The Defence of the Realm (71 page)

When the flow of VENONA decrypts reduced to a trickle during the early 1950s, however, the Security Service senior management largely ceased to pay detailed attention to them. In October 1955 an important clue to Philby in a newly decrypted message from Moscow to the London residency of September 1945 was missed.
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The value of VENONA as a counter-espionage tool was diminished, sometimes seriously, by the extreme secrecy with which it was handled. As Peter de Wesselow, who had the main day-to-day responsibility in MI5 for handling VENONA, later recalled, it ‘was considered as of exceptional delicacy' and the decrypted messages from Moscow to London were ‘ten times more delicate than the rest'.
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The Director of GCHQ, Group Captain E. M. Jones, made life more difficult for his cryptanalysts by denying them the real names and biographical details of the British citizens whom de Wesselow and others in MI5 suspected of being referred to by codenames in the VENONA traffic.
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In April 1956 both the DG, Sir Dick White, and the future DDG Graham Mitchell, then Director D (counter-espionage), unaware of the important clue to Philby which had been overlooked only six months earlier, mistakenly concluded that VENONA was no longer ‘worth the effort'. Though GCHQ continued to work on VENONA, the Security Service ‘virtually abandoned it' for the next five years.
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Service interest in VENONA revived in the early 1960s as the result of the acquisition of new intelligence from the KGB defector Anatoli Golitsyn and from Swedish intelligence. Though Golitsyn had little precise intelligence on the so-called ‘Ring of Five', he identified it as the ‘valuable agent network' mentioned in decrypts of September 1945.
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Following requests during 1960, the Swedes supplied copies of wartime GRU telegrams exchanged between Moscow and the Stockholm residency, some of which were discovered to have employed the same one-time pads used in hitherto unbroken GRU traffic with London.
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One hundred and seventy-eight GRU messages from the period March 1940 to April 1942 were successfully decrypted in whole or part. After a gap of almost three and a half years, another 110 decrypts were produced for the period from September 1945 to March 1947.
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The main discovery from this new VENONA source was the existence of a wartime GRU agent network in Britain codenamed the ‘X Group', which was active by, if not before, 1940. The identity of the leader of the Group, or at least its chief contact with the GRU London residency, codenamed INTELLIGENTSIA, was revealed in a decrypted telegram to Moscow on 25 July 1940 from his case officer
as one of the CPGB's wealthiest and most aristocratic members, educated at Westminster School and King's College, Cambridge:

[The Honourable] Ivor Montagu, brother of Lord [Ewen] Montagu, the well known local communist, journalist and lecturer. He has
[several words not decrypted]
contacts through his influential relations. He reported that he had been detailed to organise work with me, but he had not yet obtained a single contact.

All that Ewen Montagu reported at this meeting was general political gossip. His GRU controller made clear his dissatisfaction in a telegram to Moscow on 16 August:

INTELLIGENTSIA has not yet found the people in the Military Finance Department. He has been given the address of one officer but has not found him yet . . . I have taken the liberty of pointing out to the X Group that we need a man of different calibre and one who is bolder than INTELLIGENTSIA.

Montagu did, however, provide classified reports from his friend, the scientist J. B. S. Haldane, educated at Eton and New College, Oxford, and, like Montagu, a Communist with aristocratic connections, whose war service for the Admiralty included work at the Royal Navy's secret underwater research establishment near Gosport.
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Most other members of the X Group proved harder to identify. BARON, who was a prolific source of intelligence on German forces and troop movements in Czechoslovakia, was thought likely to be a member of the intelligence service of the Czechoslovak government in exile in London.
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There was speculation that BOB, another member of the X Group, was the future trade union leader Jack Jones, though a report of 1969 concluded that there were ‘few pointers to the identity of “BOB” and the most that can be said is that Jones cannot be eliminated as a candidate.'
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A decade after work on the GRU decrypts began, the Security Service's VENONA experts were still uncertain what the X Group's precise function had been:

We have not established what the X Group represents. It is not the Communist Party as such, but it is probably some fraction or undercover group of the C.P. Moscow obviously visualised it as a source of military intelligence but it is difficult to trace the connection between Ivor Montagu (whose interests were largely in Film Production, Jewish affairs, International Table Tennis etc.), a Colonel in the R[oyal] A[rtillery], a girl in a Government Department and NOBILITY, a journalist.
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The Service devoted no significant further resources to unravelling either the connection between Montagu and the rest of the X Group or the identity of NOBILITY, which remains unknown.
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*
The dominions in 1948 were Australia, Canada, Ceylon/Sri Lanka, India, New Zealand, Pakistan, South Africa. Though technically a dominion until 1949, Ireland had long ceased to be an active member of the Commonwealth.

4

Vetting, Atom Spies and Protective Security

The most unwelcome increase in the Security Service's responsibilities during the early Cold War was in vetting. Even at the end of the Second World War there was little sign of what was to come. The future DG, Roger Hollis, noted in February 1945, ‘The Civil Service has in the past shown an extreme and understandable reluctance to have its intake vetted by us.'
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Though most government departments consulted the Service about the employment of temporary personnel on secret work, they rarely did so about established staff. In at least one case, a Whitehall failure to consult Service records led to the appointment of a Communist as private secretary to a cabinet minister.
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Even when a Communist was discovered in a sensitive post, there were no grounds for dismissal. ‘All that a Department could do was to transfer him to non-secret or less secret work, if it could do this without rousing the man's suspicions.'
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The Attlee government was initially reluctant to grapple with the problem of keeping Communists away from classified information for fear of being accused of witch-hunts by the Labour left. It was gradually spurred into action by the sensational revelations of Soviet espionage which began with the arrest of Alan Nunn May in March 1946, followed a few months later by the report of the Canadian Royal Commission on Igor Gouzenko's disclosures of Soviet spy-rings in Canada.
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In May 1947 the newly founded Cabinet Committee on Subversive Activities (GEN 183) concluded that ‘what was done in Canada might be attempted with comparable if not equal success in any other democratic country, including our own', and that the May case showed ‘the existence of a Soviet espionage machine in this country':

The ideology of the Communist involves, at the least, a divided loyalty, which might in certain contingencies become active disloyalty; the Canadian case has amply demonstrated the reality of this danger. This is not to say that all Communists would be prepared, even after long exposure to Communist indoctrination, to betray
their country by consenting to work for Russian espionage agents; but there is no way of separating the sheep from the goats, at least until the damage has been done or suspicion is aroused . . . We are, therefore, forced to the conclusion that the only safe course is to decide that a member of the Communist Party is not to be employed on work where he may have access to secret information.
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Attlee brooded for some months before deciding to grasp the nettle. He minuted in December 1947: ‘We cannot afford to take risks here, and the general public will support us. Fellow travellers may protest, but we should face up to this. Action should be taken in regard to Fascists as well as Communists although the former are feeble.'
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Feeble though the tattered remnants of British Fascism were, they proved of some use for public relations purposes in enabling the government to claim that it was protecting the state against extremists of both left and right. In March 1948, following cabinet discussion, the Prime Minister announced in the House of Commons the introduction of what became known as the ‘Purge Procedure' excluding both Communists and Fascists from work ‘vital to the Security of the State'. The Communist MP Willie Gallacher interjected defiantly, ‘So raise the scarlet banner high!'

The Security Service was unenthusiastic. It would have preferred a more systematic use of the existing informal vetting system which, it believed, could ‘produce as good security' as the Purge Procedure. The Service was predictably anxious that a more public vetting system might prejudice the secrecy of its sources, especially in the Communist Party.
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But there was also a deep sense of grievance at the way in which Labour ministers, embarrassed by the unpopularity among many of their own supporters of the extension of the vetting system, seemed reluctant to take full political responsibility, preferring to let the opprobrium fall as far as possible on MI5. On 25 March 1948 Herbert Morrison, the Lord President, told Guy Liddell, the DDG, ‘I hope you chaps will be very careful in [vetting] all these Civil Servant cases.' Though Morrison's tone seems to have been light-hearted, Liddell gave an indignant reply:

I said that I should like him to know that all these cases are handled with scrupulous care and impartiality, and that so far from being a set of irresponsible autocrats in these matters, it was our Department which was exercising a restraining hand not only on the Working Party set up by the Cabinet, but also on all Government Departments. It seemed to me that in the Press, Parliament and in the public mind generally a totally false impression was being allowed to grow up about the work of our Department. This could not be otherwise than extremely damaging to our work in the future, particularly to the cooperation we get from the Police,
Government Departments and various administrations overseas. It seemed to me that there was a serious risk of our being used as a whipping boy . . .
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A few weeks later, Liddell put the same point to the Prime Minister but found Attlee unsympathetic: ‘I pointed out to him that in the minds of the Press and the public we appeared as a bunch of irresponsible autocrats who, without authority, were empowered to victimise unfortunate Civil Servants. He said he was afraid that this was to some extent unavoidable . . .'
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A still indignant Liddell wrote to the Treasury, ‘There is a strong belief that MI5, staffed by black reactionaries, is in a position to influence Government departments against their better judgement.'
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The Security Service therefore welcomed the appointment in April 1948 of a three-man Advisory Tribunal, chaired by Sir Thomas Gardiner, former Director General of the Post Office, which took some of the responsibility for purge decisions from its shoulders. The other two original members of the Tribunal were both retired civil servants, though one was soon replaced by a former trade union official. While the final decisions on dismissals remained with ministers, the Tribunal was given the task of reviewing the evidence on which decisions were based. The Service immediately agreed to reveal to the Tribunal full details of its intelligence on those purged and the sources on which it was based.
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A new sub-division, B1E, was set up to investigate Communism in the civil service and the professions, with responsibility for preparing purge cases. Its head, Graham Mitchell (soon to take over all B1), usually appeared before the Tribunal and quickly reached an understanding with Gardiner, who remained chairman until 1958. In the Service's view, Gardiner ‘was impartial but showed a ready understanding of Security Service problems and the protection of sensitive sources'. Sitting alone with the three Advisers and their secretary (usually a Treasury official), Mitchell showed them raw intelligence of a kind still never shown to ministers or government departments, such as transcripts of intercepted telephone calls and bugged conversations, agent reports (with comments on the agent's reliability and access) and photographs of Communist Party registration cards. Gardiner voluntarily proposed that the Service should have the opportunity of checking in draft the Tribunal's reports to ministers to ensure that they did not unwittingly compromise an intelligence source. The three Advisers on the Tribunal also took care to protect the source when asking questions. It quickly became Service practice never to recommend a purge case which it was thought the Tribunal might reject. On one occasion Gardiner told Mitchell he was worried that the fact that the Tribunal usually found in favour of the cases put
to it by the Security Service might undermine public confidence in its impartiality. Mitchell, however, did not respond to Gardiner's suggestion that the Service put forward weaker ‘Aunt Sally' purge cases which the Tribunal could use to reassure public opinion by rejecting.
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The Purge Procedure initially involved only what later became known as ‘negative vetting': the checking of those engaged in ‘secret work' against Security Service records, especially its increasingly complete files on Communist Party membership.
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The Service, however, was alarmed by the increase in its workload. In June 1948 Hollis complained that the Purge Procedure was placing an ‘intolerable burden upon the Security Service'.
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The burden increased further as the procedure was extended to List X firms (those working on classified government contracts). Hitherto the only course of action open to the Security Service when it discovered those it regarded as security risks employed on secret work outside the public service was to try to persuade the contractors concerned to move them discreetly into other jobs. Since this was not always possible, in 1949 the cabinet agreed that in the last resort a minister (in practice usually the Minister of Supply) should have the right to instruct a firm to remove a suspect from work on a secret contract. Unlike the Purge Procedure in the government service, what became known in Whitehall as the ‘Industrial Purge' was never publicly announced.
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