Читать книгу The Black Door: Spies, Secret Intelligence and British Prime Ministers - Richard Aldrich - Страница 12

How can I avoid the suspicion … that the whole thing is a political plot?

Ramsay MacDonald1

We were completely misled on that subject

Stanley Baldwin2

The interwar years were a time of international subterfuge; of clandestine struggles between intelligence agencies only recently created. As Britain and Bolshevik Russia faced off in a global war of subversion and counter-subversion, a fear of communism swept the Whitehall establishment. A smear plot allegedly sought to topple a Labour prime minister, while another prime minister publicly misused intelligence for political expediency. Remarkably, these things happened twice in the space of a decade. The history of secret intelligence and Downing Street has an intriguing habit of repeating itself, and many of the issues that emerged in the interwar years would resurface to confront later prime ministers.

Two prime ministers dominated the 1920s and 1930s: Stanley Baldwin and Ramsay MacDonald. Both entered office as inexperienced and unsophisticated consumers of intelligence. Both faced a steep learning curve. Stanley Baldwin was a hands-off prime minister. A master of delegation, he allowed his ministers maximum freedom – to the extent that he drew charges of complacency and laziness. Baldwin expended most of his energies developing personal relations with MPs, and so spent a great deal of time sitting in Parliament: sometimes on the green benches of the Commons resting his eyes through some dreary debate, at other times slouched in an armchair somewhere soaking up the political atmosphere; but always in conversation. It was a working style that did not please everybody. One exasperated colleague complained, ‘What can you do with a leader who sits in the smoking room reading Strand magazine?’3

Beneath the surface, Baldwin was a highly-strung individual. He exhibited a range of nervous habits, from a subtle eye-twitch to compulsively smelling any object that fell into his hands. He was particularly keen on putting books to his nostrils and enjoying a long, loud sniff.4 Yet he worked well in a crisis. These are intriguing, almost contradictory, characteristics which bear directly upon a prime minister’s use of intelligence. His proclivity for delegation hints at a lack of interest in detailed intelligence material, while his nervous demeanour suggests an unsuitable constitution for dealing with the periodic crises of the secret world. In fact, Baldwin did draw steadily on intelligence throughout his time in office, although he did so in a blundering and unsophisticated manner which frustrated the intelligence community. He compromised GC&CS’s best intelligence source on the Soviets, publicly accused Air Ministry intelligence reports of misleading him, almost cost an MI6 analyst his job, and fell out with MI5 over surveillance of King Edward VIII.

In theory at least, Baldwin should have had an easier ride than Ramsay MacDonald. The illegitimate son of a farm labourer and a housemaid, MacDonald was an outsider. As the first ever Labour prime minister, he was also the first prime minister to hail from a working-class background. He was not part of the establishment; not one of the old boys. MacDonald had never even held a ministerial position before entering Downing Street. There can have been very few prime ministers as inexperienced in the workings of the secret world – or indeed of Whitehall in general – as he.

Despite his energy, good looks and personal magnetism, MacDonald was prickly, guarded and introverted. Unlike Baldwin, he had an impressive capacity for hard work. His working day began at seven, and would drag on until the early hours of the following morning. Poor at delegating, he served as his own foreign secretary in his first government throughout 1924. Returning as prime minister for a second time in 1929, MacDonald only appointed someone else, Arthur Henderson, as foreign secretary for political reasons, and sought to keep as much control over foreign policy himself as possible.5 One might expect that this would have increased his access to intelligence, and made him a particularly active consumer compared to other prime ministers. But in reality, he generally kept the intelligence community at a distance, and had little intention of ever meeting an MI5 or MI6 officer. At one point, in order to remain detached from the intrigues of the secret world, he even forced a senior MI6 man to stand in an adjoining room, and would only speak to him using the permanent secretary at the Foreign Office as an intermediary.6

Yet MacDonald was a Labour hero, the party’s man of destiny. He served as prime minister in 1924, and again between 1929 and 1931. In politics, as in much of British public life, however, heroes exist only to fall. Things inevitably soured for MacDonald in 1931 when he agreed to serve as head of a national coalition government designed to see Britain through the international economic crisis. Deemed a traitor by his erstwhile supporters, he was unceremoniously sacked from the Labour Party which he had done so much to turn into a credible force in British politics. Although he remained prime minister until 1935, the Conservatives, including Stanley Baldwin and Neville Chamberlain, increasingly dominated the government. Ravaged by insomnia and ill-health, the ageing prime minister ‘slowly faded away’.7 A sea voyage was recommended to restore his health, but he died on board an ocean liner in November 1937. By then, many of the European crises that would trouble his successors were already visible.

The election of the first ever Labour government raised a whole host of questions about the relationship between Number 10 and the intelligence establishment. King George V wondered what his ‘dear Grandmama’, Queen Victoria, would have made of a Labour government, and the same can be said for the intelligence services. MacDonald had long been on MI5’s radar: the service had actually recommended prosecuting him for delivering seditious speeches during the First World War. Elements within the intelligence elite continued to view MacDonald and his first government with ‘suspicion, alarm and in some cases contempt’. The mistrust was mutual, and Vernon Kell, the long-serving director-general of MI5, knew full well of Labour suspicions towards his service.8

The Foreign Office deliberately waited several months before showing any signals intelligence to the new prime minister. When he was finally inducted, MacDonald was probably the only member of his cabinet informed of the activities of GC&CS. The diplomats feared that Labour ministers would be horrified at the idea of intercepts and espionage, and, in Churchill’s words, kept MacDonald ‘in ignorance’. Even once he had gained experience, intelligence officers still kept him ill-informed. In the early 1930s, important reforms meant that MI6 confined itself to operations on foreign territory, while MI5 took over responsibility for countering communist subversion from Scotland Yard. Seeking to ease coordination and reduce overlap, these reforms shaped both organisations for decades to come. Yet it seems that MacDonald was not even told about them.9 Similarly, Arthur Ponsonby, his parliamentary under-secretary at the Foreign Office, was refused all access to signals intelligence and MI6 reports, despite directing the government’s Russia policy. Whenever Ponsonby mentioned intelligence, his officials became rigid. Not that Ponsonby particularly minded; he thought intelligence was a ‘dirty’ business.10

Few Labour ministers were intelligence enthusiasts. In 1929 Robert Vansittart, the senior official at the Foreign Office, had to defend the Secret Service Vote, from whence came funding for clandestine activity, against the new foreign secretary, Henderson. Britain’s most senior diplomat, Vansittart was an extraordinary polymath and aesthete – during his time as a young diplomatic trainee in Paris he had written a play in French, entitled Les Parias, which was a great success at the Théâtre Molière. He went on to produce several volumes of poems fêted by figures such as T.E. Lawrence. A romantic soul, full of passionate loves and hatreds, he adored intelligence.11 ‘Van’, as he was known, bemoaned how Henderson, a tee-totaller, ‘rated Secret Service like hard liquor, because he knew, and wanted to know, nothing of it’. Although this is perhaps unfair, given that even senior Labour ministers were given limited access to it, Vansittart felt frustrated because the government indulged in intelligence ‘all too little’.12 MacDonald’s administration took ‘a jaundiced view’ of the orientation of the intelligence establishment as a whole. There was a ‘climate of mutual mistrust’, with MI6 officials wary of discussing anything within earshot of MacDonald’s ministers.13

As prime minister, MacDonald did receive a weekly summary of British revolutionary movements written by Special Branch. He was not impressed, thinking the reports suffered from political bias and added little insight. To the anger of Special Branch, he refused to circulate them to cabinet. His attitude towards intelligence did soften over time, especially when dealing with growing problems of industrial unrest, and he came to realise that domestic intelligence provided by MI5, Special Branch and even MI6 could help to determine government responses.14 His hard work won respect amongst the Whitehall establishment. The cabinet secretary Maurice Hankey, for example, liked MacDonald ‘very much’, and got on with him ‘like a house on fire’.15 MacDonald was no Soviet stooge, and indeed was disliked by the Soviet ambassador in London, who called him fickle and vain. Throughout his premiership, MacDonald remained committed to monitoring Soviet activities just as much as did his Conservative counterparts.16 But the notorious ‘Zinoviev letter’ delivered a fatal blow to MacDonald’s burgeoning relationship with the secret world, and cast a dark shadow over relations between Labour ministers and secret service for decades to come.17

MacDonald found himself in a precarious position in 1924, perched delicately atop an unstable minority government. The fact that his was the first ever Labour administration made his position even more perilous. He, and his young party, had a lot to lose. Rather like Harold Wilson half a century later, MacDonald had been elected early in the year, but faced another general election in October. MacDonald too found enemies among right-wing sections of the establishment, eager to smear the prime minister and destabilise his nascent Labour government.

Days before the election of October 1924, the Daily Mail published a sensational story: ‘Civil War Plot by Socialists: Moscow Order to our Reds’.18 The newspaper had somehow obtained a copy of a letter purportedly written by Grigory Zinoviev, head of the Comintern, to the Communist Party of Great Britain. So close to an election, this ‘revelation’ inevitably had damaging implications for MacDonald and his Labour government – which was exactly why the Daily Mail published it so gleefully. Addressed ‘Dear Comrades’, the letter sought to ‘stir up the masses of the British proletariat’ and instigate rebellion. It mentioned ‘agitation-propaganda work’ inside the armed forces, and urged communists to penetrate ‘all the units of the troops’. Perhaps most damaging to MacDonald, it referred to a group inside the Labour Party ‘sympathising’ with closer Anglo–Russian relations.19 This implied that the government was soft on Bolshevism – an injurious charge, given the enduring paranoia about Moscow.

Although MacDonald had sought to distance Labour from the British communists, as prime minister he had already offered de jure recognition of the Soviet Union and signed two treaties with the new state. Like Lloyd George before him, he hoped simply to improve bilateral trade and bring the Soviet Union into the international community. Unfortunately, his approach ‘seemed nothing less than treachery’ to establishment figures fearful of the relentless march of communism. The popular press were critical too, dubbing one of the treaties ‘Money for Murderers’. To make matters worse, the Labour cabinet had also resisted prosecuting John Campbell, a communist journalist accused of subverting the armed services, on the grounds that he had an excellent war record.20 Personally, MacDonald had some reservations about that decision, and rightly worried that ‘more will be heard of this matter’.21

Questions over the role of the intelligence community in the notorious Zinoviev affair lingered for almost a century. Did intelligence officers deliberately forge the letter to bring down a democratically elected prime minister? If not, did they at least publicise the letter in order to achieve that end? Was the secret civil service during the 1920s simply anti-Labour? MI6’s official historian, Keith Jeffery, sums up the suspicions nicely: ‘Right-wing elements, with the connivance of allies in the security and intelligence services, deliberately used the letter – and perhaps even manufactured it – to ensure a Labour defeat.’22 These questions are crucial. They raise issues of accountability and political legitimacy at the heart of the secret world.

The Zinoviev letter was almost certainly a fake. Gill Bennett, the Foreign Office historian with access to MI6 sources, concludes that it was ‘highly unlikely’ to have been written by Zinoviev. Instead it was most likely a forgery produced by someone with links to the international intelligence community and a decent knowledge of Comintern. Bennett adds that the mystery forger was also probably ‘aware that there were interest groups in Britain who would make use of the forgery to further their own cause by damaging the Labour Government and derailing the ratification of the Anglo–Soviet treaties’. It is more than possible that information about the proposed forgery could have reached British intelligence officers looking to aid the Conservatives in the forthcoming election.23

White Russians, the exiled supporters of the tsar, were the most likely culprits. Those based in Britain certainly possessed motive, given their vehement opposition to MacDonald’s Anglo–Soviet treaties. They also had the means, including a sophisticated intelligence network and forgery capabilities in Europe. It is likely that the forger was based in Riga – some of the individuals passing intelligence to MI6 in that city were certainly involved with White Russian circles.24 One of a team of four key White Russian suspects in the forgery, Alexis Bellegarde, had close links with MI6, and went on to become one of the service’s most successful wartime double agents working against the Nazis.25 Others would exaggerate the authenticity of the letter as it was passed upwards – eventually to MacDonald himself.26

On 2 October 1924, MI6’s Riga station obtained the letter and despatched an English version to London. A week later, MI6 headquarters sent copies to the Foreign Office with a covering note asserting that ‘the authenticity of the document is undoubted’. It was, they insisted, by Zinoviev. In fact, MI6 conducted no checks on the authenticity of the letter. Nobody inside MI6, for example, had asked how Riga had obtained it; nor did anybody enquire as to whether it was the original or a translation.27

The Foreign Office rightly sought ‘corroborative proofs’ before showing the letter to the prime minister. MI6’s Desmond Morton supposedly provided these on 11 October. His report, apparently based on information received from an agent who had infiltrated the Communist Party of Great Britain, stated that the British communists had held a meeting at the start of October to consider a letter received from Zinoviev, thereby validating the Riga letter. Intriguingly, however, the agent’s original written report made no mention of any letter from Moscow at all. Morton claimed that the extra information had been gained after he met the agent on 10 October for further discussion. Morton appears guilty of, at the very least, asking leading questions to generate information to fit the Zinoviev story. At most, he knew the letter was a forgery, but realising the implications for MacDonald, intended it to be treated as genuine. He certainly disliked both the Bolsheviks and the Labour Party.28

Morton’s rather weak ‘confirmation’ was good enough for the Foreign Office. The permanent secretary observed: ‘We have now heard definitely on absolutely reliable authority that the Russian letter was discussed at a recent meeting of the central committee of the Communist Party of Great Britain.’29 The prime minister was duly informed. Upon first reading the letter on 16 October, MacDonald was suspicious. He ‘did not treat it as a proved document’, and asked that ‘care should be taken to ascertain if it was genuine’. ‘In the storm of an election’, it never crossed his mind that this letter ‘had any part to play in the fight’.30 He requested more proof, but his instructions were ignored, and none was sought.31 MacDonald was both right and wrong: the letter was of dubious authenticity, but it would play a role in the election.

MI6 realised the letter was a fake: Morton privately told MI5 towards the end of November – long after the damage was done – that ‘We are firmly convinced this actual thing is a forgery.’32 But he refused to admit this in wider circles. Quex Sinclair, the head of MI6, even wrote a list of reasons, probably drafted by Morton, explaining why the letter was genuine. Each, however, was rather weak. First, Sinclair argued that the source’s reliability strengthened the authenticity, even though MI6 did not know the identity of the ultimate source – an agent’s agent. Second, Sinclair pointed to various ‘corroborative proofs’, but these too were unreliable. Third, MI6 noted that the Soviets had frantically arrested two Comintern officials – a circumstantial point at best. Fourth, Sinclair arrogantly avowed that the possibility of MI6 being taken in by White Russian forgers could be ‘entirely excluded’. This was complacent, to say the least. He then falsely asserted that MI6 knew the identity of all hands through which the letter had passed. Again, this was simply not true, since MI6 did not know the original source. Finally, Sinclair argued that the letter’s contents were consistent with other genuine documents – but this proved nothing. Morton had something to hide. He had long prided himself on being able to spot forgeries, and most likely knew all along that the letter was a forgery.33

A leak was probably inevitable, especially once MI5 had circulated the letter widely to senior military personnel. There were also anti-MacDonald factions within MI6, with contacts in the press, who would have been glad to see him fall and who rubbed their hands with glee when the letter arrived in London. Given the overlapping nature of intelligence circles at the time, it is difficult to prove the identity of the culprit.34 There were many suspects, all rather devious. Within MI6, suspicion falls on Desmond Morton and Stewart Menzies, a future chief. In fact, Morton later accused Menzies of posting the letter to the Daily Mail. Joseph Ball of MI5 is another candidate. He later went on to work for the Conservatives and, liaising with his former intelligence colleagues, ran a campaign of dirty tricks against the Labour Party, including infiltration, press manipulation and the tapping of phone lines.35 Others include Reginald ‘Blinker’ Hall, the naval intelligence chief turned politician, who had lost his Conservative seat in Parliament when MacDonald came to power.36

All of these suspects have three things in common: they had served with the intelligence services; they were allied closely with the Conservatives; and they would have firmly believed that they were acting in the national interest by unofficially publicising the letter in an attempt to destabilise MacDonald. Remarkably, by 22 October Conservative Central Office also had a copy of the letter. Whoever leaked it, it certainly found its way ‘to those vested interests who could best make political capital out of it at the government’s expense’.37 Meanwhile, similar people, including ‘Blinker’ Hall, were exploiting the Conservative–intelligence nexus to play similar tricks against the nascent Irish Free State. Stanley Baldwin too was not above suspicion, regarding Ireland at least, given that he became an honorary member of a secretive group of former intelligence officers presided over by Vernon Kell and known as the IB Club. The Zinoviev affair can easily be seen as part of a broader campaign by the establishment to undermine opponents.38

Ramsay MacDonald was away in the final stages of electoral campaigning when the Daily Mail broke the story. Hoarse and audibly tiring, the last thing he wanted so close to a second election was a scandal which threatened to prematurely end the Labour dream. Although sceptical of the letter’s authenticity, he asked the Foreign Office to draft a protest to the Soviet ambassador. It had to be ‘so well-founded and important that it carried conviction and guilt’.39 Unsatisfied by the draft of this response, he substantially rewrote it in a hotel room at Aberavon on 23 October, but ran out of time before having to rush off to another election meeting. He therefore returned the unfinished draft to London without initialling it, indicating that he wanted to see it again before it was sent. Upon hearing that the Daily Mail had a copy of the Zinoviev letter and was about to publish, the Foreign Office sent MacDonald’s unfinished protest off to be printed alongside it. MacDonald was not consulted.40 He was therefore naturally ‘dumbfounded to be asked by a pressman attending one of my meetings that evening if I had authorised publication’. Caught off guard, he ‘felt like a man sewn in a sack and thrown into the sea’.41

MacDonald considered the matter carefully, and concluded that ‘in my absence, the anti-Russian mentality of Sir Eyre Crowe, the senior official at the Foreign Office was uncontrolled. He was apparently hot. He had no intention of being disloyal, indeed quite the opposite, but his own mind destroyed his discretion and blinded him to the obvious care he should have exercised.’42 Although undoubtedly disappointed with Crowe, MacDonald saved the blame for the Daily Mail and the Conservative Party. He ranted in his diary that ‘nothing untoward would have happened had not the Daily Mail and other agencies including Conservative leaders had the letter and were preparing a political bomb from it’.43 Rather naïvely, perhaps, he was ‘genuinely dumbfounded’ that the paper had obtained a copy.44

On 27 October, MacDonald finally gave a public explanation during an election speech in Cardiff. Feeling bruised and suspicious, he vehemently denied that he had delayed the publication of the Zinoviev letter, slammed the ‘Tory propagandists’ who ‘know nothing’, but loyally defended the Foreign Office and Crowe’s decision to publish his protest. He then attacked the press for obtaining a copy of the letter and seeking to ‘spring it upon us’. He implicated the Conservatives for smearing him and, to laughter from the crowd, alluded to ‘another Guy Fawkes – a new Gunpowder plot’.45 The speech failed to deal with the threat posed by the letter. With the election just hours away, the press continued to hound the beleaguered prime minister. The Daily Express and the Daily Mail both saw him at odds with the civil service. The Manchester Guardian joined the chorus, arguing that if the letter was a hoax MacDonald’s department had made an ‘egregious blunder’, but if it was genuine the prime minister could hardly accuse his enemies of fabricating a plot. MacDonald was livid at the ‘scoundrels of the press’, and increasingly saw the whole affair as a personal vendetta.46

The election was held on Wednesday, 29 October. Although MacDonald held his constituency, the Conservatives enjoyed a resounding victory, gaining 155 seats. Electoral experts suggest that the Zinoviev letter was not the cause of the Labour defeat, as the Conservatives, in all likelihood, were going to win regardless. But the following day MacDonald returned to London convinced that the letter was a forgery and a plot was afoot. He now sought proof.47 One of the first things he did was to visit Eyre Crowe. Instead of finding him at the Foreign Office, Crowe was ill in bed, heartbroken at having published the protest letter without approval. On 31 October MacDonald met with his outgoing cabinet. A long and heated discussion developed, with some calling for an inquiry into the role of the intelligence services in the Zinoviev affair. MacDonald resisted the idea, explaining that Crowe and the Foreign Office had not tried to sabotage the Labour Party. Instead, MacDonald appointed a cabinet committee to examine the authenticity of the now notorious letter. But with little firm evidence, no conclusion was possible. And with that MacDonald resigned and departed for a walking holiday in the West Country.48

Stanley Baldwin had been disturbed by the Zinoviev saga. Taking the helm on 4 November 1924, he convened the prime minister’s Secret Service Committee and ordered a review of the whole system, asking for recommendations for ‘greater efficiency’. At the end of 1925, the committee reported to Baldwin that had they been designing the intelligence system from scratch, a single unified department would have been desirable. As it was, however, they advised the prime minister to leave it as it was: imperfect but functioning.49 Baldwin cannot have been entirely satisfied. Two years later, he convened the committee again, this time tasking them with an investigation into the state of affairs at Scotland Yard – he feared that Labour might seize on the ‘political work’ of the Yard to argue that a government department was engaging in party politics.50 His anxieties about the intersection of ideology and intelligence, fuelled by Zinoviev, were prescient, given that he soon ordered a politically controversial security raid on Soviet premises which backfired spectacularly.

The 1926 General Strike increased the obsession of the authorities with Soviet subversion and the hidden hand of Moscow. Baldwin remained calm, but the Beaverbrook and Rothermere press portrayed the strike as an attempted revolution. MI5 and Special Branch intercepted the mail of leftist leaders and sampled public opinion directly by eavesdropping under railway platforms. The resolution of the General Strike in May 1926 was perhaps Baldwin’s most triumphant moment: he was mobbed in the streets and cheered in Parliament. But the security services and the military remained nervous, especially about sedition in the armed forces. In October 1926, at the behest of the excitable home secretary William Joynson-Hicks, a dozen prominent communists were arrested on transparently trumped-up charges.51

Britain’s intelligence services now had their collective eyes firmly fixed on the same building in Moorgate. It housed ‘Arcos’, or the All-Russian Co-operative Society, a body which orchestrated Anglo–Soviet trade. The intelligence community rightly perceived Arcos as a front for Soviet propaganda and subversion against Britain. MI5 ridiculed the Soviet description of Arcos – ‘the sole purchasing and selling agency in Great Britain for the Government of the U.S.S.R.’ – as naïve and childlike: ‘They believe that if they say a thing often enough most people are bound to believe it in the long run.’52 To complicate matters, Arcos shared offices with the Soviet Trade Mission, making the line between the two organisations rather blurred. Nonetheless, MI5 had traced the first major Soviet espionage ring to be deployed in Britain back to the offices of Arcos.53 MI5, MI6 and Special Branch all watched and waited, trying to build up a bigger picture of an international communist network.

In March 1927 a new lead emerged. A human source informed MI6 that a classified British military document had been copied at Arcos. Quex Sinclair promptly passed this information to Vernon Kell, given that, in Sinclair’s words, ‘it concerned an act of espionage against the Armed Forces’, and therefore was not MI6’s responsibility. With Zinoviev a fresh memory, Kell and MI5 prudently spent a few weeks validating the evidence before alerting the director of public prosecutions. It was then felt to be time for action. Kell attempted to see John Anderson, permanent secretary at the Home Office – but Anderson was at a conference and unavailable. Undeterred, Kell instead sought a meeting with the director of Military Operations and Intelligence. Also unavailable, out of London. To complete an unhappy hat-trick, Kell was also knocked back by the Chief of the Imperial General Staff; also away for a couple of days. After mulling over the problem during lunch, lamenting his lack of traction in Whitehall, Kell was ambling back towards the office when he bumped into the secretary of state for war, Laming Worthington-Evans, in the street, and managed to secure an appointment at the House of Commons for 5 p.m. Worthington-Evans kept Kell waiting for fifteen minutes, but having heard the evidence he sent Kell to see the home secretary. At 5.40 p.m., and after a frustrating day, Kell finally found a receptive audience in the fervently anti-communist home secretary. Joynson-Hicks, or ‘Jix’ as he was popularly known, immediately interpreted the evidence as proof of dangerous sedition. Leaving the MI5 boss in his office, he took Kell’s statement straight to the prime minister. Baldwin, who was with his foreign secretary Austen Chamberlain at the time, agreed that Arcos should be raided in order to obtain evidence of a breach of the Official Secrets Act. An animated Jix returned less than thirty minutes later, saying, ‘Raid Arcos. Do you want it in writing?’54

Baldwin’s haste surprised Kell. The prime minister was not known for quick decisions or decisive action, but Jix had been pressing him to take a tougher line against the Russians for a while, and had long been angry about Soviet financial support for the miners during the General Strike. Kell’s evidence from Arcos forced Baldwin’s hand.55 As with the Zinoviev affair, the fact that this evidence focused on subversion of the armed forces, a serious government concern, made it all the more compelling.56 Neither Baldwin nor the foreign secretary, however, was made aware of the full diplomatic implications: that a raid on Arcos would mean a de facto raid on the Soviet Trade Mission.57 Remarkably, Sinclair and MI6 were barely informed of the proposed raid, despite the fact that it was Sinclair who had passed the evidence to Kell in the first place. On 12 May, as was often his way, Sinclair, a bon viveur, enjoyed a long lunch somewhere in clubland. He only found out about the raid at three o’clock – just one and a half hours before it commenced. Understandably angry at Kell, he later used the incident as ammunition in his ill-fated attempt to unify the intelligence services into a single organisation.58

The raid itself was utterly inept. Ham-fisted policemen brandished guns and ordered employees to empty pockets and handbags, but didn’t seem to know what they were looking for. Nobody was in charge. To make matters worse, a lack of Russian-speakers prevented the police from translating the piles of documents in order to uncover incriminating evidence. Meanwhile, two Arcos employees frantically burned a stack of secret papers in the basement.59 Although the prime minister had personally authorised the raid, MI6 were livid. They too had an interest in Arcos, and Baldwin’s foray had ruined their continuing operations against an international espionage ring. Sinclair cursed that it was an ‘irretrievable loss of an unprecedented opportunity’.60 The raid had broader ramifications for MI6 operations: it would compromise their espionage efforts in Moscow if the Soviets sought retaliatory action against the British mission there, given that it quietly acted as a letterbox for MI6.61

That was not the worst of it. Under pressure from Jix, Churchill and a group of baying backbenchers to take a tough line against Soviet subversion, Baldwin’s government decided to sever diplomatic relations with Moscow. They had hoped to find incriminating evidence in the Arcos raid with which they could publicly justify this move. Unfortunately, none was forthcoming, and opposition MPs taunted the government that the supposed seditious document was ‘merely a figment of the imagination’.62 The security services lamented that the documents they had captured ‘do not appear to be of very great value’.63 Specifically, there was nothing which proved that the Soviet Diplomatic Mission had been conducting sedition or propaganda.64 Panicking, Baldwin drew on top-secret intercepted GC&CS material to prove Soviet guilt. On 24 May, in an unprecedented move, he rose to his feet in the House of Commons and read from signals intelligence intercepts – or, as the cabinet put it delicately, from ‘secret documents of a class which it is not usual to quote’.65

The harassed Baldwin falsely presented the Arcos raid as an intelligence success, claiming that ‘both military espionage and subversive activities throughout the British Empire and North and South America were directed and carried out from Soviet House’. Moreover, he added that ‘No effective differentiation of rooms or duties was observed as between the members of the Trade Delegation and the employees of Arcos, and both these organisations have been involved in anti-British espionage and propaganda.’66 These two charges were accurate, but could not be adequately backed up by documents found at the scene. Instead, Baldwin began reading the highly classified signals intelligence intercepts. He quoted a startling intercept sent from the Soviet chargé d’affaires to Moscow, stating: ‘I very much doubt the possibility of a raid on our Embassy. I would, however, consider it a very useful measure of precaution to suspend for a time the forwarding by post of documents of friends, “neighbours” and so forth from London to Moscow and vice versa. Telegraph your decision immediately.’ Uproar broke out when the opposition asked how Baldwin had obtained the documents, and only the speaker’s intervention saved the prime minister from having to answer.67 Baldwin even published the texts of top-secret telegrams intercepted by GC&CS in a White Paper.68 Two days later the House of Commons reconvened to debate the issue. Following the prime minister’s earlier lead, both the foreign secretary and Jix gleefully divulged yet more intercepted material. As Christopher Andrew, MI5’s authorised historian, has observed, the debate ‘developed into an orgy of governmental indiscretion about secret intelligence for which there is no parallel in modern parliamentary history’.69

GC&CS, and by extension Baldwin’s cabinet, had long had access to all Russian traffic, including diplomatic and intelligence material. GC&CS also monitored communications between Comintern and the British Communist Party from, for example, an unmarked intercept station located in south London targeting a transmitter based in Wimbledon.70 After the Arcos fiasco, however, the Russians realised that their codes had been broken. Predictably, they replaced the system with a better, seemingly impenetrable, encryption scheme, known as the one-time pad.71 The one-time pad system, as the name implies, used a new cipher for each message, creating huge problems for the codebreaker. As a result, intelligence dried up. Over the next few years GC&CS had access to few Soviet diplomatic messages, and the only high-grade Soviet traffic available was that of Comintern.72

Sinclair, his deputy Stewart Menzies, and Alastair Denniston, the operational head of GC&CS, were all furious about Baldwin’s use of signals intelligence in Parliament. They pointed out the inestimable value of the source, and rightly predicted the detrimental consequences of parliamentary revelation. It was to no avail. Given the Soviet threat, the suspicions about the USSR’s connections to the left wing of the Labour Party, and, most importantly, the political reputations now at stake, intelligence had become temporarily expendable.73 Sinclair lamented how decrypts had been read ‘as a measure of desperation to bolster up a case vital to Government’. He bemoaned the lack of coordination within the intelligence services, and once again pressed for all three agencies to be united under one roof.74 Denniston also attacked Baldwin for having ‘found it necessary to compromise our work beyond question’.75

Baldwin should not shoulder all the blame. As we have seen, in the immediate aftermath of the First World War, intelligence chiefs had grown so alarmed about Soviet subversion that they too had advocated publishing intelligence in order to make the public aware of the scale of the threat. In fact, even Sinclair had changed his tune. Just seven years before, confronted with fears of the Bolshevik Revolution stretching its tentacles into Britain, he had argued that ‘Even if the publication of the telegrams was to result in not another message being decoded, then the present situation would fully justify it.’76 Moreover, Baldwin had tried to learn the lessons of the secret past. He consulted cabinet minutes from 1923, when the government had faced a similar issue. Amazingly, they recommended full disclosure: ‘The advantages of basing the published British case on actual extracts from the despatches which had passed between the Soviet government and its agents, outweighed the disadvantages of the possible disclosure of the secret source from which these despatches had been maintained.’77 The whole decade of the 1920s proved a learning experience for both the intelligence agencies and the politicians, who still lacked a central intelligence machine to guide them in the use and practice of this important weapon of statecraft.

The Arcos story – told and retold – eventually became the symbol of security failure for secret services around the world. New recruits to GC&CS were warned that senior politicians, including the prime minister himself, could be horrendously indiscreet when the political stakes were high. The episode strained the trust between the secret world and Number 10. It demonstrated that intelligence officers needed to be careful about how their product was used.78 The lesson would prove crucial during the Second World War regarding the use of Ultra decrypts. Menzies, the wartime head of MI6, never forgot that nobody in government understood the importance of protecting the source as much as the intelligence professionals.79 The lessons were not lost on a future prime minister, either. With the Arcos fiasco perhaps in mind, Churchill would personally insist that the circle with whom he shared his Bletchley Park material was limited to only half a dozen of his closest ministers.80 Even in the 1970s, when cabinet ministers were being indoctrinated into the arcane mysteries of ‘sigint’, they were visited by a mysterious figure from the Cabinet Office whom they called ‘the Man from UNCLE’. This official, in fact the Cabinet Office Intelligence Adviser, proceeded to recount the story of Baldwin’s blunder – by then politely referred to as a ‘mistake’ – to reinforce the importance of never breathing a word about sigint.81

By the summer of 1929, Ramsay MacDonald was back inside Number 10. This time, however, he headed a national coalition government with Stanley Baldwin, who chose to occupy the traditional residence of the chancellor of the exchequer next door at Number 11. He became increasingly influential as MacDonald aged, withered, and became an ever more marginalised figure. Although not prime minister between 1931 and 1935, Baldwin, as lord president of the council, in practice wielded as much power as, if not more than, MacDonald. Churchill referred to him as ‘the virtual prime minister’.82

Throughout the 1920s, the intelligence community had focused on Russia, communism, and what can perhaps be seen as a First Cold War, often fought out on the fringes of empire in locations as distant as Hong Kong and Shanghai. By contrast, the cabinet ignored Ireland during the second half of the decade. When MacDonald returned to power, though, attention turned briefly to the rise of the Irish leader, Éamon de Valera, who had been involved in the Easter Rising, had fought in the War of Independence, and had opposed the settlement that created the Irish Free State. Since then he had led the nationalist party Fianna Fáil into the Dáil, and went on to win the 1932 election. The government sensed trouble, and sought to bring de Valera down. In the absence of effective intelligence-gathering machinery in Ireland, MacDonald was informed by biased, outdated and alarmist intelligence which insisted on portraying de Valera as a violent IRA man rather than a democratic statesman. MacDonald bought this line, and believed de Valera was ‘undoubtedly a complete prisoner to the Irish Republican Army’. This flawed intelligence also confirmed the prejudices of Baldwin, who had increasing sway over MacDonald and was a diehard unionist with bitter contempt for Irish nationalism. Although London was jittery about overreacting to inflammatory intelligence, MacDonald and particularly Baldwin embarked on a campaign of economic sanctions to undermine de Valera. Based on an exaggerated threat of Irish subversion, the strategy was misjudged, and merely allowed de Valera to gain ‘immense political mileage’.83

For now, though, Ireland was a red herring. The real threat seemed to be coming from the east rather than the west. Eyes began to turn towards Adolf Hitler and the ominous rise of Nazi Germany. Yet secret intelligence did not inform strategic policy on Germany, or indeed Japan, particularly closely during the late 1920s and early 1930s. Especially in the empire across the Middle East, India and Malaya, intelligence officers remained unduly focused on Bolshevism.84 Moreover, partly because Hankey had failed to create a central intelligence ‘brain’ in the Cabinet Office, secret information remained tactical and operational, with little impact on discussions about the next major threat. Instead, policymakers relied on conventional and open sources – or, as in Ireland, biased locals. As Germany, Italy and Japan all began to make noises about revising the international order during the mid-1930s, intelligence on capabilities and industrial capacity became a priority. However, there was still no central machine for using intelligence to assess the strategy or intentions of these new enemies.85 Added to this, British impecuniousness and memories of the tragic devastation of the First World War fostered a reluctance in MacDonald and Baldwin to address the issue. MacDonald, perhaps unsurprisingly, remained more focused on economic recovery in the aftermath of the 1929 Wall Street Crash.86

Rearmament remains a controversial issue – one breath away from ‘appeasement’. Baldwin was long paraded alongside Ramsay MacDonald and Neville Chamberlain as one of the ‘Guilty Men’ who had failed to deter Hitler. More recently it has become apparent that, in a difficult economic context, he did much to improve Britain’s defences – albeit not enough to provide convincing deterrence.87 In March 1934, Baldwin announced that Britain would retain parity in air strength with Germany, hoping that this public commitment would deter Hitler’s aerial ambitions. Later in the year, he announced an expansion of the RAF to keep pace with the German programme. Nevertheless, Baldwin wanted to avoid an all-out arms race, and sought to rearm at a pace the public could accept, rather than at the optimum speed to counter Hitler.88

Intelligence was central to these complex rearmament debates. Both MacDonald and Baldwin knew Britain could not afford rapid, large-scale rearmament. Intelligence therefore became crucial in understanding exactly how much rearmament was necessary to counter the Nazi threat, and what kind of weapons were needed. Everyone was obsessed with air power. For the fascists it was symbolic of a modernist future, for others it was the likely harbinger of urban destruction at the very outbreak of war. Downing Street wanted an accurate picture of the current size of the Luftwaffe and the speed of future expansion. This, of course, was rather difficult to achieve in what was increasingly a Nazi police state. New technologies are often developed in secret and misunderstood even by those who develop them. Moreover, Hitler maintained strict control of the German press, and exaggerated Nazi strength. In other countries, especially Japan, ‘horrible deaths awaited those suspected of spying’.89

Britain lacked hard intelligence – especially on German intentions. The decline of the codebreakers at GC&CS made matters worse still. In the 1930s the Germans made increasing use of the Enigma encryption machine and electro-mechanical ciphers that generated millions of possible solutions to any secret message, and could not at the time be broken. Progressively through the 1930s, GC&CS lost the ability to read the codes of other important powers, including Russia, Italy and Japan. By the end of the decade the only major power whose traffic they were regularly reading was the United States. Baldwin and MacDonald never enjoyed the insight into German thinking that Churchill was later to gain from Bletchley Park.90

Intelligence capability cannot be increased overnight. Successive governments had slashed public spending in an attempt to deal with the aftermath of the First World War and then the Great Depression. As part of this, MacDonald’s national government had imposed deep cuts on army, naval and particularly air intelligence. Strikingly, Robert Vansittart, the permanent under-secretary at the Foreign Office, later admitted that the head of one section of the intelligence services ‘was so short of funds that at times he was reduced to relatives for assistance’.91 Lack of funding proved particularly detrimental given the increasing focus on the size and strength of the German air force, which was one of the great unknowns of the 1930s and which, as a new and frightening form of warfare, needed to be better understood. Interwar developments in air power had dramatically increased British feelings of vulnerability. Baldwin captured the mythical status of air power in his 1932 speech ‘Fear for the Future’ when he insisted ‘the bomber will always get through’.92

Air intelligence now fell into a range of mental traps which generated complacency about the pace of Luftwaffe growth. Analysts believed that the Germans sought quality over quantity, and so thought it would take some time before Hitler could build enough planes to constitute a real threat.93 Accordingly, intelligence was made to fit into a preconceived model, with the German air force ‘expanding in neat and well-ordered steps from the creation of one air division to the next’.94 Even when offered excellent intelligence by France which indicated greater German ambitions, the Air Ministry refused to budge from its fixed mind-set.95 The ministry’s dogged underestimation of the Germans is still a puzzle, not least because back in the 1920s it, alongside the Admiralty, deliberately exaggerated the strength of the French air force and the Japanese navy to argue for more resources.96 Obsessed with the national stereotype of German efficiency and order, analysts thought the Nazi approach would be slowed by the need to train air crew, create support services and build barracks. According to the Deputy Chief of the Air Staff, ‘a nation so admittedly thorough as Germany will not be content with a mere window-dressing collection of aircraft and pilots’. The Air Ministry happily predicted that the Germans would not be able to match the RAF until 1945.97

Meanwhile, at the centre of government a slow revolution was beginning. In 1931 Desmond Morton, an impish MI6 officer, had been allowed to create the Industrial Intelligence Centre. Beginning as a modest clearing house for economic intelligence on arms production capacity, something that no one seemingly wanted to own, it offered accurate assessments based on all source intelligence. More importantly, this unit was also the seed of centralised intelligence analysis that the Cabinet Office and Downing Street so badly needed. Although less sanguine than those of the Air Ministry, Morton’s assessments lacked impact, not least because he himself was unpopular, and did little to ‘promote interdepartmental harmony’.98 Detailed and extensive, the reports apparently ‘raised a riot each time’ they were read, since ‘neither Baldwin nor Chamberlain wanted to believe them’, and nor did MacDonald.99 Despite the improving intelligence on industrial matters, Baldwin woefully underestimated the speed of German rearmament throughout 1934 and much of 1935.100 With Robert Vansittart and the Foreign Office joining the argument, intelligence on the state of the German air force became Whitehall’s hottest potato.101

In March 1935, Hitler himself joined the debate, dramatically lifting the veils of secrecy from the Luftwaffe. In doing so, he bewildered British planners by claiming air power parity with the UK. This was bad news for Baldwin. Firstly, Churchill had long argued that Germany would soon overtake Britain if rearmament of the two countries continued at their present rates. Secondly, he had also warned that once Hitler had got the lead, Britain would be unable to catch up.102 Thirdly, poor Baldwin had unequivocally promised the House of Commons in November 1934 that ‘it is not the case that Germany is rapidly approaching equality with us’.103 Overnight, Hitler’s claims seemed to prove Baldwin wrong and Churchill right. Churchill was not guessing, and had secretly been supplied with the more hawkish intelligence estimates by Morton.

Baldwin publicly admitted to intelligence failure, explaining to the House of Commons that his forecast of German air power expansion, given the previous year, was off the mark.104 In a dramatic confession, he continued, ‘Where I was wrong was in my estimate of the future. There I was completely wrong.’ He also admitted that there was simply a lack of good intelligence. ‘I tell the House so frankly, because neither I nor any advisers from whom we could get accurate information had any idea of the exact rate at which production was being, could be, and actually was being speeded up in Germany in the six months between November and now.’ He did not stop there. Going beyond lamenting a dearth of facts, he added: ‘We were completely misled on that subject.’ This was a damning judgement of the intelligence assessments, and amounted to an admission that the British secret services had been defeated by a German deception. ‘I will not say we had not rumours,’ the prime minister continued. ‘There was a great deal of hearsay, but we could get no facts’ – aside from those which came from Hitler himself: hardly the most reliable source.105

Baldwin was refreshingly unafraid to admit mistakes.106 Like so many prime ministers publicly discussing intelligence, however, his performance was ‘dishonest, if politically expedient’.107 The Foreign Office and the Industrial Intelligence Centre had offered a less complacent view. By publicly blaming intelligence, Baldwin had put at least one MI6 officer’s job on the line, while Christopher Bullock, the permanent secretary at the Air Ministry, also worried about his future – after all, he had provided Baldwin with the soothing air intelligence estimates. In the end, though, Baldwin used the opportunity to sack Lord Londonderry, the secretary of state for air.108 The prime minister had misused the intelligence débâcle publicly in the House of Commons for political purposes and to effect ministerial change. It soon became apparent that Hitler had exaggerated his air power parity claims anyway.

The failure of British intelligence on the key question of air power actually makes Baldwin look rather better. He deserves more credit for increasing rearmament, given the weak intelligence support he received on this vital matter, and it could be argued that his decisions helped ensure victory in the Battle of Britain in 1940.109 Yet, as the historian David Dilks has argued, had intelligence been stronger, and had ‘the British appreciated the magnitude of their peril at an earlier date, had they embarked on an ambitious rearmament programme in 1934 instead of 1936’, Hitler might have been deterred altogether.110 Weak British intelligence in the 1930s, and the lack of any central assessment mechanisms, probably contributed to appeasement. Conversely, good intelligence ‘might have been the only means possible to tear the blinkers’ from ministerial eyes.111

For both MacDonald and Baldwin, intelligence services became entangled with matters of the heart. A former lover allegedly blackmailed MacDonald with compromising letters during the latter stages of his final premiership in the mid-1930s. Various accounts exist as to what happened next, but some suggest MacDonald used secret service funds to pay her off, or even asked MI6 to swoop in and seize the offending letters. Either way, somehow the blackmailer, one Mrs Forster, was prevented from sending her evidence to the press. MacDonald’s biographer sees some truth in the story, but maintains that it was ‘out of character for MacDonald himself to have authorised – much less ordered – the use of public money for such a purpose. But desperate men do sometimes act out of character.’112

For Baldwin, the stakes were higher. In 1936, increasingly frail and looking to retire, he confronted the abdication crisis. King Edward VIII was determined to marry the American Wallis Simpson. Baldwin considered her completely unsuitable, since she had divorced her first husband and was seeking a divorce from her second. The security service also knew of her Nazi sympathies, and for this reason Baldwin and his foreign secretary Anthony Eden had decided that the new King should no longer be supplied with secret documents.113 Baldwin staunchly believed that it would be better for the whole government to resign than to allow any such marriage to proceed. Running on phosphorus pills prescribed by his doctor, he was ready for this final challenge, and wondered whether destiny had kept him in office solely for the task. Oddly, this delicate piece of constitutional management was perhaps the prime minister’s most concerted effort as a personal user of intelligence.114

Edward VIII became King in January 1936. Baldwin liked the new monarch on a personal level, and met Wallis Simpson in May. By the autumn, having shown the King gossip about the couple’s relationship from American newspapers, Baldwin felt ‘the ice had been broken’. He was comfortable warning the King to be careful and discreet.115 Although the affair received front-page coverage in America, remarkably the King persuaded the British press to say nothing. The crisis erupted in November, when Edward summoned the prime minister and declared that he intended to marry Mrs Simpson. Unsurprisingly, he was used to getting his own way, and was immune to appeals to duty from Baldwin.116 In addition to creating tension between Buckingham Palace and Number 10, the crisis brought Baldwin into direct conflict with Vernon Kell at MI5. In December 1936, the prime minister demanded that MI5 investigate Mrs Simpson, but Kell declined. Baldwin certainly disliked the American socialite, once stating ‘I have grown to hate that woman.’ He felt she had done more to harm the monarchy ‘in nine months than Victoria and George the Fifth did to repair it in half a century’, and noted approvingly that a friend of the King had referred to her as ‘a hard-bitten bitch’.117 It was more than personal, though – Baldwin feared a constitutional crisis of sovereignty. He also felt ‘no other suitable machinery existed’ to conduct such a sensitive operation.118

In what was a rare confrontation with a prime minister, Kell disagreed. He argued that the proposed marriage would not threaten the realm, and was consequently no business of MI5’s. The prime minister refused to give up. He pressed Kell further, and the director-general felt compelled to discuss the issue with his deputies. They were seemingly persuaded, and reluctantly agreed to conduct telephone and physical surveillance. MI5 consequently made ‘certain delicate enquiries’. Surveillance of Mrs Simpson’s phone revealed that she had another secret lover, a Ford car dealer in Mayfair. The King was never informed. Special Branch also apparently watched Mrs Simpson, and drew up a file documenting her liaison with the car dealer, whom they described as ‘very charming, very good looking, well bred and an excellent dancer’. Even while the King was considering abdication, Mrs Simpson was seeing her other beau, upon whom she lavished expensive gifts and money.119

Baldwin’s government also targeted the King. Horace Wilson, the prime minister’s adviser at Number 10, asked the head of the General Post Office, Thomas Gardiner, to intercept all phone calls between the King’s addresses, including Buckingham Palace, and certain addresses in both Continental Europe and London where Simpson was likely to be staying. Five days before the abdication, the Home Office put the ‘most secret’ request in writing.120 ‘Tar’ Robertson, an MI5 officer better remembered for his wartime role in the Double Cross deception operations, claims to have been involved. He apparently entered Green Park at night to access a GPO junction box hidden in the bushes and tap the phone line between the King and his brother, the next in line to the throne, in order to ‘see how the situation was moving’.121

Intelligence gathered by such means not only helped Baldwin to deal with the King by providing context, it also enabled him to monitor and control the international press during the crisis. Several unhelpful stories were intercepted by cable monitoring and then squashed by the home secretary.122 However, it seems that the process of abdication, Baldwin’s favoured outcome, would have been under way by then in any case. It also seems unlikely that MI5 found anything further against Mrs Simpson through its telephone-interception operation. Nonetheless, Baldwin got his way, although he believed that ‘no more repugnant task has ever been imposed on a prime minister’.123 The King abdicated on 10 December 1936. Baldwin’s appearance at the Houses of Parliament that day was greeted by ‘loud cheers’ from the public, and only a small and insignificant ‘little burst of booing’.124 The prime minister himself would resign less than six months later, making way for his chancellor of the exchequer, Neville Chamberlain.

Between them, MacDonald and Baldwin had faced a wide array of complex secret service issues. These included Soviet subversion, the Ireland problem, the rise of Nazi Germany and the abdication crisis. Inexperienced, driven by political motivations, and for the most part lacking a centralised ‘brain’ to bring intelligence into policymaking, they fared poorly and made costly mistakes. By contrast, Chamberlain’s premiership faced just one overriding issue which intelligence targeted: the Axis between Adolf Hitler and Benito Mussolini. Yet few prime ministers, if any, endured a more disastrous relationship with intelligence than he.