Before the end of 1914 the problem of labour shortage was already beginning to present itself in one or two branches of the munitions industries, especially in the manufacture of shells and fuses. Negotiations between the Trade Unions and the Engineering Employers’ Federation resulted in the Shells and Fuses Agreement, signed on the 5th of March 1915, under which the first measure of dilution was introduced. From the date of appointment of the Committee on Production (the 2nd of February 1915), the Government itself took an active part in promoting the dilution 1 of labour by the relaxation of Trade Union rules and the introduction of less skilled male and female workers. The Treasury Conferences of the 17th to 19th of March, and the 25th of March 1915, over which Mr. Lloyd George presided, resulted in the giving by the Trade Unions of a general assent to necessary measures of dilution, subject to guarantees as to the rates to be paid and as to the restoration of suspended Trade Union regulations at the conclusion of the war. In June and July the substance of the ‘Treasury Agreement’ was embodied in the first Munitions of War Act, which was passed into law on the 2nd of July. This Act for the first time provided the Government with compulsory powers for the introduction of dilution on any scale that might be required. In the autumn of 1915 the Government issued its general Dilution Scheme, based on reports made to the Ministry of Munitions by the Central Labour Supply Committee, on which Trade Unions and employers’ associations were represented side by side with the49 Government departments concerned in the production of munitions. The famous ‘L’ Circulars, 1 in which the regulations for the introduction of the scheme were embodied, laid down not only the rates to be paid, but also a recognized procedure for workshop consultations on the occasion of introducing dilution into any establishment. From the autumn of 1915 onwards, dilution was constantly being extended, as the demand for munitions became greater and the shortage of workers more acute.