This happy state, unfortunately, did not long continue; and looking back the reasons are now quite clear. When the war broke out unemployment was generally feared, so much so that a Government Committee on the Prevention and Relief of Distress was appointed which invited mayors and provosts throughout the country to form local committees to deal with unemployment. The Local Government Board urged local authorities to expedite public work; even the Director of Army Contracts appended to Government contracts a memorandum advising contractors that in executing the work they should arrange for the employment of as large a number of men as possible instead of working overtime. By December 1915, not unemployment, but a grave shortage of skilled engineering workmen proved to be the national difficulty. Various attempts were made to remedy the shortage; first, by transferring skilled men from commercial work to munitions work; next, by obtaining the release of skilled men from the Colours; thirdly, by importing skilled Belgian refugees and mechanics from Canada; fourthly, in some districts, by forming “king’s squads” or mobile companies to work wherever they were most needed. All these methods proved quite inadequate and the sole remaining course left open was to make the best use of the skilled men who were actually available, that is to say, to remove them from work on which unskilled men or women could be employed and up-grade them on to the most difficult skilled work which only a tradesman could undertake, or put them as supervisors over the unskilled labour so brought in. This is what was popularly known as “dilution,” but its successful introduction involved a definite suspension of Trade Union customs.

In the late autumn of 1914, it was discussed at various conferences between the employers’ federations and the unions, but without success. In January 1915, the Government entrusted the problem to the Board of Trade, and in February the Committee on Production under the chairmanship of Lord (then Sir George) Askwith was appointed to formulate a programme for Government action. It is easy, of course, to be wise after the event, but it was an unfortunate circumstance, and deprecated by employers themselves, that it should, in the first instance, have been left to “Capital” to propose to the Trade Unions suspension of customs and practices which the Trade Unions had spent years in establishing, and which were regarded by the average workman as the bulwarks of his trade rights. All these customs, for example, the limitation of apprentices; the restriction on the working of certain machines by skilled men only; the remuneration of overtime; the limitation of output; the exclusion of women and also of men who had not served an engineering apprenticeship, were designed for the purpose of building up a system under which the Trade Union craftsman would have a monopoly of his trade, and be secured as far as possible against unemployment. It was regarded by the men as the natural instinct of every employer to break through these rules, and so, by securing the right to bring in unskilled labour, to reduce the standard of wages of skilled men. In spite of all undertakings by employers that the alterations in working conditions would be only for the period of the war, the workmen were never convinced that such measures were really necessary in the interests of the country or anything but devices of unscrupulous employers. Had Government in the first instance undertaken the negotiation of these proposals, and not left it to the employers, the history of munitions production would have been very different.

The “Treasury” Agreements of March 1915

It was the Trade Unions themselves who represented to the Government that if anything was to be done in the direction of suspending trade customs, the Government would have to take the matter into their own hands. So, in March 1915, a conference was held at the Treasury, when the Cabinet made a direct appeal to the Trade Unions of the country, and concluded a treaty known as the “Treasury” Agreement which, had it been successful, would have secured for the war period a suspension of strikes and of all restrictions upon output. The treaty, however, turned out to be completely ineffective, and the cause is illuminating. At the beginning of March the cost of living had gone up, according to the Board of Trade statistics, to 15 to 20 per cent. above the July 1914 figure. There was a general outburst throughout the country against profiteering; Labour reprinted and circulated Mr. Bonar Law’s famous statement that “well-managed ships to-day are making simply enormous profits, and those profits come from the very cause for which the people of this country are making sacrifices in every direction and even giving their lives” (Parliamentary Debates, 1915, Vol. 69,793). The result was an immediate increase in strikes. The following were the stoppages of work reported to the Board of Trade:

Number of disputes in progress at beginning of 1915, 10.

DuringJanuary191530fresh disputes.
”February”47” ”
”March”74” ”
”April”44” ”
”May”63” ”

The Limitation of Employers’ Profits

The Amalgamated Society of Engineers was represented at the Treasury Conference; its representatives, however, had been instructed not to agree to any scheme until they had reported it to, and obtained upon it the instructions of, their Executive Council. On that becoming known to the Government, the Chancellor of the Exchequer convened another conference on March 25, 1915, at the Treasury with the Amalgamated Society of Engineers, and a further agreement was there signed. At the conference the Amalgamated Society of Engineers insisted that the Government should take steps to regulate employers’ profits, arguing that it was unfair to prevent the workman from using his tremendously increased economic power and at the same time leave employers free to use theirs. A supplemental agreement was then made with the Amalgamated Society of Engineers containing this clause: “That it is the intention of the Government to conclude arrangements with all important firms engaged wholly or mainly upon engineering or shipbuilding work for war purposes under which their profits will be limited with a view to securing that benefit, resulting from the relaxation of trade restrictions or practices, should accrue to the State.” The national need for limiting employers’ profits had been emphasized previously by the Committee on Production. This recommendation had the strong approval of Lord Kitchener; speaking in the House of Lords on March 15 (see Parliamentary Debates, 1915, H. of L., Vol. 18,723) he said: “Labour may very rightly ask that their patriotic work should not be used to inflate the profits of the directors and shareholders of the various great industrial and armament firms, and we are therefore arranging a system under which the important armament firms will come under Government control, and we hope that workmen who work regularly by keeping good time shall reap some of the benefits which the war automatically confers on these great companies.” Negotiations were undertaken by the Government with various armament and shipbuilding firms with a view to the Government taking possession of them, but these broke down and the Government abandoned the idea. Other negotiations to limit, first, dividends, and then, alternatively, net divisible profits, also collapsed and nothing came of them. The fact that workmen were prevented from forcing higher wages while employers were left free to make higher profits completely nullified the “Treasury” Agreements and something had to be done. On June 9, 1915, the Ministry of Munitions was constituted by Act of Parliament. Immediate steps were taken to draft the Bill which afterwards became the Munitions of War Act, 1915. The Government appreciated the importance of getting the Bill agreed to by Labour, as indeed they ultimately succeeded in doing. The first point on which Labour insisted was the limitation of profits of the employers. This was ultimately provided in Section 5. It only applied to “controlled establishments,” and until the later introduction of the Excess Profits Duty the owners of non-controlled establishments were allowed to make such profits as they thought fit. But it was shutting the stable door after the steed was stolen. Throughout the war, Labour never got rid of the notion that the profits of employers were not restricted until Labour had forced the Government to restrict them, and that even then the restriction was on a wholly inadequate scale.

Failure of Compulsory Arbitration

The substantial effect of the Munitions of War Act, 1915, was to give statutory force to the “Treasury” Agreements. The obligations which the Act imposed upon the owners of controlled establishments were substantially the safeguards for Labour contained in the “Treasury” Agreements, and upon Labour the provisions contained in those Agreements preventing stoppages of work. Part I of the Act provided for the settlement of labour differences and in certain cases for the prohibition of strikes and lock-outs, and for compulsory arbitration. It might well be thought that the circumstances of the war provided a unique occasion for the success of compulsory arbitration, but it was a failure, signal and complete. A great many Unions at first acquiesced in arbitration because as long as prices continued to rise, advances of wages were more or less automatically awarded, so as to adjust wages to cost of living. When, however, the Unions refused to go to arbitration, or, if they went, to comply with the award, it was impossible to make them. If 100,000 men cease work it is impracticable to prosecute or fine all of them; to select a certain number soon raises cries of victimization, those prosecuted are made martyrs, and funds are raised by their colleagues for payment of their fines. While the pretence of enforcing awards was maintained for a certain time, everybody concerned in the administration of the Munitions Act knew that compulsory arbitration was a broken reed. This was proved in the very month the Act was passed, namely, June 1915, in the case of the miners’ strike in South Wales, to which reference is made on p. 156. But in view of the absolute dead-lock at which collective negotiations between employers and trade unions had arrived by the end of 1914, it was essential for the Government to undertake the general regulation of labour itself, and the powers for doing so were conferred on the Minister of Munitions by the Munitions of War Act, 1915. Much adverse criticism has been levelled at the labour administration of the Ministry, but State regulation was the sole remaining remedy; if this be remembered, it must be conceded that labour was regulated as efficiently as circumstances allowed.