Expansion Scheme L of 1938
By 1938 the Government was sufficiently sensitive to the air dangers to give the RAF, and, to some extent, the anti-aircraft defences, the first claim on available resources. This meant rejecting the earlier doctrine of balanced allocation of resources between the three Services and allowing a clear priority to the air arm. The priority was becoming more pronounced as the crisis over Czechoslovakia approached.
The priority given to the RAF did not, however, mean the end of financial considerations. On the contrary, successive proposals for revision of the Scheme F of came up for discussion, and all of them were beyond the available financial resources. Even the great rearmament vote and loan of 7th March 1938 fell short of the needs of the RAF. That vote brought the total planned expenditure of the RAF over the next four years to about £500 millions, but the cost of the minimum programmes which the Air Ministry had formulated at the end of 1937 was established as at least £650 millions by 1941.
In March 1938, the negotiations between the Secretary of State for Air and the Cabinet were suddenly overtaken by Hitler’s annexation of Austria, which at once made the dangers in the international situation become more immediate and apparent. There was little time to lose, and for the first time a real mood of urgency crept into the discussions of the air plans at the highest level. Suddenly, finance was no longer considered the worst obstacle. The question was no longer what the country’s finances could afford but what industry could turn out. So when the Cabinet met in the early days of April to decide finally and urgently the scale of the aircraft programme, they were compelled to define it not in terms of finance but in those of industrial capacity.
An entirely new principle entered into the plans. The revised Air Ministry proposals required a whopping 12,000 aircraft in two years. Analysis of the industrial capacity showed that this was also the maximum which the aircraft industry could produce by that date. On 27th April 1938 Cabinet authority was consequently given to the new plans, and Scheme L of 12,000 aircraft in two years came into operation.
The passing of Scheme L was a real turning point. Not only did it reflect the heightened sense of urgency in the Government, but it also signified the end of the purely financial checks on rearmament. The RAF was the first among the Services to enter into what to all intents and purposes were wartime conditions of supply, for from now on expansion in the air was to subject only to industrial limitations: production capacity, raw materials, labour and management.
The scale of the upswing in the overall rearmament programme in 1938-1939 can be illustrated by the following numbers. The annual cost of equipment and stores for the fighting Services rose nearly eightfold from about £37 million in the financial year ending March 1934 to £273 million in the year ending March 1939. During the same time, standard rate of income tax rose from 4s. 6d. in the pound in 1934 to 5s. 6d. in 1936 and 7s. 6d. in 1939. In 1937, the Government launched a five-year rearmament loan of £400 million, but in the spring of 1939 this had to be raised to £800 million.
Expansion of the Industrial Capacity
The reality of industrial limitations to Scheme L came to be felt almost at once. The flow of aircraft production failed to keep up with manufacturers’ own forecasts, and for a long time the aircraft industry appeared to be all but incapable of further rapid expansion. It was a foretaste of the industrial problems of wartime production.
By the spring of 1938 most aircraft companies had travelled a long way from the state in which they were in 1934. With the first orders under the rearmament scheme their position rapidly and strikingly improved. In 1935 and 1936 orders for license production of the Hawker Fury helped the Fairey Aviation Company to turn the corner, orders for the Hart bomber revived Hawker Aircraft and orders for the Handley-Page Harrow injected new life into the latter company. Orders for the Kestrel engine prevented Rolls-Royce from abandoning the production of aero engines and started them on that road to perfection which they so successfully trod in the subsequent ten years. The British Aeroplane Company, which shared with Rolls-Royce the main burden of aero-engine production, was also strengthened at that period. So also were the other ‘family’ firms, and the industry as a whole appeared to be fully stretched.
Contrary to a popular belief, the problems were not to any considerable extent those of factory space, plant and machinery. At the end of 1936 and the beginning of 1937 most of the aircraft companies began to find that the tools and floor space inherited from the ‘lean years’ were no longer sufficient to deal with the expanding programme. Further additions could and, in fact, were made without much strain on available resources. Early in 1936 the Air Ministry and the firms launched a number of projects for factory construction with Government assistance. Between 1936 and 1938 much new capacity was planned and laid down with a view to future expansion.
Some of the new capacity was designed as ‘shadow schemes’, conceived as contributions to the war potential. But this conception had to be modified with the further expansion of the air programmes. ‘Shadow’ factories had now to be reckoned as additions to peacetime capacity, and still further capacity had to be laid down. In the course of this continuous piling up of factory buildings and plant, shortages of machine tools and delays in construction were bound to occur here and there, but the factory programme as a whole was as yet well within the powers of the building industry and of the machine-tool industry in Britain and abroad, and it was in fact being fulfilled more or less according to expectations.
Thus, broadly speaking, machinery and floor space were adequate for the programmes of 1936 and 1937, and together with the new schemes carried out, approved or planned by the spring of 1938, machinery and floor space were quite adequate for the new scheme of 12,000 aircraft then introduced. Indeed, in view of the generous orders from the Air Ministry the aircraft manufacturers were so expansive that the industry was now if anything over-provided with buildings.