King and Skelton quickly re-established their harmonious relationship when the Liberals returned to office in 1935. Despite his loyal service to Bennett, Skelton's own views on international affairs were closer to King's, though the prime minister, ever attuned to public opinion and his own predilections, drew back from the more extreme neutralist and anti-imperialist attitude of his under-secretary. As the spectre of war in Europe loomed larger with each of Hitler's triumphs, King never doubted that if war came, Canada would again be "at Britain's side."
Within the Department, Skelton's neutralism was shared by some, though not all, of his officers. But the most important fact shaping Canadian foreign policy during the final few years of peace was King's determination that, though he would continue to rely on Skelton's advice, the prime minister would "lead and not be controlled."
As the Depression eased in the late 1930s, Skelton hoped to expand the Department's representation in Europe, across the emerging Commonwealth, and throughout Latin America. But King and his Cabinet were unenthusiastic about increased spending on diplomatic posts. As the threat of war stalked Europe and Asia, the prime minister worried too about being drawn into embarrassing situations abroad that might generate domestic divisions and endanger Canada's national unity. Although a minister was appointed to Belgium in 1938, with dual accreditation to the Netherlands, expansion remained slow.
Skelton was more successful on other fronts. He managed to secure the appointment of career foreign-service officers as heads of post, which was essential to his concept of a truly professional and modern foreign service. By 1939, only London and Washington continued to be headed by political appointees.
The under-secretary also convinced the prime minister to expand the Department in Ottawa during the late 1930s, when eight new officers joined, six of them by competitive examination. Unfortunately, the organization of the Department did not keep pace. All officers in Ottawa continued to report directly to Skelton, whose inability to delegate meant that he was overworked, while junior officers were often idle. "There wasn't all that [much] work," recalled Jack Pickersgill, who joined the Department in 1937. "When I went into External Affairs…after I read The New York Times through in the morning and decoded a couple of telegrams...I wondered what to do next. I gathered that there was a sort of ripening process that went on…but you didn't ripen much if you never saw anybody."
Admired for his policy advice, Skelton was castigated as an administrator by observers in Ottawa's small diplomatic community. In 1939, Lester Pearson declared the Department to be, "in one crude phrase,...in a mess." The onset of war that September would place even greater strains on the Department's inadequate administrative structure and on the under-secretary.