No More Champagne

by David Lough

  Upon the assumption that before the 6th April 1926, you have completed the outstanding contracts & received payment therefore, and given full effect to your other intentions, & thus definitively ceased as [an] author, it is in my judgement (reached after taking careful advice) quite clear that, under the law, you will not be liable to assessment to Income Tax for the year 1926/7 in respect of profits from the profession of author.7

  Nonweiler told Churchill that the immediate benefit of this manoeuvre would be to halve his next income tax payment to £2,000.8 Churchill carried on writing for the press right up to the deadline of 5 April: ‘I have just polished off two more articles to help pay the Income tax,’ he told Clementine in mid-March. ‘Perhaps I may get another one out of myself this afternoon or tomorrow morning.’9

  As Churchill prepared for his first Budget, Chartwell continued to be an unwelcome distraction. Water streamed into the building on a February site meeting that he attended, but nobody could agree who was liable to pay for the repair. ‘According to your view, the Architect is apparently responsible for nothing,’ Churchill complained to Philip Tilden. ‘If this is your doctrine, it appears to me very extraordinary – so extraordinary that it ought to be tested.’10

  Churchill’s first Budget was dominated by one political issue: whether or not Britain should rejoin the gold standard at sterling’s pre-war rate of exchange. Most opinion in the Treasury and City supported the orthodox view that the move was essential to restore Britain’s pre-eminence in the world of finance. However, a clutch of economists led by J. M. Keynes warned that the result would be depression and unemployment. Churchill agonized over the decision, before accepting the Treasury orthodoxy. He later admitted it was one of his greatest mistakes: ‘I had no special comprehension of the currency problem and therefore fell into the hands of the experts, as I never did later where military matters were concerned.’11

  Churchill was on more familiar territory dealing with changes to Britain’s personal tax regime. He aimed to ‘stabilize’ society by reducing taxes on ‘active’ wealth at the expense of ‘inherited’ wealth. ‘The doctor, engineer and lawyer earning 3 or 4 thousand a year and with no capital will get the greatest relief,’ he told Parliament. ‘The possessor of unearned income derived from a capital estate of 2 or 3 hundred thousands, the smallest relief; while the millionaire will remain substantially liable to the existing scales of high taxation.’12

  By the summer of 1925 the chancellor’s salary was proving wholly inadequate to cope with the constant stream of bills emanating from Chartwell. The pace of Churchill’s official duties slackened after the Budget, but his ‘cessation’ as an author prohibited him from finishing The World Crisis, the most obvious way of reducing his overdraft, which was again over its limit.13 As a stop-gap Churchill borrowed another £4,400 from family trusts, confessing to Jack that the days of plenty of 1921 already seemed like a distant memory: ‘We are having a great economy rush here and putting down things in all directions.’14 Clubs, cows and polo ponies all found themselves in the firing line,15 but this first economy drive made little difference. If by the end of 1925 Churchill’s overdraft was below the (raised) £7,000 limit, it was because he had sold more of his few remaining shares.

  Christmas at Chartwell revealed more leaks in the roof, forcing the children to leave the nursery whenever it rained. ‘All the three rooms, the Butler’s, the Cook’s and the Housemaid’s are dripping wet,’ Churchill complained to his surveyor. He had reached the end of his tether and finally called in his lawyers.16 In response, Philip Tilden briefed his own surveyors:

  Mrs Churchill, who has great influence over Mr Churchill, has given it as her opinion that the house is falling down. I want you professionally and independently to make an examination of this concrete, as I will not be played about with over this house, which has been excellently built.17

  With Jack’s agreement as co-trustee, Churchill borrowed another £2,200 from his father’s trust while these arguments continued, taking the trust’s loan up to £10,000.

  Clementine took the children to the French coast and from Downing Street a Churchill burdened by money worries wrote to her: ‘How I wish I was with you all – reviving in Riviera brightness, with just an occasional flutter at trente et quarante, in the evenings or even the afternoon as soon as they open.’18

  In March 1926 Churchill revived himself with the help of an ‘Arnold Alpine Sun Lamp’19 as another Budget approached. It was followed in May by the General Strike when workers downed tools in key industries such as the railways, the docks, and electricity and gas supply. The government enlisted volunteers to maintain some semblance of normality and, in the absence of normal newspapers due to striking printers, Churchill oversaw production of the government’s short-lived substitute, the British Gazette.

  By the time the strike came to an end ten days later, Churchill’s overdraft had risen above £6,000.20 There was tax to pay, as well as a pile of bills from Chartwell. His credit exhausted with both Lloyds Bank and his father’s trust, Churchill realized that something had to give. The only realistic solution was to abandon his eighteen-month-old ‘cessation’ as an author so that he could complete The World Crisis.

  The challenge was to do this without re-triggering the tax bill that he had so recently avoided by retiring and which he was in no position to pay. On 9 June, while Jack negotiated a fourth emergency loan from his father’s trust’s lawyers,21 Churchill discussed the difficulty with Sir Richard Hopkins, the Inland Revenue’s chairman. Sir Richard recorded Churchill’s request in a handwritten note, which he stored in a special file marked ‘Semi-official correspondence to be kept by the Private Secretary’:22

  In December 1924 he made a definite decision to cease all [writing] activities and took immediate steps to do so. He had no intention of resuming until he left office. He then understood that any other course was barred by government policy. He now finds that publication of books by the Prime Minister and Lord Birkenhead*3 introduce a new factor: he has now ascertained that mere publication of a book is not barred.

  The two books he proposes to publish were mainly complete when he ceased. They can be completed in spare time in his vacation and in subsequent week-ends. I told him that I would consult….23

  After a second meeting with Churchill, which he recorded in a note marked ‘Secret’, Sir Richard sent to his chancellor a handwritten draft of ‘the sort of letter which I suggest you might write to me’. Churchill left the chairman’s opening paragraph untouched:

  At the time when I took office, as Chancellor of the Exchequer, understanding that by the very fact of holding such an office I was precluded from continuing in any way my previous profession as a journalist and author, I took immediate steps to wind my profession up. I ceased all journalistic work & although I had entered into contracts to publish the books both of which were nearly completed I cancelled the contracts, forgoing both serial rights & royalties.

  Hopkins suggested that Churchill should limit himself to just completing The World Crisis, but Churchill was satisfied that this draft letter left him greater flexibility to do more if needed, especially where it said: ‘I have no other work of authorship (or journalism) in view, except that possibly I may give permission for re-publication of some old articles (the copyright of which I had treated as worthless) & receive some honorarium therefore.’ He removed from Hopkins’s draft any suggestion that he would not pursue a newspaper serialization.

  The letter’s real rub came in its final paragraph, which Hopkins had drafted as: ‘I assume that if I take this course that my past liability will not be altered, but I will be glad if you let me know authoritatively on this subject so that I may know just where I stand.’ Churchill changed the final phrase, substituting ‘what my position is under the law & the existing practice’.24

  On receipt of Churchill’s amended letter, Hopkins again consulted his senior staff. A Mr Shaw summed up the prevailing mood: ‘Granted a cessation, subsequent events ca
nnot transform the cessation into a continuance.’25 This was the conclusion for which Hopkins and Churchill had hoped: the tax Churchill had saved when he retired as an author just over a year earlier would not have to be repaid now that he was taking up the profession once more. Accordingly, Hopkins wrote to Churchill again, privately and on unheaded notepaper:

  Dear Chancellor, The question of your liability to Income Tax is in law, as you are of course aware, a matter for determination by the appropriate body of Income Tax Commissioners. I have however consulted our experts as to your case (as set forth in your letter of the 20 inst) in relation to the relevant law & practice. In their opinion, which we as a Board share, there was a cessation and the past liability would not be altered by the circumstances now contemplated.26

  Churchill found it more difficult to accelerate the cash advances due from his publishers for the third volume of The World Crisis, which the contracts stipulated to be payable on publication, but which he now needed to be paid straightaway. Scribner’s Sons would pay only on publication27 and Butterworth told Churchill’s agent that he would charge interest if he had to pay earlier. ‘£2,000 is of course a small matter to Mr Churchill, but to me the loss of its use is a big matter,’ he claimed, seriously misjudging Churchill’s situation.28

  Churchill was forced to take on another emergency bank loan in July. This took his borrowings from bank and family trusts above £30,000.29 Cornered, he abandoned his earlier assurances to Butterworth that he would not sell the newspaper serialization rights. The editor of The Times agreed to revive its fee of £2,500, but then Churchill had to go to the prime minister, somewhat warily, for permission. Stanley Baldwin’s agreement proved the easiest step of all. ‘I had some conversation with the Prime Minister and found he considered it perfectly proper for me to publish the book in serial form,’ he was able to tell Butterworth.30

  Writing was not going to be enough on its own, so Churchill used the parliamentary break of summer 1926 to devise a second, more stringent economy drive at Chartwell. This time all the cattle, chickens, pigs and ponies (bar one in foal) were to be sold; the family was to spend Christmas in London and from the New Year Chartwell was be let. Monthly household expenses (which covered food, wages, maintenance and cars, running at nearly £480 a month), were to be halved. ‘The following should be tried at once,’ he proposed to Clementine:

  a. No more champagne is to be bought. Unless special directions are given only white or red wine, or whisky and soda will be offered at luncheon, or dinner. The Wine Book to be shown to me every week. No more port is to be opened without special instructions.*4

  b. Cigars must be reduced to four a day. None should be put on the table; but only produced out of my case . . .

  There was to be no fish course when the Churchills ate by themselves, which would be most of the time, because visitors were to be invited ‘very rarely, if at all’. The secretaries should choose the most urgent £1,500 of bills for payment, but the rest would have to wait. ‘Every new bill as it occurs is to be shown to me,’ Churchill announced to his wife. ‘Nothing expensive is to be bought, by either of us, without talking it over.’31 Since the move to Chartwell two years earlier, Clementine had requested transfers of no less than £13,000 to her account, over and above her normal allowances, which suggested that she was not such an ‘economical cat’. Wisely, however, she made no written reply to Churchill’s suggestions, but took herself off on a shooting holiday in Scotland, where she waited for this new regime to unravel as quickly as the first.

  The cattle and ponies were sold and the groom was sacked, but Chartwell was never let. According to Churchill’s daughter Mary, just four at the time, there appeared to be no shortage of food or drink, either. Her father did forego his usual summer holiday in France: instead he confined himself to writing, painting and laying some bricks at Chartwell. ‘The output was colossal,’ recalled Churchill’s new parliamentary secretary Robert Boothby, after a visit to Chartwell that summer. ‘Yet he always found time, plenty of time, to talk.’32 By the end of October the third volume of The World Crisis had grown to a longer than expected 230,000 words.33

  Early in 1927 Churchill went on a European journey with his fifteen-year-old son Randolph. He took the proofs of The World Crisis with him for a final polish, then dispatched the corrections from Genoa before setting off on a cruise around the Mediterranean. ‘Thank God the book is finished,’ he told Clementine. ‘It is now off my hands for good or ill for ever. It will I hope secure us an easy two years without having to derange our Chartwell plans: & by that time I will think of something else.’34

  Clementine might have been more reassured had the trip not included the detour on the way home of a pig-hunt in Normandy with the duke of Westminster and his new girlfriend Coco Chanel. Nearby at Dieppe was the Casino R. Ferrand, where Churchill proceeded to lose an estimated £350.35 ‘The Sherwoods [Sherwood Starr shares] have lost over £1,000 since we last parted,’ Churchill wrote home, ‘so do not fret about my peccadillos [sic] at the Casino.’ Overall, he argued, their finances were ‘by no means in an unsatisfactory state. Indeed I am hoping that with care & prudence we may have a couple of peaceful years, & consolidate our position at Chartwell.’36

  When he returned, The Times began printing extracts from The World Crisis and judged this final volume to be the strongest of the three. This view was endorsed by the book-buying public. Sales were strong in Britain from the outset, reaching 12,000 by the middle of the year.37 They started slowly in America, but soon picked up. Churchill instructed his tax adviser to include profits of more than £9,000 in his tax return.38

  Chancellor Churchill’s 1927 Budget was dominated by the £30 million hole left in the government’s finances by the previous year’s General Strike. Senior Treasury officials advised Churchill to borrow the whole amount, but Churchill won Prime Minister Baldwin’s agreement to a cut in government and defence spending, while he also raised taxes on tyres, wines and tobacco. Baldwin greeted Churchill’s Budget speech as ‘a masterpiece of cleverness and ingenuity’, but Churchill doubted whether he had really helped to drag the economy out of its post-war malaise. ‘This debt and taxation lie like a vast wet blanket across the whole process of creating new wealth by new enterprise,’ he told a senior aide.39 It went against his instincts, and in the summer he supported a large cut in local taxes or rates paid by factories and farmers, the ‘de-rating scheme’ suggested by a young Conservative MP, Harold Macmillan.

  Meanwhile, the chancellor’s own finances were in need of a boost before the holiday season began. It came in part from Bernau, who conceded a temporary increase in Churchill’s overdraft limit (now up to £9,000), and in part from Butterworth, who agreed to accelerate Churchill’s next royalty payment, otherwise not due until October.40 Final bills remained at Chartwell, where Philip Tilden suspected further allegations of falling plaster from the ceilings were in fact a tactic to delay payment; when dry rot was discovered Tilden blamed Churchill’s carpenter for using soft woods. He then abruptly declared his own role at Chartwell to be ‘closed’. There were renewed threats of legal action on both sides, but the financial trail disappears at this point because Churchill’s bank accounts for the last part of 1927 and 1928 are missing from his archive. Already, however, Chartwell and its furnishings had cost at least £40,000 – three times Churchill’s original estimate.41

  Churchill urgently needed to find a new way to supplement his ministerial salary. Without using his agent, he approached Butterworth and The Times in November, proposing an extra book in The World Crisis series to cover the aftermath of the war: their response was enthusiastic. A rather demotivated Curtis Brown was left to approach Charles Scribner for the American rights:

  Doubtless you have heard that the Rt. Hon. Winston Churchill is at work on a book called Aftermath that serves as a conclusion to his World Crisis series. He thinks he is going to keep it down to 100,000 words, but I doubt that. You know how keen he is on advances, and will understand w
hy it is that I have to ask £1,000 advance on 20% on this new book.42

  Butterworth and The Times43 accepted Churchill’s proposed completion date of 1928, but soon afterwards a more lucrative offer of £6,000 arrived from Ray Long,*5 the head of William Hearst’s*6 International Magazine Company stable. He wanted a series of twelve articles to publish in their magazines on both sides of the Atlantic.44 Churchill decided to postpone The Aftermath until September 1929, leaving him time to finish the articles. ‘The General Election will almost certainly be over by then,’ he explained to Butterworth, anxious not to return the advance on signature, ‘and if I were out of office a great deal more freedom could be used in the telling of the tale.’45

  Backed up by The Times, Butterworth called the chancellor at the Treasury to change his mind – and he knew just how to do it: he offered an extra £1,500 in cash if Churchill stuck to the original 1928 deadline for The Aftermath. Churchill persuaded Ray Long to accept a first batch of only four articles, and on subjects that required minimal research (‘Eminent personages’); he then accepted Butterworth’s money:

  After careful reflection, I am prepared to try to work to the timetable you suggested in your long letter. I cannot however give any binding guarantee other than a provision for the return of the advance if publication has to stand over till 1929. But this is a fairly good spur, you will have to be content with it. Now let me have the contract.46