Enemies Within

MI5’s budget was cut from £100,000 in the last year of the war to £35,000 in the first year of peace: it was £22,183 in 1921. These budgetary cuts were made despite the unrelenting efforts of the Bolshevik regime throughout the 1920s to spread world communist revolution, with propaganda, subversion and espionage deployed to weaken the British Empire and sundry groups and individuals enlisted to give overt or covert help in damaging British imperial capitalism. As an economy measure MI5 moved in 1919 from its offices near Haymarket, close to Whitehall and Westminster, to smaller, cheaper premises at 73–75 Queen’s Gate, Kensington, where it remained until shifting in 1929 to Oliver House at 35 Cromwell Road, Kensington. In contrast to the reduced spending on domestic counter-espionage and security, police outlay in England and Wales rose from £106,521 in 1917 to £1,159,168 in 1918, to £5,511,943 in 1919 and to £6,679,209 in 1921. Thereafter, it edged upwards to £7,239,694 in 1929.

The need to impress politicians in order to protect or expand budgets contributes to a perennial failing of intelligence services. ‘What we want’, Desmond Morton of SIS instructed the head of station in Warsaw in 1920, ‘is absolutely inside information or none at all … if you start with the idea that nothing that ever appears in a newspaper is of the least value, I am sure everything will be all right.’ This was not invariably sound procedure. ‘S.I.S. values information in proportion to its secrecy, not its accuracy,’ Stuart Hampshire was recorded as telling his wartime intelligence chief Hugh Trevor-Roper in 1943. ‘They would attach more value, he said, to a scrap of third-rate and tendentious misinformation smuggled out of Sofia in the fly-buttons of a vagabond Rumanian pimp than to any intelligence deduced from a prudent reading of the foreign press.’ The eighth of the ten commandments of intelligence propounded by the SIS veteran Brian Stewart made the same point more prosaically: ‘secret and official sources have no monopoly of the truth. Open, readily accessible sources are also important.’ This was a lesson that the Intelligence Division had first taught in the 1870s.10

With depleted budgets, the activities of both MI5 and SIS were kept peripheral to central government, although anxieties about Bolshevism were rampant throughout the 1920s. ‘We naturally ascribe all of our ills to this horrible phantom,’ wrote the industrialist-aristocrat and former Cabinet minister Lord Crawford in 1927, ‘always lurking in the background, and all the more alarming because it is tireless and unseen.’ Diplomatic relations between London and Moscow were likened by Vansittart in 1934 to that of card-players whose opponents kept a fifth ace up their sleeves and a Thompson sub-machine gun under the table. Yet there was no anti-communist section operated by SIS in 1939.11

Special Branch officers were often prejudiced, but unlike J. Edgar Hoover’s Federal Bureau of Investigation they had no programme to harass, entrap and incriminate. State underfunding of the intelligence agencies during the 1920s nudged them into closer reliance on right-wing individuals and organizations than was desirable. Instead of picking and paying trustworthy agents, they had to use (although they dared not rely on) dubious informants. There were unsavoury, self-dramatizing confidence-tricksters making quick improvisations on their way to the main chance. One example is a young public schoolboy named James McGuirk Hughes. In 1923 he posed as ‘a Red’, and claimed membership of the CPGB so as to penetrate Liverpool trade unionism and remit secret reports to the super-patriotic British Empire Union. He was part of a gang associated with the future MI5 agent-runner Maxwell Knight which repeatedly burgled and wrecked the Glasgow offices of the CPGB. Hughes supplied ‘oddments of information’ to MI5, which mistrusted him as a boastful and indiscreet ‘windbag’. When in 1926 he failed to get on to the payroll of MI5 or the Daily Mail, he convinced Sir Vincent Caillard, financial comptroller of the armaments company Vickers and former officer in the old Intelligence Division, that he could supply dirt on workers’ militancy. Caillard gave him a retainer of £750 a year, with an additional £750 to pay informants (which Hughes probably pocketed).12

Another unreliable informant was George McMahon @ Jerome Bannigan, who supplied Special Branch and MI5 with bogus information about gun-running to Ireland and about a communist plot to disrupt the Trooping of the Colour. He was arrested in 1936 after hurling a loaded revolver at King Edward VIII in St James’s Park as part, so he claimed, of a Nazi conspiracy. At McMahon’s trial Sir Donald Somervell, the Attorney General, was determined to suppress mention in court of either Moscow or Berlin and to stop indiscretions about McMahon’s earlier use as an informant: ‘We did not particularly want the names of our emissaries whom he had seen to come out, or the previous history,’ Somervell noted.13

The security services understood – as Special Branch seldom did – the necessity of evaluating the trustworthiness of informants. Material from a paid informant named Kenneth Stott @ MARMION began to be supplied, through a trusted intermediary, to Desmond Morton of SIS in 1922. Stott informed on militant Scottish trade unionism, secret German industrial activities, the Brotherhood of Russian Truth, German secret agents and the French intelligence service. ‘He is badly educated, his personal conceit is enormous and his methods are unscrupulous and peculiar,’ Morton was warned in 1923. ‘While Stott’s knowledge of the Labour movement in this country is undoubtedly very extensive … his knowledge of foreign espionage methods seems to be sketchy.’ When he named suspects he allowed colourful ‘imagination and animus to have full play’. He was accordingly dropped by SIS in 1923; but, like Hughes, he continued to be paid by a credulous rich man, Sir George Makgill, for titbits on trade union conspiracies until 1926.14

Most British military attachés were intelligent in their collection and sifting of material. Charles Bridge, the cavalry officer who was Military Attaché at Warsaw and Prague until 1928, when he went to run the foreign intelligence operations of the Vickers armaments company, spoke French, German and Italian, with a smattering of central European languages. When he left Vickers in 1934, it was to become inaugural secretary general of the British Council, in which post he was able to place informants and cultivate ‘Friends’ across Europe. Bridge, it was said, had ‘the energy and exactitude of a first-rate staff officer, the courtesy and knowledge of the world expected of a military attaché, and … an indefinable mixture of devilry and charm’.15

Equally impressive was James (‘Jimmy’) Marshall-Cornwall, the Military Attaché at Berlin in 1928–32, who spoke French, German, Italian, Dutch, Norwegian, Swedish, Turkish, modern Greek, Chinese and colloquial Arabic. Although he knew how to open sealed envelopes without detection and how to tap telephone and telegraph lines, as Military Attaché he had no need of ancillary skills such as burgling safes, forging passports and concocting invisible ink. His reports never failed to interest. ‘The National-Socialist Movement is a real danger, and far more of a menace to the present constitution than is Communism,’ he reported from Berlin to the Foreign Office as early as 1930. ‘The trouble about the “Brown Shirts” is that their principles and theories are entirely destructive. They wish to destroy the present fabric of the State, but have no constructive programme with which to replace it, except a sort of mad-dog dictatorship.’ The Nazis were, Marshall-Cornwall advised, ‘far more akin to Bolshevism than to Fascism’. As to Hitler, ‘He is a marvellous orator, and possesses an extraordinary gift for hypnotizing his audience … Even though his policy is a negative one, his personal magnetism is such as to win over quite reasonable people to his standard, and it is this which constitutes the chief danger of the movement.’ Subsequently Marshall-Cornwall wrote a thoughtful treatise on geography and disarmament. In 1943 he was transferred from a post in the Special Operations Executive to be Assistant Chief of SIS.16

The Admiralty’s grasp of naval intelligence was weaker than the War Office’s hold on military intelligence, perhaps for lack of the sound traditions derived from the old Intelligence Division and possibly for lack of brainpower. ‘All simple-minded, religious, semi-literate, and amazingly unadaptable’, concluded Harold Laski of the London School of Economics after lunching at the Admiralty in 1929. ‘No doubt they are technically superb,’ he conceded, ‘but they never see beyond their noses.’17

Sir Robert Bruce Lockhart, who had been acting Consul General in Moscow when it became the Soviet Union’s capital in 1918 and survived a month’s imprisonment in the Lubianka, exchanged confidences during the 1930s with ‘Commander Fletcher … of the Secret Service’. Reginald (‘Rex’) Fletcher had become a Royal Navy cadet in 1899 aged fourteen. After wartime service on destroyers in the Dardanelles, he became post-war head of the Near East section of the Naval Intelligence Division. He sat as Liberal MP for Basingstoke in 1923–4, became an SIS officer supervising overseas operations, joined the Labour party in 1929 and was elected as Labour MP for a Midlands mining constituency in 1935. During the 1930s he worked at SIS headquarters in Broadway during the morning before crossing Westminster to the House of Commons in the afternoon. Fletcher and Bruce Lockhart agreed in their response when, in 1936, Admiralty intelligence became excited by obtaining ‘absolute proof’ of a secret treaty between Italy, Germany and Franco whereby Italy was to receive the Balearics and Ceuta and Germany the Canary Islands in return for helping the Nationalists in the Spanish civil war. ‘No intelligence reports can be taken at more than twenty per cent of truth,’ commented Bruce Lockhart, when the story reached him. ‘Secret treaties, etc., are the kind of thing intelligence officers keep supplying all the year round.’ Fletcher of SIS told him, ‘Admiralty Intelligence is particularly bad, no grey matter in it.’ Rear Admiral Sir James Troup, Director of Naval Intelligence, ‘however good he may be as a sailor, is an absolute child about intelligence’. In 1938, using SIS sources while explicitly denying that he had access to any intelligence sources, Fletcher contributed an essay on European air power (containing strictures on the Air Ministry) to a rearmament survey entitled The Air Defence of Britain. The savagery of his Commons speech in January 1939 attacking Chamberlain’s policy of appeasement was remarkable as coming from an SIS man. The Foreign Office’s liaison with SIS Patrick Reilly perhaps had Fletcher (afterwards Lord Winster) in mind when he later wrote of ‘that dangerous type often found in Naval Intelligence, the Commander passed over for promotion, bitter because he thinks, probably rightly, that he is cleverer than his contemporaries who have been promoted’.18

Starting in 1919 SIS officers were installed in British embassies and legations under the guise of passport control officers (PCOs). Many heads of diplomatic missions mistrusted the PCOs’ activities being run under cover from their buildings. A few PCOs were gung-ho buffoons, several were spivs, but others were discreet and conscientious. Ambassadors and heads of legations however preferred formal sources of official information, received unofficial confidences which they could evaluate for themselves and disliked material of obscure and untested origins which might mislead when transmitted to London. They further feared that sub rosa activities by PCOs might cause diplomatic incidents or compromise the mission. This attitude was so pronounced that in 1921 the Foreign Office (codenamed ZP inside SIS) sent a circular to all its embassies and legations in Europe which outlined its attitude to espionage during the 1920s. ‘Today the old type of Secret Service has disappeared, and melodrama has given place to a more sober style of enquiry from which the diplomat need no longer, as he was very properly required to do before, withdraw the hem of his garment,’ wrote the PUS, Sir Eyre Crowe. ‘It is largely concerned with subterranean revolutionary movements and individuals, and instead of spying on the military defences of individual countries, devotes itself principally to detecting tendencies subversive of the established order of things, irrespective of whether these are directed against the United Kingdom or are International in character.’ This circular did little to reduce the hostility of traditional diplomats to spies operating in their territories. As one example, Sir Tudor Vaughan, the British Minister to Latvia, was outraged by the breach of propriety and possible complications when the files of the SIS station in Riga were moved for safety to the legation after the ARCOS raid in 1927.19

In addition to the PCOs, Admiral Sir Hugh (‘Quex’) Sinclair, Chief of SIS in 1923–39, financed the parallel Z Organization – a network of businessmen based overseas, acting as informants and collecting Friends who could amplify their reports. Claude Dansey, the PCO at Rome, left his post in 1936 with the cover story that he had been caught embezzling SIS funds. He subsequently opened an import-export business based at Bush House in the Strand, from which he ran the Z Organization. Dansey was a self-mystifying and sinister man: ‘I’m sure he’s very clever & very subtle, but I have no proof of it because I can’t hear 10% of what he says’, wrote Sir Alexander Cadogan, PUS of the Foreign Office, at the time of Dansey’s appointment as wartime Vice Chief of SIS.20

The successes of the Admiralty’s wartime code-breakers, known as ‘Room 40’, are celebrated. Their greatest SIGINT coup came in 1917 with the interception of the Zimmerman telegram, in which the German Foreign Minister promised to award three southern USA states to Mexico if it joined the Germans and declared war on the USA. The War Office’s MI1B did equally important work. The two sections, which veered between cooperation and rivalry between the wars, were merged into one agency, the Government Code and Cypher School (GC&CS), in 1919. It was swiftly recognized as the most secretive and effective British intelligence agency. The Russian section of GC&CS was led in the 1920s by a refugee from the 1917 revolution, Ernst Fetterlein, who had decrypted British diplomatic material in the tsarist cabinet noir before decrypting Bolshevik diplomatic messages for the British. For most of the inter-war period the Chief of SIS, Admiral Sinclair, was also Director of GC&CS. GC&CS had no more immunity from histrionic fantasists craving attention than other security services. One Cambridge mathematician and GC&CS officer, who committed several indiscretions in 1938–40, had ‘a kind of secret service kink’, Guy Liddell noted. ‘He likes to imagine himself as a cloak-and-dagger man, and is given to relating hair-raising stories about himself which have absolutely no foundation in fact.’ He also drank Chartreuse by the bottle.21

Lord Curzon of Kedleston, Foreign Secretary in 1919–24, was as peremptory and touchy as minor royalty, but unfortunately without their laziness. During 1920 he became wrathful about the deciphered wireless messages exchanged between Moscow and the Soviet trade delegation in London. ‘That swine Lloyd George has no scruples or shame in the way he deceives,’ Lenin declared in one intercepted message. ‘Don’t believe a word he says, but gull him three times as much.’ Lloyd George was nonchalant about the insults; but eight messages from Lev Kamenev, the head of the Moscow communist party (who was in London for the trade negotiations), referring to the CPGB and to Moscow’s secret subsidy of the Daily Herald, inflamed Curzon and other extreme anti-Bolsheviks in the Cabinet. They insisted on publication of these incriminating messages: a rash, flamboyant gesture which betrayed to Moscow that its codes had been broken. Alastair Denniston, head of GC&CS, blamed the short-term Kamenev publicity coup for the plummeting output of deciphered Soviet radio traffic after 1920. Thereafter, although GC&CS intercepted much secondary material on Asia and Bolshevik subversion in the British Empire, it was weak on central Europe. In addition to Curzon’s blunder, it seems likely that White Russians, who had been captured by Bolshevik forces in Crimea and had been indiscreetly told by their English contacts of GC&CS’s cryptographic abilities, disclosed that the English could understand most secret Bolshevist signals.22

Further political indiscretions jeopardized GC&CS’s good work in decoding intercepted signals traffic: in 1922 more Soviet decrypts were published by the London government; on 2 May 1923 Curzon sent a formal protest about Bolshevik subversion in Britain to the Soviets. This so-called Curzon Note was the first protest by one government to another that acknowledged that it was based on the intercepted radio traffic of the recipient nation. There were further calamitous revelations about signals interception at the time of the police raid in 1927 on the London offices of the All Russian Co-operative Society (ARCOS) searching for purloined secret official documents. Cabinet ministers quoted from Soviet diplomatic dispatches that had been sent from London to Moscow in code. The Soviet Union dropped its encryption procedure and introduced the more secure one-time pad method.

The Foreign Office replaced the Admiralty in 1922 in its supervision of GC&CS. There was no one of sufficient seniority there to halt the misjudged disclosures of 1922–3 and 1927. The three old-guard diplomatists who served as PUS at the apex of the Office hierarchy during the 1920s, Sir Eyre Crowe, Sir William Tyrrell and Sir Ronald Lindsay, regarded intelligence as a subordinate aspect of diplomacy. They doubtless agreed with the Berlin Ambassador, Lord D’Abernon, that ‘the Secret Service’ product was ‘in a large majority of instances of no political value, based mainly upon scandal and tittle-tattle, and prepared apparently with no discrimination as to what is really important’. By contrast, the rising younger men of the 1920s understood the value and necessity of secret intelligence. Vansittart, who replaced Lindsay in 1930, and Cadogan, who succeeded him, were the first PUS to value this new ingredient in statecraft. This was held against them by officials and politicians who preferred to work by their own settled assumptions and hunches. ‘No one questions Van’s patriotism,’ wrote the Cabinet Secretary, Sir Maurice Hankey, in explanation of his enforced retirement in 1938, ‘but he is apt to get rather jumpy. He pays too much attention to the press of all countries and to S.I.S. information – useful pointers in both cases, but bad guides.’23

The Flapper Vote

One momentous fact is always overlooked: for MI5’s first two decades Britain was not yet a full parliamentary democracy. Property-owning qualifications restricted the franchise, and all women were excluded from parliamentary elections. In 1910, at the first general election after the formation of the security services, the electorate numbered 5.8 million for England, 357,566 for Wales, 785,208 for Scotland, 698,787 for Ireland, making a total of 7.6 million. The combined population of England, Scotland and Wales was about 40 million (this includes children). During the war of 1914–18, Britain was depicted as the world’s leading parliamentary democracy, although only about 40 per cent of its troops had the vote, whereas universal male suffrage had prevailed in Germany since 1871. In Britain in 1918 the franchise was extended to all men over the age of twenty-one and to women aged over thirty. The English electorate accordingly rose to just over 16 million, the Welsh to 1.2 million, the Scottish to 2.2 million and the Irish to 1.9 million – a total of 21.3 million. There was subsequent discussion of equalizing the franchise for both sexes at twenty-five, but in 1927 ‘the Cabinet went mad’, as one of its members, Lord Birkenhead, explained, and authorized the extension of the vote to women above the age of twenty-one – ‘a change so dangerous and so revolutionary’ that Churchill fought it. This was called the Flapper Vote.24

The general election of 1929 was the first in which the British parliamentary franchise was extended to all men and women aged over twenty-one, except for prisoners, peers and lunatics. For the first time women comprised the majority of the electorate: 52.7 per cent were female and 47.3 per cent were male (15.2 million women and 13.7 million men). There had been an almost threefold increase in the electorate in under twenty years. Conservative activists believed that the Baldwin government’s defeat by Labour was made inevitable by the extended franchise. Other conservative thinkers saw this as part of a wider dégringolade. ‘The two most important happenings in my lifetime’, said Hensley Henson, Bishop of Durham, ‘are the revolt of women against their natural and traditional subordination, and the repudiation of Christianity lock, stock and barrel in Soviet Russia. The one destroys the family, and the other banishes God.’25

‘The Flapper Vote … had to come, but came too soon,’ Vansittart judged. After the election of 1929, ‘electoral power passed from the thoughtful – pessimists said the educated – in a crucial decade, which first popularized the impracticable’. His deputy Sir Victor Wellesley was likewise convinced that the instability of British foreign policy during the 1930s was ‘largely due’ to the recent expansion of the electorate to include women. ‘The pressure of an uninstructed public opinion’ after the Italian invasion of Abyssinia resulted in policy swerves and a fatal diplomatic crash which forced the resignation of the Foreign Secretary. ‘We like to think of democracy’, wrote Wellesley, ‘as the best guarantee against war. The events of 1935 prove that it can be as dangerous as a war-minded autocracy.’ Wellesley, writing from the perspective of 1944, made a further point: universal adult suffrage was obtained just at the moment when ‘the authority and prestige of parliaments’ were declining in democratic countries; legislatures were ‘steadily losing their sovereign power’. The volume and intricacy of public business required such specialization that parliaments were slackening control of the administrative machinery: real power had shifted to highly capitalized international companies, argued Wellesley, who founded the Foreign Office’s Economic Relations section in 1933. Britain’s epoch of full democracy began just as the deification of the nation state was occurring elsewhere in Europe: Italy had its Duce, Germany its Führer, Spain its Caudillo and Hungary its Serene Regent; but the most enduring absolutism was in Soviet Russia, where the dictatorship of the proletariat became the dictatorship of Generalissimo Stalin.26

One fact about the departments of state was so enormous, omnipotent and matchless that it is seldom mentioned. Whitehall was overwhelmingly masculine. The departmental culture was a body of assumptions, judgements, tastes and habits that, even when they underwent adaptation and reformulation, remained irrefragably male. No woman exerted any influence within any ministry. The security services were exceptional in employing women – Jane Sissmore, Ann Glass and others – in positions that mattered. Women were required to resign from the civil service if they married: their first thoughts must henceforth be for their husbands and their homes, so the Home Civil Service judged, and they should not be taking a salary into a household which already had a male breadwinner. The first marriage waiver was given to a principal at the Ministry of Labour in 1938. A year or so later Jane Sissmore, afterwards Jane Archer, became an outstanding exception to this rule. The former Oxford communist Jenifer Hart at the Home Office obtained a marriage waiver in 1941 with the support of her boss, Sir Alexander Maxwell, who advised her to announce in The Times that she wished to be regarded as married although she was barred by the civil service from being so. (She also endured sexual advances in the office from Sir Frank Newsam, who succeeded Maxwell as PUS in 1948.) Under wartime conditions most other women were required to resign on marriage, and were then re-employed as temporary civil servants for the duration of the war.