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[Cd, 3626. Price 3d.














iii
-º
-º-º-º-º-º-º-º:
- - º
TREASURY MINUTE, DATED 23RD MARCH, 1905.
The First Lord recommends to the Board that a Committee be appointed:
(1) To enquire into the effect which the concentration of Govern-
ment Manufactories and Workshops in London and the
Metropolitan Area has upon the rate of wages, the cost of
living, including rent, the economy of production in time of
peace, and power of expansion in time of war ; and to enquire
what change, if any, is desirable in the present distribution
through the country of such Manufactories and Workshops.
(2) To suggest principles on which work should be distributed
among two or more Government Manufactories capable of pro-
ducing similar articles. - -
(3) To enquire whether Government production can be advan-
tageously replaced by private enterprise, and, if so, to what
extent and on what terms.
The First Lord further recommends that this Comºtes shaft be con
stituted as follows:–
--~\º
Sir G. H. MURRAY, K.C.B., Permanent Administrative Secretary
to the Treasury (Chairman).
Sir J. L. MACKAY, G.C.M.G., K.C.I.E. -
Sir GUY FLEETWOOD WILSON, C.B., Director of Army Finance.
Mr. GoRDON MILLER, C.B., Accountant General of the Navy.
Mr. H. LLEWELLYN SMITH, C.B., Controller General of the Com-
mercial, Labour and Statistical Department, Board of Trade,
with
Mr. S. ARMITAGE-SMITH as Secretary.
My Lords approve,
Note. -
On the death of Sir W. Gordon Miller, Rear-Admiral S. M. Eardley
Wilmot was added to the Committee.
413a. 2250—Wi. T.L. 97. 7/07. Wy. & S. 3622r. a 2
76.288













3.
GOVERNMENT FACTORIES AND WORKSHOPS COMMITTEE
REPORT.
CONTENTS.
Introduction—Enumeration of Government Factories, Sec. 1–2 - - - - -
Description of the Ordnance Factories, Sec. 3–23
Royal Laboratory, Sec. 3–6 - - -
Royal Gun Factory, Sec. 7–8 - - - - - - - - -
Royal Carriage Factory, Sec. 9–12 - - - - - - - -
Royal Small Arms Factory, Sec. 13–19 - - - - - - - -
Royal Gunpowder Factory, Sec. 20–23 - - - - - - - -
Alternative policies open to Government for obtaining supplies, Sec. 24–25 .
Advantages of manufacture by Government, Sec. 26 - - - - - - -
Present principle of allocation of orders, Sec. 27 - - - - - -
Results of the present principle, Sec. 28–29 - - -
Primary Function of the Ordnance Factories, Sec. 30 - - - - - - -
Proper principle of allocation, Sec. 31–33 - - - - - * --- * -
Opinion of Sir Francis Mowatt's Committee, Sec. 34 - - - - -
This opinion not acted upon fully, Sec. 35 - - - - - - - - -
Maximum and Minimum numbers to be employed on the principle proposed, Sec. 36–38
Possibility of expanding from Minimum to Maximum, Sec. 39 - - - - -
Proposed principle of allocation (i) should increase the productive power of private
trade, Sec. 40 - - - - - - - - - - - -
and (ii) should decrease fluctuations in employment, Sec. 41–2 - - -
Effect of reduction of numbers upon cost of production, Sec. 43 - - - - -
The Ordnance Factory Prices—Simplification and non-publication suggested, Sec. 44–47
Locality of the Ordnance Factories, Sec. 48–52 - - - - - - - -
Undesirability of removal, Sec. 53–54 - - - - - - - - - -
The Royal Army Clothing Factory, Sec. 55–62
Products and objects of the Factory, Sec. 55–56 - - - -
Difficulty of expansion, Sec. 57 - - - - - - - - -
Suggested reduction of numbers, Sec. 58 - - - - - - -
Defect of present organisation, Sec. 59 - - - - - - - -
Accounts and prices, Sec. 60 - - - - - - - - - -
Comparison of Government Trade wages, Sec. 61 - - - - -
Locality, Sec. 62 - - - - - - - - - - -
Factories of the General Post Office, Sec. 63–67.
Distinction between the Factory at Holloway and the Factory at Mount
Pleasant, Sec. 63 - - - " . " - - - - -
Distribution of Orders between the Factories and the Trade, Sec. 64 - -
Numbers employed and conditions of labour, Sec. 65 - - - - -
Possibility of removal, Sec. 66 - - - - - - - - -
Possible Decentralisation of heavy telegraph stores, Sec. 67 - - - -
The Royal Navy Victualling Yard, Deptford, Sec. 68–70.
Manufacture of Biscuits, Sec. 68 - - - - - - - - -
Manufacture of Chocolate, Sec. 69 - - - - - - - -
Cooperage, Sec. 70 - " * ,
Conclusion, Sec. 71 - - - -
PAGE.
.
11
E8



º
*
*
REPORT OF THE GOVERNMENT FACTORIES AND WORKSHOPS
COMMITTEE TO THE LORDS COMMISSIONERS OF HIS
MAJESTY'S TREASURY.
MAY IT PLEASE YOUR LORDSHIPS :
Various circumstances have contributed to delay the completion of
the duty entrusted by Your Lordships' predecessors to this Committee.
Amongst these we may mention the change of Government, which took
place some eight months after we had begun our enquiry; the regretted
death of one of our colleagues, Sir W. Gordon Miller ; the severe illness
of another colleague ; and, finally, certain negotiations relating to the
Royal Small Arms Factory at Birmingham, which had a direct bearing
on the subject of the second of our terms of reference.
Rear Admiral S. M. Eardley Wilmot, Superintendent of Ordnance Stores,
Admiralty, has been associated with us in the place of the late Accountant
General of the Navy, and the Committee thus reconstituted has the
honour to submit the following Report to your Lordships.
(2) It will perhaps be convenient to begin by enumerating the different Enumeration of
manufacturing establishments of Government which exist at the present the Government
moment. Factories.
There are three Departments of Government which maintain such es-
tablishments, viz., the General Post Office, the Admiralty, and the War
Office.
The General Post office has two manufacturing establishments under
its control, viz., one at Holloway and one at Mount Pleasant.
The Admiralty has a small establishment at Deptford; and this is the only
“manufactory ‘’ under the control of this Department into which we have
enquired. It is true that to a small extent manufacturing operations are
carried on by the Admiralty elsewhere; but we have not felt called upon to
enquire into these, as our attention is specifically directed by the first
of our terms of reference to manufactories in the Metropolitan district,
and similar considerations have led us to exclude from our enquiry the ex-
tensive operations carried on at the Royal Dockyards.
The most important manufacturing Department for our purposes is the War
Office, which has under its management at the present time six con-
siderable factories, viz., (1) the Clothing Factory at Pimlico ; and (2) the five
“ Ordnance Factories,” viz., the Laboratory, the Gun Factory, and the
Carriage Factory, at Woolwich ; the Small Arms Factory, at Enfield; and
the Gunpowder Factory at Waltham.
the Ordnance
We will begin by considering the position of the Ordnance Factories. Desºjºtion of
- Factories.
I. THE ROYAL LABORATORY.
(3) The work of the Royal Laboratory is to manufacture ammunition of all
kinds from materials derived partly from the Gunpowder Factory at
Waltham Abbey, partly from the trade.
It is by far the largest factory in the Arsenal.
-
-









2
(4) It is estimated by the Superintendent that the largest number
of men who could be employed at the Laboratory under its present
conditions as to land, buildings, and plant is about 13,000, assuming that
day and night shifts are worked for seven days a week; and that the smallest
nucleus from which this maximum number could be reached without
delay is about 3,500. To expand from the minimum to the maximum staff
in this case would require, it is estimated, some three or four months.
The power of the Royal Laboratory to increase its output to meet a sudden
emergency was amply proved during the late war. In a month the normal
output of the Laboratory was increased threefold, and in five months fivefold.
(5) In comparison with the Royal Laboratory the work done by
private trade in this country in connection with the actual filling of
ammunition is inconsiderable. On the other hand, the mechanical work done
by the trade in connection with the manufacture of ammunition is said to be
two or three times as great as that of the Royal Laboratory.
There are very few processes performed in the Government factory
which are not actually performed by the trade also, and one of the effects
of the South African War was to break down the few remaining monopolies
of the Royal Laboratory's production; on the other hand, the trade manu-
factures some things, such as the larger kinds of armour-piercing shell, which
the Government factory has never made and does not possess the requisite.
plant for making. -
(6) The Royal Laboratory employs a few women, and a considerable
number of boys. Of the adult male labourers employed about five-sixths
are paid on piece-work rates, single or collective. The “Rowan’’ system of
premium piece-work is used to a certain extent.
II. THE ROYAL GUN RACTORY.
(7) The Royal Gun Factory is divided into two portions; the first, which
employs about three times as many men as the second, makes guns; the
second makes (Whitehead) torpedoes.
- -
It is estimated by the Superintendent that the maximum number of
persons who could be employed at the factory, on the assumption that separate
shifts are worked by night and by day, is rather less than 5,000; and that the
smallest number which must be retained in normal times with a view to
reaching this maximum without delay is about 2,000.
In the case of the Royal Gun Factory, however, the expansive power of
the Arsenal was not tested to the fullest extent during the recent war in South
Africa. During the period of that war the gun factory was not called upon to
increase its numbers by more than some 30 per cent., an increase the greater
part of which was incurred for the purposes of the Royal Laboratory, and
the additional demands upon this factory attributable to the war were
insignificant.
(8) Nearly all the labour employed at the Royal Gun Factory, which is
for the most part skilled, and, in many cases, highly skilled labour, is paid on
piece-work rates—mainly single piece-work rates—though for some operations.
the collective piece-work system is necessarily adopted ; and here, as else-
where, the practical result of the system of piece-work rates is that the work-
men earn one-third as much again as they would on time rates.
III. THE ROYAL CARRIAGE FACTORY.
(9) The most important products of the Royal Carriage Factory are gun-
mountings—for all kinds of artillery, both for the Army and for the Navy,
for garrison, siege, field, horse, and mountain guns. Further; it produces
several classes of wooden articles, the principal being wooden wagons,
ammunition boxes, rifle chests, packing-cases, etc.
º
ºº
-
-
-


3
In considering the proper relation of this factory to the trade it is
important to bear in mind this distinction between the two principal classes
of its products, viz., gun-mountings on the one hand, and on the other the
wooden articles above mentioned.
(10) The maximum number of men who could be employed at the factory
under present conditions is said to be about 3,700; and it is estimated that
2,500 or thereabouts is the smallest number from which the factory could
expand without delay to this maximum.
It is not possible to accommodate 3,700 men (the maximum number as
estimated above) in the carriage factory at one time ; to find employment
for this number resort must be had to double shifts in some parts of the
factory, and overtime in others, a method not ordinarily adopted at this
factory in normal times.
It will be observed that the margin of expansion of which the carriage
factory is capable is comparatively small. The number of additional men who
can be taken on in an emergency is only about 1,200, or less than 50 per cent. of
the minimum staff. The explanation appears to be that the factory is some-
what ill-proportioned at present ; the forge and foundry are too small in
relation to the other shops composing the factory, and their output, of
course, determines the output of the shops dependent upon them. What is
produced by the forge and foundry working night and day is not enough.
to keep a double shift occupied in the dependent workshops.
(11) The supply of certain classes of skilled labour, that, e.g., of black-
smiths and coopers, is not so plentiful as might be wished; but, speaking
generally, the Carriage Factory found no difficulty during the South African
War in recruiting both its supervising and subordinate forces.
The proportion of supplies drawn from the factory and from the trade
respectively tends to approximate to the ratio of one to two. -
(12) The Royal Carriage Factory employs both skilled and unskilled
labour. Most of the men are paid on piece work rates, single or collective.
These rates, which are settled by a special rate-fixing branch of the Car:
riage Factory, work out at about 30 per cent, more than the time rate fixed
for each man. -
IV. THE ROYAL SMALL ARMS FACTORY, ENFIELD.
(13) At the time when our enquiry began the manufacture of small arms
had for many years been carried on by Government at two separate estab-
lishments, both equally under the control of the Chief Superintendent
of Ordnance Factories, viz., the factory at Enfield Lock, where machine
guns and bayonets are also produced, and the factory at Sparkbrook, Bir-
mingham, where rifles only were manufactured, and where in addition the
whole work of rifle repairing for the Army had recently been concentrated.
But during the course of our enquiry the situation became materially changed.
With the falling off in the increased demands made upon the factories
during the South African War, the question as to the desirability of con-
tinuing manufacture in two separate factories forced itself upon the atten-
tion of the War Department.
(14) A Committee (of which Mr. Bromley Davenport, late Financial
Secretary to the War Office, was chairman), was appointed in February,
1905, by the Secretary of State for War to
“enquire into the growth of expenditure on the wages of subordinates paid from Subhead
A of Army Vote IX. (Inspection and Custody of Stores) and to report what reductions are
possible”
4130. - A.



4.
and the following paragraph was included in their Report :-
“The Committee understand that the Army Council have recently decided that the Rifle
Factory at Sparkbrook should be held in reserve and used for manufacture only in times
of emergency and should in peace time be confined to repair and conversion work.
They have taken some evidence on the question and, after full consideration, they are inclined
to the view that the Sparkbrook Factory might with advantage be closed altogether, if suitable
arrangements can be made for carrying out the repairs at Enfield or locally in the Commands.
The site is a valuable one, the present cost of keeping up the establishment is considerable,
and if it could be closed, the staff of the Inspection Department could be correspondingly
reduced, though some staff would still be required to inspect the work done by the Bir-
mingham Small Arms Company” (Sec. 7 pp. 4-5).
That recommendation has now been carried into effect.
The land, buildings, and machinery of the Sparkbrook Factory have been
sold to the Birmingham Small Arms Company, who have undertaken to
give preference as regards employment to the men employed at the factory at
the date of transfer. The company will maintain the factory and plant in a
condition to manufacture the short Lee-Enfield rifle, and Government, on its
side, will guarantee to the company a proportion of the orders for rifles placed
with the trade.
This being so, we think that the change in question should be welcomed
from the point of view both of economy of production and power of expansion
in emergency.
(15) Only two firms manufacture the kind of rifle required by Government,
viz., The London Small Arms Company and the Birmingham Small Arms
Company; and there appears to be no effective competition between them, the
prices of both being invariably the same.
The sale of the Sparkbrook Factory to the Birmingham company will
increase the resources of private trade upon which Government can draw in
emergency : it should also result in economy.
(16) The dual manufacture, at Sparkbrook and at Enfield, hitherto carried
on has not been economical.
There are obvious advantages, e.g., in the reduction of indirect charges, to
be obtained by concentrating the manufacture of similar articles in one factory,
provided, as in the present case, that the resulting establishment does not
become unwieldy; and we are confident that if Government were now beginning
such manufacture de novo two separate factories would not be created.
(17) Not only so, but the manufacture of rifles at Sparkbrook, in spite of the
natural advantages of its situation, has proved to be somewhat expensive
in comparison with similar manufacture at Enfield.
Birmingham is the centre of the gun-making industry in this country,
and is in close proximity to the sources of supply both of coal and of iron.
Yet in spite of the advantages in these respects which it possesses over
Enfield, it appears that the Enfield Factory has on the whole produced
at a less cost than the factory at Sparkbrook.
Taking the period of the fifteen years from 1889–90 to 1903-4, inclusive, we
find that the average cost of rifle production at the two factories has been
as follows, viz.:-
£ s. d.
Enfield - - 3 3 2
Birmingham - 3 7 7.8
Showing a difference of 4s. 5-8d.
During the same period the average number of rifles manufactured annually
at Enfield was 44,274 and at Sparkbrook 16,181. -


5
This disproportion in the volume of output of the two factories doubtless
goes far to explain the higher cost of production at Birmingham, but as the
factory at Sparkbrook was incapable from its position of enlargement, while
the factory at Enfield Lock can, if necessary, easily be enlarged, it would
have been impossible (even had it been desirable) to concentrate the whole
rifle-manufacturing business at Birmingham.
(18) As the factories at Sparkbrook and Enfield were the only Government
factories capable of producing the same articles, the abandonment by Govern-
ment of the Sparkbrook Factory relieves us of the duty of reporting on the
second of our terms of reference.
(19) The maximum number of men who can be effectively employed at
Enfield in its present condition as to plant and buildings is estimated to be
about 3,500 and the minimum number who must be retained to enable this
maximum to be reached without delay is estimated at about 2,000.
V. THE ROYAL GUNPOWDER FACTORY.
(20) The principal products of the Royal Gunpowder Factory are cordite and
guncotton. Thus the constituent of the Arsenal to which it stands in the closest
relation is the Royal Laboratory, for the finished products of the former are among
the raw material of the latter.
(21) It is estimated that the largest number of men who could be employed
there under existing conditions is about 1,500, and that the smallest number of men
who could be employed at the factory consistently with retaining the power to
expand without delay to this maximum is from 570 to 600.
To increase the output beyond the maximum given above would need an
addition to the existing land and buildings of the factory.
The Royal Gunpowder Factory, unlike the other constituents of the
Arsenal, employs unskilled labour alone, and labour of this kind is to be found
in sufficient quantities in the immediate neighbourhood of the factory, or, failing
this, could be drawn from the north and the east of London.
(22) The explosive materials produced at the Royal Gunpowder Factory are
also produced by the trade, which for the present purpose means some eight
companies situated in different parts of the United Kingdom ; there are no
manufacturing processes carried on at the factory which are not or could not
be carried on by the trade ; on the other hand, the trade manufactures
some materials which are not produced at the Royal Factory, notably lyddite,
the whole supply of which required by Government is bought from private
producers.
In recent years the values of the explosive materials obtained annually
by Government from the Royal Factory and from private sources respectively
have stood in the ratio of one to two.
(23) The site of the Royal Gunpowder Factory appears to be well adapted
for its purposes. It is near both to the sources from which it draws its raw
materials, and to the destination of its finished products, viz.: the Royal
Laboratory; its position has all the advantages attaching to water communi-
cation, and to comparative isolation from other buildings. Further, the factory
is conveniently situated with regard to the Supply of labour.
We are informed that though many of the processes performed in the
manufacture of explosive materials at Waltham Abbey require care and atten-
tion, no technical skill is required in most of its operations, and this fact
renders the problem of expansion in a crisis far easier here than elsewhere.
412.a. A 2


6
The labourers are all paid on time rates; there is no piece work, nor
would it be desirable, in view of the nature of the products, to introduce
payment on that system. -
Three alternatives (24) If Government were considering de novo the best way to supply its
. .." needs for munitions of war three alternatives would present themselves.
SUlmer.
On the one hand it might assume the responsibility of satisfying its
requirements entirely by means of its own resources. This was the system
which, in fact, prevailed in this country up to 1859, prior to which year the
Arsenal at Woolwich was the sole source from which the Government obtained
its warlike stores; it was this system also which prevailed in France prior to
the Franco-Prussian War.
On the other hand, Government might rely exclusively upon the resources
of the private enterprise of the country, without itself possessing any facilities
for manufacture—a system which prevails to a large extent in Germany at the
present time.
Again, there is a third alternative, viz., that of obtaining the munitions of
war required partly from private enterprise and partly from factories under
direct Government control. This is the system which has prevailed in this
country for nearly half a century, and which was adopted in France after the
war of 1870.
(25) For the purposes of our enquiry it is scarcely necessary to discuss the
relative merits of these three alternatives. The system of relying on the
combined results of Government and private manufacture has become firmly
established in this country, and is not likely to be abandoned.
(26). But it may be convenient to indicate at this point the considerations
which are usually urged in justification of the maintenance of a system of State
manufactories.
Advantages of (i) For some of the productions required for public purposes Government
Government
manufacture.
is in a position similar to that of a private consumer, and can rely on prices
being regulated by the ordinary operation of supply and demand.
But with regard to other kinds of necessary supplies, including some of the
most important and costly munitions of war, the operation of those economic
principles which ordinarily determine prices is less certain.
Not only are the sources of supply in these cases strictly limited, but
demand also is limited. Government finds itself in the position of a consumer
supplied by a limited number of producers, who enjoy something approaching
to a monopoly ; and effective competition can scarcely be said to exist.
It is obvious that such conditions are favourable to the existence of under-
standings of a more or less formal nature, between the few firms who are
capable of supplying the requirements in question ; and experience shows that
where Government is not in a position to manufacture for itself, full advantage
will be taken of its necessities.
(ii) In another direction, also, the possession of factories by the Govern-
ment conduces to economy. It is impossible, of course, to accept Supplies from
private manufacturers without inspection, and when those supplies consist of
articles of complicated mechanism, such as artillery, the highly specialised
knowledge required for efficient inspection can scarcely be obtained without
some practical experience of manufacture.
(iii) Again, it is incontestable that repairs of all kinds necessitated by the
wear and tear of the service, from a battleship to a rifle, are more economically
effected by Government than by private contract. The amount of repair
required in a given case can scarcely ever be gauged with any degree of

7
accuracy beforehand, nor is it easy to devise any effective means of checking
the items of the labour bill in the case of repairs done under contract.
(iv) Manufacture by Government is further valuable in establishing a
standard of excellence in workmanship.
(v) The existence of Government manufacturing establishments appears
to be of some public utility also in relation to the improvement of design. The
Government factories are able to collate and compare the features of different
designs submitted to them from the several private manufacturers and others
with whom they are brought into contact, and the design eventually adopted
may thus combine the advantages of a number of alternatives.
(vi) Lastly, there is no doubt that Government manufacture incidentally
furnishes a means of checking the prices charged for supplies purchased
from private trade.
(27) We have next to consider the question, To what extent should
Government rely on its own factories and on the private manufacture of this
country respectively 7
. The principle on which the allocation of orders is determined at the present Present principle
time is based, as regards guns, upon giving approximately one-third to the governing alloca-
Ordnance Factories, and two-thirds to the trade; as regards ammunition a . º
larger proportion goes to the Ordnance Factories. ... the
Trade.
The procedure is somewhat as follows: When the probable requirements I
for the ensuing financial year are approximately known and have been
considered departmentally, an “Allocation Committee,” consisting of repre-
sentatives both of the Admiralty and the War Office (including officers of the
Arsenal, of the Military, Finance, and Contract branches of the War Office,
and the Financial Member of the Army Council), meet together to settle the
points of difference, and decide the allocation.
The result is arrived at after considering the position of the Ordnance
Factories; and the circumstances of the different branches of trade at the
time, such as the necessity of maintaining some sources of supply by means of
the customary amount of orders, or encouraging others by greater demands.
After the programme of allocation has been settled, tenders are invited
from the trade, and modifications may be introduced on a comparison of trade
and Arsenal prices.
(28) The general result of the present system of allocation is that rather Practical results
more than one-third in round numbers of the value of supplies required annually of this principle.
is obtained from the factories, and the remaining two-thirds from the trade.
(29) This result, however, does not appear to be in consonance with the
general principles on which it has been held that the factories should be
administered.
One object, for instance, which, it is admitted, should be kept in view is
that the Arsenal should not be allowed to expand in ordinary times beyond the
minimum point of economic production consistent with the power of rapid
expansion, but it would appear that the Arsenal has, in fact, often been above
that ideal standard; and the accounts show that during the last fifteen years
the output of the factories has increased by £750,000 a year.
It is further admitted that Government should not make “trade * articles,
i.e., staple articles of recognised type for which there is a constant demand on
the part of private consumers; but we are told that, in point of fact, the factories
are: *y pressing (sometimes successfully) to be allowed to make such
articles.






8
But we need not develop this point further, because we propose to suggest
a different principle of allocation from that which at present appears to be accepted.
(30) The considerations which are given above as explaining and justifying
the existence of the Government manufacturing establishments are considerations
of economy and efficiency.
Primary function But there is another which far outweighs these in importance so far as the
# *9* production of munitions of war is concerned.
Factories:
To maintain a r -: - - -
reserve of pro- The existence of the Ordnance Factories is part of the necessary insurance
ductive power for of the nation against the possible failure of supplies in time of war; and their
emergencies. primary function is to provide a reserve of productive power capable of being
utilised to the full in times of emergency.
In such times not only does the demand for almost all kinds of war
stores become immensely greater in volume, but immediate delivery becomes a
matter of urgent necessity. Delay, which is inconvenient in time of peace,
may have infinitely graver results in time of war.
It is essential, therefore, that Government should have at its disposal
a reserve of productive power capable of expanding rapidly to meet the
exigencies of Sudden and unforeseen demand. -
It is admitted on all hands that the ultimate productive power of the pri-
vate industry of this country is greater than that which is possessed by the
Government establishments. But the trade takes time to adapt itself to
an increased demand, and the Arsenal must be adequately equipped for tiding
over the first few months of a critical period. After that period, all important
as it is in war, private enterprise may be trusted to meet the national
requirements to a large extent.
Proper system of (31) The conclusion at which we have therefore arrived is that the
º of proper organisation of the Arsenal is one which will enable it to increase
OrCleI’S.
its output, without loss of efficiency, to the greatest possible extent in the
shortest possible time. And the proper system of allocation of orders for
warlike stores between the factories and the trade is that which will best
conduce to this end.
But it may be urged that in the Arsenal the Government possesses a
valuable extent of land upon which it has erected, and maintains at great
expense, the costly buildings and still more costly machinery of its factories.
º
Other considerations apart, it is obviously proper for this fixed capital
to be employed with a view to the greatest possible economy of production.
(32) But it will, we think, be found that the principle of the most
economical production proves to be incompatible with that of rapid expansion.
The organisation of the factories which would fit them to produce most
economically in ordinary times is not that which would best fit them for
the attainment of their principal end, viz., to act as a reserve of power in
times of crisis.
To leave buildings and machinery in part idle, or indeed to work machinery
at less than its full power, or with less than its full complement of labour,
necessarily increases the cost of production. The cost of the Supervising
and directing staff cannot be reduced proportionately with reductions in the
lower ranks; the most competent workmen cannot always be employed on
the work for which they are best fitted, and the charges for depreciation and
maintenance, etc., which also remain constant, must then be spread over a
smaller volume of manufactured products.
Thus to work the factories at less than their maximum output, i.e., to
work with less than their maximum complement of labour, is pro tanto
uneconomical; to work them at their maximum destroys their principal
raison d’être—their power of expansion.

9
-
We feel little doubt that, in the case of munitions of war, the power to
expand rapidly in emergency is of more importance than economy of
production in ordinary times; and that prudence may require us to sacrifice
the latter to some extent in order to secure the former.
(33.) It has, however, been suggested that the factories should be permanently
maintained in a condition to produce at any time the maximum output re-
quired in time of war; and that in time of peace the existing machinery and
the redundant force should be employed in the production of other articles
which could either be utilised by the Government itself or sold in the open
market.
We cannot recommend the adoption of such a system. The competition of
a Government factory in the open market would involve an unjustifiable
interference with private enterprise, while the number of articles (other
than munitions of war) which the factories could produce, and which are also
required for Government consumption would be so limited as to have no
appreciable effect on the plant and workmen employed.
(34). Here, perhaps, we may be permitted to quote the opinion, with which ºpiniº of the
we are happy to find ourselves in entire agreement, of a previous Committee *...
which has given consideration to this subject. - -
In January, 1900, the Secretary of State for War referred to the con-
sideration of a Committee (of which Sir Francis Mowatt was Chairman)
a programme submitted by the then Director-General of Ordnance for
strengthening the reserves of matériel of the Army.
This programme included proposals for increasing largely the productive
power of the Ordnance Factories at a cost estimated to exceed £1,000,000
sterling.
The attention of the Committee was specifically directed to—
“The capacity of private firms to supply the guns, ammunition, and stores required.”
They expressed the opinion that the factories—
“should be so organised as to be able materially to increase their ordinary output
in times of national emergency or in the event of a temporary failure from whatever cause
of the deliveries of the trade.”
The Committee went on to state their conviction that—
“This reserve power can only exist so long as the work assigned to the factories is well
within the means of its normal staff working the ordinary number of hours per week.”
“It is essential, therefore, :k :k :k :k either that the ordinary demands
upon the factories must be reduced, or that the buildings, plant, and staff must be increased
possibly to the extent and at the cost proposed by the Director-General of Ordnance,”
but after carefully considering evidence furnished not only by representatives
of the War Office and of the Ordnance Factories, but also of the trade, the
Committee pronounced in favour of the former alternative, at the same
time recommending certain additions to the buildings and plant of the Arsenal
which, though less comprehensive than those proposed by the Director-General
of Ordnance, were yet considerable.
This recommendation was adopted by the Secretary of State, received the
sanction of Parliament, and has, in fact, been carried into effect.
(35) The material resources of the Arsenal, are now considerably greater
than they were before the South African War; and our present duty is to
attempt a Solution of the problem which we have enunciated above, viz.,
how, given these material resources, to secure the maximum power of in-
creasing the output of the factories.





10
Maximum and
minimum number
of men to be
employed on the
above principle.
- - -
- * * * - -
- -
It has been suggested to us that the adoption of the rule under which about
one-third of the annual requirements is supplied by the factories was the
practical result of the adoption of the recommendations of the Mowatt
Committee.
But we are not satisfied that full effect has been given to the principle
underlying those recommendations.
(36) The description of the Ordnance Factories given above contains the
information which we have obtained from the superintendents of the various
factories upon the following points:–
(a) What is the greatest number of workmen who could efficiently be
employed in each factory, working the longest number of hours (including
extra shifts, where this is possible, and, where it is not, including over-
time) given the existing machinery and buildings 2 This we will call the
“absolute maximum ” of the factory; it is limited, of course, by the size of
the buildings, the amount of the machinery, and the nature of the opera-
tions carried on in each factory, some of which admit, while others ex-
clude, the possibility of working more than one shift in emergency.
(b) What is the smallest nucleus, starting from which the maximum
number of employés could be reached without delay and without hampering
the work of production ?
2
This “minimum ” is limited by the number of sections into which a work-
shop is divided, and the amount of supervision required in each, i.e., the
number of managers, assistant managers, foremen, and leading men who
command the lower ranks of labour.
| (37). It seems to us that the proper establishment for the factories lies at or
about this “ minimum,” and that the proper principle of allocation is to
assign so much work, and so much only, to the factories as will keep fully
employed during normal hours this nucleus army of labour.
(38) The following tables show (1) The average number of persons employed
in the Ordnance Factories during the years 1899–1904, together with the
actual numbers employed during the third week of November, 1906; and
(2) the “ absolute maximum
to the opinions of the superintendents respectively.
2.5 Ç
and “minimum ” of each factory according
I
AVERAGE NUMBERS OF EMPLOYES IN THE ORDNANCE FACTORIES FOR THE
YEARS 1899–1904, AND ACTUAL NUMBERS EMPLOYED IN NOVEMBER, 1906.
November,
-- 1899. 1900. 1901. 1902. 1903. 1904. 1906.
Royal Laboratory - - 7,944 10,552 10,873 8,717 7,258 7,186 5,744
Royal Carriage Factory - 3,051 3,398 3,705 3,708 3,368 3,202 2,859.
Royal Gun Factory - 2,717 3,155 || 3,507 3,367 3,086 3,127 2,609
Royal Small Arms Fac- - -
tory, Enfield - - 2,208 2,610 2,936 3,013 2,791 2,536 2,050
Royal Gunpowder bac- - *
tory, Waltham Abbey - 889 | 1,040 1,224 1,207 1,159 1,214 775
Royal Small Arms Fac-
tory, Birmingham - 458 564 700 788 754 653 -
Building Works Depart-
ment - - - - 1,159 1,463 1,838
The Central Office - - 522 540 578
- .
TOTAL - 18,948 || 23,322 25,361




11 -
2
*
II.
Actual
-- Numbers “Absolute . Mini 25
November Maximum.” IIllin Ulm.
1906.
Royal Laboratory - - - - - - - 5,744 13,000 3,500
Royal Carriage Factory - - - - - - 2,859 3,700 2,500
Royal Gun Factory - - - - - - 2,609 5,000 2,000
Royal Gunpowder Factory - - - - - 775 1,500 600
Royal Small Arms Factory, Enfield - - - 2,050 3,500 2,000
TOTAL - - - - - - - 14,037 26,700 10,600
If the Building Works Department and the central office be excluded, it
appears from Table II. that the “absolute maximum ” of the factories proper
may be placed at about 26,700 men, and the minimum at about 10,600. It is
right, however, to state that the Chief Superintendent of the Ordnance
Factories considers that the present total of 14,037 men is not susceptible
of any further reduction.
We do not feel able to make any definite recommendations as to the
exact number to be adopted for the minimum establishment, which requires
further examination, and a fuller knowledge of the circumstances of
each of the factories, than we can claim to possess.
If the principle which we have ventured to lay down is adopted, it
will probably be thought desirable to make a special enquiry before the
precise figures are finally settled.
(39). In recommending that the numbers of the normal establishment of . of
the Ordnance Factories should be fixed on the principle above suggested, we . .Im-
have assumed that no difficulty would be found in obtaining enough labour
to increase this force rapidly in times of emergency to the maximum attainable.
This assumption appears to be justified by the experience of the
Arsenal during the South African War. There was a remarkable unanimity
in the evidence of the Superintendents of Factories on this point.
The capacity of the several factories to expand from their minimum to
their maximum numbers appears to vary ; with the Carriage Factory the
increase is 50 per cent. ; with the Enfield Small Arms Factory it is 75
per cent.; with the Gun Factory and Gunpowder Factory it is 150 per cent. ;
and with the Royal Laboratory it is nearly 300 per cent. ; but we gather
that little difficulty is anticipated in finding the requisite balance of labour,
whether skilled or unskilled.
During the South African War sufficient numbers were forthcoming,
and there does not appear to be any reason for believing that in a future
emergency a different result would ensue.
Not only does this appear to be true of the Arsenal but we have been told
by two of the most important manufacturing firms in this country that
they also anticipate no difficulty in increasing their establishments to their
fullest extent.
(40) We have based our proposal for reducing the cadre of the Arsenal Same principle
- - inn, - - does not apply to
in ordinary times on the fact that only by so working can its power of the trade.
4130.


12
The minimum
when arrived at
should be fairly
Constant,
Effect of reduc-
tion on the cost
of production.
expansion be preserved. But it may possibly be objected: If the resources
of the trade are the ultimate reserve of power in emergency, does not
the same reasoning apply to both sources of supply Does it not follow
that to rely on the trade to its full extent in ordinary times impairs its
ability to expand in emergency *
The answer, we think, is that, whereas the maximum productive power
of the Arsenal is something with definite and ascertainable limits, that of the
private trade is not. The resources of private enterprise in this country are
capable of almost indefinite, though not of immediate, expansion. Demand
discovers or creates new sources of supply, and the result of an increased
demand upon the trade in ordinary times would, therefore, probably be to create
an additional reserve of power in emergency.
(41) The considerable reduction in the numbers of men employed at
the Arsenal would, of course, have to be effected gradually and in such a
manner as to cause the least amount of hardship to the employés, viz., by the
Ordinary process of wastage rather than by discharges.
When, however, this reduction is once effected, it should be found possible
to eliminate all but trifling and casual fluctuations of labour at the Arsenal
in normal times. Given the requirements of Government, estimated as closely
as may be at the beginning of each financial year, the share of the factories
will be so much as their minimum establishment is capable of producing.
The balance will be allotted to the trade.
(42) It is true that demands for war stores are subject, owing to changes
in pattern and design and other causes, to some variation even in normal times;
and the demands made upon the factories being ea hypothesi constant, the
variation in the demand made upon the trade will be pro tanto increased.
But the trade will probably find compensation for this inconvenience
in the greater amount of supplies which would on the whole be drawn
from it under the system which we recommend.
However that may be, the trade is certainly in a better position than the
Arsenal to face the inconvenience of a fluctuating demand. The factories
have only one customer, viz., Government ; the trade have many customers
of whom Government is only one. Again, the factories are confined exclusively
to the manufacture of certain kinds of products; when demand for those
products falls off for a time they cannot, as the private trade can, divert
their machinery and labour to the manufacture of other products, the sale of
which may realise a profit, or at least may go to meet accruing charges for
maintenance. Nor are the factories at liberty, as the private trade is, to
accumulate a reserve of manufactured products in anticipation of possible.
but uncertain future demand.
(43) A reduction of the numbers of workmen employed at the Arsenal
would naturally cause an increase in the cost of production. Against the
products of each factory there have to be charged the cost of production in
that factory, and a proportionate part of the cost of the central administra:
tion. The cost of production includes charges for depreciation on plant and
buildings, maintenance charges, etc., all of which remain constant, whatever
may be the variations in the output or the number of workmen employed.
Further, not only the indirect, but the direct, labour cost of production is
increased, because it is impossible, without impairing the efficiency of the
factories for their primary work, to reduce the higher grades of labour
proportionately when a reduction of the lower ranks is effected.
The cost of production, therefore, at the reduced Arsenal would be higher
than it is at present; and its charges to its customers would have to be
increased. It would also be necessary to bear this point in mind whenever
the Ordnance Factory accounts were used as a criterion by which to compare
trade and Government prices.

*
13
The existence of these inconveniences must be recognised, but we submit
that they must be regarded as more than counterbalanced by the advantages
incident to the adoption of the guiding principle which we recommended,
viz., the greater power of expansion both of the factories and of the trade,
and the avoidance of difficulties connected with fluctuations of employment.
It may also be expected that some reduction in trade prices will ensue if the -
orders given to the trade are materially increased.
(44) We have suggested above that the accounts of the Ordnance Factories The Ordnance
will be less useful as a criterion of trade prices if the reduction which we Factory prices.
recommend in the output of the Arsenal were effected.
This is a point which requires some further explanation.
Section 1 (2) of the Act 52 & 53 Vict., cap. 31, requires that these
accounts shall disclose for each of the Ordnance Factories “the cost of labour
employed and the value of stores expended in such a form as the Treasury
from time to time direct or approve.
So far, then, as the Act goes it would be sufficient to prepare, and present
to Parliament, a brief statement of the “prime cost '' (i.e., labour and material
cost) of production for each factory. And if to this there were added a
general statement of the administrative expenses of the Arsenal, and the total
amount of all charges indirectly incurred in production there, all statutory
requirements would be fulfilled. tº
(45) But since the Act was passed various attempts have been made by the
*Treasury and the War Office to elaborate the form of the accounts, so as to show
in great detail the exact price of each article produced in the factories. ºn
One of the objects kept in view in this procedure has been to present the
accounts in such a form as to enable a comparison to be made with the
prices charged by private manufacturers. It has, however, been generally
recognised that in order to make such a comparison possible many quali-
fications and corrections would have to be introduced. º
(46). There are certain charges incident to manufacture by Government
which are not incident to private manufacture ; and there are again certain
charges borne by private manufacturers which Government escapes altogether.
The Ordnance Factory prices include the former and exclude the latter.
The trade prices include the latter and exclude the former.
On the first page of the Ordnance Factories Blue-book there will con-
sequently be found a note which has been inserted on the recommendation
of the latest of several committees, which (with the assistance of eminent
accountants) have advised the War Office on the form of these accounts.
The note is as follows:–
“The prices shown in these accounts do not include rent of land, interest on capital, or other
trade charges and risks not incurred in Government manufacture, but, on the other hand,
include charges for depreciation and upkeep of unused buildings and machinery maintained
with a view to expansion, and cost of care and custody of Imperial stock stores,”
and a reference to this caveat reappears on each page of the price list which
follows.
(47). Having regard to the qualifications to which attention is called in this
note, we think it is a matter for consideration whether the voluminous details
contained in the accounts are worth the trouble and expense incurred in their
production, and whether some simpler method of complying with the terms of
the Act of Parliament could not be adopted. Apart, however, from this
question we think it is not desirable to publish the detailed prices in their
present form.
4130. - B 2



14
Locality of the
Ordnance
Factories.
Undesirability of
removal.
(48). It remains for us to state the conclusions at which we have arrived
on the questions put in the first term of reference.
The data for forming a judgment as to the comparative cost of living in the
Metropolitan area and elsewhere are exceedingly complex; and it must not be
forgotten that the conditions of private and of State employment are not
identical. -
But, from enquiries which we have instituted, we think that it is
established that in certain industrial towns, which have been selected for
comparison, the cost of living (including not only rent but also the
necessaries of life) for skilled labourers is lower than it is at Waltham and
Enfield and considerably lower than it is at Woolwich.
The difference is most striking in the case of rent, which in the selected
provincial towns is only about two-thirds as high as at Woolwich. Prices
of necessaries vary much less widely, but here also the advantage is on the side
of the provincial towns. If the whole of a workman's expenditure on food,
fuel and rent be considered it is found that the cost in the selected provincial
towns is about 14 per cent, less than at Woolwich. -
(49) The level of wages also both for skilled and unskilled labour appears
to be higher in the Metropolitan area than in provincial towns. Thus
in the fourteen selected provincial towns the average rates of wages in
the Building and Engineering trades for skilled workmen are roughly 11 per
cent. less than at Woolwich, and the difference in the wages of unskilled
labour is proportionally somewhat greater.
(50) But it must not be assumed that there is any very close or necessary con-
nection between the cost of living on the one hand, and the level of wages on
the other; for the mobility of labour is not sufficient to produce equal
conditions of life in different industrial centres.
It is unnecessary, however, for the purpose of the present enquiry, to
subject such conditions to a close analysis from the point of view of the
workmen, for we are concerned with them only as they affect economy of
production in time of peace, and power of expansion in time of war.
(51) During recent years a tendency has undoubtedly manifested itself to
move industrial undertakings from the Metropolitan area to other localities,
where the burden of local rates is less, and the prevailing standards of wage
are lower. Prima facie, therefore, there might seem ground for believing that
Government might follow the example of private enterprise and seek some
more favourable area of production.
(52) It must not, however, be assumed that, were any such migration
possible, Government would be able to effect a reduction in wages, even
for skilled labour, to the level of the existing standard in the area chosen.
The establishment of new Government manufactories in a given industrial
district might possibly have the result of raising the level of wages previously
obtaining in that district. Nor could it be expected that the cost of production
would fall proportionately with any reduction in the rates of wages for skilled labour
which might be effected by the removal. -
It might be found that the lower paid labour of the provincial district was
quite as expensive as the highly paid, but also highly skilled, labour of the
Metropolitan area. And even admitting that the Arsenal, if situated in a
district closer to the sources of the supply of coal and iron, e.g., in Birmingham,
would produce at a less cost than at present, it does not by any means
follow that such an economy would be realisable under existing conditions.
(53) For the existence of the Arsenalin its present position is the cardinal fact
of the case. --
----------

15
^
The economy to be realised by production elsewhere must indeed be
considerable if it is to overbalance the loss consequent on the abandonment
of the site at Woolwich, and the immense expenditure entailed upon public
funds by acquiring a new site, providing new buildings, and replacing the
existing machinery.
To transplant the Arsenal as a whole to some place which is, and which
would remain, more economically favourable to production can indeed
scarcely be regarded as practicable, and to transplant a part only appears
open to grave objections.
The different factories of the Arsenal are all more or less closely inter-
connected and interdependent, and the expense involved by decentralisation
would in all probability counterbalance any economy of production which
might thus be attained. Nor is it possible to overlook the results of such
decentralisation upon the area abandoned.
The disturbance which such a change would produce would affect the whole
population which has grown up around, and depends on the industry of Govern-
ment ; while the most thrifty of the Arsenal workmen would be among
the first to feel the loss, for a large number of them have, through the
agency of building societies and otherwise, become the owners in whole or
part of the houses in which they live.
Apart from these considerations the sudden concentration of a large indus-
trial population, e.g., on the outskirts of one of the industrial towns of the
Midlands or the northern counties would in all probability go far to create a
similar condition of affairs to that from which it is desired to escape. And if a
site for the Arsenal were selected remote from existing centres of population,
Government might be faced with the necessity of providing from public funds
the necessary housing accommodation.
(54) This leads us to what we must regard on this point as on others, as the
decisive consideration—the power of the Arsenal to expand in time of war.
Rapid expansion is most easily effected when manufacture is carried on in
close proximity to a large centre of population where other industries (besides
the manufacture of munitions of war) are conducted. Assuming it to be
possible and economically desirable to move the Arsenal into a sparsely
populated area (and we do not believe either assumption to be well-founded),
such a course would frustrate the principal object for which the Arsenal exists.
It is necessary for the Arsenal to have a large reservoir of labour near it
from which it may draw in times of emergency, and, further, it is under such
conditions that redundant labour is absorbed more readily and with less hard-
ship to the men, when the time for contraction arrives.
THE ROYAL ARMY CLOTHING FACTORY.
(55) We will deal next with the Royal Army Clothing Department, which is
situated at Pimlico and is under the control of the Quartermaster-General.
It consists of three portions, a factory, an inspecting department, and a store ;
but it is with the first alone that we are concerned.
The Clothing Factory makes garments only; all head-dresses and boots for
the Army are obtained from the trade exclusively, and it is from the trade
also that the Clothing Factory obtains its raw material—cloth and buttons,
metal badges, etc.
From the date of its erection (shortly after the Crimean War), until 1868,
the Clothing Factory made all the garments required by the Army; in that year
supplies began to be drawn from the trade also, and from the year 1881 to the
outbreak of the South African War the principle governing the allocation of
16
orders has been to give five-sevenths to the Government factory and two-
sevenths to the trade.
". of the (56). The primary object for which, in our judgment, the Clothing Factory
a CUOry. ought to be maintained is (as in the case of the Ordnance Factories), to
maintain a reserve of productive power to meet emergencies. It is also
required in order to produce certain garments of a higher class than can
be conveniently procured from the trade; and it should act as a check on
undue inflation of prices in time of war.
In the Clothing Factory, unlike the Ordnance Factories, the large majority
of the employees are women. In May, 1905, there were employed there 1,466
women and 122 men. These women are all either wives, widows, daughters or
sisters of soldiers, and both the number to be employed and the rates of
remuneration are largely affected by other than economic considerations.
The factory at (57) In dealing with the primary function of the factory—power of expansion
present can to meet sudden demands—we are met with two features in which the Clothing
*..." ** Factory is sharply distinguished from the ordnance factories.
The Arsenal, even as at present organised, is capable of a considerable and
rapid expansion of numbers.
The difference between the maximum number of women who can be employed
at the clothing factory and the numbers which have hitherto been regarded as
normal is very small, and a long period is necessary to enable expansion to
take place.
The number (of men and women together) employed in the factory before
the outbreak of the South African War was 1,640; the maximum number
realised during that war was 1,780, and it took two years to effect this *
increase of 140 persons.
In the case of female labour one resource open to the Arsenal is not
available. It is impossible to work women in three or even two shifts; the
only way to increase the output when the factory is full is by working short
periods of overtime.
(58) But the most important reason for the inelasticity is that the
number of workers for peace requirements has been maintained at too high a
figure.
The numbers employed before the recent war were determined by the
- rule of allotting about two-thirds of Army requirements to the factory. We
. * think that the proportion of Government made garments should be reduced, and
* * * that orders for at least one-half (instead of one-third) of the garments in question
should be allotted to the trade.
The results of our recommendation (should it be adopted) would be that
new sources of supply will be opened up in the private trade of the country,
or at least sources of supply which were opened up during the recent war
will be maintained, instead of being starved out of existence (as would other-
wise happen), owing to slackness of orders now that the exceptional demands
caused by the war are ceasing, while the factory would be capable of produc-
ing as much as it can at present in the event of sudden and unforeseen
demands arising.
Defect of the (59). We ought perhaps to call attention to one feature in the organisa-
Pºnt organisa tion of this factory which may militate against its full usefulness—we mean the
tion. very imperfect development of the principle of “subdivision of labour º' which
prevails there.
With the exception of the purely mechanical processes—those of machin-
ing and buttonhole machining, each garment is completed by one worker.



17
~
The same woman assembles all the parts of a garment and presses the
finished garment.
This is a very unusual system. The private trade—both tailoring and
other trades—has long recognised that economy, rapidity, and dexterity in
production are best secured by a complete “division of labour.” Each
worker is, under such a system, confined to the performance of one process, the
production of one part of a garment.
It is claimed on behalf of the factory system that the women become much
more skilful all round hands, and this is doubtless true. It is also true that the
extreme form of sub-division of labour is not suitable to the highest and most
finished kinds of tailoring performed at the Royal Factory. But with regard to
the rest we think that some division of labour is desirable, and in time of war it
should be introduced in its most complete form, at any rate for the garments
required for field service which are of a much simpler type than those made in
the factory in ordinary times.
(60). The Army Clothing Factory accounts are presented to Parliament and Accounts of the
published in a form generally similar to those of the Ordnance Factories. Clothing Factory.
The remarks which we have made above upon the Ordnance Factory prices
apply also to the Clothing Factory prices, and we think that the account to be
presented to Parliament should be modified in a similar manner. -
(61) There are certain circumstances which render it improbable that pro-
duction at Pimlico can ever be economical under existing conditions.
The Clothing Department obtains by purchase from outside the materials Comparison of
necessary for the manufacture of garments both by the factory and by the Wages paid by
trade - the factory and
- - the private trade.
As the trade is compelled to take its materials from the Government store,
its competition with the Government Factory is confined to that portion of the
cost of manufacture which depends on wages and on indirect charges only.
Now a comparison between the wages of the female labour employed at
Pimlico with that employed in the private tailoring trade presents great
difficulty.
There is firstly a difficulty in ascertaining the rates of wages prevalent in
the trade (though wages actually paid by contractors who are engaged in execut-
ing Government orders are ascertainable). The wholesale clothing trade is
notoriously a “sweated” industry, and sufficient data are not easily accessible.
But there is a further difficulty in effecting any comparison in pari
materia. The tailoring work done by women at Pimlico is said to be superior
in kind to that executed by any female labour in the trade, and a comparison
between the wages paid by Government to women and the wages paid by
private employers to men for similar work would, of course, be useless.
But after allowing for corrections under these heads, we think it is clear
that the average level of wages paid to the women at Pimlico is much higher
than that prevailing elsewhere.
In the Government Factory the women sewers and machinists are paid
piece-work rates calculated on a time work rate of 4d. an hour in the first
case, and 6d. an hour in the second. Normally, apart from sick-leave and
holidays, the women work forty-eight hours a week, or at the most forty-nine
and a half hours, but their actual earnings average, for machinists, 28s, a week,
and for hand-sewers 20s, a week, while button-hole machinists earn on an
average 30s, a week and more.
18
Locality of the
Factory.
Distribution of
work between the
factories and the
trade.
We believe these rates to be considerably in excess of the average earnings
of women of the best class in the private tailoring trade, where also the hours of
labour are much more severe. -
(62). The locality of the Government Factory, viz., Pimlico, is not the best
conceivable for the purpose. Most of the employés live in the vicinity of the
factory, i.e., in Pimlico, Chelsea, Fulham, Battersea, Vauxhall, and West-
minster, where rents are high compared with districts outside the Metropolitan
area. It is not necessary for the factory to be in close proximity to the
store, and if the factory were being started de novo it would doubtless be
possible to find a position in a less expensive area; but as the existing leases
on which the factory premises are held do not determine for another generation
(not until 1937) no useful purpose would at present be served by discussing the
advantages of alternative sites.
THE POST OFFICE FACTORIES.
(63) The General Post Office has under its control two manufacturing
establishments, viz., one at Holloway and one at Mount Pleasant, but at the
latter, which is primarily a store, the work of manufacture is inconsiderable
in amount and simple in kind, being confined to the production of such
articles as batteries, the arms of telegraph poles, street letter-boxes, etc.
It is at the Holloway Factory that the instruments required by the
Department are made.
(64) The relation of this factory to outside sources of supply is determined
as follows. -
In the first place all repairs required by the Department are done at its own
factories, and this accounts for about half the work done at Holloway, and
about two-thirds of that done at Mount Pleasant.
With regard to manufacture (i) there are certain classes of articles
which are obtained solely from the factory; (ii) there are others which are
obtained solely from the trade; and (iii) there are again others for which
the factory tenders in competition with private contractors.
The first category consists of instruments of delicate mechanism for which
it is necessary to maintain a high standard of workmanship, and upon the
excellence of which the Post Office may be able to rely with confidence in time
of strain and pressure, and of instruments which are, for the time being, in
an experimental stage.
Thus the limits of this second class are not stereotyped ; when an
instrument has passed out of the experimental stage, it passes out of the category
of those things which are as a matter of course allotted to the Government
Factory.
The second category embraces all those manufactured articles required
for postal and telegraphic purposes which are, for the time being, not contained
in either of the other two ; in particular all articles of recognised type for
which there is a market apart from Government demand.
With regard to the third class of requirements we are unable to criticise
the actual application to Government and private products of the criterion
of comparative cost.
The Post Office does not publish or present to Parliament an account for
its factories, though we understand that some sort of account or balance
sheet is prepared and submitted to the Postmaster-General, and that the proper
form of such an account is now occupying the attention of the Department.


19
" . But an attempt is made to place the factory and the trade on equal terms
- - for the purpose of tendering by adding 25 per cent. to the prime cost of
production in the factory.
This percentage is supposed to represent (a) a sinking fund to cover the
initial cost of the (freehold) sites, and the buildings, (b) depreciation upon
buildings and machinery, (c) maintenance of machinery, (d) power, (e) Super-
vision, (f) establishment charges and (g) incidental expenses.
But whether or not the percentage includes interest on the capital outlay
and whether or not it is adequate or (as the Controller of the Factories
thinks) excessive, we are unable to say, as we have not examined the accounts
in question. But the point does not appear to be one of much practical
importance, for the Department fully recognises the desirability of obtaining
as large a portion of its supplies as possible from the trade, and we entirely
concur in the principles on which orders are at present allocated to the
Government Factory.
The practical results of the system of allocation are that at the present
time in round figures £107,000 per annum is paid to outside manufacturers
as compared with £56,000, the value of instruments made by the factory,
while five years ago £27,000 was paid to the trade as compared with £20,000
spent in the factory, i.e., concurrently with an increase of nearly 128 per cent.
in the annual value of the instruments required, the percentage of Government-
made instruments has sunk from 43 to 34.
(65) In April, 1905, the persons employed at each of the two factories were Numbers
as follows:– - employed and
Holloway. Mount Pleasant. º of
Men - - - - - - - 308 359 a,00UIT.
* Boys - - - - - - - 128 138
- Women and girls - - - - - 16 –9
Total - - 4.52 506
958.
Thus the factory at Mount Pleasant is the larger of the two in point of num-
bers, but the value of the output from Holloway is greater and its wages bill
is larger.
All these persons are engaged under the ordinary conditions of private
business, except of course that they enjoy the advantages incident to all
Government employment, viz., a week of forty-eight working hours instead
of fifty-four ; gratuities on leaving ; more liberal sick pay and more liberal
* paid-holidays than are given in the outside labour market, and free medical
attendance.
It is noteworthy that a large proportion of the men employed at the
instrument factory are in receipt of high wages.
More than 33 per cent. of these men are rated at 40s. a week and upwards;
more than 47 per cent. at 37s. 6d. and upwards, and more than 73 per
cent. at 35s., and upwards ; wages which may be taken to indicate a high
class of skilled labour. Actually the men are paid on the piece-work system
under which they earn wages exceeding these time work rates by at least
30 per cent. on an average; the time rates being used only to regulate their
pay during such sick leave, paid-holidays, and collective piece-work.
We are informed that these wages correspond closely with the wages paid
by private employers for work of a similar nature.
(66) We have considered the possibility of getting the work now carried on Possibility of
at Holloway done outside the Metropolitan area, but we can find no advantage removal.
in such a course. - -
4130.
C


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The supply of labour of the kind employed at the Instrument Factory is
small, and the greater part of it is, we are told, absorbed by Government,
the only other consumers of telegraph stores being the railway companies.
At present more than 86 per cent. of the employés live within three miles
of the factory at Holloway, and we are given to understand that it would be
necessary to offer wages at least equal to those now paid at Holloway in order
to attract skilled artisans of the kind required to any provincial district;
and that the wages paid in the provinces for work which may fairly be
taken as comparable to that of the Holloway Factory, are not lower than
those now paid by Government,
Moreover, there are certain positive advantages attached to the existing site
of the Holloway Factory.
Instruments made by outside contractors are examined in the Govern-
ment Factory, and when the place of manufacture and the place of
inspection are close together, the time occupied in transit, and the cost of
transit, as well as the risk of damage en route, are reduced to a minimum.
(67) With regard to Mount Pleasant the disadvantages of decentralisation
are not so obvious.
It has been suggested to us that the inconvenience of moving the factory
as a whole would more than counterbalance any economy which might be
secured, but we have also received evidence tending to show that a considerable
economy might be effected in the present cost of transport if the heavy
telegraph materials could be stored in some district in the Midlands, favourably
situated as regards railway and canal facilities, in close proximity to the sources
of Supply. It appears that a large amount of such stores are sent from con-
tractors in the Midlands into store at Tondon and are thence distributed to
the Midlands and the North ; and we think that in all probability some
economy could be secured, after allowing for the additional expense of a
decentralised inspection staff, by establishing a provincial depôt for heavy
metal stores in, e.g., Birmingham.
We understand that this question is already under the consideration of
the Postmaster-General.
With regard to stores required for the postal service, however, the case
is different. Almost all the clothing required is obtained from London con-
tractors, and a large proportion of the clothing is distributed in London.
The boots are obtained in the neighbourhood of Northampton, but the
stocks kept in store at a given time are not, in the opinion of the Controller
of Stores, sufficient to justify the creation of a provincial depôt for this purpose
with the necessary inspecting staff. º
We are unable, therefore, to recommend any further decentralisation.
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THE NAVY WICTUALLING YARD, DEPTFORD.
(68) We will conclude our Report with a few remarks about the sole manu-
facturing department under the control of the Admiralty which is near the
Metropolitan area.
The Navy Victualling Yard at Deptford employs some 500 men, about
forty of whom are engaged upon the manufacture of biscuit, chocolate, and
casks.
The manufacture of hair-beds and flour which used to be carried on at
Deptford has recently been abandoned.





viz., at present those at Deptford and Gosport.
13th March, 1907.
º
º
-
No supplies of Navy biscuit have ever been obtained by contract, the Manufacture of
requirements of the Fleet having been produced at the Victualling Yard bakeries, Biscuit.
jº.
During recent years, however, circumstances have materially changed.
Not only has the amount of biscuit consumed by the Fleet been greatly
reduced, but the Victualling Yard bakeries have become less important
as sources of supply, for bakeries are constructed in all the large ships
now built, and are installed in those which undergo refitting.
We understand that it is probable that the Gosport bakery will shortly be
closed altogether, and that the question is under consideration of closing the
Deptford bakery also, where no biscuit has been baked during the last two years.
(69) Taking an average of the last three years, about 950,000 lbs. of chocolate Manufacture of
are annually produced at the chocolate mill, and about 200,000 lbs, are obtained Chocolate.
annually by contract.
The objects for which the Admiralty are said to continue the manufac-
ture of chocolate are (i) to maintain a reserve of productive power to meet
emergencies, and (ii) to effect economy.
For instance, the Admiralty calculate that should necessity arise they
could increase their output of chocolate from 9,500 lbs. a day to 19,000
lbs. a day.
But it is admitted that the trade could supply all necessary requirements
in time of peace, and there is no evidence that the power of the trade to
increase its output in time of war is not at least as great as that of the Dept-
ford establishment; and as the Admiralty do not maintain any exceptional
reserve of raw material (viz., cocoa beans, etc.) and in times of emergency
would therefore have to rely on the same sources of supply as those on
which private contractors draw, the chocolate factory does not appear to
be indispensable on the first of the two grounds mentioned above.
With regard to the question of economy it is estimated by the
Admiralty that, given the existing site, buildings, and machinery of the choco-
late mill, but taking into account all expenditure connected with mainte-
nance, Navy chocolate can be produced for about two shillings per 100lbs. less
than the contract price. -
To abandon manufacture would, therefore, entail upon the Admiralty
an additional expenditure of about £950 per annum, and as the site of the
chocolate mill does not appear to be required for any other purpose con-
nected with the Victualling Yard, there appears to be sufficient reason to con-
tinue manufacture as at present.
(70) The cooperage at Deptford is not a large business. Some twenty-five Cooperage
men are engaged on manufacture and some fifteen on repairs. A repairing staff
appears to be necessary in any event, and the manufacture of casks, there-
fore, might perhaps be allowed to continue as at present.
(71). We desire to place on record our appreciation of the services of
our Secretary, Mr. S. Armitage Smith, who has been of the greatest assistance
to us throughout our enquiry.
G. H. MURRAY,
JAS. L. MACKAY,
GUY FLEETWOOD WILSON,
H. LLEWELLYN SMITH,
S. EARDLEY WILMOT.
S. ARMITAGE-SMITH, Secretary.




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