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THIS DOCUMENT IS THE PROPERTY OF HIS BRITANNIC MAJESTY'S GOVERNMENT

Printed for the War Cabinet. January 1 9 4 0 .

S E C R E T . Copy No .

W . M . (40) 23rd Conclusions.

T O B E K E P T U N D E R L O C K A N D K E Y .

It is requested that special care may be taken to ensure the secrecy of this document.

W A R C A B I N E T 23 (40 ) .

CONCLUSIONS of a Meeting of the War Cabinet held at 1 0 Downing Street, S.W. 1 , on Thursday, January 2 5 , 1 9 4 0 , at 1 1 - 3 0 A.M.

P r e s e n t : The R i g h t Hon . N E V I L L E CHAMBERLAIN, M.P . , P r i m e Min i s t e r (in the Chair).

The R i g h t Hon . S i r J O H N S I M O N , K . C . , The R i g h t H o n . V I S C O U N T H A L I F A X , M.P . , Chancellor of the Exchequer . Secre ta ry of S t a t e for Fore ign

Affairs. The R i g h t Hon . S i r S A M U E L H O A R E , A d m i r a l of the Fleet the R i g h t Hon .

Bt., M . P . , Lord P r i v y Seal. L O R D C H A T F I E L D , Min i s t e r for Co­o rd ina t ion of Defence.

The R i g h t Hon . W I N S T O N S. The R i g h t Hon . O L I V E R STANLEY, C H U R C H I L L , M.P . , F i r s t L o r d of the M.P . , Secre tary of S t a t e for W a r . A d m i r a l t y .

T h e R i g h t Hon . S i r K I N G S L E Y W O O D , T h e R i g h t Hon . L O R D H A N K E Y , M.P . , Secre tary of S t a t e for A i r . Min i s t e r w i t h o u t Por t fo l io .

T h e following were also p r e s e n t : The R i g h t Hon . S i r J O H N A N D E R S O N , The R i g h t Hon . A N T H O N Y E D E N , M . P . ,

M . P . , Secre tary of S t a t e for the Secre tary of S t a t e for Dominion H o m e D e p a r t m e n t a n d Min i s t e r of Affairs. H o m e Securi ty .

The R i g h t Hon . M A L C O L M M A C D O N A L D , T h e R i g h t H o n . W . S. M O R R I S O N , K.C. , M.P . , Secre tary of S ta t e for the M . P . , Min i s t e r of Food (Items 1 Colonies (Item 3 ) . and 2 ) .

T h e R i g h t Hon . S i r A N D R E W DUNCAN, T h e R i g h t H o n . W A L T E R E L L I O T , M . P . , P r e s i d e n t of the Boa rd of T r a d e Min i s t e r of H e a l t h (Items 1 and 2 ) . (Items 1 and 2 ) .

S i r H O R A C E J . W I L S O N , P e r m a n e n t S i r T H O M A S P H I L L I P S , Secretary, Secre ta ry to the Treasu ry . M in i s t r y of Labour (Iterns'1 and 2 ) .

L i e u t e n a n t - G e n e r a l H . R. S. M A S S Y , D e p u t y Chief of the I m p e r i a l General Staff (Item 3 ) .

Secretariat. Sir E D W A R D B R I D G E S . C a p t a i n A . D. N I C H O L L , R . N . Mr . F . H E M M I N G . Mr . W . D. W I L K I N S O N . Mr . A. B E V I R .

[ 2 0 7 2 2 ]

W A R C A B I N E T 23 (40 ) .

C O N T E N T S . Minute

No. Subject. Page 1 W a g e s and Pr i ces . . . . . . . . . . . . . . . . . . 169

The possibility of stabilising the prices of staple commodities.

2 Norweg ian Rou te . . . . . . . . . . . . . . . . . . 173 Analysis of cargoes.

3 Colonial E m p i r e 174 Utilisation of man-power resources.

4 T h e F a r E a s t 175 Relations with J a p a n : the case of the S.S. Asama Maru.

5 Ass is tance to F i n l a n d . . . . . . . . . . . . . . . . . . 177 Supply of aircraft. Assistance from Italy.

6 The A i r S i t u a t i o n 177

7 T h e Nava l S i t u a t i o n 177

8 T h e M i l i t a r y S i t u a t i o n 177 Western Front. Finland.

Wages and Prices. The possibility of stabilising the prices of staple commodities. (Previous Reference: W.M. (40) 21st Conclusions, Minute 2.)

1. The W a r Cabinet h a d before them a R e p o r t by the Min i s t e r i a l Commit tee on Economic Pol icy dea l ing w i t h the possi­b i l i ty of s tab i l i s ing the prices of s taple commodit ies as p a r t of the G o v e r n m e n t s policy in re la t ion to wages a n d pr ices ( W . P . ( G ) (40)18) . '

The Chancellor of the Exchequer sa id t h a t the quest ion for decision was whe ther the Government should employ public funds, and , if so, to w h a t extent , in order to keep down the re ta i l prices of the most essential commodities en t e r ing in to the cost of l iving. I n reach ing a decision r e g a r d mus t be p a i d to the following :—

(i) The e x p e n d i t u r e of public funds on keeping down the cost of l iv ing w a s bound to effect our financial posit ion in view of the large sums involved. Th i s migh t be very serious, since i t would be difficult to cover by taxa t ion a n d bor rowing even' the ex i s t ing demands on the budget in the nex t financial year. A n y g a p which could not be covered would in t roduce an element of inflation,

(ii) The possibi l i ty of keeping down the cost of l iving was in t imate ly connected w i t h the demands made by labour for wages advances. A t the p resen t t ime labour, when asked to assist in p reven t ing wages increases, were incl ined to reply by saying t h a t the Government should themselves take s teps to keep down prices.

The Government h a d a l ready incur red subs tan t ia l expendi tu re (amount ing approx imate ly to £1,000,000 a week) on keeping down the cost of ce r t a in essential foodstuffs. H i t h e r t o th i s h a d not been made public , b u t i t could not, and indeed should not, be concealed much longer.

T h a t figure was, however, in no sense a measure of the to ta l cost to the Exchequer of con t inu ing a policy of th i s charac ter ( p a r a g r a p h 5 of the Commit tee ' s Repor t ) . I t would be very dangerous for the Government to make a publ ic declara t ion of the i r in ten t ion of m a i n t a i n i n g the cost of l iv ing a t i ts present figure for an indefinite per iod. I n so f a r as the M i n i s t r y of Food had made definite cont rac ts for purchases for a subs tan t ia l per iod ahead, i t was possible to form some judgmen t of fu tu re t rends . A r r a n g e ­men t s of th i s k ind h a d been made in r e g a r d to a number of essential foodstuffs, b u t not in the case of cereals, wh ich const i tu ted the m a i n risk. Since las t September the rise in the wholesale pr ices of cereals h a d been double t h a t of other commodit ies. H e (the Chancellor of the Exchequer ) h a d been pressed by Mr . C r e r a r to make a definite b a r g a i n for C a n a d i a n wheat , bu t h a d refused to do so on the terms then suggested ($1 a bushel for two years) .

The Minister of Food said t h a t in the negot ia t ions w i t h Mr . C r e r a r we h a d offered 85 cents, a n d he in the end h a d come down as far as 93 cents, as compared w i t h h i s o r ig ina l demand of 115 to 120 cents. N o t w i t h s t a n d i n g the fa i lu re of these negotiat ions, subs tan t ia l purchases had recently been made on the marke t a t 86 cents.

The Chancellor of the Exchequer d r e w a t ten t ion to p a r a g r a p h 9 of the Repor t , which set out the p r i n c i p a l elements in the cost-of­l iv ing index. The basis of t h a t index requ i red revision, bu t i t was sacrosanct in the eyes of Labour and could not be modified in t ime of war . The Commit tee had , however, a r r a n g e d for the establish­ment of a para l l e l index g iv ing the w a r cost of l iving, which would pay r e g a r d to changes both in q u a n t i t y a n d qua l i ty resu l t ing from the war . Ren t , inc luding ra tes , was a l ready controlled (16 per cent.), and, if food (60 per cent.) were kept subs tant ia l ly a t i t s p resen t pr ice level, we should have gone a long way towards keeping the cost-of-living index steady. Th i s would be sti l l fu r ther assured if c lothing (12 per cent.) could also be prevented from r i s ing in cost. T h i s l a t t e r question, which ra i sed the problem of s t a n d a r d clothing,

[20722] B 2

was a t p resen t being examined by the I n t e r d e p a r t m e n t a l Commit tee on Economic Policy. I t would be seen, therefore, t ha t , o ther t h ings being equal , it would be possible for the Government , a t the cost of the Exchequer , to secure for a t ime a fa i r ly close a p p r o a c h to s tab i l i sa t ion of the cost of l iv ing as reflected in the cost-of-l iving index.

I t h a d been po in ted out in the discussions in the Commit tee t h a t we were ge t t i ng no advan tage , in the form of a definite b a r g a i n w i t h Labour , from the subs t an t i a l expend i tu r e now being incur red on subsidies , though no doubt ind i rec t advan tages were secured as a resu l t of the s i tua t ion c rea ted by a steady cost of l iv ing. H e w a s adv i s ed—and he fully concu r r ed—tha t i t w a s not possible to enter in to any definite bargain, w i t h Labour t h a t wages should not go u p if t he cost of l iv ing were kep t s teady. T r a d e Un ion leaders were not in a posi t ion to bind the i r members on a ques t ion of th i s k i n d ; moreover, the re were other reasons, a p a r t f rom the cost of l iving, why in w a r t ime some wages m i g h t rise, e.g., owing to scarci ty of ski l led labour in (for example) the mun i t i ons indus t r i e s . T h e fact t h a t no b a r g a i n w i t h labour was prac t icable was , however, no reason why the Government should no t t ry to s tabi l ise the cost of l iving. The R e p o r t of the Commit tee po in ted out ( p a r a g r a p h 14) t h a t there were three courses open to the Government : ­

(i) The Government m i g h t abandon the present policy a n d a r r a n g e for food pr ices to be ra i sed by s tages un t i l the whole or the m a i n p a r t of the Excheque r loss was cancelled. The Commit tee were definitely opposed to a d o p t i n g such a course, and he (the Chancel lor of the Exchequer ) was wi l l ing to cont inue t he subsidies a t the i r present r a t e for a f u r t he r per iod. There was, he felt, a g r ea t a d v a n t a g e to the Govern­ment in so doing, since, in view of the very la rge p a r t p layed by wages in d e t e r m i n i n g the cost of the immense cont rac ts of all k inds which the Government w a s p lac ing in th i s country, e.g., if wages were allowed to r ise too far, the cost of those con t rac t s would be more t h a n p ropor t iona te ly increased,

(ii) T h e Government m i g h t for a t ime a t least cont inue the i r p resen t policy a n d even extend i t , e.g., in to the field of clothing, bu t w i t h o u t a t t e m p t i n g to secure any under ­s t a n d i n g from organ ised Labour in r e tu rn . Th i s w a s the course which he a n d the other members of the Commit tee were disposed to favour,

(iii) F ina l ly , the Government migh t cont inue a n d extend the i r policy in r e t u r n for a general u n d e r s t a n d i n g w i t h organised Labour t h a t they, as a movement, while not s t a n d i n g in the w a y of app l ica t ions for w a g e increases of a reasonable charac te r from indus t r i e s which h a d not yet received advances du r ing the recent wage cycle, would discountenance or discourage any fu r the r pressure for wage increases beyond t h a t point . T h i s a l t e rna t ive offered ce r t a in a t t r ac t i ons but , as he h a d a l ready explained, he d id not believe t h a t any such u n d e r s t a n d i n g w i t h L a b o u r could be reached. I f a p roposa l on these lines were p u t to Labour a n d re jected by them, the effect would be f a r worse t han if the Government were to have made no a t t e m p t to secure such a n agreement . I t should be remembered also tha t , even if such an agreement were reached for a fixed per iod, the cost of buy ing suppl ies from abroad migh t , i n the meanwhile , r ise so seriously t h a t the a r r a n g e m e n t could not be cont inued. I n t h a t event, the j u m p in t h e cost of l iv ing migh t be so" considerable, even if the full shock were removed by the cont inuance of subsidies a t va r y ing levels for a fu r the r per iod, as to fu rn i sh by itself a most po ten t cause for increased wage demands .

The genera l conclusion reached by the Commit tee was t h a t a policy of subs id i s ing the cost of l iv ing should be cont inued, and, if necessary, ex t ended to c lo th ing ; and t h a t the fact t h a t these subsidies were be ing p a i d should be announced. I t should be made p la in , however, t h a t the Government could not u n d e r t a k e to s u p p o r t any p a r t i c u l a r level of pr ices for necessit ies indefinitely, w i thou t r e g a r d to changes in costs abroad or wages a t home. A t the same t ime the Government , whi le avoiding any suggest ion of a formal l i nk ing between wages a n d prices, should make i t clear t h a t they expected tha t , to the ex t en t t h a t the policy of pr ice s tabi l i sa t ion in r e g a r d to the necessit ies of l ife was cont inued, claims for increased wages on account of the cost of l iv ing would not be justified.

The First Lord' of the A dmiralty sa id tha t , if a policy of price s tabi l i sa t ion , such as t h a t suggested, were pract icable , the Govern­ment would thereby depr ive demands for wage increases of the i r mora l suppor t , a t least in so far as they were based upon the cost of l iv ing. The Government would, therefore , be able to t ake a much s t ronger l ine to prevent wage increases. The Government could then say t h a t they h a d decided themselves to bear the b r u n t of the increase in the cost of the necessities of life and could w i t h confidence resist , as u n p a t r i o t i c , demands for increases in wages. The Government should face the likelihood t h a t a t some stage there would be s t r ikes even in the muni t ions indus t r ies . These could be f a r more r ead i ly overcome if the cost of l iving were kep t s teady. P r o m th i s p o i n t of view i t was desirable to include in the scheme as wide a r a n g e as possible of the commodities en te r ing the cost of l iv ing index. The scheme w a s in h i s view sound.

The President of the Board of Trade t hought t h a t the Govern­men t would be well advised not to move too quickly in the di rect ion of impos ing a complete control on the u p w a r d movement of the cost of l iving. I t was a lways easier for the T r a d e U n ion leaders to gu ide the i r members t h a n to control t h e m ; and, if i t were made impossible to ju s t i fy any demand for wages increases based on the cost of l iv ing, demands would be p u t fo rward on o ther g rounds which the T r a d e Un ion leaders would find i t much more difficult to oppose. A small g r a d u a l increase in the cost of l iv ing would crea te a sense of conten tment in the minds of the workers a n d would do no h a r m . I t was su rp r i s i ng indeed how relat ively small were t he increases i n wages since the w a r ; these h a d been mostly set t led w i t h reference to the cost of l iv ing and had given sa t i s fac t ion to the workers concerned. I t was , in his opinion, easy to over-est imate both the ex ten t to which e a r n i n g s had been increased by over t ime a n d the ex ten t to which the ea rn ings of working-class households had , as such, been increased. W h i l e he w a s in favour of s tabi l i s ing the cost of foodstuffs, he w a s more doubtful r e g a r d i n g the appl ica ­t ion of t h a t policy to c lothing a n d fuel. As r ega rds the la t t e r , i t would in any case be wiser to w a i t un t i l more definite informat ion w a s avai lable as to the cost involved.

One g rea t a d v a n t a g e of s tabi l i s ing the cost of l iv ing w a s t h a t i t would give relief, no t only to wage earners , bu t also to al l those dependent on fixed incomes who, if the cost of l iv ing were to rise, would be unab le to ob ta in relief t h r o u g h wage increases. Speak ing personal ly, he would not himself be undu ly a la rmed a t a prospect of l i nk ing wages to the cost of l iv ing for a l imited period, a n d of r e s to r ing the I n d u s t r i a l Cour t a s the o rgan for measu r ing the wage advances to be given.

The Prime Minister sa id t h a t he would be opposed to a d i rect l i nk ing of t h i s k ind , a l though, of course, the cost of l iv ing d id affect wages . I f the Government were to subsidise the cost of l iving, they should make the fullest possible use in publ ic of t he i r decision.

Sir Thomas Phillips sa id t h a t the Min i s te r of Labour was in favour of w h a t m i g h t be called a n elast ic s tabi l i sa t ion of the cost

of l iving. On the quest ion of the best method to be adop ted to secure for the Government the full a d v a n t a g e for th i s policy, i t w a s i m p o r t a n t to recall t h a t the local T r a d e Un ion Execut ives were being pressed by the i r membership to secure increases in wages, a n d tha t , if they took the opposi te view, the resul t would be t h a t au tho r i t y would pass from them to the uncons t i tu t iona l elements in the labour movement. I t was for th i s reason t h a t t he cons t i tu t iona l leaders should not be pressed too far . I t would not be possible to ob ta in from the T r a d e s Un ion Congress a pledge on the subject of wages, a n d i t would not in his view be desirable to seek such a pledge a t the present t ime, even if i t were possible to ob ta in one. I f the cost of l iving w a s e l iminated as a g round for d e m a n d i n g wage increases, demands would be p u t f o r w a r d on other a n d more dangerous grounds . H e favoured, therefore, a n a r r a n g e m e n t by which, on the one hand , the cost of l iv ing would be k e p t subs tant ia l ly stable, and , on the other hand , would be al lowed to r ise from t ime to t ime to a l imited extent , thereby p rov id ing the local T r a d e U n i o n Execut ives w i t h a n oppo r tun i t y for secur ing small advan tages for the i r members. The quest ion of the tex t of the s t a t emen t to be m a d e a n d the method of m a k i n g i t would requ i re careful considerat ion.

The Minister of Health sa id t h a t he was in favour of a n elast ic ad jus tmen t r a t h e r t h a n a r ig id one. A s r e g a r d s the a p p r o a c h to Labour , the experience of the Old A g e Pens ions Scheme suggested t h a t i t was much bet ter for the Government to t ake L a b o u r in to the i r confidence r a t h e r t h a n to seek to commit them to the mer i t s of any p a r t i c u l a r policy.

The Minister of Food sa id tha t , on the general ques t ion of policy to be adopted , he was in agreement w i t h the views expressed by the P r e s i d e n t of the Board of T r a d e and by S i r Thomas P h i l l i p s on behalf of the Min i s t e r of Labour .

The Chancellor of the Exchequer sa id tha t , as r e g a r d s the app roach to Labour , i t h a d been suggested t h a t he m i g h t go to the meet ing of the Na t iona l J o i n t Advisory Counci l to be held on the 31st J a n u a r y . On the following day (the 1st Februa ry ) a genera l Debate on economic o rgan isa t ion would take place in the House of Commons, a n d th i s would provide a n admirab le o p p o r t u n i t y for a genera l s ta tement of policy to be m a d e on behalf of the Government .

The Prime Minister agreed t h a t a s t a tement should be m a d e in the House of Commons on the 1st Feb rua ry . A s r ega rds the quest ion whether , and , if so, how, a s ta tement should be communi­cated previously to the Labour Movement, he suggested t h a t the final a r r a n g e m e n t s should be left to the Chancellor of the Exchequer a n d the Min i s t e r of Labour .

The W a r C a b i n e t ­(1). Gave general approva l to the recommendat ions of the

Min i s t e r i a l Commit tee on Economic Pol icy in r e g a r d to s tabi l i s ing the pr ice of ce r ta in s taple foodstuffs w h i c h enter in to the cost-of-living index ( W . P . (G.) (40) 18), a n d in p a r t i c u l a r agreed— (a) t h a t the policy to be a imed a t should be the genera l

s tabi l isat ion, for a per iod of six months , a t approx imate ly the presen t figures, of t he cost of ce r t a in s taple foodstuffs, bu t t h a t t h i s s tabi l isa­t ioh need not be r ig id :

(6) t h a t considerat ion should be given to the ques t ion of p reven t ing r ises in fuel costs; a n d of the ins t i tu ­t ion of s t a n d a r d clothing, w i t h a view to p reven t ing rises in t h i s i tem in the cost-of-l iving index figure.

(2) A g r e e d t h a t i t w a s desirable t h a t the Government ' s policy in t h i s m a t t e r should be made widely known, a n d t h a t t h e S t a t e m e n t in wh ich i t w a s announced should be so d r a f t e d as to secure the wides t measure of suppor t for the p r inc ip les involved.

(3) A g r e e d t h a t t h i s S ta tement of Pol icy should be announced i n t he Deba te on Economic O r g a n i s a t i o n to be he ld in the House of Commons on the 1st Feb rua ry , 1940.

(4) A u t h o r i s e d the Chancellor of the Exchequer , in conjunct ion w i t h the Min i s t e r of Labour , to decide whether , and, if so, i n w h a t form, any previous communicat ion on th i s subject should be made on behalf of the Government to the L a b o u r Movement.

(5) Took note t h a t a r r a n g e m e n t s had been m a d e by the Min i s t e r of Labour , in conjunct ion w i t h the T r e a s u r y a n d the M i n i s t r y of Food, a n d other D e p a r t m e n t s concerned, t o , p r e p a r e a scheme for the in t roduc t ion of a w a r cost-of­l iv ing index, which would be m a i n t a i n e d in add i t i on to the ex i s t ing cost-of-l iving index figure.

Norwegian 2. The First Lord of the Admiralty s a id t h a t as a r r a n g e d Route. a t the mee t ing of the W a r Cabinet , noted in the marg in , he h a d Analysis of made an analys is of the cargoes ca r r ied by sh ips in Br i t i sh convoy cargoes. on the N o r w e g i a n rou te since the 23rd December, 1939. Out of a (Previous to ta l of 107 cargoes the p r inc ipa l i tems were as follows :— Reference: Ships.W.M. (40) 22nd Conclusions, P u l p (31) a n d P a p e r (5*-) 361 Minute 2.) Genera l ca rgo 29

Ba l l a s t 24 Ore ... 6 T imbe r 5 *

These figures were very s t r i k ing a n d suggested t h a t the quest ion deserved fu r the r examina t ion , in order to ensure t h a t the cargoes b rough t by sh ips from Scand inav ia cont r ibuted ' fully to our w a r effort. I n p a r t i c u l a r , a reduct ion should, if possible, be made i n the number of sh ips a r r i v i n g in bal last . The g r e a t bulk of the sh ips in ques t ion were unde r n e u t r a l flags.

I n discussion, reference w a s made to the difficulty of compell ing n e u t r a l ships , coming to th is count ry for cargo, themselves to ca r ry ca rgo ins tead of a r r i v i n g in ba l las t ; to the poss ibi l i ty t h a t in the per iod u n d e r review the impor t s of p u l p a n d paper- m igh t have been except ional ly h i g h o w i n g to seasonal or other causes ; a n d to o ther fac tors b e a r i n g on the n a t u r e of the cargoes ca r r i ed on the N o r w e g i a n route .

T h e W a r Cab ine t agreed— (a) T o inv i te the P r e s i d e n t of the Boa r d of T rade , in conjunc­

t ion w i t h the Min i s t e r of Supply , the Min i s t e r of S h i p p i n g a n d other Min i s t e r s concerned, to p r e p a r e a r e p o r t —

( i ) se t t ing out the n a t u r e of the cargoes normal ly ca r r i ed by neu t r a l a n d B r i t i s h ships t r a d i n g to t h i s count ry from Norweg ian p o r t s ;

(ii) m a k i n g recommendat ions for improv ing the s i tua t ion .

(Previous Reference: W.M. (89) 122nd Conclusions, Minute 2.)

(&) T h a t the P r e s i d e n t of the B o a r d of T r a d e should consul t w i t h the L o r d P r i v y Seal w i t h a view to the inclusion of the r e p o r t re fe r red to in (a) in t he genera l r epo r t on s h i p p i n g which the l a t t e r h a d been asked to u n d e r t a k e a t the Mee t ing of the W a r Cabine t noted in t he m a r g i n .

Colonial Empire. Utilisation of Man-Power Resources. (Previous Reference: W.M. (39) 53rd Conclusions, Minute 3.)

3. The W a r , Cabinet h a d before them a M emor andum by the Secre ta ry of S t a t e for the Colonies ( W . P . (G.) (40) 15) on the Ut i l i s a t ion of the M a n - P o w e r Resources of the Colonial E m p i r e .

The Secretary of State for the Colonies exp la ined t h a t the first call for Colonial man power should be for local defence (or use in the Midd le E a s t ) and for the ma in tenance of the i r civil services and the i r essent ia l indust r ies . The next call should be for pioneer un i t s , a n d i t w a s the in tent ion to employ these un i t s , o ther t h a n Af r i can , in F rance . H e h a d consulted the Governors of the Wes t I n d i a n Colonies, as he had been in some doubt whether the proposal was desirable for c l imatic reasons. The view expressed by the Governors, on the advice of the local medical au thor i t i es , h a d been tha t , provided t h a t t he re were a sufficient complement of doctors and adequa te medical services, there would be no objection to the proposal . The chief trouble was likely to be lung disease. I t was, however, recommended t h a t these un i t s should not be sent to F rance un t i l the S p r i n g was well advanced.

The Prime Minister sa id he w a s doubtful of the advan tages of the proposa l to recrui t these pioneer un i t s .

The Secretary of State for War sa id t h a t he also w a s doubtful as to the u t i l i t y of the proposals a t the present t ime. A t a la te r s tage in the w a r they might be t r i ed out . On the other hand , there would be advan tages in t ry ing to get labour from China , a n d he would like the au thor i ty of the W a r Cabine t to send to H o n g Kong two officers who had been engaged in r e c r u i t i n g Chinese labour

. in the las t war , w i th the object of t r y ing to secure suppl ies of -Chinese labour f rom Nor the rn Ch ina for use in France .

The First Lord of the Admiraltyexpressed the view t h a t th is proposal was poli t ical ly dangerous a t a t ime when over a mill ion people were unemployed in th i s country . A d m i t t e d l y i t h a d been done in 1918, b u t - b y t h a t t ime we h a d then lost a mil l ion men in the war .

The Secretary of State for War sa id tha t , in o rder to ob ta in the labour requ i red from th is country, i t would be necessary to use:-compulsory powers .

-The Secretary of State for Foreign Affairs doubted whe ther the r ec ru i tmen t of Chinese labour would be found possible a t th is j unc tu re . "He thought the French m i g h t object, and the J a p a n e s e pos i t ion- in Nor the rn China would make i t extremely difficult.

-The Prime Minister po in ted out t h a t cap i ta l migh t be made out :of th i s m e a s u r e in enemy p r o p a g a n d a .

I n "discussion, i t was expla ined t h a t i t was in tended t h a t the two officers re fer red to should make confidential enqui r ies as to the posit ion, s o t h a t p lans migh t be ready for ac t ion if i t was eventual ly f o u n d - t h a t the necessary labour could not be obta ined from resources in this country. I t was poin ted out t h a t i t was ha rd ly possible to make enquir ies of th i s n a t u r e w i thou t i n c u r r i n g publici ty, as publ ic i ty was the essence of a r e c r u i t i n g campa ign . Pub l i c i ty migh t have "the most undes i rab le react ions and provoke foreign p ropaganda .

The First Lord of the Admiralty enqu i red whether i t would be possible to proceed more r ap id ly w i t h the extension of the Malay Regiment , wdiich was referred to in p a r a g r a p h 17 of the Memo­r a n d u m ( W . P . (G.) (40) 15), fand whe the r i t was possible to use thenv to help ga r r i son ing Singapore , where they m i g h t relieve E u r o p e a n s and would make a balance w i t h the I n d i a n element in the g a r r i s o n .

The Secretary of State for the "Colonies agreed t h a t th i s source migh t be t a p p e d wi th success a t a la te r s tage. The reasons aga ins t

press ing m a t t e r s a t th i s po in t were, first, t h a t i t h a d been decided on the g rounds of secur i ty t h a t i t would be necessary to keep E u r o p e a n t roops in any case in S ingapore , and secondly, t h a t fu r the r Ma lay forces, if ra ised, could be equ ipped only a t the expense of E u r o p e a n t roops.

The Secretary of State for Air informed the W a r Cabine t t h a t all Colonial Governments abroad h a d been advised t h a t the Royal A i r Force were wi l l ing to accept fully qualified t radesmen. The A i r M i n i s t r y did not contempla te any campa ign for large-scale r ec ru i tmen t of Colonials of mixed or coloured blood, and he felt t h a t these would be be t te r employed in local pioneer un i t s . The Royal A i r Force, however, r equ i r ed a number of Cypr io ts or P a l e s t i n i a n s for Royal A i r Force anc i l l a ry services in the Midd le Eas t , and au thor i sa t ion h a d a l r eady been given for enl i s tment in local services. H e felt i t inadvisable to d isperse resources for flying t r a i n i n g th roughou t the Colonial E m p i r e , a n d t h a t i t w a s wiser to concentra te on schemes for t r a i n i n g in the Dominions, Midd le Eas t , Sou the rn Rhodes ia and I n d i a . I t would be p r e m a t u r e to encourage appl ica­t ions from prospect ive c a n d i d a t e s for flying dut ies u n t i l the Oversea T r a i n i n g Schemes were in a more advanced stage, when the Colonial Office would be informed of the necessary act ion to be taken.

The proposal to ra i se a ba t ta l ion in Cyprus w a s then discussed. The W a r Cabine t were informed t h a t the a r r a n g e m e n t s h a d been agreed between the W a r Office a n d the Colonial Office.

I n reply to a quest ion, the Secretary of State for the Colonies sa id t h a t he t h o u g h t t h a t the desire to serve was for the present be ing met by the proposa ls a t p resen t in view, a n d he d id not a n t i c i p a t e any difficulty if no fu r the r s teps were au thor i sed beyond those a l ready t aken to afford o p p o r t u n i t y of service to personnel in t he Colonies.

H e also d rew a t t e n t i o n to the fac t t h a t p a r a g r a p h 45 of h i s M e m o r a n d u m should have included a reference to the add i t i on of a second rifle ba t t a l ion to the N o r t h e r n Rhodes ia Regiment , a n d should, a l lowing for th is , have described the number of A f r i c a n s serving w i t h the local forces in E a s t Af r i ca as a whole as h a v i n g increased from approx ima te ly 5,500 to 15,000.

The W a r Cabine t ag reed— (i) To app rove general ly the proposals set ou t in

W . P . (G.) (40) 15, for the u t i l i sa t ion of the man-power resources of the Colonial E m p i r e , in p a r t i c u l a r t h a t the first call on t he man-power should be for local defence a n d for the ma in tenance of civil services a n d essential indus t r i es .

(ii) T h a t i t w a s undes i rab le a t the presen t t ime to proceed w i t h t he proposals summar ised in p a r a g r a p h 58 (b) for the r ec ru i tmen t of pioneer un i t s .

(iii) T h a t i t w a s undes i rab le to proceed a t the p resen t j u n c t u r e w i t h the proposa l for sending two officers to H o n g K o n g to inves t iga te the possibil i t ies of r ec ru i tmen t of labour, in p a r t i c u l a r in N o r t h e r n China , for use in F rance .

The Far East. 4. The Secretary of State for Foreign Affairs r e fe r red to the Relations with discussion on th i s m a t t e r a t the previous Mee t ing of the W a r Japan: the case Cabinet , a n d said t h a t he proposed to send two te legrams to H i s of the S.S. Ma jes ty ' s Ambassado r a t Tokyo. T h e first would consist of a n Asama Maru. exposi t ion of our case in i n t e rna t iona l law. The second would (Previous in s t ruc t S i r Rober t Cra ig i e to p u t before the J a p a n e s e Fore ign Reference: Min i s t e r (a) c e r t a in proposa ls for dea l ing i n the f u t u r e w i t h the W.M. (40) 22nd t r a n s p o r t of G e r m a n personnel in J a p a n e s e ships, toge ther w i t h Conclusions, (&) cer ta in suggest ions w i t h a view to reach ing a set t lement of the Minute 9.)

c[20722]

presen t incident . These suggest ions, placed in o rder of t he i r acceptabi l i ty to ourselves, were a s follows :—

(i) I t m igh t prove on inves t iga t ion t h a t some of the G e r m a n s t aken f rom the Asama Maru d id not fal l w i t h i n the ca tegory of those specially useful for the G e r m a n w a r effort, a n d could p e r h a p s be h a n d e d over to the J a p a n e s e Government , t h e res t con t inu ing to be deta ined,

(ii) Al te rna t ive ly , we m i g h t be wil l ing, as a ges ture , t o h a n d over the whole p a r t y to the J a p a n e s e Government , if t he l a t t e r would u n d e r t a k e to in te rn them for the d u r a t i o n of the w a r .

(iii) Or, aga in , we m i g h t be wi l l ing to h a n d them over on condi t ion t h a t they should give a n u n d e r t a k i n g , e i the r t o the J a p a n e s e Government or to ourselves, no t t o engage in any wa r l i ke service aga in s t the Al l ies d u r i n g the war .

S i r Robe r t C r a i g i e would not, of course, offer these suggest ions in succession, or a l low M. A r i t a a n immedia te choice between them.

I n discussion i t was agreed t h a t the t h i r d solution should not be p u t fo rward , for t h e presen t a t any r a t e .

A s r e g a r d s t he m a i n issue, the view was expressed t h a t i t would be a g r e a t a d v a n t a g e if we could r i d ourselves pe rmanen t ly of the annoyance of hav ing to search J a p a n e s e vessels for G e r m a n s of m i l i t a ry age seeking to r e t u r n to Germany. T h e rea l ques t ion was whe the r i t w a s possible to a r r ive a t an agreed set t lement for the fu tu re w i t h o u t loss of p res t ige to the J a p a n e s e Government . W e also, however, h a d p res t ige to ma in t a in . The first s tep, therefore, w a s to get the J a p a n e s e Government to accept the propos i t ion t h a t t h e passage of Ge rmans of mi l i t a ry value in the i r sh ips across the Pacif ic m u s t be s topped. I t m igh t be useful, in t h i s connection, to p o i n t out t ha t , j u s t as the U n i t e d S ta tes mai l s h a d become the vehicle of an organised traffic in contraband, so the re w a s a danger t h a t J a p a n e s e s h i p p i n g m i g h t become the vehicle for an organised traffic in G e r m a n personnel .

T h e nex t s tage would be to reach agreement as to how th i s traffic was to be s topped ; a n d the final s tep would be to a p p l y the agreement so reached to the Asama Maru incident . P r o v i d e d the J a p a n e s e Government d isp layed a desire to obta in a solut ion of the genera l issue, H i s Ma je s ty ' s Government could afford to go a long­way to meet the J a p a n e s e Government as r ega rds th i s p a r t i c u l a r incident . B u t a se t t lement of t he genera l issue was an indispensable condit ion to a compromise in th i s p a r t i c u l a r case.

I t was po in ted out t h a t the J a p a n e s e migh t well a d o p t the a t t i t u d e t h a t a se t t lement for the fu tu re should take the form of a " gen t l eman ' s a g r e e m e n t , " which would not be made publ ic . T h i s course would not meet our p o i n t of view. Fu r the r , any agreement on th i s m a t t e r w a s bound to ob ta in publ ic i ty .

I n fu r the r discussion, the First Lord of the Admiralty sa id t h a t the N a v y h a d " fa i led to find " the fu r ther J a p a n e s e sh ips now en route, r e g a r d i n g which the J a p a n e s e Ambassador in London h a d spoken to t he Fore ign Secre tary (Foreign Office t e legram to Tokyo, No. 49, da ted the 25th J a n u a r y ) .

The Foreign Secretary sa id t h a t he h a d received no message of impor tance from S i r Rober t Cra ig i e since the l a t t e r ' s t e l egram of the prev ious day, in which he h a d expressed the op in ion t h a t J a p a n had not a s ingle leader w ho would da re to face such a s torm as the present , a n d to tel l the people the t r u t h (Tokyo te legram No. 120).

The W a r Cab ine t— I n v i t e d the Secre ta ry of S ta t e for Fore ign Affairs to r e d r a f t the proposed despa tch to H i s Ma je s ty ' s Ambassado r a t Tokyo, in consul ta t ion w i t h the F i r s t L o r d of the A d m i r a l t y , in the l igh t of the discussion which h a d t a k e n place.

Assistance toFinland.Supply ofaircraft.(PreviousReference: W.M. (40) 2 2 n d Conclusions, Minute 5.)

Assistance from Italy. (Previous Reference: W.M. (40) 14th Conclusions,. Minute 9.)

The AirSituation.(PreviousReference:W.M. (40) 2 2 n dConclusions,Minute 1.)

The Naval Situation. (Previous Reference: W.M. (40) 2 2 n d Conclusions, Minute 2 . )

The Military Situation. Western Front and Finland. (Previous Reference: W.M. (40) 2 2 n d Conclusions, Minute 3.)

5. I n reply to a question, the Secretary of State for Air sa id t h a t he proposed to see the F i n n i s h Min i s t e r t h a t af ternoon

r e g a r d i n g the decision which, had been approved by the W a r Cabinet on the prev ious day to release 20 S k u a a n d 13 Roc a i r c ra f t for

F in land .

The Secretary of State for Foreign Affairs d rew a t t en t ion to Rome te legram No. 75 of the 24th J a n u a r y . T h i s te legram conta ined cer ta in informat ion received from a secret source, which ind ica ted tha t the I t a l i a n in ten t ions towards F i n l a n d in th i s m a t t e r were sa t is factory.

T h e W a r Cabinet : ­(i) Took note of the above s ta tements .

(ii) I nv i t ed the Fore ign Secre tary to in form Si r Pe rcy Lora ine of the la tes t measure of Br i t i sh ass i s tance to F in l and .

6 . The Secretary of State for Air sa id t h a t there h a d been l i t t le a i r ac t iv i ty in the previous 24 hours . One enemy a i r c ra f t h a d made a t i p -and- run r a i d to the Shet lands , in the course of which four bombs h a d been dropped on was te l and a n d unsuccessful

a t t acks h a d been m a d e on a motor vessel a n d a t r awle r in the neighbourhood of t he Shet lands .

r p j i e W a r Cabinet took note of th i s s ta tement .

7. The First Lord of the Admiralty sa id t h a t a repor t h a d been received tha t a n unknown vessel h a d been sunk off the Tagus .

Des t royers h a d obta ined a very good contact no t f a r from where H .M.S . Exmouth h a d been sunk, a n d very hopeful a t t a c k s h a d been car r ied out.

The W a r Cabinet took note of th i s s ta tement .

8. The Secretary of State for War sa id t h a t the re was n o t h i n g to r epo r t from the W e s t e r n Fron t .

I n F in l and , the F inns h a d c a p t u r e d 300 pr i soners near Kei ta le , but the re w a s no change in the general s i tua t ion . T h e F i n n s appea red to be hold ing the i r own aga ins t the Russ i an a t t acks .

The W a r Cabinet took note of the above s ta tement .

Richmond Terrace, S.W.1, January 25, 1940.