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Black Wednesday: The records of the bilateral meetings of the Prime Minister and Chancellor of the Exchequer 1992 

Written by Michelle Clement, Researcher in Residence at No.10 Downing Street and Co-Teacher at the Strand Group, King’s College London.

This blog series has been made possible by the declassification of prime ministerial archives through the Public Records Act. The following files were used to research this blog post, PREM 19/4484 and PREM 19/4079

On Wednesday 16th September 1992, Britain withdrew from the Exchange Rate Mechanism. Government attempts to exert control over markets, in this case currency markets, was shown to be well and truly over.

The Exchange Rate Mechanism (ERM) had been introduced as part of the European Monetary System in 1979. Then Prime Minister James Callaghan decided not to participate. In the late 1980s Chancellor of the Exchequer Nigel Lawson and Foreign Secretary Geoffrey Howe sought to convince Margaret Thatcher of the need to join the ERM. But she was against joining, not least because her economic adviser Alan Walters believed that the ERM was a ‘half-baked’ idea. In October 1989 Nigel Lawson resigned and John Major became Chancellor. Like Lawson, Major supported joining the ERM because he saw it as an anti-inflationary measure.

Major and the Foreign Secretary, Douglas Hurd succeeded in persuading Thatcher to join the ERM and on 8th October 1990 Britain joined.

All ERM member countries agreed to keep their currency value within set limits linked to the Deutsche Mark, it was a semi-fixed exchange rate. As a consequence many countries had to copy the anti-inflationary policies of the German Bundesbank. Britain’s decision to join represented a major shift, it became the cornerstone of the country’s European and economic policies.

The decision to join was implemented quickly. Britain entered the ERM at a high level in relation to the Deutsche Mark – £1 = DM2.95. The lower limit for sterling’s exchange rate was DM 2.773. If the pound approached this level, the government (via the Bank of England) would be obliged to intervene – through buying sterling and raising interest rates. Thatcher and Major took the decision without negotiating with their European counterparts. They wanted a strong pound so that imports would remain cheap which would in turn pressure British companies to curb price rises. Karl Otto Pöhl, then President of the German Bundesbank, suggested to the Chancellor John Major that they negotiate the rate as it was high. Major said no because the decision had been taken by the Prime Minister.

Seven weeks later in November 1990, Thatcher left Government and John Major became Prime Minister. Membership of the ERM failed to bring instant prosperity. Over the next 18 months Britain went into recession, unemployment increased and people struggled to pay their mortgages. This was a ‘white-collar’ recession which hurt Conservative-voters. But, the ERM did start to reduce inflation.

After winning the General Election in April 1992, John Major was determined to run the economy as he had before. He was focused on reducing inflation and despite the downsides he said Britain’s membership of the ERM was a policy on which he would never give way. Major told journalist Andrew Neil, “Andrew, don’t you understand, there is no alternative!”

By the summer of 1992 the German economy was faltering under the pressure of West and East German reunification whereby the West German Deutsche Mark was introduced into East Germany in 1990. German inflation was increasing and so the Bundesbank raised interest rates multiple times (from November 1990). Helmut Schlesinger, the new President of the Bundesbank (1991-93), said their decision was made on the basis of what was needed for Germany even though this would impact other ERM members. There was also growing uncertainty around the ratification of the Maastricht Treaty, which set the timetable for Economic and Monetary Union within the European Union.

In mid-June 1992 the summaries of the bilateral PM-Chancellor meetings show Chancellor Norman Lamont cautioning that there was ‘a risk that, in the wake of arguments about Maastricht, there would be a more concerted attack on the ERM.’ To quash this speculation publicly and with backbenchers, Lamont said he would make clear that he and the Prime Minister ‘believed there could be no question of ditching ERM membership. […] The Government’s commitment to reducing inflation within the ERM discipline was absolute.’

By the end of August 1992 the situation was becoming more fraught, sterling was ‘perilously close’ to its ERM lower limit. The Chancellor told the Prime Minister that he would be discussing an ‘intervention strategy’ with the Bank of England. In early September there was a meeting in Bath, of European finance ministers and central bankers. Lamont hoped that his European colleagues could be persuaded to support him. In the event, Lamont clashed with the President of the Bundesbank, Helmut Schlesinger.

So, what now? Britain could either increase interest rates or be devalued within the ERM. Major insisted on keeping sterling in the ERM at the existing rate. Meanwhile Italy faced a currency crisis, the Bundesbank supported Italy at first but then withdrew. Schlesinger said he would reduce interest rates if Britain and Italy devalued sterling and the lira. Major refused. Italy did devalue the lira by 7%, Germany cut interest rates by a marginal 0.25%. Currency dealers who held onto the lira lost a huge amount for their clients and suspected the same would happen to sterling.

Chief Economic Adviser to HM Treasury, Alan Budd said Italian devaluation had been seen as ‘an extremely harmful event for sterling.’ Budd visited the Bundesbank in Frankfurt to communicate that there would be no question of sterling joining any weaker currencies in any devaluation against the Deutsche Mark. But in Budd’s words this was ‘one of the great wasted journeys.’

In the last recorded note of a bilateral meeting between the Prime Minister and the Chancellor prior to Black Wednesday, Lamont said he had written to the President of the Bundesbank ‘expressing concern about the unofficial remarks on realignment reportedly made by a member of the Bundesbank Council the previous day.’

Between 11th September and Black Wednesday on 16th September, there were no notes filed on the bilateral meetings between the Prime Minister and Chancellor. It is likely that responding to the rapid pace of events took over.

Nine months later, however, on 14th June 1993 the Principal Private Secretary to the Prime Minister, Alex Allan wrote to Permanent Secretary to the Treasury, Sir Terence Burns attaching a ‘very lightly edited transcript’ of his notes of the bilateral meeting that took place two days before Black Wednesday. He wrote, ‘So far as I can discover, I never did a formal record of the meeting: it is unclear whether this was because I was asked not to or whether it simply got overtaken by events.’

This bilateral meeting between Major and Lamont took place on Monday 14th September 1992. The Head of the No.10 Policy Unit, Sarah Hogg, Alex Allan and Terence Burns were also in attendance. The discussion centred on sterling’s precarious position within the ERM, the impact of external factors such as the French referendum on the Maastricht Treaty (due on 20th September 1992) and the circumstances under which Britain could withdraw from the ERM.

Chancellor Norman Lamont said the Government would ‘fight like mad in [the] next week and month to maintain’ their position within the ERM, ‘even if interest rates have to go up.’

Prime Minister John Major was ‘worried’ about the ‘shorter time scale.’ He was ‘prepared to put interest rates up. But any material move on interest rates might flatten the economy. Not help the exchange rate.’ Major said they had two options ‘devalue or leave the ERM.’ He did not know what the market reaction might be. Major weighed up the options – ‘Party politics of devaluing are bad across the spectrum. Leaving would be devastating across half the spectrum; better with [the] faction we least like.’ Evidently, Major accepted that the eurosceptics within the Conservative Party who were causing him many issues at the time, would favour withdrawing from the ERM.

Lamont explained the need to be seen to try to stay in the ERM. Alex Allan records Lamont somewhat obscurely saying that ‘if circumstances were going to arise even more quickly’ it would be ‘important to be seen to (raise interest rates), so we have been seen to make an effort.’ He added, ‘withdrawal without fighting’ was the ‘worst option’.

Fast forward to two days later and as we know events unfolded at speed. By the end of Wednesday 16th September 1992 Britain had withdrawn from the ERM. There had been two interest rate rises in one day (though the second was not implemented). And the Bank of England had spent £3.3 billion to try to keep sterling inside the ERM.

The currency dealers and hedge funds were united in their goal – sell sterling. The governments and central banks of Britain and Germany were ultimately not united by a common goal. To an extent, Britain joined the ERM to tackle inflation and inflation did reduce significantly – from 8.1% in October 1990 to 3% in September 1992.

Lamont left government seven months after Black Wednesday and was succeeded by Kenneth Clarke. As Chancellor, Clarke sought to recover the Government’s reputation for economic competence but the crisis had caused serious damage. Speaking about Black Wednesday Clarke said, “It did change the course of politics.” Outside of the ERM inflation stayed low and the economy flourished but Major’s government did not get the credit.


No.10 Downing Street and the Cabinet Office:
Moulding the central machinery of government during John Major’s premiership

Written by Michelle Clement, Researcher in Residence at No.10 Downing Street and Co-Teacher at the Strand Group, King’s College London.

This blog series has been made possible by the declassification of prime ministerial archives through the Public Records Act. The following file was used to research this blog post, PREM 19/4697.

There has long been a tension in the central machinery of government in Britain, between creating a system that works for the style and personality of a Prime Minister whilst maintaining traditional conventions of cabinet government. The Civil Service’s role in part is to be, in the words of Professor the Lord Hennessy, the continuity men and women.

When a Prime Minister is elected she or he has the power to mould the No.10 machine, whether that be through creating new units or appointing a raft of external advisers with new responsibilities. There is a great deal of elastic in the No.10 machinery for a Prime Minister to stretch as they wish. The limitations have often arisen when a Prime Minister seeks to insert a political appointee into a role that would have been reserved for a traditional career civil servant or when competition emerges between a special adviser and a Cabinet minister or civil servant.

While it almost goes without saying but does bear repeating, the pace of politics in the age of televised House of Commons proceedings, 24-hour media and now the internet has meant that decisions are taken more quickly and are communicated to a wider, global audience.

The political climate in which a Prime Minister operates has an impact on the nature of the machinery of government. The most senior civil servant to advise on the shape of prime ministerial machinery has traditionally been the Cabinet Secretary. The Cabinet Secretary is in many ways the embodiment of the British constitution. As the British constitution does not exist in one single document, the Cabinet Secretary of the day has a fundamental role in interpreting and overseeing the implementation of the rules.

The recently released government archives for the first few years of John Major’s premiership give an insight into how the Cabinet Secretary’s role works in practice.

On Tuesday 7th September 1993, the Prime Minister John Major had dinner with his Principal Private Secretary, Alex Allan; Head of the No.10 Policy Unit, Sarah Hogg; and Cabinet Secretary and Head of the Home Civil Service, Sir Robin Butler. They met to consider changes to make the central machinery of government work more effectively for the Prime Minister.

The day before the Cabinet Secretary had written to the group outlining his thoughts on the subject, to inform their discussion. He began –

One of the greatest advantages of our central machinery is its flexibility. Although the physical constraints on No.10 have prevented its expanding as other departments have grown and although the Cabinet Office, strictly speaking, serves Ministers collectively, the scope for arranging these assets to meet changing times and the modus operandi of the Prime Minister of the day is considerable.

Butler explained how the use of Cabinet and Cabinet Committees ‘to make decisions’ had been in decline for many years and as such the Cabinet Office had ‘shrunk’ with it. For comparison, in 1946 Clement Attlee held 108 Cabinet meetings with 468 memoranda whereas in 1992 Major held 40 meetings with 22 memoranda. The sharp decline in memoranda had happened during Margaret Thatcher’s premiership.

Butler went on to set out why this downward trend had emerged.

1. For some issues, life moves too quickly for the ponderous formality of the Cabinet and Cabinet Committee machinery. (N.B., however, that this is sometimes a pretext used for bouncing colleagues).
2. The pressure on Ministers’ time makes it difficult to get meetings together. Much more is cleared by correspondence.
3. Leakiness militates against circulating papers on sensitive issues. It also militates against open discussions and disagreements in Cabinet. Important issues tend to be settled in small groups and reported only formally, often orally, to Cabinet.
4. For various reasons, Lady Thatcher accelerated this process although, as the figures show, it was in progress well before her.

The Cabinet Secretary alluded to the changing pace of politics and the political climate in which the Prime Minister was operating, to which the machinery had to adapt. The Major Government had significant concerns as a result of the leaking of Cabinet discussions and disagreements by those who were in the room.

Yet Butler would not be fulfilling his role if he did not outline the disadvantages of the declining use of the traditional machinery, he wrote –

• The formal processes ensured that issues had to be carefully prepared and Ministers were systematically briefed for a discussion of them.
• The process of Ministerial discussion brought wider political perspectives to bear on a subject from Ministers who were not close to it. […]
• It reduces the leverage of the Cabinet Office and No.10 on Departments on the process and our involvement in it.

Butler’s subsequent recommendations showed there was an issue of sharing information and responsibilities. He noted that the Cabinet Office could
‘be more involved in advice on day-to-day issues’ but this needed two things:

1. The No.10 Private Office inviting us to advise more often;
2. Devising some modus operandi for cooperation with the Policy Unit so that the Prime Minister does not receive separate streams of advice which Private Office have to reconcile.

The Cabinet Office ought also to be able to do more in spotting things before they get into a mess; but it helps if we are involved in such issues from the outset.

Butler suggested that the Prime Minister ‘should more frequently use the Cabinet Office by prescribing that some collective machinery should be established to sort out an issue […] this should preferably be done before the issue gets into a mess.’ Butler recommended a new routine to assist Major – three times a year, the Cabinet Secretary could put to the Prime Minister ‘after consultation with the Head of the Policy Unit, a list of “hot” domestic issues likely to arise over the coming term’; they would then meet ‘to discuss the machinery for handling them.’

Private Secretary to the Prime Minister, Mary Francis responded to Butler’s note ahead of the dinner, her reply gave an indication of the matters which were on the Prime Minister’s mind.

First, I do not know exactly what the Prime Minister is looking for – and I suspect he is not entirely sure himself. It lies somewhere amongst getting more interdepartmental advice via the Cabinet Office; more/better long term thinking; improved trouble-shooting; and having more opportunities to discuss informally whatever is on his mind.

The discussion at the dinner itself did not seem to move things on significantly in the way in which Butler had advocated but there was some progress. Principal Private Secretary to the Prime Minister, Alex Allan wrote a memorandum on the points agreed at the dinner which revealed the Prime Minister’s mindset.

There was scope for making greater use of […] the Cabinet Office machinery to resolve problems without having to involve too much of the Prime Minister’s time. […]

It was unsatisfactory that Ministers sometimes stuck firmly to departmental briefs, showing no flexibility, with the result that the issues had to be referred to the Prime Minister to arbitrate.

Major complained of there being ‘too much paper’ being provided for meetings. Allan suggested that ‘it would be useful if the Cabinet Office and Policy Unit could liaise more closely in advance to see if a single brief could be provided.’ The Prime Minister agreed with the Cabinet Secretary’s suggestion of introducing ‘a more systematic look at the handling of issues likely to arise over a slightly longer period of time.’ As such, the Cabinet Secretary would ‘draw up a list of such issues about three times a year, in consultation with the Head of the Policy Unit.’ These amounted to short-term fixes to address the Prime Minister’s concerns, rather than strategic structural change.

The time that a Prime Minister affords a given issue – whether that be a policy or changes to the machinery – is instructive for the Civil Service as to whether it is a priority or not. Much of Major’s premiership was clouded by tensions that were both time and energy-consuming within the Cabinet and the Conservative Party. Perhaps this meant that reform of the machinery of No.10 and the Cabinet Office was not as much of a priority for this Prime Minister as it had been for some of his predecessors, indeed as it would be for his immediate successor.


No. 10 Downing Street – Computers Networks, Security & “Internet Superhighways”

Written by Ashley Sweetman, former Researcher in Residence at No.10 Downing Street and PhD candidate, King’s College London.

Early in the 1990s, computers and computer networks became increasingly common in British Government. Though such machines had been installed in large organisations from at least the early 1960s, the latest document release – and file PREM 19/4621 specifically – highlights some of the challenges related to their installation in No. 10 Downing Street.

The Telecommunications Secretariat in the Cabinet Office not only had responsibility for communication arrangements in No. 10 but was also ‘actively concerned with implications for technical security’, such as ensuring that any new wiring or equipment was properly recorded, which it said had ‘not happened in the past.’ It also meant ensuring that any new hardware was ‘situated so that they do not introduce technical security weaknesses.’ They said that it was agreed in writing that they should be consulted in the placement of any electrical equipment, including phones and wiring.

The main impetus came in June 1990. It was decided that a computer network would be installed in No. 10 which required extensive cabling, in every occupied room in the building, barring the State rooms but including certain rooms in the flat. Required to last 10 years, the hardware had to be installed to offer officials maximum flexibility given the difficulty of fully anticipating their requirements as technology became ubiquitous.

The computer network in 70 Whitehall had already proven useful. It was used primarily for saving computer files centrally, for electronic mail and for the use of a common database. Some years before, civil servants realised that computer networks offered the potential to make government business run more smoothly. In the Department of Trade and Industry (DTI), a computerised ministerial diary network was planned for launch in September 1986, which linked the offices of each of its Ministers, the DTI’s Parliamentary Branch, its Press Office and its Permanent Secretary’s office. It would improve the efficiency of ministerial diary work, allowing others to check it (though privacy arrangements were controlled by the relevant Diary Secretary) and could also be used to develop reports and produce a complete list of all Ministers’ public engagements for ‘speech planning’ and ‘monitoring the spread of regional and overseas Ministerial visits.’

Despite such successes, there were some concerns that installing computers was not all good news. ‘The use of computers also had drawbacks’, a No. 10 memo noted. ‘Many people find them difficult to understand; they sometimes go wrong; they impose essential but unfamiliar additional tasks upon users to keep their information safe; and users need technical support.’

However, there were security benefits to the installation of a computer network. Each user had control over who could view their files, having to grant access rights to them before they could see the contents. The COSINS system in 70 Whitehall had received approval from CESG as ‘suitable for holding classified information up to and including SECRET.’ The proposal was to replicate this system for No. 10. Though, the network and equipment did not all have to be put into place in one operation: they were akin to a ‘Lego’ kit, according to the memo.

Though ‘value for money’ was a key consideration from the outset, security of these systems was equally integral for No. 10 and Cabinet Office officials. In October 1990 Caroline Slocock, one of the Prime Minister’s Private Secretaries, wrote:

What this boils down to is that ITM [Branch of the Cabinet Office] are entirely confident that a networking system of computers would be secure for the handling of SECRET information. We will of course have a TEMPEST system for work of a higher classification which will not be part of a networked system. Although eventually most computers in No. 10 may be networked to a central computer located in the Garden Rooms, safeguards can be put in place which will ensure that privileged information is not available to unauthorised users within or outside No. 10.

Slocock also wrote later that month to Mike Childs in the Cabinet Office, thanking him for his assessment of the security in the new network:

I was grateful for your assurance that the network system would be secure for SECRET and information of a lower classification. I have discussed this with Charles Fountain who is satisfied that information passed through fibre optic cables will be secure from outside monitoring. He also accepts that on the face of it we can design the system in such a way that privileged information within No. 10 can be kept secure from other No. 10 users. A further issue in the event of our being linked to users outside No. 10 would be whether we can keep our files secure from them where necessary.

Though No. 10 was receptive to technological change, embracing new hardware and systems with the promise of improved efficiently, political considerations intertwined with such advancement. In February 1992, the No. 10 IT Manager Donald Horsburgh described how the Cabinet Office had informed him that ‘there may be a need, depending on the election result, to erase existing data from the computer systems.’ He then sought advise on what would legally be required.

Nevertheless, progress with the network installation continued throughout 1992 and by mid-May British Telecom (BT) has installed the network wiring hub in the No. 10 basement. Unsurprisingly, Horsburgh was also concerned with the security of the network:

The arrival of the network raises several data security questions. The network will relieve staff of responsibility for the security of their data and place it in the hands of the system manager. This however makes it crucial that suitable arrangements are made to ensure the safety of the data in case of fire or other mishap. It is therefore proposed that a full tape copy of the network data is stored at secure offices in 70 Whitehall. In addition, I would suggest the purchase of a fire proof safe to store the daily incremental backup tapes. However as there may be security implications I would welcome your thoughts on this proposal.

By April of the following year, with the network complete, independent security consultants Gamma Secure – a List X company – surveyed the Downing Street network and produced a system security profile for it. Final approval of the profile would be given by CESG. Gamma examined all aspects of the cabling infrastructure and advised on two potential gaps in security: the fibre optic cable hub in the Downing Street Press Office; and the cabinets housing the Aspect One network hub in the No. 10 basement. They explained in some detail their reasons for citing the former:

A note was made of the lack of physical access control at five of the ports on the hub in the press office. Whereas each port at a connection box can be selectively disabled via the network management console (NMC) in the computer room, none of the five ports emanating from the hub can be disabled without disabling the entire unit. This unfortunately means that it is possible to connect a device to a port that could be used to monitor all the data traffic on the network … They suggested replacing the existing dumb hub with a small “intelligent” Ungerman Bass hub. The UB hub could then be controlled from the computer room. A hub plus one Ethernet concentrator card to provide the necessary ports would cost in the region of £6k plus VAT.

Gamma were also unhappy at the locks fitted on the cabinet in the basement which stored the wiring hub. They afforded a ‘low level of security’ and the wide distribution of keys only exacerbated this issue, Gamme assessed. They recommended they were replaced by padlocks if necessary, with the custody guards holding one set of keys and the system manager the other. ‘To gain CESG’s approval for the system’, Donald Horsburgh wrote, ‘action must be taken to plug these gaps quickly.’

Come August 1994 and an even bigger phenomenon had emerged – the Internet. He was alerted to this new phenomenon by Damian Green who at the time worked in the No. 10 Downing Street Policy Unit. Such new technology was working its way onto the political agenda. Green’s letter to Alex Allan, copying in Donald Horsburgh, is worth quoting in full. Under the bold and underlined heading ‘INTERNET’, Green wrote:

Various MP’s who are computer-literate have made the point to me that it would be advantageous for No. 10 to be seen to be up with developments in this area. Specifically, connecting No. 10 with the Internet would keep us up with the White House, which has made a big thing of the modern way the Clinton/Gore administration deals with communications.

Internet users will be a growing group of opinion-formers, and I can just imagine Tony Blair showing how he belongs to a new generation by signing up. And up top of the purely political angle, there is a case to be made for encouraging schools to provide this resource to their pupils. A few are already doing so, but we are lagging behind the USA, and a well-publicised push from here would do some good.

Any interest?

Allan replied a month later and began to think about the motivations for linking No. 10 up to the Internet. Amongst what he saw as ‘the most obvious’ reasons were: to allow members of the public linked to the Internet to send e-mail to the Prime Minister/ No. 10 to express their views, largely as an alternative to writing/faxing/phoning their views; to allow individuals linked to the Internet to pass messages to No. 10 staff, and vice versa; to allow No. 10 staff to get access to the services available on the Internet; and to provide a way that people linked to the Internet could get access to No. 10 press notices, the Prime Minister’s speeches, etc. There was also the more general objective, which Allan described as ‘demonstrating that Number 10 is keeping up with technological trends.’ He went on to express how there were ‘all sorts of bells and whistles we could add’ in the future – including World Wide Web links, which is something he had been told the White House were about to unveil.

A specific issue for Allan was whether Britain followed the American trend and advertised that it was possible to send messages directly to the Prime Minister, and ‘presumably’ get a reply. The White House did this at the time through an account – ‘president@whitehouse.gov’. Allan felt sure that ‘we should offer this in time’ but expressed cautious about ‘rushing into it.’ He said: ‘I do not believe we would get a huge volume of E-mail in the long run, but we could expect an initial flood as people around the world tried it out for fun.’

Perhaps his deeper motivation was an internal government rivalry. Allan concluded his note by saying that he knew the Treasury was about to be linked up to the Internet to offer access to Treasury press notices, speeches and possibly statistics. ‘Is it possible for us to piggy-back on them in some way?’ was how he ended his memo.


 

How does No. 10 operate when its premier is out of the country?

Written by Ashley Sweetman, former Researcher in Residence at No.10 Downing Street and PhD candidate, King’s College London.

As an historian of both prime ministers and intelligence, the most interesting file in this release for me is PREM 19/4624, which contains documents which explain how No. 10 Downing Street used – or, more accurately, attempted to use – secure speech equipment to keep in touch with prime ministers while they travelled overseas.

Though the documents paint a rather farcical picture of poor equipment and angry staff, they get to the heart of a quite serious question – how does No. 10 operate when its premier is out of the country?

The story starts with Margaret Thatcher’s visit to Tokyo and Canberra in June 1979, a month after her election victory.

On 26 June 1979, the day that the prime minister was due to depart, Flight Lieutenant of Avionics at RAF Brize Norton contacted Mr Carter, the Duty Clerk at No. 10, with the COMSEC material he would require for the flight. Contained were the key settings for the RACAL Datacom equipment which would be used on the flight.

Some five days earlier, a Ministry of Defence note from the Wing Commander for Director of Signals (Air) addressed to Squadron Leader Haley concerning the RACAL Datacom equipment which would be used at HQ38GP and on the VC10 plans carrying the prime minister. Concerned with security, the Cabinet Office had requested that a new key setting was used for each individual call. Line One of the key setting sheet was to be used for TEST calls and necessary operator management contact, but lines two to 25 were to be used in sequence for LIVE calls.

On 25 June 1979, Leslie Wright, of the Cabinet Office’s Telecommunications Secretariat, had contacted Clive Whitmore, Principal Private Secretary to the Prime Minister, to provide some context on the use of the RACAL equipment:

I said recently that it might be possible to provide a less-than-fully-secure speech link between No. 10 and the aircraft taking the Prime Minister’s party to and from Tokyo. The necessary arrangements have now been made and I attach for the Duty Clerks a note on equipment operation and the method of setting up a call. [Duty Clerk] Roger Carter will be given a briefing on the equipment by F/LT Whithead before take-off from London airport.

Wright described how equipment had been installed in three locations: on the aircraft’s flight deck with an ‘extension to an instrument in the VIP compartment’; at the Flight Watch operator’s position at HQs 38 Group Upavon ‘because all calls must be monitored there’; and at the Duty Clerk’s desk.

Wright also estimated the level of protection afforded by this hardware. It would provide a ‘measure of privacy somewhat better than … a Post Office scrambler’ but ‘not full speech security.’ In the Cabinet Office’s assessment, the equipment provided about 10 hours’ worth of protection against a ‘sophisticated intelligence attack.’ Wright also gave a nod to the reliability of the system. ‘The success of calls will vary depending on the radio conditions and the position of the aircraft at the time,’ he warned with impeccable foresight.

Two days after arriving home from the overseas trip, No. 10 Duty Clerk Roger Carter recorded his thoughts on how use of the equipment had gone.

Following delivery of the case containing the equipment about an hour before take-off at Heathrow, Carter received a tutorial from Flight Lieutenant Whithead during which they successfully tested the speech privacy equipment between the flight and Upavon Flight Watch (UFW). However, attempts during the flight were less successful:

Attempted several times en route to Tokyo to establish contact with No. 10. On each occasion we were unsuccessful. The Captain on the Flight Deck monitored the call, and was able to speak direct to UFW but could not get further. I could hear nothing at all on RACAL. Together with Squadron Leader Symes (to whom I subsequently surrendered the equipment, as requested) I investigated the connections under the Flight Desk. Despite our inability to discover any fault we were unable to make any contact on further testing.

Carter tested the equipment on arrival in Tokyo on the line already established, and the equipment worked adequately. On the subsequent flight between Tokyo and Canberra, however, it ‘proved impossible’ to test the equipment.

Success was more forthcoming on the homeward leg of the journey. Contact was finally established while over France when Carter spoke directly to No. 10 on several occasions and tested on both ‘clear’ and ‘secure’ settings. This was a result, Wright felt, of Upavon Flight Watch and the crew of the plane both ceasing to monitor transmissions. Wright was advised that success was not just a result of being closer to home, as VHF did not change in quality over appreciable distances.

Carter’s concluding remarks left little room for interpretation:

I spent several hours working with this equipment trying to establish communications with No. 10. Most of this was at night, when the crew or myself were engaged elsewhere, thereby interrupting my sleep… And of course, we have to pass through the sleeping compartments of the Prime Minister and the other VIPs – hardly satisfactory from their point of view.

On each occasion it took a long time via UFW to either fail or succeed in making contact. The aircrew were ‘critical’ of UFWs ability and certainly at one point I recall them saying that they ‘couldn’t get a land-line to No. 10’ – something I’d have thought was virtually impossible. If this telephone link is to be used for possible PM control of a situation, the time-scale of connection will have to be speeded up considerably. One certainly got the impression that UFW was the ill-fitting cog in the machines.

Significant detail was added on what had been done since the Tokyo and Canberra visits to improve knowledge of the RACAL system:

Since the Tokyo trip we have used the Racal equipment in Exercise MARTOCK (which you attended for a short time with the Prime Minister in COBR last week) and we have carried out tests with the two aircraft sent to Cyprus as part of that exercise. Experience gained from all this shows that provided radio conditions are good, that there is an experienced operator at the Flight-watch at Upavon and that there is a good line connection between there and Whitehall, an acceptable link can quickly and easily be established with an aircraft. Incidentally, the Flight-watch operator must monitor all connections but there is no need for the aircrew to do so …. nothing we can do about radio conditions … but we can and will do something about training Flight-watch operators and we will provide a permanent direct link between Upavon and the COBR which could be extended when necessary into No. 10. Except for the tail into No. 10, all these things have to be done in any case as part of our contingency arrangements for dealing with a terrorist incident overseas.

In reply, Whitmore said that this ‘experiment’ should be continued and expressed his encouragement at the actions taken to put right the problems encountered on the Tokyo trip. He suggested that further experience could be gained when using the equipment on the forthcoming trip to Lusaka.

Experience certainly was gained from that flight to Lusaka. A note from MODUK Air to HQ 38 GP and the Cabinet Office, with GCHQ copied in, provided a stark insight into the security of the system:

Flight watch freq transmissions were monitored by 591 su RAF comsec monitoring unit partially because comms for this visit are analogous to those for op pilpit and partially to test newly provided speech privacy equipment. Regret to advise that inter alia the following compromising messages were passed en clair r en clair.

Alfa quote wish to know if he replied to the Lusaka telegram we received – he is not sure unless he has the content of that one that mentioned the unwarranted but unpersons travelling at a late stage unquote

Bravo quote I was referring to the radio which they carried from No10 on to the aircraft for use in Lusaka. Part of the waveband selector was left behind unquote

Charlie quote when you get there you will have a minute from the Chancellor of the Exchequer about local government expenditure which the prime minister should have seen over the weekend unquote

Delta quote can we set to Mode 2. Haven’t got the equipment with me at the moment. I do want to test mode 2 just to see if we can use the wretched stuff. Just waiting to test mode 2 unquote

Request you ask all parties to tighten comsec and use secure or privacy equipments when practicable monitoring continues.

For gchq logs and tapes follow.

The saga continued. In November 1981 a report similarly dismal in tone to that of Mr Carter some two years previously was sent following the prime minister’s visit to Mexico:

On the return flight from Cancun to London you asked me to look into the system. I have canvassed my colleagues on this matter and they concur with my conclusions.

On 3 July 1979 Roger Carter minuted Whitmore setting out his conclusions. I agree completely with every point he raised. The only additional comment that I can make is that despite a lapse of two years, during which time efforts have been made to improve the equipment, no effective improvement has been made.

I believe that two years is long enough for the equipment to be tested – the result of which is the obvious conclusion that the equipment is totally unrelieble. The existing equipment cannot possibly be brought up to the required standard and unless it can be improve dramatically in a specified time, I would recommend we ask Communications Centre to look around for a new system.

To this end I suggest that discussions be held between No. 10 Duty Clerks, Cabinet Communications Section, and the RAF, including radio experts and pilots of the Queen’s flight.

Later in 1981 it fell to one of the Prime Minister’s private secretaries to contact Leslie Wright in the Cabinet Office to look for a ‘more reliable and regular link’ or for an alternative system. Wright responded.

Firstly, he reiterated the level of security that the RACAL system provided:

The equipment deos not provide “secure” speech but rather what is referred to as “less-than-fully-secure” speech. The distinction is that whereas the equipment will safeguard conversation against attempts by the media or other ‘amateurs who may choose to monitor what is being said, it can be successfully exploited by a sophisticated intelligence organisations.

Following this, Wright went on to offer greater context about RACAL and why it was selected:

Next, when the RACAL equipment was first introduced (it is, incidentally, the only such equipment currently available and suitable for air/ground use), it was primarily to meet a requirement forming part of our contingency plans for reaction to a terrorist incident overseas. For that purpose, we started off using the public switched telephone network (PSTN) between the Cabinet Office Briefing Room (COBR) and the RAF Flight Watch at Upavon but experience of the mix of the PSTN link and an HF [high frequency] radio link with an aircraft led to a decision to provide a full-time circuit between Upavon and the COBR; to that has now been added a facility to extend this over a full-time circuit with No. 10. As compared with the PSTN, there is no doubt that the full-time circuit is an improvement. But, from the outset, we have bene troubled with intermittent faults on the now very aged control desks at RAF Upavon. As quickly as one was identified and put right, another manifested itself and, somehow, Murphy’s law decreed that new faults attended attempts to establish some of the links required between No. 10 and the aircraft carrying the No. 10 party. Early next year, the Flight Watch responsibility will be transferred from Upavon to Bampton Castle where air/ground calls will be routed through a modern installation. The combination of the full-time circuit with Bampton and the modern facilities there will together lead to a more acceptable success rate on calls with No.10 than has been the case in the past I feel sure. To this I think we need to add more familiarisation training for No. 10 staff on racal equipment prior to each overseas visit.

In contrast to Wright’s optimism, the duty clerk responsible for the RACAL system on the prime minister’s tour of the Far East in 1982 was clearly irritated by the hardware. The equipment ‘failed to provide a secure link between the Prime Minister’s aircraft and No. 10 any time during’ that tour’. Two sets of equipment were carried on. On the outward flight to Elmendorf Airbase it was found that when the equipment was used, live fuses in the aircraft were blown and contact with 81 Signals at Bampton was lost. Tests continued until staff concluded that the equipment was at fault. They conducted a ground test in Tokyo but between there and Hong Kong it had not been possible to test RACAL in secure mode. During the rest of the tour, efforts were made to contact 81 Signals Unit from the aircraft while in flight but all failed.

A note from Alan Davies-Jones [seemingly a duty clerk] in November 1982 described the ‘spectacularly high failure rate’ of RACAL. Success, he said, was ‘considerably more difficult to find.’ He stated in quite stark terms that even if it were 100 per cent reliable, it could not provide a fully secure speech facility, and that after three and a quarter years of testing there were ‘precious little signs of improvement.’ Davies-Jones was also negative about the move to Bampton. Though, he said, they had held their fire to give the move a ‘reasonable’ chance to work, it had ‘not helped very much at all.’ He also described how ‘so much time and energy’ on maintaining the Prime Minister’s security and safety that it did not make a great deal of sense and could, ‘under extreme circumstances, be absolutely disastrous.’ It was only a matter of time, Davies-Jones felt, before a ‘highly embarrassing’ incident.

A note from 12 November 1982 from Flesher says that the time had come to say we would be content ‘only with a reliable and secure system of communication, whether this is by voice communication or by teleprinter link.’ He understood that Leslie Wright of the Cabinet Office had been in discussions with the Ministry of Defence about the feasibility of a teleprinter link but had been able to arouse only minimal interest. Flesher’s tone sounded desperate:

I do not think we should rule out asking Western allies what systems they use. If there are no technically feasible options (which I find difficult to believe) or if the cost of such options is prohibitive, we shall at least have put the position on a rational footing. At present, however, we are in considerable danger of embarrassment, or much worse, through inaction.

Robin Butler, the Prime Minister’s Principal Private Secretary, wrote to Robert Armstrong, Cabinet Secretary, setting out the position and asking for some options. He said that the PM’s next overseas visit would be to the Falklands and that he’d like the new system to be live by then.

However, Butler felt there was ‘good reason’ to suppose a secure teleprinter system could be successfully installed in a VC10 and that it would be ‘fully operational in good time’ for the Prime Minister’s next overseas trip.

A test flight was eventually scheduled for 18 April 1983. No. 10 Duty Clerk Steve Geary went onboard an RAF VC10 between RAF Brize Norton and Prestwick for the three hour flight, during which the system’s operators were able to get into contact with 10 Downing Street, using RACAL, on three separate occasions. Reception on both the plane and at the office was ‘reasonable clear’ according to Geary, with some interference but no undue distortion.

Approximately a month later, when Geary needed the system to work, it failed him. He travelled with the Prime Minister to the Williamsburg Economic Summit from 28 to 30 May 1983. Geary described how RACAL was used on the outbound flight on 28 May between Heathrow and Langley Airforce Base to make contact with No. 10 on a ‘number of occasions’, but that only plain mode, not secure mode, was available. This was traced to a blown fuse in the equipment held at Downing Street. On the return flight, RACAL was used between the plane and Bampton and the operator was able to hold both plain and secure conversations with Bampton.

In July 1983 it seemed that a significant breakthrough had been made. Leslie Wright of the Cabinet Office informed Robin Butler that a contract had been placed with the company that produces the radio selected for use from the VC10 and that this radio and its ground station in the UK would provide the world-wide communications cover that cannot be provided by existing MoD facilities. Wright had asked that every evert was made to have necessary additional equipment developed and produced in time for it to be available for use during the flight to and from the Commonwealth Heads of Government Meeting. The company provided the equipment expressed doubt over this timescale given the technical problems that had to be overcome, but said that they would make every effort to do so. As a contingency, Wright said he would arrange tests of RACAL speech security equipment to be carried out on a routine VC10 flight between the UK and India in the next two months. Duty clerks would be given the opportunity to take part. The aim was to select the best radio frequencies to enable satisfactory use of the RACAL equipment if it was needed.

However, Wright was not as optimistic about the wider impacts as Butler likedly hoped. ‘Would that I could offer the comfort you seek in your minute’, he lamented. ‘The only other clear requirement for this form of communication and that is in support of a Minister sent to assist with negotiations at the scene of a terrorist incident overseas in which there are UK interests.’ Wright also outlined the current situation in the West:

The only existing secure (telegraph) ground/air communications are in the NIMROD aircraft but operation of these is restricted to the NATO area. A requirement has been stated for secure communications for the new MOD (Air) tanker aircraft fleet but it is unlikely that the communications being developed for the Prime Minister’s aircraft could meet this.

Failing to find an efficient secure communication resulted in an almost farcical moment when the Prime Minister visited Scotland in 1983. The document is worth quoting at length as it provides a flavour of the powerlessness of officials when attempting to convey important message to the Prime Minister when away from Downing Street:

You are aware that on Friday we were unable to get highly classified information from No. 10 to the Prime Minister’ party in Scotland. We had to arrange for Mrs Harris to escort this information to Balmoral on Saturday.

I think this episode illustrates how we are sometimes unable to keep the Prime Minister fully up to date about sensitive matters. In a world that increasingly depends for its security on the rapid transmission of classified information, I feel our links with the Prime Minister are sometimes shown to be inadequate. Surely we should be able to have a secure link (up to and including Top Secret codeword) between No.10 and the Prime Minister at all times.

When the Prime Minster travels abroad we rely on Racal (not very reliable and Cabinet Office are trying to replace it) and Brahms. We also have secure links with Chequers. However, when the Prime Minister goes on regional tours we frequently do not have a link because there are not any engineers to set up Brahms. Would it not be possible to take an engineer on such trips?

I do not know about the mechanics for consulting the Prime Minister about “nuclear matters” when she is either out of the country or on regional tours. However, I assume that there would be a need to communicate with her using highly secure equipment. Is our equipment capable of dealing with this sort of situation?

A SECRET-classified response to the note outlined the hopelessness of the situation:

At present no equipment exists which could travel with the PM’s suite and which could be used at any time for the transmission of classified information up to and including TOP SECRET with or without restrictive markings. For use on tours as you have in mind, the most secure equipment currently available is Brahms. However apart from the expense, which would be considerable if it were taken on every regional trip the PM made, Brahms would have limited use in certain circumstances.

With regard to your penultimate paragraph (nuclear), the situation is very similar to that described above. In times of tension it is not anticipated that the Prime Minister would be out of London. If she were I am told contingency plans exist for handling such situations.

As of March 1984 there were attempts to communicate securely by using Brahms. Leslie Wright wrote to Sir William Heseltine at Buckingham Palace about the possibility:

You now have at Buckingham Palace a BRAHMS on loan from this Office (CO) for the period of the Visit to Jordan; and arrangements have been made with the FCO to take to Amman the two equipments given to you on long-term loan by GCHQ. The FCO engineer there will connect the equipment in the Royal Party office in Amman and Aqaba and, having done so, carry out tests with this Office. For your information, there will also be BRAHMS in the Comcentre in the Embassy and in the temporary Comcentre to be set up in the Holiday Inn hotel at Aqaba.

The cypher key tape issued to Angela Bowlby will enable secure speech between Amman and Aqaba and between either of these and Buckingham Palace, 10 Downing Street and this office.

By December 1984 Leslie Wright informed Robin Butler that the Ministry of Defence had made the financial provision to enable six of the VC10s normally used for ‘VIP flights’ to be modified to carry our secure equipment – thought he feared that ‘we may still not have the secure communications capability by the time of the next long-distance flight. The following day, Butler wrote to Clive Whitmore at the Ministry of Defence to inform him that the Cabinet Office, MOD (Air) and others had co-operated on a project to determine if ‘fully secure telegraph facilities’ could be provided between No. 10 and the RAF VC10s when the Prime Minister was on long-distance flights. Butler announced that the technical feasibility of that installation had been demonstrated. Rather disappointedly, Butler said that it would have been helpful to have used the equipment during Margaret Thatcher’s visitg to Peking, Hong Kong and Washington in the week of 17 December 1984 since such a large proportion of that week would be spent in flight, but it would not be possible to apply the necessary modifications to one of the VC10s. He told Clive Whitmore that he would be grateful if it could be done in time for the next long-haul flight, likely in February.

Whitmore was aware of just how long such a system had been required. He explained to Butler how initials trials of a prototype installation had been completed but that further modifications were needed to meet the required operational standard, which should be complete by early summer. To meet the needs of the February trip, Whitmore had made arrangements for the VC10 selected for that flight to be fitted with the new consoles, which wouldn’t allow time for all planned system modifications, but the system installed on a trial basis should satisfy the Prime Minister’s requirements.

Confirmation of a temporary solution was forthcoming. Leslie Wright announced the relegation of RACAL:

For the coming flight to Washington, I propose not to provide “less-than-fully-secure” voice (RACAL) equipment because new, fully secure teleprinter communications systems will be available between the Communications Centre in the Cabinet Office and the VC10 throughout the flight. Telegrams to be sent to aircraft should be handed by Duty Clerk to one of the Comcentre staff at the connecting door by arrangement. On receipt on the aircraft, these will be passed by one of the two communicators to Cameron Taylor. FYI, the telegraphic address “AIRBORNE” will be used to identify telegrams to/from VC10.

Later that month the Prime Minister received a note regarding a trip to Moscow which referred to the volume of communications material being received. ‘Communications Centre is under pressure at the moment due to WINTEX [a NATO military exercise] and would be grateful if we could restrict our communications to essential documents only.’

The sensitivity of such communications equipment is emphasised by the distress which emanates from a document from Leslie Wright to Robin Butler in April 1985, seemingly referring to the Moscow trip of the previous month:

One of the BRAHMS secure speech equipments taken on the Far East trip has been returned to us in a state which seems to point to a deliberate attempt having been made to gain access to the inside of it. The edges of the metal cover which protect the classified cryptographic unit and the vocoder have been distorted upwards as though force has been applied with some kind of tool. The damage is not consistent with the equipment having been dropped.

Arrangements are in hand for the equipment to be stripped down for an internal check and refurbishment but, meantime, I would be grateful to know if there is any recollection of the equipment having been left unguarded at any time and if so, where. If it was left unguarded, it will be essential to know if the key-tape was with the equipment.

Further insight is provided by a document from mid-1985 which outlined the communications arrangements for when the Prime Minister was on holiday in Austria between 12 and 22 August. A telegraph link was available which was direct and secure. A direct speech link from the No. 10 switchboard was also available, terminating in the room to be used as the No. 10 office with extensions to the Prime Minister’s room and to the bedrooms of the secretarial support staff. In the No. 10 office BRAHMS equipment connected to the speech link and key material to be used would enable secure speech with STS or BRAHMS users in No. 10, Cabinet Office, Foreign and Commonwealth office and the Foreign Secretary at the Consulate General in Marseilles between 12 and 17 August.

Even as late as 1989, difficulties were still being experienced with the technical nature of secure communications equipment. A note from CK Davies in the Cabinet Office’s Telecommunications Secretariat to Stephen Wall, Private Secretary to the Secretary of State at the Foreign Office, demonstrates this:

We spoke. When the Prime Minister goes overseas by VC10 and on flights which last more than about two hours, secure telegraph communications are provided. The equipment is installed by GCB and is manned by two operators, usually one from GCB and one from FCO.

One difficulty is that of operator training. Skill are best gained by handling communications whilst in flight and, ideally, two additional operators should be accommodated periodically for training. However, since the Prime Minister’s flights are usually oversubscribed there is rarely sufficient accommodation to allow this. As an alternative, we should like, from time to time, to install secure communications on the Secretary of State’s flight when a suitable programme presents itself.

Technology offered innovative solutions but its pioneering nature meant that it often proved frustratingly unreliable for its Government users. Even by the end of the 1980s there seemed only compromise measures for contacting the Prime Minister whilst they were out of No. 10.