1. Reference my Nos. 133 [1] and 174 [2] relative to the provision
of requirements of the British Pacific Fleet.

2. Following consultations between Ministers and Admiral Fraser
and his officers, War Cabinet has given further consideration to
the new programme of works for the Royal Navy totalling
3,309,500, which is additional to the programme originally
approved for 5,562,500.

3. In the following paragraphs is given an outline of War
Cabinet's decision [3] which has been communicated to Admiral
Fraser.

4. It was noted that the following conclusions had been expressed
in the aide-memoire submitted by the Royal Navy representatives at
a Conference held in Melbourne on 10th July:-

'It has been possible to delete a few of the items owing to
American releases, and Admiralty has been asked to cancel the
Floating Docks.

Apart from this, the programme necessary is as already stated, and
cannot be further reduced.'
5. When the additional works programme totalling 3,309,500 was
originally submitted to War Cabinet on 28th June, the following
observations and recommendation of the Production Executive were
considered:-

'(a) That Full Cabinet recently approved a housing programme which
was regarded as an essential minimum in view of the critical
housing shortage and the key role of the building industry in
plans for employment in the transition period. To achieve the
programme approved by Full Cabinet during JulyDecember 1945, will
involve a manpower requirement approaching 20,000 men when account
is taken of the building labour needed on site, and the labour
required to install utilities on site, to produce materials and
fittings, and for other ancillary activities.

(b) That, even if the recommendations of the War Commitments
Committee regarding the conditions of special releases from the
Services are accepted, it is still likely that, amongst the labour
becoming available from special Service releases and other
sources, apart from the Allied Works Council, there will not be
sufficient men of the particular types required for the housing
programme in its various phases.

(c) That, if there is to be an assurance that the housing
programme will be within our capacity, then it is essential that
we should concentrate on obtaining resources for the housing
programme from the chief source which is known to contain labour
of the types required-i.e. the Allied Works Council. It is also
essential that the right kind of labour should be obtained in the
very near future, since, if availability is delayed until towards
the end of the year, it will not be practicable to implement the
gradual expansion of building activities which the success of the
approved programme requires.

(d) That if this additional Royal Navy commitment is accepted,
then the Allied Works Council, far from releasing labour in the
near future, will require an additional 600 men immediately (to
bring its labour force up to the maximum strength approved by War
Cabinet), and will need to have its wastage replaced at least
until the end of September. After the end of September, there may
be a very slight release of labour, perhaps amounting to 1,500 men
released in the December quarter of 1945.

(e) That if, on the other hand, War Cabinet decides that the
additional Royal Navy commitment cannot be accepted, and if the
Australian Services are held to the diversion of manpower from
their own projects which they have offered as a contribution to
Royal Navy projects, then the Allied Works Council should be in a
position to release in July-December 1945 the bulk of the labour
engaged on Royal Navy projects. Since it is understood that a
great part of the existing approved programme is nearing
completion, there is a prospect of very early releases which would
make a vital difference to the progress of the housing programme.

(f)That the Australian Government, in a cablegram to the United
Kingdom Government, had recently emphasised that there were strict
limits beyond which Australia could not go in providing resources
for the support of the Royal Navy; and that, from the very
beginning of negotiations in regard to the basing of Royal Navy
Forces on Australia, it had been stated that it would be necessary
for the United Kingdom to make a substantial contribution from its
own resources, and Australia's difficulties in regard to
constructional labour and materials had been particularly
stressed.

RECOMMENDATION
That War Cabinet be advised that, in the opinion of Production
Executive, the acceptance of the proposed additional commitment
for Royal Navy works projects is beyond the capacity of Australian
resources, having regard in particular to the urgent necessity to
execute the housing programme on the scale approved by Full
Cabinet.'
6. On 28th June, War Cabinet [4], on the recommendation of the
Advisory War Council, accepted the views of the Production
Executive, subject to certain elasticity which might be possible
without prejudicing the realisation of the objectives of the
housing programme. In regard to the relation to the housing
programme requirements, of the labour bloc employed on Royal Navy
works, the following stipulation was made by War Cabinet [5] when
the manpower allocation for the civil economy was approved in
October 1944:-

'That it was particularly important that works projects for the
British Forces should not be allowed to absorb men and materials
which would otherwise be available for the housing programme.'
Notwithstanding the foregoing, War Cabinet noted [6], when a
programme of works for the Royal Navy was authorised in November
1944:-

'That the United Kingdom projects will delay for approximately 3
months the release of further men by the Allied Works Council,
some proportion of whom would otherwise be available for the
Housing programme.

That the United Kingdom projects can only proceed at the expense
of the Housing Programme, particularly in New South Wales and
Queensland where work is already far behind schedule.'
When the full original programme for 5,562,500 was approved by
War Cabinet in December 1944 [7], the period within which the
labour force of the Allied Works Council was to be reduced from
26,600 to 19,900, was extended from 30th June to 31st July, 1945.

7. At a Conference in Canberra on 6th July between Commonwealth
Ministers and the Commander-in-Chief, British Pacific Fleet, the
limits of the commitment for Royal Navy works, in accordance with
paragraph 6, were defined as follows:-

'(1) The commitment in respect of manpower and material resources
which the Commonwealth Government is prepared to accept for works
for the Royal Navy is not to exceed the programme which can be
carried out for the following sum:-

Original programme 5,562,500
Plus a margin for additional urgent items,
minor unforeseen items, and under-estimates
of approved major items 1,000,000
Total: 6,562,500
(2) In addition to the above commitments, the provision of the
needs of the Royal Navy may be supplemented as follows:-

(i) The release of facilities which can be made available by the
United States and Australian Forces.

(ii) The use of Royal Marine Engineers as a supplement to the
labour force of the Allied Works Council. The provision of
materials for projects undertaken by them is part of the total
commitment referred to in paragraph (1).

(3) On the understanding that the figure in paragraph (1) is the
maximum capital commitment, and, to the extent to which it is not
possible to employ Royal Marine Engineers on normal works
maintenance, the Commonwealth will undertake such maintenance work
as an additional commitment in accordance with its interpretation
of this term in relation to Australian Works Services.'
8. In re-affirming its decision that the limits in paragraph 7 are
the maximum extent of the works commitments which can be accepted,
War Cabinet recalled that the limitations on Australia's capacity
had been constantly emphasised to the United Kingdom Government,
vide cablegrams Nos. 133 and 174 and earlier references therein.

9. War Cabinet noted that the Commonwealth has already completed a
works programme for war purposes totalling 183,000,000. The
necessity for advantage being taken by the Royal Navy of existing
accommodation and facilities vacant or becoming available in
preference to undertaking new construction has frequently been
stressed.

10. Finally, War Cabinet observed:-

(i) That Australia's fighting forces, on the recommendation of the
Advisory War Council, are being reduced by 64,000 men by the end
of the year, in order to provide for housing and other high
priority needs of the civil economy.

(ii) That the report and recommendation of the Production
Executive, referred to in paragraph 5 above, had been submitted in
the light of the recommendation by the Advisory War Council that,
in the assessment of capacity to undertake additional commitments,
it was to guard against the neutralisation of the measures being
taken to establish equilibrium in the war effort.

11. I would repeat the assurance given the United Kingdom
Government that we would do all in our power to meet the
requirements of the Fleet within our limited capacity and having
regard to other high priority commitments. In order to provide for
the original programme of Royal Navy works, the Government has
accepted the retardation of its housing programme during the first
six months of this year, and this has now become a matter of
cardinal importance in its relation to social welfare and re-
settlement of members of the Forces. The Government's co-operation
has also been demonstrated by the fact that it has already
accepted over-all commitments for the Royal Navy totalling over 25
millions.

CHIFLEY