CHAPTER 27

An Iron Chancellor

After his defeat in Dundee, Churchill had the consolation of time to spend on his writing, and on developing (often with his own hands) his country house at Chartwell in Kent. In 1923 Stanley Baldwin, the new Prime Minister, called an unexpected general election because he wanted a mandate to introduce protection which he believed would allow him to reduce unemployment. This of course was Churchill’s original reason for leaving the Tories and he sought a constituency to stand in, making the unfortunate choice of Leicester where he formed no relationships with the people and fought a lacklustre campaign, losing to a wealthy Labour Party candidate. His only consolation was that the electorate had given no mandate for protection.

Baldwin had thrown away a substantial parliamentary majority. Lloyd George and Asquith, in agreement for once, supported the formation of a minority Labour government under Ramsay Macdonald. Churchill disagreed violently; in January 1924 he wrote to The Times: ‘The enthronement in office of a socialist government will be a serious misfortune such as has usually befallen great states only on the morrow of defeat in war.’¹ This was his break with the Liberal Party. Soon afterwards the Conservative member for the Abbey Division of Westminster died, leaving a constituency which included most of the West End of London, inhabited by the wealthy upper classes and very different from Dundee. He stood as an ‘Independent Anti-Socialist’ with the tacit support of many Conservative leaders, though they could not prevent an official party candidate standing against him. It was a far more stimulating campaign, with Churchill travelling round the West End in a coach with a trumpeter and deploying the chorus girls of Daly’s Theatre; he lost by 43 votes.

He had been moving closer to the Conservatives for several years, perhaps since he first became a ‘big navy man’ more than a decade before. In March 1922 he was ‘more Tory than the Tory ministers’ in opposing recognition of the Bolshevik regime.² In June 1923 he described himself as ‘what I have always been – a Tory Democrat’ and claimed that only ‘force of circumstance’, including the question of tariff reform, had pushed him towards the Liberals nearly 20 years ago.³ In the spring of 1924 he appeared at a huge Conservative rally in Liverpool, and began to seek a seat as a Conservative candidate. He was adopted for Epping, to the north-east of London, and the suburban voters provided a reliable Tory majority. When the Labour government fell at the end of the year, he was elected with a majority of more than 9,000. From this point he remained a member of the party until his death more than 40 years later, and on these grounds the Conservatives have claimed him as one of their own. Yet it can be argued that all his best work was done as a reforming Liberal minister, or a Conservative rebel, or as Prime Minister of a coalition; and in 1940 it was not the Conservatives who welcomed his elevation to the premiership.

Baldwin asked Churchill to join his government as Chancellor of the Exchequer. Churchill wanted to reply ‘Will the bloody duck swim?’ but instead answered with more dignity: ‘This fulfils my ambition. … I still have my father’s robe as Chancellor.’⁴ One leading Conservative commented: ‘Winston’s appointment is genius – you have hamstrung him …’.⁵ Certainly he was not the obvious candidate for the post – he knew little or nothing of economics or finance, he sometimes gambled compulsively and his own affairs were often in a mess. He would not leave the office with his reputation enhanced.

Nevertheless he was a reforming chancellor in many ways. He reduced the minimum pension age from 70 to 65, he reorganised the system of paying war debts to the United States and reformed the rating system of local government finance. But he returned to the Gold Standard at an unfavourable rate, which severely restricted credit, and he was opposed to any deficits in the budget while determined to cut taxes to restore the post-war economy. John Maynard Keynes followed up his The Economic Consequences of the Peace (about Versailles) with The Economic Consequences of Mr Churchill:

Why did he do such a silly thing?

Partly, perhaps, because he has no instinctive judgement to prevent him from making mistakes; partly because, lacking this instinctive judgement, he was deafened by all the clamorous voices of conventional finance; and most of all, because he was gravely misled by his experts.⁶

In addition Churchill alienated many with his typically combative conduct during the General Strike of 1926. Maurice Ashley, recently chairman of Oxford University Labour Club, almost turned down a post as his research assistant as ‘To me Winston Churchill was the politician who … had helped crush the General Strike. … Churchill was not merely a Conservative, a turncoat from the milder Liberals, but a reactionary of the deepest dye.’⁷

As Chancellor Churchill had some kind of interest in every department of government, but he was driven to cut defence spending which formed the largest portion of the national budget apart from the servicing of debts. He was up against formidable teams in each of the service ministries. Beatty was all-powerful at the Admiralty, with his charm, his connections and his political skills. He was supported by the First Lord, William Bridgeman, whom Lloyd George described as on the one hand having ‘engaging and childlike simplicity’ while on the other being ‘a wily Salopian’.⁸ The Bridgeman-Beatty partnership was probably as close as any between any two holders of these offices.⁹ Trenchard at the Air Ministry was even more domineering. His minister, Samuel Hoare, was the first full-time peacetime Air Minister to sit in the cabinet. He demonstrated his faith in the air by flying to India with his wife in 1927, at a time when long-distance flights were regarded as heroic. He was a clever and effective politician himself, but regarded Trenchard as a prophet. The army was less dramatic, headed by Laming Worthington-Evans as War Minister, who had already clashed with Churchill over air control. The Chief of Imperial General Staff from 1926 was General Sir George Milne, who started off with plans for reform but was soon bogged down in army conservatism.

Churchill was still particularly suspicious of naval demands, largely based on his personal experience. In August 1919 he wrote: ‘I suffered from three years of naval finance before the war and every pound was fought with an extreme but at the same time a salutary ferocity.’¹⁰ The Liberal MP Joseph Kenworthy, a former naval officer, wrote in 1927: ‘A former big navy advocate, he is now the watchdog of the Treasury.’¹¹ But Churchill believed he had good reasons for the change as the navy wanted to indulge in several very expensive projects with no real enemy in sight. In November 1924 he told the cabinet: ‘In view of the probable necessity for the development of a naval base at Singapore and the Admiralty desire for an increase in the cruiser programme … some investigation was required as to the rate at which these projects could be undertaken consistently with our financial situation and the desirability from a political point of view of avoiding any increase in expenditure on armaments in the forthcoming financial year.’¹²

The great naval base at Singapore was a central part of the strategy against Japan, after Britain was forced to drop the alliance with her as part of the Washington negotiations. Back in 1904 Fisher had claimed that Britain possessed ‘Five keys that lock up the world!’ – the Cape, Alexandria, Gibraltar, Dover and Singapore. To him they were ‘another proof that we belong to the ten lost tribes of Israel’, but Churchill was much more pragmatic.¹³ In 1921 the cabinet, including Churchill, had adopted a plan for an £10½ million base, but it was dropped by the Labour government, which enraged Churchill: ‘They have flouted the Dominions. They have deprived the British navy of the power of defending Australia and New Zealand.’¹⁴ He was less keen when the incoming Conservatives restored the programme in 1924, though he was never totally against it. His policy, as with building the air force and new cruisers, was to ‘slow down the rate of expansion’.¹⁵

The plan depended on defending the base against Japanese attack until the main fleet was mobilised to be sent to the region, and this aroused great controversy. The army and navy favoured six or eight 15-inch land-based guns to counter the Japanese battleships, the air force wanted torpedo bombers. Churchill supported the latter, partly because of its flexibility: ‘it is much better to have this cost represented in mobile air squadrons rather than tied up forever in one spot in two heavy batteries’. Moreover, from the Chancellor’s point of view it did not involve immediate cost and fitted in with the long term plan for the base: ‘if this work were completed in fifteen or twenty years, the air should play a far larger part in it than is now contemplated’.¹⁶ Trenchard of course supported this view but was overruled, much to his regret. Churchill also drew up his ideas for the strategy of a war in the Far East, though it was well beyond his remit as Chancellor. He suggested a division of battlecruisers or fast battleships during a period of tension, which would harass the Japanese while the main fleet was sent from the Mediterranean. If war was declared, a ‘preconceived programme of new construction’ should be started which would include the preparation of a floating base including store ships, tankers, repair ships and all kinds of ancillaries ‘capable of being moved forward point to point by selected anchorages with the movement of the battle fleet’.¹⁷

According to Churchill in July 1925, there was no question of ‘mortal peril’, which he defined as ‘a physical assault so violent as to deprive Great Britain finally of the power to convert to war purposes the latent energy of the empire’.¹⁸ Only two powers, Japan and the USA, had the capacity to threaten the British Empire on the seas. ‘However foolish and disastrous such a war would be … We do not wish to put ourselves in the power of the United States. We cannot tell what they might do if at some future date they were in a position to give us orders about our policy, say, in India, or Egypt, or Canada …’.¹⁹ In September 1928 he ‘talked very freely’ and claimed that the Americans were ‘arrogant, fundamentally hostile to us, and that they wish to dominate world politics. … their “big navy talk” is a bluff which we ought to call … we ought to say firmly how large a navy we require, and that America must do the same.’²⁰

As to Japan, he stated in March 1925:

Everything really turns upon whether the cabinet wish the navy to be ready as soon as possible to put a superior battle fleet with all the ancillaries in the Pacific in case of a war with Japan. If this is the policy, I do not think that the Admiralty requirements are excessive. If we are to beat Japan in her own home waters and ward off France while our navy is at the other end of the world, and guard all the trade routes simultaneously through all the oceans and seas, even more, in my opinion, will be needed.²¹

But he did not think this at all likely, and wrote to Keyes a few weeks later:

I do not believe Japan has any idea of attacking the British Empire, or that there is any danger of her doing so for at least a generation to come. … She would not, as in the case with Germany, have any chance of striking at the heart of the Empire and destroying its power to wage war. We should be put to great annoyance and expense, but in three or four years we should certainly sweep the Japanese from the seas and force them to make peace.²²

Battleship construction was tightly controlled by the Washington Treaty, and in April 1925 Churchill even quibbled over the ‘questionable policy’ of adding anti-torpedo bulges to the Queen Elizabeths, though they were his favourite ships and bulging was one of his favourite policies. ‘It is not only the expense incurred upon the ships … but the whole question of dock accommodation is affected thereby.’²³ The main battle now was over the number of cruisers. Their size was fixed by the Washington Treaty at 10,000 tons and 8-inch guns, but there was no agreement on the number. The Admiralty wanted a force of 70 to protect British interests over the seas, but the war-built light cruisers had only six 6-inch guns in single turrets and on 4,000–5,000 tons they were barely suitable for ocean operation. Even the six ships of the Effingham and Emerald classes, built in 1916–25, with seven 7.5-inch guns, were now considered obsolete – Beatty claimed that ‘the advent of the 8-inch gun ship has made not only the 6-inch ship, but also the 7½-inch ship out of date, and if you pit a 7½ inch ship against an 8-inch ship you are courting disaster …’.²⁴ The Labour government of 1924 was pressurised by fear of unemployment into continuing with five new 8-inch cruisers of the Kent class. The opposition claimed the credit, however, and Clementine wrote: ‘… these silly Tories are probably now so pleased with Ramsay [Macdonald] over the five cruisers that they will not yet need your help in fighting Labour’.²⁵

There is no better example of Churchill’s habit of falling into the role he was playing at the time and using his enormous ability to pursue it, than the struggle over cruiser construction in the mid-1920s. According to the leading naval historian of the period:

An interesting feature of Churchill’s attack on the navy estimates for 1925–26 is that not only in tone and content but at times in the actual words used, it bears an extraordinary resemblance to Lloyd George’s attack, as Chancellor of the Exchequer, on the estimates for 1913–14 … except that this time Japan had been substituted for Germany as the probable adversary.²⁶

Churchill maintained friendly relations with Beatty and his ardent supporter Keyes. He wrote to Lady Keyes late in 1924: ‘I feel that my duties as Chancellor of the Exchequer will leave me on the other side of the table to the Admiralty, at any rate during the unhealthy estimate season.’²⁷ Beatty wrote: ‘That extraordinary fellow Winston had gone mad, economically mad, and no sacrifice is too great to achieve what in his short-sightedness is the panacea for all evils, to take one shilling off the income tax. … As we at the Admiralty are the principal spending department he attacks us with a virulence, and now proclaims that a navy is a quite unnecessary luxury.’²⁸ Clementine on the other hand urged: ‘… stand up to the Admiralty and don’t be fascinated or flattered or cajoled by Beatty. I assure you, the country doesn’t care two pins about him. … Beatty is a tight little screw and he will bargain with you and cheat you as though he were selling you a dud horse which I fear the navy is.’²⁹

Naval estimates totalling £60½ million were finally presented in March 1925, with no new construction, but it was not a victory for Churchill as the question of new cruisers was left to a supplementary estimate after an investigation. There was a ‘ding dong’ battle in a committee chaired by Lord Birkenhead, and in July Beatty wrote to his wife: ‘We have reached an impasse with the government on the cruiser question, and I do not see the way out. We have made our proposals as being the very lowest we can agree to, and they won’t have them, with the result that somebody has got to give way completely and Willie Bridgeman is as firm as a rock. Therefore the whole of the Admiralty is with him en bloc and I suppose we shall have to go.’³⁰ But Bridgeman worked on the Prime Minister, persuading him that it would be easier to lose Churchill than him and Beatty and the rest of the Board of Admiralty. It was announced that four cruisers were to be laid down in 1925–26, and three more in the following year.

Churchill had been defeated, but he did not change his mind. In July 1927 he recalled the events of 1914–15:

I have never accepted the 70 cruiser programme or the reasoning on which it stood, and the cabinet assent in 1925 was given only to an instalment of that programme up to 1929, large reductions being made by the Admiralty through an arbitrary extension of the life of cruisers. … There is no parity whatever in the tasks of defending trade and attacking trade. Less than ten German cruisers, loose in the great waters, were not destroyed till after several months of serious depredations by more than 100 British and allied vessels. I believe, therefore, that the safeguard of our food supply will be found not in multiplying cruisers beyond a certain point, but in instituting convoys.³¹

In 1927 a Geneva conference instituted the B class of cruiser, still with 8-inch guns but on a tonnage of 7,500 so that it had only six guns instead of eight. This led to further disputes and in October 1927 Churchill told the Prime Minister: ‘My opening talk with the Admiralty revealed abysmal differences. I am proposing no cruisers in ’27–’28 or ’28–’29, and they want three B class in each of these years, with possibly a smaller type of B substituted in the second year.’³² Churchill was sceptical: ‘I cannot help seeing in imagination this B class cruiser, chosen in such indecent haste by the cabinet, caught alone in some distant ocean by a foreign ship of which she might have been the equal and after a gallant fight at needlessly unfair odds, sinking beneath the waves with all her crew.’³³

Even after the dispute Keyes did not miss a chance to emphasise the unseaworthiness of the older cruisers, as Churchill sailed with him in the Queen Elizabeth in 1928: ‘From this steady platform, looking at the destroyers and light cruisers plunging into heavy seas I am thankful that the former are no smaller … and pray that our small C and D class cruisers … may have reached their allotted span, for heaven help them if they have to fight cruisers of the type the United States, Japan, France and Italy are building.’³⁴

Behind Churchill’s scepticism was the fear that the new ships would be outmoded by the time any war came. He quoted Fisher:

Build late, build fast,

Each year better than the last.³⁵

In February 1929 he pointed out that ‘the 18 vessels that we now had on our hands would almost certainly be outclassed by the new American cruisers. This illustrated the mistake in building prematurely.’³⁶ He also noted that ‘the Germans were building a new 10.000 ton vessel embodying novel features. By lightening weights and developing a very high horse-power per ton they had been able to design a very remarkable ship … armed with 11-inch guns; it would have a greater radius of action than our battlecruisers, and would fire a greater weight of shell per minute than they.’³⁷ These were the ‘pocket battleships’. Named the Deutschland, Admiral Scheer and Admiral Graf Spee, they were the largest allowed under the terms of the Treaty of Versailles but they found a gap which had not been expected, and they would cause concern in later years.

Comparatively little attention was paid to destroyers, which were not mentioned in the Washington Treaty. There was a large stock of wartime V and W classes, descendants of Churchill’s M class of 1913–14. They were excellent ships in their day but now ageing. In July 1925 it was agreed that ‘an annual construction of nine destroyers and six submarines, together with certain ancillary vessels, will be required’.³⁸ The annual order included a flotilla leader (instead of a light cruiser as in the past) and eight ships, beginning with Codrington and eight vessels of the A class launched in 1929. As more were launched in subsequent years, they would become the ‘A to I’ classes which would form the core of the navy’s destroyer force at the beginning of the next war. Submarine construction progressed with the O and P classes launched in 1928–29. Anti-submarine vessels were revived when in October 1927 ‘Admiral Field spoke of the importance of beginning a few sloops of the Flower class at £100,000 apiece in the latter part of 1928 …’.³⁹ These became the Bridgewater and Sandwich, developments of the Flower class of the last war, to be followed by four similar vessels; but in general anti-submarine warfare was neglected due to faith in the asdic as a means of detecting them.

Churchill was constantly aware of cost saving and expense. During a visit to Keyes in the Mediterranean Fleet in 1926 he worried about the dues on passing through the Corinth Canal: ‘I have to look at these things very carefully.’⁴⁰ He examined other areas of naval expenditure and complained in November 1924: ‘Practically every ship not in dockyard hands refitting is kept permanently manned with its full complement of active-service ratings. These complements have been largely increased in the same ships since 1914; for instance the approved war complement of the Iron Duke in 1914 was 885, the approved peace complement is now 1,089, and the super-war complement … is 1,212.’ There was little provision for reserves, but ‘We are invited to live, perhaps for a quarter of a century of peace with our pistol at full-cock and our finger on the trigger.’⁴¹

The advantages of technology were not being exploited and in February 1927 he wrote to Bridgeman: ‘… the very fact that the navy has a better and more modern plant should enable reductions in the lower grades of personnel to be effected. The inconsistency lies with anyone who says: because we have better and more powerful weapons, we must have more men. Machine power within certain limits should be a substitute for man power …’.⁴²

In January 1928, in an attempt to cut the estimates to £56 million, he suggested ‘that the scheme of anti-aircraft armament should be postponed for this year’.⁴³ He complained about ‘an item in the Admiralty estimates for expenditure on an anti-aircraft weapon which … had not yet been tested in concert with the Air Ministry, and the suggestion was made that before serious expenditure is incurred, the merits of this weapon should be discussed by the Committee of Imperial Defence’.⁴⁴ He refused to pay marriage allowances to naval officers to bring them into line with the army and RAF, which greatly annoyed Beatty.

From the army, General Philip Chetwode wrote to Churchill on his appointment to the Exchequer: ‘Don’t be too ferocious with the poor army – we are just beginning to get back to 1914 standards – in fact better in some respects …’.⁴⁵ Churchill agreed that ‘there was little, if any, room for reduction in the size of the army’.⁴⁶ In January 1925 he disagreed with an army proposal to sell old rifles: ‘There is no greater security against vague and unmeasured dangers than a large store of rifles. … We ought never to have less than two million rifles of all sorts and kinds in this country.’⁴⁷ He urged more flexibility in organisation, writing to Worthington-Evans in January 1927 during a crisis in China: ‘The army are accustomed to think in divisions. They were the bricks out of which the Western Front was built … But it does not follow that a division as constituted for the Western Front is the proper unit for the interests of China. What you want is to make up a “force” for China, fitted as accurately as possible to the work you think it may have to do …’.⁴⁸

Churchill did not forget the idea of mechanising the cavalry after he left the War Office. In 1928, his desire for economy caused him to demand that cavalry be either mechanised or abolished. That caused a shock in the War Office which leapt to the defence of the cavalry, and for the moment only the junior Hussar regiments, the 11th and 12th, were re-equipped with armoured cars. That year a committee on the future of the cavalry could only conclude that a new design of lance was needed.⁴⁹

Despite his efforts to save the independent air force, Churchill had left the Air Ministry with a very weak home defence force. In 1923 Britain had 24 fighters, 12 bombers and 24 army co-operation machines, a total of 60; France had 300 fighters, 296 bombers and 596 army co-operation aircraft, a total of 868 or a superiority of 14 to 1. There was no real prospect of a war with France, but it highlighted how far the RAF at home had fallen behind. A plan was drawn up to increase the force to 642 aircraft by 1930, which also involved building and equipping new airfields and training the pilots and mechanics, while 400 of Trenchard’s short service pilots were to be taken on. War with France was even less likely in 1925 after the Treaty of Locarno settled many differences. Hoare wrote: ‘The relations between England and France are as friendly as they could be. Germany is altogether deprived of an air force, yet France continues to maintain an air strength more predominant than was ever her military strength under Napoleon or Louis XIV. Are we justified in remaining for many years in a position of such numerical inferiority in air strength?’⁵⁰ Churchill did not demur from the general principle of air expansion, but questioned the urgency. In November 1925 he agreed that ‘some increase in the Royal Air Force must be faced in order to secure the safety of the country’.⁵¹ He complained about ‘the violent alterations in policy to which the air service had been subjected in the past’. Current plans stretched up to 1931; he suggested that might be extended to 1940.⁵² This time he did not object to the foundation of the Royal Auxiliary Air Force of ‘weekend flyers’, perhaps because it was a cheap way of building up the force to its nominal strength.

His support for the independent air force was not unconditional, and in September 1925 he wrote to Hoare: ‘Up to the present the Treasury view has been favourable to the maintenance of a separate air force, but you would be surprised to hear all the quarters in which misgivings are felt on the subject. My own view is strictly in favour of the air force on the merits, subject only to the query “can we afford it”.’⁵³ This probably inspired Trenchard to write to him: ‘I ask you to look at the service that has been formed and is growing up. Have you any idea of the spirit which obtains in the air force? Wherever you go, whether it is a Punch-and-Judy show or in grand opera, in the highest circles or the lowest, you will hear the opinion that the air force do better than anyone else. … take the Hendon display; take flying generally; … the spirit animating the whole service …’.⁵⁴ The air force generally got off lightly and as the 1928 estimates were being prepared Churchill wrote: ‘In view of the large economies already made in the air estimates, the Secretary of State for Air found it impossible to give a favourable reply to the further appeal made to him by the Chancellor of the Exchequer for still greater savings, and Mr Churchill felt he could not press the point.’⁵⁵

Though air power had proved very useful on the Western Front for reconnaissance and spotting for guns, the army did not fight hard for control of army-co-operation squadrons, perhaps because they regarded that kind of war as an aberration and had no vision of air power in any other circumstances. That part of the air force was therefore neglected, as Hoare admitted in 1925. The RAF only had 48 army-co-operation aircraft and no plans to expand that number in parallel with the rest of the service; they were ‘greatly inferior in number’ to French machines and not suitable for a bombing attack on France.⁵⁶ It was very different for the navy, where Beatty fought strongly and skilfully with Trenchard over control of the Fleet Air Arm. Churchill however maintained his policy of ‘unity of the air’ as proclaimed in 1922.

Churchill’s prejudice against airships continued, and in June 1926 Sir Samuel Hoare wrote: ‘Winston, on the totally irrelevant evidence of the war, is still dead against airships and loses no time to dig at the programmes.’⁵⁷ The issue was disposed of in October 1930 when the airship R101 crashed in France killing 47 people, including the Labour Air Minister Lord Thomson and the Director of Civil Aviation. John Bull and the Daily Telegraph both turned down Churchill’s articles on the disaster, the former because it already had a cheaper article.⁵⁸ Churchill was not disappointed when the government cancelled all airship projects,

An election was called for 30 May 1929 and Churchill retained his safe seat comfortably. This time Labour was now the largest single party with 287 seats compared with the Conservatives’ 261 and the Liberals’ 59. Ramsay Macdonald formed his second government and Churchill was out of office again.