Blood, Toil, Tears and Debt A month after becoming prime minister in 1940, Churchill was broke. By Mark Archer
http://www.wsj.com/articles/blood-toil-tears-and-debt-1447437716
‘These filthy money matters are the curse of my life and my only worry,” the 24-year-old Winston Churchill complained to his mother in 1898. Money troubles dogged Churchill throughout his life, as David Lough reveals in “No More Champagne,” his fascinating study of Churchill’s finances. On several occasions, the author shows, Churchill was “bailed out” by friends with gifts or loans when his debts threatened to push him into bankruptcy.
A month after becoming prime minister in 1940, Churchill ran out of money to pay his household bills, his taxes and the interest on his large overdraft. His personal assistant, Brendan Bracken, approached Sir Henry Strakosch, an Austrian-born banker who supported Churchill’s anti-Nazi stance. Strakosch promptly wrote out a check for £5,000, which the author estimates to be equivalent to $250,000 today. (Each page includes a helpful multiplier for calculating the rough modern equivalent of financial figures quoted in the book.) “The amount reached Churchill’s account on 21 June,” Mr. Lough writes. “Thus fortified, he paid a clutch of overdue bills from shirt-makers, watch-repairers and wine merchants before he turned his attention back to the war.”
No More Champagne
By David Lough
Picador, 532 pages, $32
Strakosch had also had to rescue him two years before, in the same week Hitler’s troops marched into Austria and Churchill gave an impassioned speech to Parliament warning that Britain “would soon have to choose between resisting Hitler’s campaign of aggression or submitting to it.” On that occasion, Mr. Lough reveals, Strakosch bought Churchill’s entire portfolio of shares, which had been plunging in value, at their original price of £18,000 (equivalent to $1.2 million today), even though their value had fallen precipitously in the market’s panic at the impending war. He never asked for the money back.
”No More Champagne” recasts many aspects of Churchill’s well-known biography. Interestingly, for instance, Mr. Lough suggests that Churchill’s famous periods of depression, what he called his “black dog,” coincided just as much with low points in his finances as they did with political events. Equally intriguingly, while Mr. Lough says that he has had access to one thick Inland Revenue file dedicated to Churchill’s tax dealings, another file remains embargoed until 2040.
Churchill’s money problems may seem surprising, since he was born into the landed aristocracy—he was the grandson of the 7th duke of Marlborough whose family seat was Blenheim Palace, one of Britain’s grandest stately homes. But, as Mr. Lough explains, by the time Churchill’s grandfather inherited Blenheim in 1857, the family fortune had been frittered away over several generations, and even the furniture was rented. Churchill’s father, Randolph, didn’t inherit Blenheim (his elder brother did). Instead, like many cash-strapped British aristocrats at the time, he married an American heiress.
Jennie Jerome’s father, Leonard, had been a successful New York real-estate developer but lost much of his fortune when he switched to trading on Wall Street. Nonetheless, when Churchill’s father died in 1895, Churchill’s mother inherited almost £5,000 ($750,000 in today’s terms) from various Churchill and Jerome trusts. Her spending rapidly reduced it. Mother and son were cut from the same cloth, as Churchill acknowledged in a letter to her:
Speaking quite frankly on the subject—there is no doubt that we are both you & I equally thoughtless—spendthrift and extravagant. We both know what is good—and we like to have it. . . . It seems just as suicidal to me when you spend £200 on a ball dress as it does to you when I purchase a new polo pony for £100. And yet I feel that you ought to have the dress & I the polo pony. The pinch of the whole matter is that we are damned poor.
As a young man, Churchill discovered that he could earn far more as a war correspondent than from his chosen profession as a cavalry officer. Mr. Lough shows that the Morning Post paid him the equivalent of $150,000 in today’s terms for four months reporting on the British army’s campaign in South Africa. He became a household name after he was captured and escaped, and he capitalized on the adventure with a well-paid lecture tour. By the time he entered politics in 1900 at age 26, he had accumulated earnings equivalent to $1.5 million today, although, as the author notes, the free-cash figure was less than half of this after he had paid bankers and tradesmen what he owed them.
Having to create a fortune for himself, Mr. Lough suggests, helps explain Churchill’s politics. Although originally elected as a Conservative, traditionally the party of the landed class, he switched allegiance to the Liberals in 1903, the party associated with entrepreneurs, and throughout his lifetime supported policies that favored wealth creation over inherited income. Politics paid well (at least compared with today), but journalism paid even better, and Mr. Lough shows how Churchill met his financial shortfall from almost constant writing.
Churchill received two inheritances after World War I, but his finances were severely dented by Chartwell, the country house he bought in 1922, where the addition of a new wing, swimming pool and tennis court ran way over budget. The resources needed to run the place included three gardeners and secretaries, a valet, lady’s maid, chauffeur, housekeeper, domestic staff—and plenty of champagne. In 1935 Churchill spent the modern equivalent of $62,000 on champagne, not that he paid on time. In 1914, according to Mr. Lough, he was smoking about a dozen cigars a day, costing more than $1,600 a month in today’s money, but he hadn’t paid his cigar supplier, J. Grunebaum & Sons, for five years. During the 1920s he lost money gambling and on the stock market, where he would typically “day trade” multiple times in the same shares. Mr. Lough estimates that Churchill lost $75,000 (equivalent to just over $1 million today) in the Wall Street crash.
He battled with the tax authorities almost all his life. As prime minister in 1940, he summoned the head of the Inland Revenue, the U.K.’s tax-collecting authority, to a meeting to agree that any revenues from reprints of his writing, now that he had “retired” temporarily from journalism, should be treated as capital gains, which were untaxed, rather than income, which was. It was a distinction that the Inland Revenue ultimately contested in an unpublicized tribunal in 1942 at the height of the war. Unsurprisingly, Mr. Lough reveals, the lay commissioners ruled in favor of the defender of the free world. As a result, he points out, Churchill ended World War II significantly richer than when he started it, thanks to the sale of film rights for his books and early advances for his memoirs, all of which he now claimed as untaxed capital gains. The outlook suddenly altered when Churchill lost the postwar general election and was voted out of office: “Tax rates of more than 90% meant that he would keep very little of any future earnings if he resumed his writing.”
Could Churchill be “bought”? Mr. Lough says no. The politician was a man of strong convictions, and his supporters’ money tended to follow his convictions rather than his convictions following his supporters’ money. The author considers the 1912 case in which James Caird, a Scottish businessman who had made a fortune in the jute business, gave Churchill £33,500 for an expressly political purpose—that of promoting free trade and home rule for Scotland and Ireland—a multiple of more than eight times Churchill’s means at the time. He finds no evidence of impropriety in the way Churchill handled the money, which he kept in separate bank accounts and did not draw upon to fund his personal overdraft. He admits that the records of the accounts are missing from 1915 and 1916 (when Caird died) but concludes: “What we can say is that the money was never transferred to his or [his wife] Clementine’s main bank account and that he never included it in any forecasts of his own cash flow during the war.” By the standards of today, on the other hand, Mr. Lough accepts that Churchill probably abused the power of his public position when he summoned the head of the Inland Revenue to negotiate a more favorable tax treatment for his journalistic earnings.
After Churchill became a private citizen in 1946, a group of friends and benefactors, steered by Lord Camrose, owner of the Telegraph newspaper, raised the figure of £50,000 ($2.5 million in today’s terms) to purchase Chartwell from the Churchills, while affording the former (and future) prime minister a lifetime tenancy, and a further £35,000 ($1.75 million) to provide an endowment for the National Trust to safeguard it after his death. Mr. Lough suggests that this was the closest thing to the type of financial reward that had been traditionally granted to victorious generals and admirals. Never one to economize when he could spend, Churchill used the money to buy up more farmland around the Chartwell estate.
—Mr. Archer is a writer living in London.
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