214 Lord Chatfield, First Sea Lord and Chief of Naval Staff, to Sir Earle Page, Minister for Commerce (in London)

Letter LONDON, 3 June 1938

In response to your telephone request of yesterday, I enclose a statement, with enclosure, which elaborates the financial aspect of the proposal regarding the acquisition of a Capital Ship by Australia.

I hope very much this will give you the information you require.

May I ask that the details may be treated as confidential.

CHATFIELD

Enclosure

Statement and Enclosure

n.d. [3 June 1938

CAPITAL SHIP FOR AUSTRALIA

A modern Battleship costs about 8 3/4 million, and could probably be completed late in 1943. By this time the AUSTRALIA and CANBERRA would be 15 years old and as a rough estimate it would probably be possible to allow the Australian Government about 1 1/2 million pounds in part exchange for these two ships. The net cost of Australia's Battleship would therefore be about 7 1/4 million pounds.

In paragraph 30 of the Chiefs of Staff Memorandum-Australian co- operation in Imperial Defence'-it was stated that the cost of a Capital Ship was estimated at 8 million pounds. The increase of about 3/4 million is due to the recent necessity of increasing the size from 35,000 to 40,000 tons.

The attached table shows in considerable detail how the relative costs of various types of ships given in paragraph 28 of the Memorandum are arrived at.

The actual figures are, of course, subject to certain fluctuations, but the relative costs remain fairly constant.

In paragraph 31 of Chiefs of Staff Memorandum it was stated that a new ship might become available in 1941. This date was given because it was thought that it might be possible to let Australia have one of our later KING GEORGE V Class ships, instead of having to wait for a new ship to be built or for one of our 1938 programme ships.

A recent review of our Capital Ship position vis-a-vis Germany and Japan shows however that we are unlikely to be able to afford to let Australia have one of our KING GEORGE V Class ships, which are specifically required to counter German ships in home waters.

We should be prepared therefore to provide Australia with either a new ship or one of our 1938 programme ships in 1943.

ESTIMATED DIRECT COST OF PRINCIPAL CLASSES OF SHIP EXPRESSED AS A YEARLY AMOUNT

Maintenance Annual Large Ship Costs Aircraft Replacement Repairs Total (a) (b) (c) (d)

Capital Ship 310,000 34,500 307,500 54,800 706,800 (NELSON Class) (100%) Cruiser, Large 187,000 23,000 93,600 20,000 323,600 (45.7%) Cruiser, Small 130,000 23,000 57,500 14,900 225,400 (31.8%) Aircraft Carrier 255,000 414,000 202,500 22,500 894,000 (36 A/C) (126.5%) Aircraft Carrier 160,000 172,500 162,500 19,500 514,500 (15 A/C) (72.7%) Destroyer Flotilla 332,000 - 181,800 14,500 528,300 (J. Class-8 Vessels) (75%) Submarine (1000 tons) 39,800 - 25,700 (e) 65,500 (9.25%)

NOTES (a) Maintenance covers the pay, victualling and miscellaneous expenses of the personnel, naval stores, fuel and armament stores consumed, and the cost of annual docking and repair.

(b) The figure for aircraft covers cost of replacing equipment (assumed life-5 years) plus annual cost of maintenance of personnel and material chargeable to Vote 4. It has been assumed that Capital Ships would carry 3 aircraft and Cruisers 2 aircraft.

(c) This figure represents the capital cost of building the ship divided by its 'life'. The lives assumed are:-

Capital Ships 26 years Carriers 20 years Cruisers 23 1/2 years Destroyers 22 years Submarines 14 years (d) Large repairs take place about the ninth year of the ship's life. In the case of a Capital Ship, a second large repair takes place about the eighteenth year. The figure taken for this column represents the aggregate cost of large repair(s) divided by the vessel's life as scheduled under (c). The actual cost of large repair is, for the most part, conjectural as little or no experience has been gained of these vessels.

(e) Submarines are not subjected to 'Large Repairs'. The average annual cost of all repairs and of periodic renewal of batteries is reflected in column (a).

GENERAL The 'Maintenance Costs' make no allowance for the non-effective liability of the personnel borne, which does not mature until years later. But if, as should be the case, it may be assumed that the reduction of any particular vessel enables a consequent reduction to be made in Vote A, there would be an eventual saving to the non-effective votes.

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1 Not printed.

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