The Defence of the Realm (24 page)

Though the meeting agreed that Kell's proposal ‘merited serious consideration', there is no evidence that it was followed up. Kell also complained that ‘totally inaccurate stories were constantly being circulated' about MI5's wartime work, ‘and he thought it would be a good thing to publish an accurate record now or later.'
⁶

Basil Thomson, an accomplished self-publicist, beat Kell to it. On 24 April, a week before he became head of the new Directorate of Intelligence, a flattering article in the right-wing
Morning Post
reported that his new ‘Special Branch' would operate ‘on the lines of Continental Secret Services and will ultimately have agents throughout the United Kingdom, in the colonies, and in many parts of the world outside the British Empire'. Wildly exaggerated though the claim turned out to be, it probably accurately reflected Thomson's immense ambitions. The
Daily Mail
next day was equally flattering:

After 50 years as a sub-department of Scotland Yard the ‘Special Branch' which looks after Kings and visiting potentates, Cabinet Ministers, and suffragettes, spies
and anarchists, has been given a home of its own and is placed under the special charge of an assistant commissioner of police, Mr Basil Thomson, who has an unrivalled knowledge of all these.

To Scotland House Mr Thomson has taken his special staff and his office furniture, including a very inviting leather armchair in which every spy of note sat at one time or another during the war.
⁷

The implication that Thomson rather than Kell had taken the lead role in wartime counter-espionage must have caused particular offence in MI5.

MI5's budget was cut by almost two-thirds – from £100,000 in the last year of the war to £35,000 in the first year of peace.
⁸
In December 1919 the slimmed down Service moved from Charles Street to smaller and cheaper premises at 73–75 Queen's Gate, where it remained for most of the 1920s before moving to Oliver House in Cromwell Road.

By May 1920 Service staff had shrunk from 844 at the time of the Armistice to 151,
⁹
with further serious cuts to come. Kell, meanwhile, was still having to fight for the survival of MI5 as an independent agency, distinct from both SIS and Thomson's Directorate. The papers of Kell's deputy, Holt-Wilson, contain a document from 1920 (probably drafted by Holt-Wilson himself) setting out MI5's case for its continued existence. At this stage Soviet espionage (unlike Soviet subversion) was not yet identified as a significant threat. The main, rather exaggerated, emphasis was placed on the threat from the revival of German espionage and the new threats from Britain's wartime allies, France and Japan. All these, it was claimed, made MI5 ‘decidedly more necessary even than before the war': ‘It may be pointed out that the total annual cost of the organization on a satisfactory basis would not exceed the actual running expenses of five Mark V tanks on a test run of 1000 miles!'
¹⁰
The document ended with a scathing attack on both Thomson and the Directorate of Intelligence:

Despite statements to the contrary in the press and elsewhere, Sir Basil Thomson's organization has never actually
detected
a case of espionage, but has merely arrested and questioned spies at the request of MI5, when the latter organization, which had detected them, considered that the time for arrest had arrived. The Army Council are in favour of entrusting the work to an experienced, tried and successful organization rather than to one which has yet to win its spurs.

Sir Basil Thomson's existing higher staff consists mainly of ex-officers of MI5 not considered sufficiently able for retention by that Department. The Army Council are not satisfied with their ability to perform the necessary duties under Sir Basil Thomson's direction, and they are satisfied that detective officers alone, without direction from above, are unfitted for the work.
¹¹

Holt-Wilson's contemptuous dismissal of the quality of Thomson's ‘higher staff' was doubtless prompted by deep animosity towards Thomson himself and resentment towards those who had jumped ship from MI5. But, despite the inadequacies of its head, there was at least a handful of officers in the Directorate of Intelligence of undoubted ability. Among them was Captain Hugh Miller, a wartime member of MI5 who late in the war had also worked part-time for Cumming. Miller had an MA with first-class honours in English literature and a second class in modern languages from Edinburgh University, where he won two gold medals. In the decade before the First World War he worked as lecturer in English successively at the universities of Grenoble, Dijon, the Sorbonne, Cairo and Aberdeen, before joining the Royal Scots on the outbreak of war.
¹²
His record of service contains high praise for his abilities before his transfer to Thomson's Directorate in March 1920.
¹³
In 1931 Miller was to return to MI5, together with his Scotland Yard colleague Guy Liddell, who, though not previously a member of MI5, went on to become one of the Security Service's most distinguished deputy director generals (DDGs).
¹⁴

MI5's most influential supporter in its struggle to defend its budget during 1920 was the Secretary of State for War and Air, Winston Churchill, who emerged from the war with even greater enthusiasm for intelligence than before and a deep concern about Communist subversion. Though Churchill still favoured combining Thomson's, Kell's and Cumming's agencies, he believed ‘it cannot be brought about in a hurry.' In the meantime it was essential not to cripple them by budget cuts:

With the world in its present condition of extreme unrest and changing friendships and antagonisms, and with our greatly reduced and weak military forces, it is more than ever vital to us to have good and timely information. The building up of Secret Service organisations is very slow. Five or ten years are required to create a good system. It can be swept away by a stroke of a pen. It would in my judgment be an act of the utmost imprudence at the present time.
¹⁵

In March 1920 Churchill circulated to the cabinet a memorandum drafted by the General Staff protesting against the extent of proposed cuts in the intelligence budget (in MI5's case to only £10,000 in 1921), which he hoped would receive ‘earnest and early consideration'. After putting the case for SIS, the memorandum turned to MI5:

It was due entirely to the work of this organization that the whole of Germany's pre-war espionage system in this country was discovered and nursed, ready to be smashed, as in fact it was, on 3rd August 1914.

. . . During the war it was the means, not only of detecting and bringing to trial some 30 spies and of placing under proper control (under Regulation 14B) some hundreds of dangerous individuals, but also of furnishing information to the Secret Services of the United States of America and our Allies, which enabled them to arrest many other enemy agents operating within their territories. It was also responsible for the initiation, from time to time, of effective anti-spy legislation, and it was undoubtedly due mainly to the special Counter-Sabotage scheme which it operated, and which proved effective up to the Armistice, that no single case of sabotage, definitely known to be due to enemy action, occurred in this country during the war.

Because of inflation, the proposal to reduce the MI5 budget to only £10,000 would leave it, in real terms, with less money than before the war:

. . . Moreover, counter-espionage is no longer a question of steaming open a letter and reading its contents. The vast improvement in methods of collecting and transmitting information (e.g. the development of wireless telegraphy, aircraft and abstruse secret inks, photography, &c) has added very greatly to the difficulty of detecting espionage, and inter alia, it has been found necessary to add to the staff of MI5 a chemical section.
¹⁶

The drive for economies in the intelligence budget, however, continued. In 1921 a Secret Service Committee of senior officials, chaired by Sir Warren Fisher, PUS at the Treasury, was instructed to make recommendations ‘for reducing expenditure and avoiding over-lapping'. Its report, issued in July, concentrated most of its fire on Sir Basil Thomson's Directorate of Intelligence which it criticized for overspending, duplicating the work of other agencies and producing misleading reports. The Foreign Office complained that in the previous year Thomson had despatched a fifteen-man troupe to Poland ‘merely to photograph one or two streets and a few villages with peasants, etc' for an anti-Bolshevik film. General Sir William Horwood, the Commissioner of the Metropolitan Police, seized the opportunity to send Lloyd George a lengthy memorandum denouncing ‘the independence of the Special Branch' under Thomson as ‘a standing menace to the good discipline of the force', and the Directorate of Intelligence as both wasteful and inefficient. Horwood insisted on a reorganization which would place Thomson and the Special Branch firmly under his control. Though Thomson refused, his intelligence career swiftly came to an ignominious end. He was, in his own words, ‘kicked out by the P.M.'. His subsequent career had about it an air of black comedy. Thomson took to writing volumes of reminiscences and detective stories with titles such as
Mr Pepper, Investigator.
In 1925 he was found guilty of committing an
act in violation of public decency in Hyde Park with a Miss Thelma de Lava. Thomson's supporters hinted darkly that he had been framed either by his enemies in the Met or by subversives.
¹⁷

With Thomson's dismissal, the Directorate of Intelligence disappeared. Horwood successfully resisted a proposal that Kell, while remaining director of MI5, should also become director of intelligence with modified responsibilities. The Secret Service Committee was initially sceptical of the need to preserve MI5 at all but eventually concluded that, because of increasing espionage by a number of powers and the threat of Bolshevik subversion in the army and navy, MI5 should continue, on a reduced scale, to have responsibility for counter-espionage and for counter-subversion in the armed forces.
¹⁸

Following Cumming's death in June 1923 (shortly before he was due to retire), MI5 faced a new threat to its independence from the ambitious new ‘C' (Chief of SIS), Rear Admiral (later Sir) Hugh ‘Quex' Sinclair, a far more flamboyant figure than Kell with a reputation for both decisive leadership and a lifestyle as a bon vivant. He derived his nickname from Sir Arthur Pinero's play
The Gay Lord Quex.
Like his namesake, playfully described as ‘the wickedest man in London', Sinclair had a stormy private life during his naval career. In 1920, embarrassingly soon after becoming naval aide to the King, he was divorced. Unlike Cumming, Sinclair ceased to wear naval uniform once he became ‘C'. Instead he found a bowler hat which some thought a size too small for him and, in the words of an admirer, ‘rammed it as firmly as possible on his head'. While keen to maintain operational secrecy, Sinclair was a conspicuous figure to many London taxi drivers, driving round the capital in a large, ancient, open Lancia. Diplomats knew that he was visiting the Foreign Office when they saw his Lancia parked outside the ambassadors' entrance off Horse Guards.
¹⁹
Kell was driven more sedately to work each morning by his chauffeur Maclean in a car which, for reasons his staff found difficult to fathom, flew a small pennant with the picture of a tortoise (not an image likely to have appealed to Sinclair).
²⁰

Sinclair quickly gained overall control of the codebreakers of the Government Code and Cypher School (GC&CS), the peacetime successors of the wartime SIGINT units at the Admiralty and War Office.
²¹
He then turned his attention to MI5. In 1925 Sinclair told Fisher's reconvened Secret Service Committee that ‘the whole organisation of British Secret Service . . . was fundamentally wrong': ‘All the different branches ought to be placed under one head and in one building in the neighbourhood of Whitehall, and to be made responsible to one Department of State, which ought
to be the Foreign Office.' Sinclair implied, though he did not say so explicitly, that the ‘one head' should be himself. He told the Secret Service Committee that it was ‘impossible to draw the line' between espionage and counter-espionage, since both were concerned with either foreign intelligence or foreign intelligence agencies. Entrusting these two complementary activities to different services inevitably ‘led to overlapping' between them. He was also critical of the management of MI5, which, he claimed, ‘contained several vested interests due to the length of time during which certain officers had served the department' – a thinly disguised reference to Kell and his deputy, Eric Holt-Wilson. Sinclair claimed that ‘with proper reorganisation' at MI5 a total staff of only five ‘would probably suffice'. Horwood, the Commissioner of the Met, supported much of Sinclair's argument: ‘Now that the war was over, MI5 as a separate entity was not necessary at all, and their duties should be taken over by SIS. In fact, he would agree to a combination of SIS and MI5 with the addition of either Captain Miller or Captain Liddell.' Ironically, six years later, Miller and Liddell, the two main counter-subversion experts at Scotland Yard, were to join MI5.

Apparently unaware of the evidence given by Sinclair and Horwood, Kell claimed that ‘his liaison with C and Scotland Yard were excellent'. Aware, however, that MI5's survival was at stake, he put the emphasis on its unique responsibility for ‘what might be described as home security':

He was responsible for the safety of the armed forces of the Crown in this country, both in respect of foreign espionage and communist interference.

. . . There was no overlapping between MI5 and Scotland Yard. The latter were not in a position to carry out the work which he did with the armed forces. He had free and direct access to all naval and military and air commands. He could see anyone he wished and give advice as to the action to be taken to deal with matters within his purview.