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Chamberlain's Folly: The National Defence Contribution of 1937

Published online by Cambridge University Press:  11 July 2014

Robert P. Shay Jr.
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Extract

When the officials at the British Treasury sat down to sketch out their proposals for the 1937 budget, they knew that they had a problem. During the previous year the Government had been forced to embark upon a costly five year rearmament program by the massive growth of the German military establishment, and the bills for that program were beginning to fall due. £180 million had been spent for defence in 1936, £60 million more than during the previous year, but £100 million less than the military services estimated would be necessary in 1937. The Services' estimate was in the words of Edward Bridges, a Treasury under-secretary, “a good deal higher than anything which I anticipated in my gloomier moments.” He knew, however, that there was little chance that it would be reduced. The question immediately at hand was where the funds could be found to pay for the burgeoning cost of defence not only in the coming year, but in the years to follow.

Another Treasury under-secretary, Fredrick Phillips, estimated that they could not realistically expect to raise more than £180 million of the £280 million they required from existing taxation. Although the canons of orthodox finance, to which the Treasury usually adhered, dictated that taxes should be increased to meet the deficit, everyone at the Treasury realized that such a measure would extinguish the growing prosperity which the Government had so laboriously and successfully nurtured since the economic collapse of 1931. Reluctantly they decided to resort to the fiscal device which Neville Chamberlain, the Chancellor of the Exchequer, had once disparaged as “the broad road that leads to destruction”: borrowing.

Type
Research Article
Information
Albion , Volume 7 , Issue 4 , Winter 1975 , pp. 317 - 327
Copyright
Copyright © North American Conference on British Studies 1975

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References

1 PRO, Treasury Papers, Budget files, T 171/332, 11/27/36, Bridges on the defence estimates.

2 PRO, Cabinet Papers, CAB 16/110, minutes of the Ministerial Disarmament Committee, D.C.M. (32), 50th meeting, 6/25/34.

3 PRO, Treasury Papers, Supply files, T 161/688/14996/1, 10/7/35, Hopkins to Chamberlain on defence finance.

4 PRO, Treasury Papers, Supply files, T 161/783/48431/02/1, 1/19/37, Phillips on finance.

5 PRO, Treasury Papers, Chancellor's files, T 1 72/1853, 2/5/37, notes from Chamberlain's personal secretary, J. H. Woods, to Hopkins and Phillips describing his meeting with Norman.

6 The records of both the Bank of England and the Treasury concerning the contact between them during the thirties remain closed making it difficult to ascertain how much influence the Bank, and Norman, actually had over Treasury policy. It was believed to be considerable.

7 In the course of a debate on the N.D.C. in Parliament Robert Boothby, a Conservative M.P. who knew nothing of the meeting between Norman and Chamberlain, was moved to comment that: “I cannot believe that these proposals were really devised by the right honourable Gentleman the Chancellor of the Exchequer himself; I still have an idea that the Bank of England had something to do with them.” Parliamentary Debates, (House of Commons), 5th ser., Vol. 323, 4/27/37, col. 291.

8 PRO, Treasury Papers, Budget files, T 171/336, 2/1 1/37, note from E. R. Forber at Inland Revenue to Chamberlain on an Excess Profits Tax.

9 PRO, Treasury Papers, Richard Hopkins files, T 175/94, 12/31/36, Phillips on inflation.

10 Feiling, Keith, The Life of Neville Chamberlain (London, 1946), p. 292.Google Scholar

11 PRO, Treasury Papers, Chancellor's files, T 172/1856, 5/13/37, minutes of a meeting between a special committee of industrial organizations and Chamberlain concerning the N.D.C.

12 Parliamentary Debates, (House of Commons), 5th ser., Vol. 322, 4/20/37, col. 1613.

13 Ibid., cols. 1615-1616.

14 The Manchester Guardian, 4/21/37. p. II.

15 Feiling, , Chamberlain, p. 292.Google Scholar

16 Keynes, J. M., letter to The Times, 4/24/37, p. 13.Google Scholar

17 Parliamentary Debates, (House of Commons) 5th ser.. Vol. 323, 4/27/37, cols. 284-286.

18 The Manchester Guardian, 5/25/37, p. 11.

19 Parliamentary Debates, (House of Commons) 5th ser., Vol. 324, 6/1/37, col. 924.

20 Ibid., cols. 880-895.