Stanley Baldwin had been disturbed by the Zinoviev saga. Taking the helm on 4 November 1924, he convened the prime minister’s Secret Service Committee and ordered a review of the whole system, asking for recommendations for ‘greater efficiency’. At the end of 1925, the committee reported to Baldwin that had they been designing the intelligence system from scratch, a single unified department would have been desirable. As it was, however, they advised the prime minister to leave it as it was: imperfect but functioning.49 Baldwin cannot have been entirely satisfied. Two years later, he convened the committee again, this time tasking them with an investigation into the state of affairs at Scotland Yard – he feared that Labour might seize on the ‘political work’ of the Yard to argue that a government department was engaging in party politics.50 His anxieties about the intersection of ideology and intelligence, fuelled by Zinoviev, were prescient, given that he soon ordered a politically controversial security raid on Soviet premises which backfired spectacularly.
The 1926 General Strike increased the obsession of the authorities with Soviet subversion and the hidden hand of Moscow. Baldwin remained calm, but the Beaverbrook and Rothermere press portrayed the strike as an attempted revolution. MI5 and Special Branch intercepted the mail of leftist leaders and sampled public opinion directly by eavesdropping under railway platforms. The resolution of the General Strike in May 1926 was perhaps Baldwin’s most triumphant moment: he was mobbed in the streets and cheered in Parliament. But the security services and the military remained nervous, especially about sedition in the armed forces. In October 1926, at the behest of the excitable home secretary William Joynson-Hicks, a dozen prominent communists were arrested on transparently trumped-up charges.51
Britain’s intelligence services now had their collective eyes firmly fixed on the same building in Moorgate. It housed ‘Arcos’, or the All-Russian Co-operative Society, a body which orchestrated Anglo–Soviet trade. The intelligence community rightly perceived Arcos as a front for Soviet propaganda and subversion against Britain. MI5 ridiculed the Soviet description of Arcos – ‘the sole purchasing and selling agency in Great Britain for the Government of the U.S.S.R.’ – as naïve and childlike: ‘They believe that if they say a thing often enough most people are bound to believe it in the long run.’52 To complicate matters, Arcos shared offices with the Soviet Trade Mission, making the line between the two organisations rather blurred. Nonetheless, MI5 had traced the first major Soviet espionage ring to be deployed in Britain back to the offices of Arcos.53 MI5, MI6 and Special Branch all watched and waited, trying to build up a bigger picture of an international communist network.
In March 1927 a new lead emerged. A human source informed MI6 that a classified British military document had been copied at Arcos. Quex Sinclair promptly passed this information to Vernon Kell, given that, in Sinclair’s words, ‘it concerned an act of espionage against the Armed Forces’, and therefore was not MI6’s responsibility. With Zinoviev a fresh memory, Kell and MI5 prudently spent a few weeks validating the evidence before alerting the director of public prosecutions. It was then felt to be time for action. Kell attempted to see John Anderson, permanent secretary at the Home Office – but Anderson was at a conference and unavailable. Undeterred, Kell instead sought a meeting with the director of Military Operations and Intelligence. Also unavailable, out of London. To complete an unhappy hat-trick, Kell was also knocked back by the Chief of the Imperial General Staff; also away for a couple of days. After mulling over the problem during lunch, lamenting his lack of traction in Whitehall, Kell was ambling back towards the office when he bumped into the secretary of state for war, Laming Worthington-Evans, in the street, and managed to secure an appointment at the House of Commons for 5 p.m. Worthington-Evans kept Kell waiting for fifteen minutes, but having heard the evidence he sent Kell to see the home secretary. At 5.40 p.m., and after a frustrating day, Kell finally found a receptive audience in the fervently anti-communist home secretary. Joynson-Hicks, or ‘Jix’ as he was popularly known, immediately interpreted the evidence as proof of dangerous sedition. Leaving the MI5 boss in his office, he took Kell’s statement straight to the prime minister. Baldwin, who was with his foreign secretary Austen Chamberlain at the time, agreed that Arcos should be raided in order to obtain evidence of a breach of the Official Secrets Act. An animated Jix returned less than thirty minutes later, saying, ‘Raid Arcos. Do you want it in writing?’54
Baldwin’s haste surprised Kell. The prime minister was not known for quick decisions or decisive action, but Jix had been pressing him to take a tougher line against the Russians for a while, and had long been angry about Soviet financial support for the miners during the General Strike. Kell’s evidence from Arcos forced Baldwin’s hand.55 As with the Zinoviev affair, the fact that this evidence focused on subversion of the armed forces, a serious government concern, made it all the more compelling.56 Neither Baldwin nor the foreign secretary, however, was made aware of the full diplomatic implications: that a raid on Arcos would mean a de facto raid on the Soviet Trade Mission.57 Remarkably, Sinclair and MI6 were barely informed of the proposed raid, despite the fact that it was Sinclair who had passed the evidence to Kell in the first place. On 12 May, as was often his way, Sinclair, a bon viveur, enjoyed a long lunch somewhere in clubland. He only found out about the raid at three o’clock – just one and a half hours before it commenced. Understandably angry at Kell, he later used the incident as ammunition in his ill-fated attempt to unify the intelligence services into a single organisation.58
The raid itself was utterly inept. Ham-fisted policemen brandished guns and ordered employees to empty pockets and handbags, but didn’t seem to know what they were looking for. Nobody was in charge. To make matters worse, a lack of Russian-speakers prevented the police from translating the piles of documents in order to uncover incriminating evidence. Meanwhile, two Arcos employees frantically burned a stack of secret papers in the basement.59 Although the prime minister had personally authorised the raid, MI6 were livid. They too had an interest in Arcos, and Baldwin’s foray had ruined their continuing operations against an international espionage ring. Sinclair cursed that it was an ‘irretrievable loss of an unprecedented opportunity’.60 The raid had broader ramifications for MI6 operations: it would compromise their espionage efforts in Moscow if the Soviets sought retaliatory action against the British mission there, given that it quietly acted as a letterbox for MI6.61
That was not the worst of it. Under pressure from Jix, Churchill and a group of baying backbenchers to take a tough line against Soviet subversion, Baldwin’s government decided to sever diplomatic relations with Moscow. They had hoped to find incriminating evidence in the Arcos raid with which they could publicly justify this move. Unfortunately, none was forthcoming, and opposition MPs taunted the government that the supposed seditious document was ‘merely a figment of the imagination’.62 The security services lamented that the documents they had captured ‘do not appear to be of very great value’.63 Specifically, there was nothing which proved that the Soviet Diplomatic Mission had been conducting sedition or propaganda.64 Panicking, Baldwin drew on top-secret intercepted GC&CS material to prove Soviet guilt. On 24 May, in an unprecedented move, he rose to his feet in the House of Commons and read from signals intelligence intercepts – or, as the cabinet put it delicately, from ‘secret documents of a class which it is not usual to quote’.65
The harassed Baldwin falsely presented the Arcos raid as an intelligence success, claiming that ‘both military espionage and subversive activities throughout the British Empire