (May 1963), 15.
Report of a Committee into the Aircraft Industry (Cmnd 2853), PP 1965“66, iv. 189,
paras. 205, 208, 458 and 523.
Merton J. Peck, ˜Science and technology™, in Richard E. Caves and associates, Britain™s
Economic Prospects (Washington: Brookings Institution, 1968), pp. 448“84, at
pp. 471“6.
314 Arms, economics and British strategy

ground-attack ¬ghter, the P.1127, which ¬rst ¬‚ew in 1960. The P.1127
was very nearly a victim of Labour™s defence review in 1966: the
Secretary of State for Defence, Healey, wished to cancel it, both on
¬nancial grounds and because he was doubtful about how often its
VTOL characteristics would be required. The Cabinet Secretary,
Trend, advised Wilson in January that there was no alternative to can-
cellation in favour of a projected conventional Anglo-French tactical
support ¬ghter, the Jaguar, if the review was to reach its ¬nancial target,
but that a decision to contract out of technological advance would
require ˜very careful presentation™. Neither the RAF nor the Admiralty
was willing to make sacri¬ces to accommodate the P.1127 in their
equipment programmes, perhaps because of its cost, which, at constant
prices, was two-and-a-half times that of the P.1 Lightning interceptor,
which had entered service in 1961, and more than eight times that of the
Hunter ¬ghter-bomber, which the P.1127 was intended to replace.
Nevertheless, the Ministry of Aviation fought hard throughout 1966,
arguing that cancellation when Britain held a world lead in VTOL
technology would destroy the aircraft industry™s con¬dence in the gov-
ernment. Even the Treasury began to waver in its opposition to the
project when it realised that American aircraft would have to be ordered
to ¬ll the gap before the Jaguar would be available, increasing dollar
expenditure at a time when sterling was under pressure. The possibility
of export earnings to offset development costs was also placed in the
balance against cancellation, justi¬ably so since the P.1127 was later
adopted by the US Marine Corps.98 In the event, the P.1127 was placed
in production as the Harrier and began to replace the Hunter in the
RAF from 1968 and entered service with the FAA in 1979, serving with
distinction in the Falklands War in 1982. The success of the Harrier
contrasted with the failure of contemporary French and German VTOL
projects, the Dassault Mirage IIIV and the Entwicklungsring Sud VJ
101 X1, to reach production status. Despite all that had happened
between 1957 and 1965 the British aerospace industry was still the third
largest in the world in terms of capacity for undertaking research and
development, and was able to take a leading role in collaborative pro-
jects with European partners in line with government policy.99

Trend to Prime Minister, ˜Defence review™, 18 Jan. 1966, PREM 13/800; Defence and
Overseas Policy Committee minutes, 21 Jan., 22 Jan., 13 Feb. and 19 Dec. 1966, CAB
148/25; Cabinet conclusions, 22 Dec. 1966, CAB 128/41, TNA. Figures for costs of
aircraft from Keith Hayward, The British Aircraft Industry (Manchester University Press,
1989), p. 6.
Humphrey Wynn, ˜Intra-European collaboration™, Royal Air Force Flying Review, 20
(June 1965), 13“20.
The hydrogen bomb, the economy and decolonisation 315

Warship builders suffered from a decline in naval orders, and the
problems of the shipbuilding industry were compounded by competition
from West Germany, Japan, the Netherlands and Sweden in export
markets for merchant ships. Credit arrangements or subsidies in these
countries encouraged investment in more modern techniques, but the
Cabinet™s Economic Policy Committee took the view in 1959 that
subsidies would serve no purpose in Britain until management and trade
unions could agree to measures to improve industrial relations and
reduce costs in line with competitors.100 By the 1960s there was surplus
shipbuilding capacity in the world, and a contraction in the British
industry was inevitable. The Geddes Report noted in 1966 that research
and development had been neglected, industrial relations were still poor
and there were too many yards chasing too few customers.101 Fair¬eld,
the ¬rm that had built the last British cruiser, HMS Blake, ran out of
funds in 1965 and the government took a 50 per cent stake in the
company, Upper Clyde Shipbuilders (UCS), which absorbed Fair¬eld
and most of the other warship builders on the Clyde. UCS did not
prosper and was the scene of a famous work-in in 1970. Rationalisation
also took place on the Tyne. Even so, the Royal Navy “ still the third
largest in the world “ placed all its orders with British ¬rms, ensuring
that Britain™s capacity to build warships was exceeded only by the
United States and the Soviet Union.
The army™s suppliers also suffered from a contraction of orders, but
the Chieftain tank programme kept production lines going at Vickers™
plant at Elswick and the royal ordnance factory at Leeds. Both of these
concerns, plus Alvis, retained the capacity to design armoured ¬ghting
vehicles, despite the small size of the British army compared with armies
of countries of similar populations. Vickers wisely diversi¬ed in the
1950s, but in the 1960s it was still a major producer of armaments.102
Given that defence expenditure at constant prices in 1969 was higher
than in 1959 (see table 6.8), it is not surprising that the military-
industrial complex was still large. However, the increasing cost of
weapons systems, especially research and development, meant that
fewer projects could be afforded and the defence industries had to be
slimmed down in much the same way as the defence services themselves

Economic Policy Committee minutes, 4 Feb. and 8 July 1959, CAB 134/1681, TNA.
Shipbuilding Inquiry Committee 1965“66 Report (Cmnd 2937), PP 1965“66, vii. 45.
J. D. Scott, Vickers: A History (London: Weidenfeld and Nicolson, 1962), pp. 361“4,
316 Arms, economics and British strategy

Global strategy: the impact of the hydrogen bomb
Since the United States was by far the senior partner in the Anglo-American
˜special relationship™, the context for the impact of technical change on
strategy is best provided by looking at American strategic thought, as
represented by Bernard Brodie. Brodie™s Strategy in the Missile Age
(1959) did not, as he modestly noted, cause the changes that occurred in
American strategy after 1960, but it did set out the intellectual frame-
work within which the movement from the doctrines of the Eisenhower
era to those of the Kennedy era took place.103 After the Korean War had
ended, Congress was unlikely to continue to vote increased funds for
military expenditure, and the destructive power of atomic weapons
seemed to provide a cost-effective means of countering Soviet super-
iority in conventional forces. In a speech on 12 January 1954 the
Secretary of State, John Foster Dulles described American strategic
doctrine as one of ˜massive retaliation™. Instead of ad hoc responses with
conventional forces to Communist aggression, as in Korea, the National
Security Council had decided to rely primarily upon ˜a great capacity to
retaliate, instantly, by means and at places of our own choosing™. Where,
on a sliding scale of possible examples of aggression, the massive reta-
liation principle would be applied was not speci¬ed, apparently in a
deliberate attempt to keep Communist leaders guessing. In December
1954 ministers on the North Atlantic Council authorised NATO
planners to proceed on the basis that thermonuclear weapons would be
used from the outset of a war, even in the unlikely event of the Soviet
forces refraining from using atomic weapons. On the other hand, by
October 1957 “ the month when the ¬rst Soviet space satellite was
launched “ Dulles was retreating from the doctrine of massive retaliation
by referring publicly to the development of tactical nuclear weapons as
an alternative.104

Preface to paperback edition (Princeton University Press, 1965), p. v.
Bernard Brodie, Strategy in the Missile Age (Princeton University Press, 1959), pp. 229,
248“54, 261“2. For the origins of the doctrine of massive retaliation, and its
implementation, see John Lewis Gaddis, Strategies of Containment: A Critical Appraisal
of Postwar American National Security Policy (New York: Oxford University Press,
1982), pp. 146“52, 165“75. For NATO doctrine, see ˜The most effective pattern of
NATO military strength for the next few years™, report by the Military Committee to
the North Atlantic Council, 18 Nov. 1954, MC 48, paras. 3“4, 6“7, reproduced in
NATO Strategy Documents 1949“1969, ed. Gregory W. Pedlow (NATO Graphics
Studio, 1997), pp. 231“50. For the debate on the balance between massive retaliation
and the use of conventional forces, see Stephen Twigge and Alan Macmillan, ˜Britain,
the United States, and the development of NATO strategy, 1950“1964™, Journal of
Strategic Studies, 19 (1996), no. 2, 260“81.
The hydrogen bomb, the economy and decolonisation 317

As Brodie pointed out, the hydrogen bomb was different from earlier
weapons, even the atomic bomb, in that a small number would be more
than suf¬cient to disable any enemy, including a superpower. The
number of American or Soviet cities or industrial centres whose
destruction would end either an economy™s ability, or society™s will, to
conduct a war was not more than 200, and possibly as small as 50,
depending upon assumptions about the interdependence of industries.
The advantage would lie with whichever power took the initiative
because, even with radar early warning systems, ¬ghter defences could
not bring down enough bombers to prevent mass destruction, and
ICBMs would be invulnerable to interception for the foreseeable
future. On the other hand, there were ways in which an ability to
retaliate “ so-called second-strike capability “ could be preserved.
A country™s strategic aircraft could be dispersed and concealed on the
ground; a proportion kept in the air at all times (as USAF heavy
bombers, with their large crews, unlike British medium bombers, were
able to do); and a high proportion of the remaining aircraft kept pre-
pared to take off as soon as an attack threatened. Missiles could be
protected in hardened silos (as American ICBMs were in the 1960s), or
launched from widely dispersed submarines (as with Polaris). Once each
side had suf¬cient second-strike capability neither could resort to the all-
out use of thermonuclear forces, either in a pre-emptive strike or in
retaliation to aggression, except as a suicidal act.
Brodie put forward the concept of a ˜limited war™, limited in the sense
that each side tacitly agreed to refrain from bombing cities, which, in a
thermonuclear context, would mean no strategic bombing between the
United States and the Soviet Union. Likewise, tactical nuclear weapons
might be used in sparsely populated areas only. Such a war must also be
limited in its objectives, to leave room for negotiation to bring it to an
end. Even so, the risks of escalation would be high, and some situations
would not be considered to be serious enough for nuclear weapons,
however limited their use. Brodie, therefore, argued for the United
States having a substantial capability for ¬ghting limited wars on a non-
nuclear basis. He was critical of the British Defence White Paper of
1958 for its ˜all-or-nothing™ approach to the use of nuclear weapons in
the defence of Western Europe, as it left no room for political or military
NATO strategy, as set out by the alliance™s Military Committee in
February 1957, provided for readiness to deal with ˜in¬ltrations,
incursions or hostile local actions™ in the NATO area ˜without neces-
sarily having recourse to nuclear weapons™, but stated bluntly that ˜in no
318 Arms, economics and British strategy

case is there a NATO concept of limited war with the Soviets™.105
However, in the following year, the SACEUR, General Lauris Norstad,
told the Senate Committee on Foreign Relations that one of the func-
tions of NATO™s proposed ˜shield™ of thirty combat-ready divisions in
Western Europe was to delay Soviet land forces long enough to give
some ¬‚exibility by removing the need to choose at once between total
war or acquiescence in some act of aggression. Behind the ˜shield™ was
the ˜sword™ of US Strategic Air Command and the RAF™s Bomber
Command. Norstad™s statement anticipated the doctrine of ¬‚exible
response, which became of¬cial American strategy in 1961. Massive
retaliation remained at one end of a spectrum that stretched to wholly
conventional forces at the other. The Kennedy administration felt less
need to economise on defence than the Eisenhower administration had
done, and a reassessment of Warsaw Pact forces suggested that the
problem of defending Western Europe without using nuclear weapons
was less hopeless than previously believed. Crises could be dealt with by
conventional forces in the ¬rst instance, as in 1961, when the American
response to the building of the Berlin Wall was to mobilise additional
army divisions, or in 1962, when the presence of American conventional
forces in the Caribbean left Khrushchev with no option but to withdraw
Soviet missiles from Cuba or risk nuclear war. Flexible response
required co-ordinated command; hence the offer to equip a NATO
multilateral nuclear force of surface ships armed with Polaris missiles,
under the command of the SACEUR, as an alternative to a proliferation
of small national nuclear forces (an offer that was dropped in 1966 when
it became clear that it was of interest only to the West Germans).
When the British Chiefs of Staff Committee ¬rst considered the
impact of the hydrogen bomb on global strategy in 1954 they agreed
that American nuclear superiority over the Soviet Union made a
deliberate act of war unlikely until the latter had caught up three or
four years hence. Even thereafter, mutual deterrence was probable,
provided NATO allies maintained their unity and continued to build
up their military strength. Communist subversion, backed by the
supply of arms and ¬nancial aid, as opposed to overt attack or inva-
sion, was the immediate threat.106 The hydrogen bomb therefore by
no means disposed of the need to maintain conventional forces to deal
with ˜limited war™. Moreover, in August 1954, after the French

˜Overall strategic concept for the defense of the North Atlantic Treaty Organisation
area™, 21 Feb. 1957, MC 14/2 (Revised), para. 19, reprinted in NATO Strategy
Documents, pp. 279“313.
˜United Kingdom defence policy™, C (54) 249, 23 July 1954, CAB 129/69, and later
version D (54) 43, 23 Dec. 1954, CAB 131/14, TNA.
The hydrogen bomb, the economy and decolonisation 319

National Assembly had rejected the proposal to incorporate West
German troops into a multinational European Defence Community, it
was clear that West Germany could be brought into NATO only if
some other way could be found to pacify fears of les Boches. Eden, as
foreign secretary, achieved this in the Paris Agreements in October,
when he committed Britain to maintaining four divisions, plus a tac-
tical air force, for the defence of Western Europe, in return for
France™s agreement to West Germany joining NATO via the Western
European Union (WEU).107
The main thrust of the Swinton Committee™s report in November
1954 was its support for the RAF™s case for a nuclear deterrent of 240 V-
bombers. It was argued that ˜the very survival™ of Britain in war would
depend upon the prompt elimination of Soviet air bases, and that that
task could not be left to the US Strategic Air Command as there could
be no assurance about American priorities as regards targets.108 This
argument was publicly stated by Churchill on 1 March 1955 in the
debate on the 1955 Defence White Paper, which announced the deci-
sion to develop the hydrogen bomb.109 Yet the priority for the nuclear
deterrent was not absolute: the White Paper also stated that Britain
must play its part in defending the interests of the ˜free world as a whole,
and particularly the Commonwealth and Empire™, in the Cold War, for
which role the army and navy were required.110
By 1955 the nature of thermonuclear weapons, and their implications
for global strategy, could be discussed by ministers in the light of the
Strath Report (see pp. 281“2). Eden believed that one consequence of
the hydrogen bomb would be a reduction in the advantage of physically
larger countries, since all would become equally vulnerable. While the
Soviet Union could be expected to match the West in the development
of nuclear weapons, he also believed that the bomb would deter superior
conventional forces in Europe.111 On becoming prime minister he asked
the new Minister of Defence, Selwyn Lloyd, to undertake a long-term
review of defence programmes over the next ¬ve to seven years, with a
view to bringing the total cost within a sum set by the Treasury (see
p. 306). Lloyd told the services at a meeting on 12 July that a major
recasting of the defence programme was required. He proposed that the
highest priority be given to the nuclear deterrent, comprising the
V-bomber force and its weapons; the Blue Streak IRBM; and ˜such

Eden, Full Circle, pp. 146“74.
˜Defence policy™, C (54) 329, 3 Nov. 1954, CAB 129/71, TNA.
537 HC Deb., 5s, 1954“55, c. 1897.
Statement on Defence (Cmd 9391), PP 1954“55, x. 475“504, para. 1.
Eden, Full Circle, pp. 368“9.
320 Arms, economics and British strategy

nuclear potential as the navy possessed™. The second priority, in his
view, should be measures to deal with the Cold War and overseas
commitments, plus the air defence of the United Kingdom and ˜the
minimum civil defence programme required to sustain public morale™.
The lowest priority should be given to preparation for a major war. He
believed that big economies might be found at the expense of the navy,
the Territorial Army and civil defence.112 He followed up with a
document known as the ˜August Directive™ in which he called for an
examination of the ¬‚eet with a view to deciding which ships were


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