No More Champagne

by David Lough

  The receiver chose the Eyre & Spottiswoode option so that he could pay Churchill the money owed for his outstanding royalties and then auction the copyrights separately to the highest bidder. ‘Cd I not get these myself?’25 Churchill asked Bracken late in March 1941, during the heaviest period of the Blitz. Surprised but delighted at this change of mind, Bracken swiftly struck a deal with the receiver at £1,500, in return for him abandoning the auction.26 ‘The Prime Minister has bought back his own copyrights,’ Bracken firmly told his former colleagues at Eyre & Spottiswoode, ‘and he does not intend to resell.’27

  A disappointed Butterworth hazarded a final, emotional appeal to his old author:

  I have had blow upon blow during the last few months. The sudden death of my wife; the bombing of a valuable collection of Chinese and Japanese curios, and of Early Water Colour Masters; culminating with my business being sold to a higher bidder... Surely enough for one man. But the knowledge that you decided to place your Copyrights in other hands, and thereby terminate our connection of 18 years, during which time I hope I have been of some service to you, is particularly painful.28

  Churchill did not reply.

  Butterworth was so confident that he would re-acquire his old business that he confessed he had prematurely accepted £200 from the Reprint Society for permission to reissue Great Contemporaries.29 A furious Bracken ordered the Reprint Society to rescind its arrangement with Butterworth and then asked them to make a higher offer. The Reprint Society paid up: it was Churchill’s first dividend from ownership of his copyrights.30 A second followed when Mrs Hill was able to provide the Sunday Dispatch with new copyright material for its weekly excerpts, almost doubling Churchill’s fee in the process to 110 guineas a week.31

  Chequers, the prime minister’s official country residence, was put to good use by the Churchills. So much so that the Ministry of Food had to raise the food rations for Chequers to the level enjoyed by foreign embassies.*6 Seasonal pheasant and venison sent from Balmoral by George VI also helped to sustain morale. ‘The luxury was heavenly, quantities of rare foods, fires, lights, drinks etc,’ Jack Churchill’s daughter Clarissa recalled.32

  However, use of the country house retreat came with a cost: the Chequers Trust provided prime ministers an allowance of £15 each weekend, but they were expected to meet the costs of food, heating, light, laundry, telephone and petrol.33 When the Churchills’ bills added up to twice the level of this allowance, their private staff argued that the government should at least pay half of all telephone costs.34 Next they questioned the wine payments: at the Admiralty, Churchill’s personal consumption had cost £30 a month, but the wine bills at Chequers were often double this amount. The Government Hospitality Fund agreed to contribute on occasions when overseas visitors were present, a condition which posed no problem. Churchill was determined to enlist the military might of the United States on Britain’s side on the war: American guests became frequent visitors to Chequers.*7

  In February 1941 Cassell & Co. published Into Battle, the first collection of Churchill’s wartime speeches. It was a huge commercial success on both sides of the Atlantic and the first real evidence that Churchill’s new international reputation had begun to transform the value of his work.

  For the benefit of the tax authorities, the book’s preamble pointed out that it had been ‘compiled’ by Randolph and that Churchill had played no editorial role; nevertheless, the contract entitled Churchill to 25 per cent of the sales proceeds, which reached more than £12,000 in Britain and America combined.35 Together with his prime ministerial salary and his earnings from his Sunday newspaper articles, they took Churchill squarely into Britain’s top wartime tax bracket of 97½ per cent.36

  The Inland Revenue turned down Mason’s attempt to argue that the Sunday Dispatch’s payments represented a series of capital receipts rather than royalties, because he had been unable to produce any proof that Churchill had sold the entire copyright in his works. An experienced politician, Churchill understood the sensitivity of fighting to remove his literary earnings from taxation at a time of war. However, the difference between no tax at all and a tax of 97½ per cent on earnings as high as £21,000 was too great to be ignored for a man as indebted as Churchill.

  He was busy planning Operation Battleaxe to halt Rommel’s advance across the north African desert, when he asked Brendan Bracken to accompany Geoffrey Mason in the time-honoured ritual of a visit to the chairman of the Inland Revenue, Sir Gerald Canny. At the meeting, Bracken and Mason challenged the decision that Churchill must pay income tax on his Sunday newspaper earnings, and asked whether a sale of film rights to My Early Life would be taxed.37 They added this item to their agenda at the last minute when Churchill received an offer out of the blue from Alexander Korda (backed by Warner Brothers). Bracken had managed to edge the studio’s original offer of £5,000 up to £7,500, all payable on signature.

  After consulting his colleagues, Sir Gerald told Mason that so far as the film was concerned, ‘It is O.K.’38 This decision raised an eyebrow or two within the Inland Revenue, but it was based on the acceptance that Churchill had retired as an author and sold all the film rights for a fixed capital sum. Churchill received his film payment by the end of June. This meant that his bank account ended the first half of the year in credit at almost £9,000, even after Churchill had repaid Sir Henry Strakosch’s loan of June 1940.39

  Sir Gerald took a different line on Churchill’s Sunday newspaper articles. ‘[Mason] was unable to produce any evidence which could lead me to the view that these were not taxable,’ he informed the chancellor of the exchequer Sir Kingsley Wood, who took an interest in the matter.40 Neither Churchill nor his adviser was ready to concede, however. ‘Mason wants to return to the charge,’ Sir Gerald told one of his senior staff a week later. ‘He wants to argue that each excerpt was a capital transaction in itself: but it seems to me a hopeless contention. However we must listen.’41

  Mason cleared his submission with Churchill before sending it to the tax authority. Considering work had continued on A History of the English-Speaking Peoples until April 1940 it began by skating on thin ice:

  At the outbreak of the war, Mr Churchill was offered the post of First Lord of the Admiralty, the acceptance of which definitely precluded him from continuing his literary work. At this stage Mr Churchill’s capital consisted of his private investments, and the copyright of certain of his old articles. The firms mentioned were anxious to purchase the right to publish excerpts from these writings, but it was impossible at that time to compute a fixed annual purchase price as it was not known to what extent their right would be exercised. For convenience it was arranged that payment should be made as and when excerpts were published and these payments have been more or less consistent each week for the past twenty months... It appears to me that there can be no question but that each payment received is a purchase of a portion of a capital asset.42

  The Inland Revenue was unmoved. It would have to see more evidence about Churchill’s contract with the Sunday Dispatch if it was to change its mind, it made clear. As there was none, Mason suggested to Churchill that he should draft a letter retrospectively confirming the terms from the owners of the paper, Associated Newspapers. After taking legal advice on the wording (without disclosing Churchill’s identity), Mason had the final text cleared by Churchill before the newspaper’s managing director signed it.43 The letter admitted that Churchill’s contract had been purely verbal and involved neither a fixed sum nor the whole copyright. This only hardened the Inland Revenue’s position, so that its full board ‘adhered’ to its earlier decision in November that the sums should be taxed.44 Churchill and his advisers would need to decide whether or not to mount a formal appeal to the general commissioners of taxation, who are ‘unpaid lay people of good standing’ appointed by the lord chancellor to hear appeals against tax assessments made by the Inland Revenue.45

  Brendan Bracken’s duties as Churchill’s ‘honorary man of business’ were
not confined to the film world. In the summer of 1941 lawyers asked who was to take urgently needed decisions about re-publishing Churchill’s early books, the copyright of which he now owned, but which were all out of print. Churchill’s one-word reply was ‘Bracken’.46 In fact, Bracken had already produced a typically trenchant recommendation on the subject:

  The earnings of Bernard Shaw and Kipling far exceeded those of any contemporary writer. They did not sell the copyright of their books to publishers. They made contracts with firms to publish their books on a commission of 10 per cent on all out-of-pocket expenses, such as manufacturing and advertising... and 15 per cent on nett [sic] proceeds of sales. And so the authors received most of the profits earned by their books.

  The publishing firm of Macmillan & Co., Bracken told Churchill, would handle his books on even better terms than Kipling or Shaw had achieved. ‘The position will be that you will continue to own the copyright of your books, that you will take the major part of the profits which they earn, and that you will have no responsibility for the cost of producing and advertising the books. I think this is an admirable arrangement.’47

  Churchill approved the start of detailed negotiations, but he was pre-occupied for most of June and July with the failure of Operation Battleaxe, which required high-level changes in Britain’s Middle East command, and then came Germany’s invasion of the Soviet Union. Not until August – shortly before Churchill left for his first summit with President Roosevelt off Newfoundland – did he find time to examine the Macmillan agreement. To the horror of those who had spent weeks negotiating each clause, Churchill put a line straight through the section that authorized Macmillan to negotiate film, radio and serial exploitation of his copyrights. Daniel Macmillan, however, kept a calm head: Churchill had not objected to the third clause of the agreement, which committed all of his future books to Macmillan. Effectively, the publisher believed, he had secured the right to handle Churchill’s war memoirs when the time came, which almost everybody assumed it would.48

  Once an Allied victory was assured, Churchill planned to retire and avoid Lloyd George’s mistake of staying on too long, he confided to Lord Camrose in November 1941. ‘His age precluded him from planning to be a big figure in the long and complicated negotiations which the peace would involve,’ Lord Camrose told his son. ‘He also has in mind the idea that he should make provision for his family. To do this he would have to be able to write.’49

  For the time being, Churchill would have to be content with a second book of his war speeches. Into Battle’s success had encouraged Cassell to publish a sequel. In the absence of Randolph, who was on his way to fight in Egypt, Charles Eade, editor of The Sunday Dispatch, undertook to compile the book without payment. By October 1941 he had amassed 100,000 words, but Kathleen Hill found it impossible to pin Churchill down to discuss the publication. The demands of prime minister took precedence as British forces were besieged in Tobruk and the German army approached Moscow.

  Churchill examined Cassell’s standard royalty contract late in November. He was still pondering the tax advantages of an outright sale in early December, when the Japanese bombed the American fleet in Pearl Harbor. This brought the United States into the war and all thoughts of his book disappeared as Churchill sped towards Washington to discuss military plans with Britain’s new ally.

  *1 Chartwell’s wartime complement increased in only one department: Churchill agreed to the department store Harrods’ request to transfer twenty-two varieties of rare fish into its lakes; in return, he could keep as many fish as he chose at the war’s end.

  *2 Beare v. Carter, King’s Bench Division 1940.

  *3 Mr Wingfield of Fairbairn, Wingfield & Wykes.

  *4 Downing Street communications with Roosevelt were labelled ‘My Personal Telegrams’.

  *5 In September 1939 Churchill helped Imre Revesz to obtain a post in the Ministry of Information and, early in 1940, to gain British citizenship under the anglicized name Emery Reves. Reves did not settle in the ministry; he moved instead to New York where in February 1941 he re-established his Cooperation agency as Cooperation Publishing Co. Inc.

  *6 Eggs were omitted from the list until late 1941, when the ministry agreed to deliver twelve a week, so long as they were ‘for the specific purpose of providing eggs for diplomatic personnel who may be visiting’.

  *7 This assistance brought extra bureaucracy: wine was only to be served with the fund’s prior approval; for each bottle, the names of guests were to be logged in the cellar book and a separate form was to detail ‘the nature of the entertainment’.

  21

  ‘Taxed to the utmost’

  Film Turns the Tide, 1942-5

  Exchange rate: $4 = £1

  Inflation multiples: US x 14; UK x 40

  THE PRIME MINISTER spent Christmas 1941 and the New Year in Washington, then returned to find a House of Commons and a public concerned about the British army’s retreat across northern Africa, together with naval losses in Asia. Churchill turned a two-day debate on the conduct of the war into a vote of confidence, at the end of which only one MP recorded a vote of opposition.

  Two weeks later, on 15 February 1942, Singapore fell to numerically inferior Japanese forces, exposing the remaining Malayan peninsular. If that fell, the enemy could threaten either India or Australia and New Zealand. An increasing number of voices questioned the wisdom of one man being both minister of defence and prime minister, so Churchill restructured his government. He held on to his key positions, giving up only leadership of the House of Commons, which he handed over to a senior Labour figure, Sir Stafford Cripps. Sir Stafford also entered the war cabinet and was to deputize for the prime minister in the House of Commons, so that Churchill did not have to attend it so frequently.

  Despite the numerous demands on Churchill’s time, he still wanted to settle the tax treatment of his regular Sunday newspaper articles. His tax adviser Geoffrey Mason was in favour of a challenge to the Inland Revenue’s ruling that these should be taxed as royalties, although the challenge would require an appeal to a tribunal of general commissioners of taxation. Churchill’s usual lawyers, Nicholl, Manisty & Co., had decided that such an appeal lay beyond their competence, so Mason had recruited help from a tax specialist, Anthony Moir, at Fladgate & Co., a firm of solicitors nearby in Pall Mall.

  Soon after his return from the White House, and ‘in strictest confidence’, Churchill had authorized Mason and Moir to consult a barrister, Charles Graham-Dixon.*1 The hope was that the opinion of a well-respected tax barrister might persuade senior minds at the Inland Revenue to think again, but it failed to do so.1

  Moir was therefore called to Downing Street in order to brief Churchill on the risks of mounting a formal appeal to a tax tribunal. Moir arrived for his first appointment on 19 May and expected the meeting would be short. Churchill was facing renewed criticism of his leadership, following the fall of the remainder of the Malayan peninsula, and the House of Commons was about to start a two-day debate on the conduct of the war. Years later Moir set down his recollection of the meeting:

  I was warned that [Churchill] would probably give me ten minutes, that I must be very brief and that I must tell him (if such was the case) that he had two or more courses open to him. Thereafter he would instantly make up his mind which course he would pursue... I was ushered into the Cabinet Room... and started off and said my piece which I had carefully prepared. [Churchill] after a short time got up and started walking around the table, talking as he did so, with the result that, when he arrived at each end he was completely out of earshot.... ‘If I appeal, will it be entirely private; can anyone get to know about it?’ I replied that it would be entirely private before the Commissioners, but if we won, they could appeal further and then the hearing would be in public.... And so it went on. My ‘ten minutes’ was eventually turned into one and a half hours, but when I left I came away with instructions to lodge an appeal. I remember walking down Whitehall and buying an evening paper,
the headline of which was ‘Why wasn’t Churchill in the House Today?’ and at least I felt that was a question which I could answer with some conviction!2

  Churchill’s absence was part of a new policy that he should restrict his appearances in the House, but on this occasion it was criticized by many members. He was, however, exonerated by at least one his critics, Sir Edward Grigg, who concluded that Churchill had ‘important preoccupations to keep him elsewhere’.3 Little did he realize it was the prime minister’s tax affairs.

  Moir was asked to suggest more tax-saving ideas to Geoffrey Mason, while they waited for the appeal process to run its course. They came up with three. The first was that Churchill should share more of his earnings from Into Battle with Randolph, who paid a lower rate of tax. Mason calculated that if Churchill handed over half, father and son could save up to £1,500 of tax between them.4

  At that time, in February 1942, filial relations were strained. Randolph’s marriage had ended and he blamed his parents for taking his wife Pamela’s side. However, he needed the money after losing £3,000 playing what a fellow officer, Evelyn Waugh, described as ‘very high gambling, poker, roulette, chemin de fer’ on the way to Egypt with his regiment.5

  Two days after ordering the transfer of his earnings to Randolph, Churchill worried about the propriety of such an action, but he was assured that Mason had already sounded out the tax authorities.6

  Another of Moir and Mason’s suggestions was that Churchill should sell the second book of his wartime speeches for a capital sum rather than royalties. Early in February Aubrey Gentry, the Cassell director, obliged by offering £10,000, but Churchill was still undecided whether to accept the sum when the fall of Britain’s Singapore garrison led the publishing firm to withdraw its offer on the grounds that the market for it had ‘dulled’.7 Kathleen Hill was quick to accept a revised offer of £8,000, but it was conditional on Cassell finding a buyer in America. This proved difficult because Churchill’s stock was falling in tandem with the reputation of the British military. After three months of fruitless searching, Churchill met Gentry to agree a reduced price of £3,000 without American rights.8