and soaring expenditure on policing. The Secret Service Vote (money voted by parliament for the purchase of secret information in the British Isles and abroad to thwart the machinations of enemies of the nation) fell from £1,150,000 in 1918 to £400,000 in 1919 and £300,000 in 1921. It sank to £180,000 a year from 1925 to 1929. SIS expenditure fell from £766,247 in 1918 to £205,200 in 1919. It lost fifty-eight staff in the first quarter of 1919, although its Chief Sir Mansfield Cumming claimed that its commitments had increased by 300 per cent. Cumming volunteered in 1921 to reduce SIS expenditure in the coming year from £125,000 to £87,500. SIS operated from a relatively cheap house at 1 Melbury Road, on the edge of Holland Park in Kensington, during 1919–25, but thereafter found the means to occupy larger and more costly offices in Broadway, near St James’s Park and a few minutes’ walk from Whitehall and Westminster.
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
