No More Champagne

by David Lough

  It was not the end of the saga. Angry that his barrister had not cross-examined Churchill, Douglas went on to repeat the libel deliberately in public and was arrested. Churchill was spared a much larger bill at the second trial when the attorney general ruled that the government should pay his legal costs (£650), as he had been carrying out work for the government at the time.

  Examining him first for the Crown, Sir Douglas Hogg led Churchill through a series of pre-emptive disclosures: he admitted to a close friendship with Sir Ernest Cassel, a friend of his parents; to the fact that Sir Ernest had not charged him for looking after his investments; that he had often been a guest at Sir Ernest’s Swiss villa; and that he had received £500 cash from Sir Ernest as a wedding present.

  ‘Did Sir Ernest Cassel give you any furniture?’ Sir Douglas asked.

  ‘The foundation for that was that in 1905 I took a small house in South Bolton Street and Sir Ernest asked Lady Randolph whether he could furnish a library for me,’ Churchill replied. ‘She consented.’29

  By the time Douglas’s less-experienced counsel started his own cross-examination, there was little to come out: Churchill happily agreed with counsel’s suggestion that The World Crisis had earned him £15,000 and managed to avoid any reference to Sir Ernest Cassel coming to his rescue in 1921, when he stepped in to buy Lord Gerald Wellesley’s lease in Hyde Park.30

  While Churchill’s finances were being discussed in court, two British oil companies approached him with a business opportunity. Shell Transport & Trading and Burmah Oil wanted him to lobby ministers to allow them to purchase the government’s controlling stake in the Anglo-Persian Oil Company. Anglo-Persian had been acquired during Churchill’s watch at the Admiralty in order to secure fuel supplies for a fleet that was increasingly powered by oil rather than coal. The oil companies suggested a fee for Churchill of £5,000. Steeped in the Gladstonian notion that a politician ought to be ‘disinterested’ in making a personal gain from his public duty, Churchill sought clearance from Stanley Baldwin, the new Conservative prime minister, before accepting. Baldwin indicated general support for the plan, but Churchill did not tell him ‘at this preliminary & non-committal stage’ of his own possible employment by the oil companies. ‘It is a question of how to arrange it so as to leave no just ground of criticism,’ Churchill told Clementine in a letter marked ‘secret’.31

  Churchill had already begun to make a contribution to the project by the time he left a fortnight later to spend time in the southwest of France on the duke of Westminster’s four-masted yacht, The Flying Cloud, which had a crew of forty. Afterwards, he warned the duke that he might not be able to return as planned for a second visit, this time to the duke’s hunting lodge nearby at Mimizan, on account of ‘important business (oleaginous)’.32 In the event he did make the return trip at the beginning of October, just as the oil companies sent their cheque for £5,000 to his brother Jack’s address.33

  The money went straight into Churchill’s account at Vickers da Costa, rather than his bank. It was used to back Churchill’s underwriting, for a fee of 2 per cent, of £50,000 of a new bond issued by The Daily Mail and General Trust, in which the sponsors*7 had been asked to reserve him space.

  The duke’s lodge lay within reach of the Mons Detrimont Casino at Biarritz, to which Churchill made a return visit for a celebration of his fee. He was less successful than on the first holiday with the duke in September, when he had won almost 30,000 francs (and the duke more than half a million).34 This time he withdrew 85,000 francs in cash at the casino window, but deposited only 6,224 francs at his bank on return to London. The loss took the cumulative cost of Churchill’s forays into gambling during 1923 well above £2,000 – more than the price quoted for Chartwell’s new wing.35

  As a result, Clementine began to question her husband’s stewardship of his inheritance, which had been supposed to banish their money worries for ever. Passing over his losses, Churchill bridled at her suggestion that it was being frittered away: ‘The estate at the moment is at least as large as it was when I succeeded, but part is invested in Chartwell instead of in shares.’ It was an ‘economically self-contained’ home that they could keep for many years before handing it on to Randolph: ‘It will have cost us £20,000 and will be worth at least £15,000 apart from a fancy price [i.e. unless someone was so keen on the house they paid a special premium price].’

  Royalties from The World Crisis would pay enough to finish it, he argued, and would keep them going for another six or seven months:36 ‘I have already planned out the third volume & anticipate no difficulty in completing it by April. It is really quite reasonable to count on £6,000 from this – perhaps £8,000.’37 They would need £10,000 a year to meet their living costs, he calculated. This was no mean sum: in the mid 1920s only 1,300 people in Britain enjoyed an after-tax income of more than £10,000 a year. For each of the first three years of the 1920s, Churchill himself had declared a pre-tax income of just under £10,000 to the Inland Revenue, and had been left with an average of £6,500 after tax.38 He did his best to reassure Clementine:

  Add to this my darling yr courage & goodwill and I am certain that we can make ourselves a good, permanent resting place, so far as the money side of this uncertain & transitory world is concerned. But if you set yourself against Chartwell, or lose heart, or bite your bread & butter & yr pig then it only means further instability, recasting of plans & further expense & worry.39

  Back in Britain, during the second half of October 1923, Churchill resumed work on the oil merger, convinced it would strengthen the security of the British fleet’s oil supplies. However, he swiftly distanced himself from the deal shortly afterwards when Stanley Baldwin surprised him (and everyone else) by calling a general election at the end of November. Carefully filing his version of events in case he should face accusations of impropriety later, Churchill transferred £4,000 of his fee from his stockbrokers40 back to his bank and resumed campaigning.

  Baldwin pledged to reintroduce tariffs to fight high levels of unemployment, but this put strains on the unity of the Conservatives while at the same time providing common cause in opposition to both wings of the Liberal Party and to Labour. Still unable to embrace the idea of introducing tariffs, Churchill stood for the last time as a Liberal candidate, but signalled his rapprochement with the right on other matters of policy by choosing to fight in Leicester West, a Labour stronghold where he hoped that the Conservatives might allow him a free run.

  It proved the most uncomfortable election of his career, as he told Brendan Bracken,*8 his new, twenty-three-year-old aide. Bracken recorded ‘a travelling crowd of socialist rowdies’ that disrupted his meetings, ‘howling a series of monotonous chants such as “What about the Dardan-eels?” “What about Gally-Polly?” “What about the fifty thousand quid Cassel gave you?”’41

  Just before polling day, Churchill bet Lord Beaverbrook that Asquith, the Liberal leader, would return as prime minister and that the Labour Party would not form a government. He was wrong on both counts: the Tories remained the largest party with 258 seats nationally, but failed to secure a Commons majority; Labour gained 191 seats and the Liberal Party trailed in third position with only 157. It was a hung parliament.

  Churchill was comfortably beaten by the Labour Party candidate in Leicester and could only look on as Labour’s leader Ramsay MacDonald formed a minority government. For the second time in his life Churchill began to prepare for a switch of allegiance. Twenty years earlier, when he had no land and little money, he had left the Tories, the party of the landed gentry, to join the Liberals, the party of enterprise and new money. Now with some modest land and much more money he prepared for a return journey back to the Tories.

  Meanwhile, the Chartwell building project remained fraught with difficulties. Early in 1924 an account from the architect Philip Tilden showed that its costs had reached almost £18,000,42 but the work was far from finished. Churchill decided not to share the news with Clementine that Knight Frank & Rutl
ey had just valued the property at only £12,000 on completion.43

  ‘Yesterday we motored to Biarritz & raided the Casino,’ he told her instead from Mimizan, where he had returned for the New Year. ‘Play was meagre, but after some vicissitudes I collected five milles [5,000 francs] & levanted with them.’44 17,000 francs was deposited in Churchill’s bank account.

  Once home, he concentrated on churning out newspaper articles to repair his finances. In February the Tory leader Stanley Baldwin announced that he would drop his support for tariff reform, which eased Churchill’s passage towards the Tories. Invited by the Liberals to fight a by-election in Bristol, Churchill declined. Instead he stood as an ‘anti-socialist independent’ at another by-election in the Abbey division of Westminster but his hopes of remaining unopposed by an official Conservative candidate were dashed. He was encouraged by Baldwin’s tacit encouragement and by the support of both the Rothermere and Beaverbrook newspapers, although the official Conservative candidate narrowly won. Churchill described the experience as ‘incomparably the most exciting, stirring, sensational election I have ever fought’.45

  This burst of political activity put paid to any chance of the final volume of The World Crisis appearing that October. Having first secured the agreement of The Times, Churchill told his publisher that the book would have to be postponed until March 1925. Butterworth allowed Churchill to hold on to the first advance which had been paid on signature of his contract, but the postponement of the second advance which was due on publication left an awkward gap in his cash flow. Churchill’s agent Curtis Brown suggested that he could plug this gap with a volume of autobiography which he could conjure up by assembling some of his old articles. ‘Butterworth doesn’t like the idea of this book coming out ahead of the third volume, but my surmise is that Mr Churchill may insist upon it for the sake of quick cash,’46 Curtis Brown confided to the American publisher Charles Scribner. However, Churchill kept this idea in reserve for another day.

  He certainly needed money. He had to pay not only Chartwell’s escalating costs, but various tax bills of almost £5,000 would also fall due in the next two years.47 At least the Churchill family was finally able to move in to part of the remodelled Chartwell during April 1924, although Clementine was pointedly absent visiting her mother in Dieppe. ‘You will be pleased with the result. It is majestic,’ Churchill wrote to her. ‘Only one thing lack these banks of green – The Pussy Cat who is their Queen.’48

  The following month, however, relations between Churchill and his architect reached breaking point. Churchill learned that Tilden had charged for the costs of correcting his own mistakes, ignoring the cap on fees that they had agreed. Churchill commissioned an independent investigation by John Leaning & Sons, a firm of London surveyors. To brief them, he produced a history of events covering six pages: ‘Mr Churchill pressed Mr Tilden for personal assurances that the cost would not exceed £7,000,’ it read in part, ‘and Mr Tilden freely and repeatedly gave these assurances both to Mr Churchill and in the presence of others.’

  Churchill claimed Tilden had kept to this figure until May 1923, at which point he had announced that the roof alone had cost an extra £1,000; next Churchill had had to insist on an extra tower because Tilden’s original plan ‘would not be satisfactory or even presentable’. The thus revised cost of £8,700 soon emerged to be ‘illusory’: ‘The estimates were raised week after week, and it soon became certain that £11,000 or even £12,000 would not see the completion of the work,’ Churchill continued. To add insult to injury, ‘the walls of the nursery wing were found to be defective. The water poured through the roof and gable at this end of the house and defaced all the plaster work which had been done.’ He concluded that the final cost now looked more like £18,000.49

  The accounts became hopelessly tangled, the more so because Churchill now insisted on paying the contractors directly rather than through Tilden, as had originally been the case. For his part Tilden refused to co-operate with Churchill’s investigating surveyors and declared that any discussion of his own fees was off-limits.50

  To Churchill’s disappointment, his own surveyors largely endorsed Tilden’s version of the costs incurred to date, at £17,500 before taking into account the architect’s fees. As a result, they found that Churchill still owed the builders a final payment of £1,183. Grudgingly, he offered 1,000 guineas (equivalent to £1,050).

  In all, Churchill’s bank accounts reveal that he made payments of more than £23,000 to cover the first two years of alterations to Chartwell. Adding in the purchase price, the Chartwell dream had cost him close to £30,000 – almost three-fifths of his Garron Tower inheritance. Some consolation came when Sir Howard Frank confirmed to Churchill’s lawyers that Lord Randolph’s will trust could justifiably lend £7,000 against a mortgage on Chartwell, rather than £4,000. Churchill increased his loan from the trust by the difference, while insuring the property for £20,000.51

  Late in September 1924 Ramsay MacDonald’s minority Labour government lost support in the House of Commons. Churchill inched closer to the Conservative Party, telling a meeting of its Scottish followers that no great ‘gulf of principle’ existed between Liberals and Conservatives when it was compared to the threat from socialism. Days before Parliament’s dissolution early in October, Epping’s Conservative Association adopted Churchill as its ‘Constitutionalist’ candidate.

  In the general election that followed Churchill gained a large majority. Nationally, the Tories won 419 seats to Labour’s 151, while the Liberals fell to 42. The Conservatives were back in power. The new prime minister Stanley Baldwin summoned Churchill to see him in London and asked whether he would serve ‘as chancellor’.

  ‘Of the duchy?’ Churchill asked.

  ‘No, of the exchequer.’52

  *1 Lawrence referred to The World Crisis, as yet unfinished.

  *2 Allington Castle in Kent.

  *3 This was 6 per cent on new building work, 7½ per cent on alterations.

  *4 France and Belgium occupied Germany’s Rühr Valley in January 1923 in response to the Weimar Republic’s failure to continue reparation payments due as a result of the First World War.

  *5 Coats (J. & P. Coats), is a British textile company; City Lights an American utility company; Mexican Eagles an American oil company; and Imps (Imperial Tobacco) a British tobacco company.

  *6 At the Cannes branch of Barclays Overseas Bank.

  *7 British, Foreign & Colonial Corporation Ltd. Churchill earned £1,000 from the underwriting. See CHAR 1/170/21.

  *8 Brendan Bracken (1901–58), born in Ireland; introduced to Churchill by J. L. Garvin, editor of the Observer, 1923; started work at publisher Eyre & Spottiswoode 1923, relaunching its Illustrated Review as English Life 1924; launched The Banker 1926; acquired half-share of The Economist with Sir Henry Strakosch 1928; MP 1929-51; parliamentary private secretary to prime minister 1940-1; minister of information 1941-5; First Lord of the Admiralty 1945; chairman, Financial Times 1945–1958; viscount 1952.

  12

  ‘No more champagne is to be bought’

  Chancellor under Pressure, 1925–8

  Exchange rate $5 = £1

  Inflation multiples: US x 14; UK x 50

  CHURCHILL WAS CONSCIOUS that as chancellor of the exchequer his financial habits would have to change. As soon as he was appointed in November 1924, he wrote to William Bernau, his bank manager, announcing that he planned to repay all his £22,000 of loans and overdraft.1 He instructed his brother Jack to sell enough shares to produce the necessary funds, leaving £7,000-worth of holdings in case he needed to secure a fresh overdraft in the future.

  A few days later Churchill was disconcerted to hear that Jack’s sales had left him at least £10,000 short of his target. Embarrassed, Churchill had to borrow an extra £1,300 from his father’s trust. He also had to persuade Bernau not only to keep his overdraft in place, but to lend him extra money temporarily until three magazines had paid their fees of £1,500 for articles he
had recently written.2

  Sussex Square was sold for £10,750, thanks to the Churchills’ entitlement to an official residence in Downing Street; however, most of the proceeds from the sale had to go back to the family trust which had made the purchase; the rest was required to furnish the Churchills’ new home.3

  All in all, it was an inauspicious start for the chancellor. His new post brought a salary of £5,000 a year, but Churchill entered office with an overdraft of £6,000; he was borrowing £15,000 from family trusts; bills were still arriving for yet more work at Chartwell; and Eric Nonweiler, his tax adviser at Lloyds Bank, warned him that he faced tax bills of £16,000 over the next three years.4

  The moment he became chancellor, Churchill told his publishers that the final volume of The World Crisis would have to ‘remain in its box until the skies are clearer’.5 Even before then, Nonweiler had been suggesting temporary retirement as an author as a possible way to reduce his bills, because any payments arriving after ‘cessation’ would be treated as capital receipts rather than income and therefore left untaxed.

  Churchill understood that it was a delicate matter for a chancellor of the exchequer to exploit what his adviser clearly labelled a ‘loophole’,6 so on 5 December, shortly after taking office, he summoned the chairman of the Inland Revenue Sir Richard Hopkins*1 for a private discussion. Six years younger than his political master, Hopkins was nonetheless experienced enough to understand the sensitivities involved and asked two senior officials to advise him how he might best respond after a second meeting with Churchill inside three days. Sir Richard drafted his response several times before writing it in his own hand on unofficial notepaper, which he headed ‘Private & Confidential’:

  As I understand the matter, you feel yourself precluded by the responsibilities of your office from continuing to exercise the profession of author or indeed to write for profit in any way & you intend merely to complete certain minor outstanding engagements entered into before joining the Government and another more important engagement – the remaining volume of your current work – which you find you could not cancel with justice to the interests of your publisher. You intend further, I understand, to assign on sale*2 any royalties to which you may be entitled.