by David Lough
Churchill set up an extra account at Cox & Co., his ‘D’ account, to control the flow of Home Rule money, £6,000 of which he gave in two batches to the government’s chief whip, the Master of Elibank, who was to emerge as one of the murkier protagonists in the following year’s Marconi share scandal.28 In September 1912, Churchill still had £4,000 of the Home Rule money and £1,500 of the free trade money lodged in his accounts, a situation that Caird happily accepted when Churchill sent him the bank passbooks to inspect.29 What happened to the £5,500 left of Caird’s money thereafter becomes less transparent. During November 1912, the chief whip’s office asked for more funds in a letter marked ‘Secret’, claiming already to have spent over £8,000 (without giving details of how) although Churchill had only provided £6,000.30
All Churchill’s bank statements for the remainder of 1912 and 1913, a period of great sensitivity over the personal finances of government ministers during the Marconi scandal, are missing from his archive. However, it seems likely that the chief whip did receive his extra £2,000 (or more), because the next report of Churchill’s Caird deposits, in June 1915, put them at £3,320, exactly where one would expect if he had acceded to the chief whip’s request in 1912 and then sat on the rest of the money during the Marconi scandal.31 Between June 1915 and August 1916, the balance fell from £3,320 to just £600;32 Sir James Caird died in March 1916 and Churchill’s finances were under stress at the time because his ministerial salary had been replaced by the pay of an army colonel, but it is impossible to be precise about whether he eventually used the balance of Caird’s money because the records of his ‘C’ and ‘D’ accounts during 1915 and 1916 are simply missing. What we can say is that the money was never transferred to his or Clementine’s main bank account and that he never included it in any forecasts of his own cash flow during the war.
He had also excluded Caird’s money in 1912 when trying to work out whether he and his family could afford to move into the First Lord’s official quarters at Admiralty House. It took eighteen months, until late in 1913, before a compromise was worked out: the grander rooms were mothballed, while the Churchills moved in to the rest with seven servants, not twelve.
Over that same period, the previously intimate political relationship between Churchill and Lloyd George had begun to change. The First Lord was now a spending minister, trying to extract funds to match an expanding German naval shipbuilding programme from a sceptical chancellor; but tensions were put aside in the summer of 1912 when long-standing Tory complaints at the corruption of Liberal politicians by newly acquired wealth suddenly erupted into the Marconi scandal. The allegations of personal gain from improper dealing in Marconi shares never touched Churchill, but did involve both the chancellor and chief whip.33 Churchill came to his colleagues’ aid by urging Lord Northcliffe*7 to restrain his newspapers’ coverage of the affair and by persuading the two outstanding lawyers of the day, Sir Edward Carson and F. E. Smith (both Tories), to represent his fellow ministers in court.34 ‘I was so encouraged to hear from Winston that you took his view of my little worry,’ Lloyd George wrote to Clementine. ‘I am almost ill with worry over it.’35
As the scandal subsided, Churchill’s mother finally threw out her second husband. Their difficulties had become increasingly public since 1910, when they had rented a house in Cavendish Square while she put the finishing touches to a play that she was writing in a fresh attempt to earn money. Keen to secure the services of a well-known actress as the female lead, she had invited Mrs Patrick Campbell*8 for daytime visits to Cavendish Square, soon reciprocated by George’s nocturnal trysts to her ‘charming little house in Kensington Square’,36 a habit that outlasted the short run of His Borrowed Plumes’.
Churchill tried but failed to broker a financial settlement ‘before any avoidable publicity is given to your rupture’ and returned to the fray in 1911, after his mother summoned both brothers to a ‘council of war’. Asking her to stay away from her husband, Churchill summoned ‘George West’ to a business interview, warning him that both he and his wife were treading dangerously: ‘Your joint financial position must be considered in regard to the maintenance of credit, the sudden removal of which might be ruinous to both of you.’37
His mother waited another five months until September 1911 before she gave up any hope of their living together again: ‘I could – but he will always hanker after the things he wants,’ she told her son sadly. ‘Of what use to chain him to me?... Tear this letter up and don’t worry about me.’38 Divorce discussions limped along during 1912, while George fought a demand to pay Jennie £2,000 a year, complaining to Jack of her ‘ghastly and persistent extravagances’.39 Jennie found a fresh solicitor, Wodehouse,*9 who suggested a scheme to raise funds by reshuffling insurance policies, but Churchill refused to play his part by providing her with a £2,000 guarantee. He told his mother:
Although there may be advantages in simplifying the control of your insurance policies, the real effect of the transaction is to secure you about £2,500 ready money, at the cost of permanently reducing your income by £300 a year. This is certainly not a good or wise arrangement, & only means a brief flutter followed by long deprivations.40
His mother’s reply at the beginning of December was emotional:
Forgive me if I return to the ‘charge’ & ask you to reconsider yr. answer in respect to this Insurance Scheme. The risk to you is infinitesimal... My position is an untenable one, & apart from anything else I must find a guarantor instead of George... I know you would do anything for me and always have... I hate having to write all this, as I know how overworked you are, but I can’t very well help it... Bless you – Mother.41
Churchill and his mother spent Christmas and the New Year together at the duke of Westminster’s new hunting lodge near Bayonne in France, where Churchill acquiesced. Pre-occupied by cabinet battles with Lloyd George over the £3 million required to build four rather than two battleships, he decided against fighting on a second front with his mother. His change of mind unlocked the divorce negotiations: George was to keep the first £2,000 of his earnings, give her the next £1,000 and then share any more equally until he had paid her £2,000 a year. ‘I am returning to you my engagement and wedding rings. I say goodbye – a long goodbye,’ Lady Randolph wrote as her decree nisi was granted on 16 April 1914.42 The next day, her former husband married Mrs Patrick Campbell, busy playing Eliza Doolittle in Bernard Shaw’s Pygmalion.
This episode finally opened the Churchill brothers’ eyes to the true size of their mother’s income over the last twenty years: she had always claimed it to be barely in four figures, but her solicitor’s schedules showed that it had exceeded £5,000 a year. The problem was that two-fifths had disappeared in paying interest on £22,500-worth of ‘official’ loans, while another fifth had gone to unofficial moneylenders. In addition, Lady Randolph estimated her unpaid bills at £5,000,43 a sum that her ex-husband claimed at his bankruptcy proceedings she had spent each year on clothes alone.
As her financial reorganization neared completion, what her solicitor called ‘a very bad hitch’ came to light. An alert lawyer acting for the Legal & General insurance company, which was due to provide her new loan, spotted the clause in Lord Randolph’s will that had given its trustees the power to divert half its income to her children if his wife remarried; if this clause was ever to be exercised, the Legal & General would find its security halved. The only way out, her solicitor suggested, was to obtain a judgement from the Chancery Court that, as it stood, the clause was iniquitous and almost certainly not what Lord Randolph had intended. Theodore Lumley broke the news to Churchill as though his firm had made the discovery, glossing over the fact that the brothers could have been receiving a formal allowance for the last fourteen years. Churchill, however, was quick to pick up the point, summoning Lumley to appear at the Admiralty that same evening:
I and my brother Mr John Churchill should surely have been informed by you at some period during the years which have passe
d of our rights under the Will. It appears to me extraordinary that we should have been left in ignorance of a matter of such consequence for the last 15 years.44
Nor did Jack conceal his shock from their mother:
We had always thought that Papa was very wrong not making any provision for us during your life. We thought the Will left us in the possible position of being for many years without a penny while you were in receipt of over £5,000 a year. This did in fact happen & you were unable to give us any allowance... Winston and I are now both making our own living and as long as we do so of course nothing will be claimed, although I believe that at the present moment we could each demand about £600 a year.’*10... We have begged you so often to live within your income – which is not a very severe demand. Your income is larger than mine in most years and you have nothing whatever to keep up. Unless you are able to do so and if you start running up bills again – there is nothing that can save you from a crash and bankruptcy.45
Agreeing to sell her home and buy a ‘doll’s house’ as replacement, Lady Randolph paid brief obeisance to her younger son’s home truths, while he juggled her increasingly litigious creditors. Her elder son needed money almost as badly, having finished 1913 with loans of £3,000, an overdraft of £2,740 and unpaid bills of at least £2,000. He recognized that his mother’s scheme, which still needed his approval, might provide a bargaining chip: if the disputed clause’s exact meaning could be established, it might help him to borrow more money to pay bills. ‘Strictly confidentially’, he asked Lumley in mid-February to look into the prospects of borrowing an extra £5,000 if the verdict went the right way.
The problem had become more urgent by April 1914: ‘Our finances are in a condition wh[ich] requires serious & prompt attention,’ he confessed to Clementine, promising to divert himself from ministerial duties for however long was required: ‘The expense of the 1st quarter of 1914 with our holiday trip is astonishing. Money seems to flow away.’46 Discreetly, he arranged an interview with the chairman of his bank, Reginald Cox.*11 It was a long one, he told Clementine afterwards, as a result of which he was to prepare a ‘scheme’ to pay off their debts: ‘We shall have to pull in our horns. The money simply drains away.’47
‘Scheme’ turned out to be rather a grand term for what Churchill had in mind: he asked to borrow an extra £4,000 to make a clean sweep of all his old, unpaid bills. He would provide security in the form of a charge over all his own and his wife’s future inheritances under the various family settlements, once he had established legal certainty to his entitlement. Cox declared himself ‘favourably inclined to entertain the matter’48 but the bank’s solicitors Fladgate & Co. wanted expensive extra security in the shape of life insurance: ‘My business proposals do not go smoothly, for the reason that the insurance companies try to charge excessive premiums on my life – political strain, short-lived parentage & of course flying,’ he told Clementine in June.49
Both Jennie and her sons now had an incentive to establish the precise meaning of Lord Randolph’s will. Churchill preferred the privacy of an arbitration, but accepted that a formal trial was inevitable because the decision of an arbitrator would not be binding on his children (who had an interest as the ultimate beneficiaries of Lord Randolph’s will trust). Wodehouse lodged papers in the case of Churchill v. Churchill which was heard behind the closed doors of the Chancery Division of the High Court on 18 June 1914. Helpfully for the brothers, the judge ruled that the trustees could make a lawful advance to them or their children without Lady Randolph’s consent, because she was adequately safeguarded by her position as one of the trustees.50 Churchill completed the paperwork for his new £4,000 loan the next day.
Cox & Co. lodged the money in his account ten days after Archduke Ferdinand’s assassination in Sarajevo.51 By the end of July, he had paid fifty tradesmen in full or in part, and only £200 remained in the account. His wine merchant was one beneficiary, but the flow of Churchill’s orders continued unabated as Randolph Payne delivered twelve consignments of the familiar mix of Perrier-Jouët champagne, brandy and vermouth to his households at Admiralty House and their rented Norfolk holiday house in the five weeks that passed between the assassination and the outbreak of war.52
*1 ‘The Pug’ was Clementine’s nickname for Churchill. Décassé was his term for ‘out of funds’. 27 October 1909 WSC letter to CSC, SFT:35.
*2 In 1754 the British government refinanced all its floating-rate debt and most of its 4 per cent annuities into a single issue of 3 per cent Consolidated Stock, which is never due to be repaid. Known as ‘Consols’, these remain the oldest public bond instruments still actively traded.
*3 James Caird (1837–1916), the owner and director of Caird (Dundee) Ltd, a textile manufacturers using modern technology to weave cloth from jute; a philanthropist, Caird donated £240,000 during his lifetime to charities, many in the Dundee region; he also helped to fund Shackleton’s Antarctic expedition (1914–16); baronet, 1913.
*4 The party included Churchill’s hosts Lord and Lady Nunburnholme, the earl of Granard, Earl Cowley, Viscount Chelsea, Lord Elcho, Lord Lovat, Lord Tweedmouth and The Mackintosh of Mackintosh. Churchill’s shooting card shows that they killed 2,947 birds on the first day and 2,034 on the second.
*5 Maxine Elliott (1871–1940), born as Jessie Dermot in Rockland, Maine; took the stage name Maxine Elliott at her début in The Middleman in New York 1890; first appeared as a ‘star’ in her own right in New York 1903; London 1905; opened her own New York theatre 1908.
*6 French troops occupied Fez, the Moroccan capital, to quell a rebellion against the country’s sultan. Fearing imminent French annexation of the country, Germany despatched a gunboat to the port of Agadir. There were no hostilities, but the speed at which a serious confrontation developed caused widespread concern in Europe.
*7 Formerly Alfred Harmsworth.
*8 Beatrice Tanner (1865–1940), took her stage name from her first husband Patrick Campbell (who died in the Boer War); stage debuts in Liverpool 1888, London 1890, New York 1900; the inspiration for George Bernard Shaw’s Eliza Doolittle in Pygmalion.
*9 H. Wodehouse, senior partner of Messrs Wodehouse & Davidson of St James Street, London.
*10 Jack’s calculation suggests the trust’s income was £2,400 a year; using the then customary assumption of an income of 5 per cent from trust investments, this implies that the trust’s capital value stood at c. £50,000.
*11 Reginald Cox (1865–1922), senior partner, Cox & Co.; agent to the British army; baronet 1922.
8
‘The clouds are blacker and blacker’
The Legacy of War, 1914–18
Exchange rate $5 = £1
Inflation multiples: 1914 US x 25; UK x 90 1918 US x 15; UK x 45
FEW IN BRITAIN even noticed Archduke Ferdinand’s assassination on 28 June 1914. The Irish Question had dominated politics in Britain for most of 1914. Writing to his Paris partners soon after the Archduke’s death, Lord Rothschild was more worried about the chancellor of the exchequer Lloyd George’s demagoguery. Markets, he reported, were better than they had been all year, and ‘all the new issues which were at a discount are now at a premium’.1
The mood among politicians and financiers began to darken in mid-July, however. European stock exchanges fell on Monday 20 July, and London reacted badly to news of Austria’s ultimatum to Serbia on the following Friday. The next morning the London Stock Exchange experienced its worst fall since 1870. When Serbia rejected the ultimatum, commentators described the markets as chaotic: ‘A DAY OF FORCED SALES’ ran the headline in the Financial Times.
After spending a few days with his family on the coast of Norfolk, Churchill returned to London in time to approve the First Sea Lord Prince Louis of Battenburg’s recommendation to delay the dispersal of Britain’s fleet to its home ports following its gathering at Spithead for a review by the king. It passed without lights through the Dover Strait to take up battle stations in the North Sea on the night of W
ednesday 29 July; the very day when Austria-Hungary declared war on Serbia, prompting a steep drop in government bond prices across Europe.*1 The Bank of England raised the bank rate to 4 per cent on Thursday 30 July, doubled it to 8 per cent on Friday and raised it again to 10 per cent on Saturday 1 August, when the London Stock Exchange closed ‘until further notice’.
Paying one of his last bills – for personal use of HMS Enchantress – Churchill described the scene in the capital to Clementine, who remained in Norfolk: ‘The city has simply broken into chaos. The world’s credit system is virtually suspended. You cannot sell stocks and shares. You cannot borrow. Quite soon it will not perhaps be possible to cash a cheque.’2 Three days later, with the agreement of Prime Minister Asquith, he ordered the full mobilization of the British fleet; on the following day, Britain’s ultimatum to Germany expired. Shortly before midnight Churchill authorized a signal to all ships: ‘Commence hostilities at once with Germany.’3
Financiers and politicians alike were taken by surprise: Cassel was still on holiday in Switzerland; Paul Nelke, the senior partner of Jack’s stockbroking firm, spoke for many when he told a stock exchange committee that ‘he was a rich man on 1st July but what he was now he could not say’.4 A complete financial collapse was prevented only by a government moratorium on all debts and emergency funding from the Bank of England.
Churchill warned Clementine that they would have to take ‘rigorous measures’ to reduce spending. However, his immediate difficulty sprang from his new life insurance policy’s restrictions against using submarines or aeroplanes: he was forced to pay an extra £39 to cover ‘aviation (including sea-planing)’ for six months, while his insurers wanted £146 if he stepped on to a warship.5
