The attention of the Committee has been drawn to the difficulties imposed on our Secret Service by lack of funds. . . . If the allowance under its head is not augmented, and very largely augmented, the organization cannot be expected to fulfil its functions, and this country will be most dangerously handicapped.
‘Defence Requirements: Programmes for the Defence Services’, 19361
INTRODUCTION
If the period prior to the First World War was the period that led to the creation of the Secret Intelligence Service (SIS), it was the inter-war period in which it most developed the trappings of a truly modern secret service. It was during this interval that the agency acquired that distinctive internal tasking and dissemination architecture the official history terms the ‘1921 arrangement’, which remains almost unique to the agency 90 years later. As a result, the years from 1919 to 1939 are the crucial period for understanding the fundamental relationship between the SIS and its masters in Downing Street and Whitehall, and its essential status and function within the machinery of British central government.
In terms of the SIS experience of the era, the inter-war years can be divided into two distinct chronological phases, and two distinct structural trends in its internal organization. The two historical phases are a bit more than a decade of post-war demobilization, recession and retrenchment between 1919 and 1932, and a second interval of just less than a decade of escalating international tensions between 1932 and 1939, terminating with the outbreak of the
Second World War. The two structural trends within the SIS were the establishment and progressive elaboration of the intelligence producer–consumer interface in government on the one hand, and the technical and technological elaboration of the business of spying on the other hand. The former of these was very much imposed from without, a consequence of the struggle for control of human intelligence operations that resulted from the First World War ‘turf wars’. The latter was a result of internal initiatives, chiefly on the part of the SIS’s second Chief of Service, or ‘C’, Admiral Sir Hugh ‘Quex’ Sinclair. Cumming may have been the founding father of the SIS, but it was Sinclair who displayed a real vision of how a national intelligence service should work, what it should be capable of, and what it needed to be able to do to fulfil those requirements. Where Cumming had been ambivalent about the role of any counter-intelligence or counter-espionage effort, Sinclair was determined to incorporate those functions centrally within SIS’s work and organization. Cumming’s MI1c had dabbled passingly and amateurishly in political operations in the nascent Soviet Union, but Sinclair sought to create a permanent subversion and sabotage arm within his agency. Where Cumming’s headquarters had been loose and informal, Sinclair’s displayed real attempts to formalize and rationalize administration and finance.
Under Sinclair, the SIS took on the desperately secret work of opening foreign diplomatic bags on behalf of the Foreign Office.
When the Passport Control Organization that Cumming had worked so hard to acquire as standing cover for his post-war foreign bureaux looked as if it might have been compromised, Sinclair set up an auxiliary field organization under a notionally dismissed officer to provide a back-up capability. Finally, it was Sinclair who confronted the new technologies and intercontinental scale of secret intelligence operations through the creation of a covert, secure clandestine radio network that linked SIS HQ to its stations abroad and their agent networks in the field. But, in the last analysis, no amount of rationalization or innovation by the new C was going to be enough to compensate for the crippling effects of recessions and international depression, and the comprehensive financial retrenchments of an increasingly economically beleaguered succession of governments, especially once confronted with the rapid escalation of tensions with what would become the Axis powers.
TASKING, OPERATIONS AND DISSEMINATION: THE ‘1921 ARRANGEMENT’
The end of the First World War prompted a comprehensive review of Britain’s defence and intelligence needs, including the intelligence services. When Cabinet convened the first of a series of Secret Service Committees in 1919 to review post-war intelligence needs, the committee was confronted with the dual problems of a failure to fulfil consumer intelligence requirements on the one hand, and operational hazards from poor interorganizational coordination in the field on the other hand.2According to the official history of British intelligence in the Second World War, one of the main conclusions of the Secret Service Committee of 1919 was that to ‘safeguard the interests’ of the agency’s major consumers, ‘the intelligence branch in each of the three Services came to house one of its sections in the SIS, where it formed a part of the HQ staff’.3Thus, the service branches, and in due course the Foreign Office and others, would have a direct input to operational targeting and planning, and would also have members of their staff indoctrinated into SIS’s sources of information. The official history of British intelligence in the Second World War refers to this consumer liaison system as the ‘1921 arrangement’, although, as we have already seen, Alan Judd has compellingly argued that the essence of the 1921 arrangement had already been formulated in what he calls the MacDonogh reforms of 1917. The details Judd provides from Cumming’s diary strongly suggest that the original, functional reorganization of Whitehall Court into ‘reporting sections’ was internal, and that the consumer liaison dimension of the MacDonogh reforms was not fully implemented during the war, although it was certainly on the books for progressive or future implementation. Of course, it is also possible that the 1919 report served as an enabling document for arrangements that already existed de facto. After all, the SIS was staffed almost entirely by personnel seconded from the service branches, and it would be very difficult to distinguish between staff seconded for operational purposes and those seconded for liaison purposes, because even the former would have been liable to report back to their home departments. At any rate, in the absence of having the 1919 report available in the public domain, it would appear that the real substance of the 1919 decision was the complete implementation of the MacDonogh scheme, but it provided as a quid pro quo (perhaps to appease Cumming’s defenders in the Admiralty and possibly the Foreign Office) an SIS monopoly on human
intelligence operations. Military Intelligence won the campaign to tie SIS to its customer departments, but lost the right to run HUMINT operations of its own.
A second quid pro quo for the SIS’s central role was that each of the Service branches would take turns providing the Chief of Secret Service (CSS), or ‘C’ (a title retained from Mansfield-Cumming even after his death).4However, this particular aspect of the arrangement was not observed in practice. When Mansfield-Cumming died in 1923, he was replaced not by a representative of either of the other two Service branches but by the Director of Naval Intelligence (DNI), Admiral Sir Hugh ‘Quex’ Sinclair. Sinclair (who, as DNI, had overseen the workings of the government Code and Cypher School [GC & CS]) arranged for SIS and GC & CS to be brought closer together, bringing GC & CS under his control as C and into SIS HQ at Broadway Buildings in 1925. Under this combined arrangement, the SIS Circulating Sections also served to issue consumer require-ments to GC & CS as well as SIS.5
The series of consumer liaison sections seconded to the SIS have become a standard in the literature on the internal organization of the SIS between the wars. They were known as the ‘Circulating Sections’, and, in the existing literature are usually, at the time of the Second World War, described as follows:
Section I Political (Foreign Office) Section II Air (Air Ministry) Section III Naval (Admiralty) Section IV Military (War Office) Section V Counter-Espionage
Section VI Industrial/Commercial (MEW) Section VII Finance
Section VIII Radio/Cypher.6
To be sure, the 1917 reorganization had created functional ‘reporting sections’ for Political, Military, Naval, Air and Economic intelligence that sorted and collated raw information forwarded from the agency’s foreign bureaux. It is unclear whether or not the Circulating Section designations were in use at the time of the original MacDonogh reforms the 1921 arrangement. This is because the assigned numerals do not reflect the chronological order in which the various Circulating Sections appeared – Section V, for example, did
not exist until 1931. But it can be ascertained that these designations were in use by 1932, at the very latest, from SOE papers released into the Public Record Office in the early 1990s.7To complicate matters further, Sections V, VII and VIII were not technically ‘Circulating Sections’ at all. Section V was operational, concerned with counter-intelligence and counter-espionage operations abroad. Section VII was Percival Sykes’s internal finance department, and Section VIII (not added until 1938) was also operational, providing a network of short-wave radio stations to carry SIS intelligence traffic on a global scale. As a result, in order to understand the development of the 1921 arrangement, one has to concentrate chiefly on Sections I, II, III, IV and VI.
The War Office liaison section, Section IV, retained the designation MI1c within the reconsolidated Directorate of Military Operations and Intelligence throughout the inter-war period. It was given in the War Office Lists of the period simply as ‘Special Duties’.
After the war, under the original 1919 implementation of the 1921 arrangement, it was a fairly sizeable section within Whitehall Court.
It included three officers, Brevet-Major Stewart Graham Menzies, formerly of the British Expeditionary Force’s GHQ intelligence branch during the war; Major L.A.C. Vigors; and Captain J.W.F.
Wyld, who had been on Cumming’s staff since 1918 at least.8 It steadily dwindled in size as post-war austerity set in, with Vigors departing in 1920, and Wyld (now listed as ‘Extra-Regimentally employed’) leaving around 1921. By 1922, it was manned by Menzies alone, and would continue to be so until his promotion to C at the beginning of the Second World War.9 Menzies also eventually doubled as unofficial deputy chief under Sinclair on top of his primary function as ‘IV’.10
The Admiralty’s relationship with the SIS developed along similar lines. In the wake of the First World War, the Naval Intelligence Directorate (NID) underwent a comprehensive review, and was cut back quite significantly. The extent of the NID’s global and London-based presence was such that the review took a number of years to complete.11Under the eventual post-war form of the NID in 1924,12 the SIS liaison was designated Section 3 (NID3; it would hold much the same designation as Section III within the SIS). NID3 was answerable to the head of NID1b which grouped together ‘special intelligence’ (SIS) with the naval intelligence organization abroad (mainly its naval attachés and intelligence centres) and a sub-section
Figure 3.1: SIS in
handling ‘special enquiries re persons’.13The original appointee to the Naval Section was a Captain Sommerville, and one of his first tasks was to prepare a report on the quality of the ‘Naval Secret Service’
provided by Cumming’s organization.14
While the War Office and Admiralty aspects of the 1921 arrangement appear, in many respects, to have essentially involved Service Branch officers taking over their respective 1917 functional reporting sections, the development of Section I was much less continuous. According to the official history, the Foreign Office insisted that the SIS ‘be kept operationally separate from its own political reporting system and only then that ‘in so far as the SIS engaged in political intelligence, it should do so as a supplier. . . to the Foreign Office, under Foreign Office control’.15 As we have seen above, the prohibition of the SIS performing foreign political espionage on behalf of the Foreign Office appears to have been withdrawn around 1917, with the SIS Political Section being established under Sir William Tyrrell in 1918. In this sense, Foreign Office liaison anticipated full implementation of the ‘MacDonogh scheme’, and well ahead of either service branch. However, in 1919, Tyrrell returned to the Foreign Office to become Assistant Under-Secretary of State.16 As a result, the section appears to have lapsed until Malcolm Woolcombe’s appointment two years later in 1921; he was later replaced during the Second World War by David Footman.17 During the inter-war period, the Air Ministry had its own intelligence division under its Directorate of Operations and Intelligence18but did not set up an SIS presence until 1929/1930. The reasons for this are unclear, although the fact that the Directorate of Military Operations oversaw intelligence concerning ‘military aeronautics’ via MO1 from 1925 on, coupled with the already existent MI1c/Military Section at SIS HQ, may have been a factor.19 However, in late 1929, the decision was taken to set up an Air Section at the SIS alongside the Military, Navy and Foreign Office secondments, headed by F.W. Winterbotham and designated AI1c.20 Within the SIS, AI1c was referred to initially as the Air Section, and then, under the adoption of the Circulating Section designations, it became Section II. Winterbotham’s Air Section proved to be the locus of a great deal of innovative thinking and activity within the SIS. It was Section II which first began to address the SIS need for technically and scientifically literate intelligence gathering, undertook a revitalized campaign of air reconnaissance of German forces in
1939 by setting up an SIS air photographic unit employing freelance pilot Joseph Cotton,21and would provide the setting for the first SIS scientific intelligence section, IId, shortly after the outbreak of the Second World War (discussed in greater detail in the next chapter).
The final development in terms of strict consumer liaison functions was that of the section handling commercial, industrial, economic and financial intelligence. The development of Section VI is less clearly defined in the literature on the SIS than that of the other consumer liaison sections. Under the MacDonogh reforms of 1917, Whitehall Court included an Economic Intelligence Section collating information needed by the War Trade Intelligence Department (later the Ministry of Blockade) and Service Branch sections involved in the enforcement of the blockade. War trade and blockade intelligence ceased to be issues after the war, and in so far as the Economic Intelligence ‘reporting section’ carried on, it did so without any single primary consumer. As we have seen above, the Department of Overseas Trade (DOT) had a long-standing intelligence function, and may have had some interest in the SIS product. If so, the interest would have been short-lived because, by the mid-1920s, it had abandoned trade intelligence as its main function in favour of organizing trade fairs abroad to promote British exports.22For much of the inter-war period, therefore, economic intelligence was a much diminished sphere of customer demand. The Second World War Economic Intelligence Section did not have any institutional raison d’être until nearly a year before the outbreak of that war.
The development that put the Economic Section on the same footing as Sections I, II, III and IV was the creation of the Industrial Intelligence Centre (IIC), originally set up at 54 Broadway and staffed with SIS personnel. The function of the IIC was to handle intelligence regarding the economic and industrial war-fighting potential of potential adversaries on behalf of the Industrial Intelligence in Foreign Countries (FCI) sub-committee of the Committee of Imperial Defence (CID).23It was originally installed at Broadway with an SIS officer called Desmond Morton as its head. Why it was initially housed at the SIS is unclear; in 1932, Morton observed in support of the Centre’s relocation to the DOT that ‘the work of the IIC in no way resembles that of “secret service”. . . . The IIC is not responsible for obtaining information in the first instance i.e. it is not a “secret service”, and has no official or unofficial agents reporting to it.’24 Indeed, the unit relied chiefly on information from overt sources,
either published or acquired through the various Whitehall Departments with whom it also dealt as consumers of its assessments.
The IIC was an analytical, not an operational entity, an early step in the evolution of the contemporary, interdepartmental, ‘all-source’
analysis of intelligence that has increasingly dominated the consumer side of the intelligence equation since the Second World War. Despite these profound differences from the SIS, and the limitations already upon the Secret Service, the IIC was set up at SIS HQ and staffed with SIS personnel.25Morton had been attached to the SIS since 1919,26in which capacity he appears to have controlled the anti-Soviet section that would figure so centrally in the 1924 Zinoviev letter affair (discussed below),27while the Deputy Head, F.F. Clively, had served as a Passport Control Officer in Prague from 1925 to 1931 and had then been posted to Passport Control headquarters prior to his attachment to the IIC in 1932.28
The demands on the IIC increased rapidly during the 1930s, leading to increases in staff size that, in 1935, made continuing housing it at Broadway unfeasible. The Treasury representative on the FCI suggested that an informal subcommittee should meet ‘and examine how best to provide staff for the IIC’.29The conclusion was that the IIC should be relocated to the DOT. On 26 August 1935, Morton wrote to Sir Edward Crowe, Comptroller of the DOT, reminding him of discussions in March of that year concerning a possible transfer of the IIC to the DOT. Apart from the steady expansion of the IIC, he argued, ‘there is also the question of relieving C of the burden of payment for the existing staff’, and it had been suggested at the time that the costs of rehousing the IIC at Overseas Trade would be absorbed from savings at the DOT during the 1935–36 financial year. Despite those discussions, he complained,
‘I have heard nothing from Jones (J.H. Jones at the DOT) since then, but the financial pressure on C has certainly not been lightened by recent events.’30
The reason for Jones’s reticence was simply that the DOT was less than enthusiastic about acquiring the IIC. His view, expressed in a 1937 paper on IIC staffing, was that ‘The IIC has to be attached to some Government department, but there is no particular reason why it should have to be attached to the DOT except that every other Department seems likely to be excluded for special reasons.’
Presumably, the ‘special reasons’ Jones so tactfully refers to were that the other government departments were for the most part consumers
of the IIC’s assessments. They were, therefore, partly in competition for access to the IIC’s scarce resources and for one of its consumers to have controlled the IIC might have constituted a conflict of interest for both the IIC and that department. Jones’s assertion that there was
‘no particular reason’ that the DOT should take on the IIC seems somewhat idiosyncratic in view of the DOT’s original intelligence function. The department had originally been established in 1900 as
‘no particular reason’ that the DOT should take on the IIC seems somewhat idiosyncratic in view of the DOT’s original intelligence function. The department had originally been established in 1900 as