I think subs are already as dominant as feasible. Nuclear subs can blow up a big patch of world, and were a big part of the recent Libyan war via Tomahawks. They do have the problems of not being as obvious to idiots, being more expensive, and being lower and especially slower than airplanes.
BlondieBC, I'm afraid your TL has a serious problem. IOTL, the Admiralty was EXACTLY AS ARROGANT as in your TL. The RN kept subs from winning by having already built alot of a SURFACE COMBATANT standard for all big surface fleets - small destroyers, which are good at sub hunting.
Nor can you can get rid of destroyers, because tiny boats are understood to be a vital part of huge fleets, and they had torpedo delivery capabilities considered important then.
I grew up on naval fiction. As I suggested to somebody with a similar idea recently, if you're interested in this sort of thing, CS Forrester wrote some good WW2 naval books plus his famous and also good Napoleonic Hornblower.