Winston the spendaholic: He teetered on the brink of bankruptcy and was saved by secret backhanders
Winston the spendaholic: He teetered on the brink of bankruptcy and was saved by secret backhanders
New book on Churchill’s finances reveals he spent £40,000 a year on casinos and £54,000 on booze
David Lough — Daily Mail Sept 12, 2015
The confession was a startling one, in light of the great man he became. ‘The only thing that worries me in life is — money,’ wrote Winston Churchill, then aged 23, to his brother, Jack. ‘Extravagant tastes, an expensive style of living, small and diminished resources — these are fertile sources of trouble.’
Indeed they were. For the qualities that were to make Churchill a great war leader came very close to destroying him time and again during his career, as manic optimism and risk-taking plunged him repeatedly into colossal debt.
In the Thirties, when he was a married man with four dependent children and already borrowing more than £2.5 million in today’s money, he would gamble so heavily on his annual holiday in the South of France that he threw away the equivalent of on average £40,000 every year
In my own career, advising families on tax affairs and investments, I have never encountered addiction to risk on such a scale as his.
To a biographer, one of Churchill’s most convenient characteristics is that he left his own bank statements, bills, investment records and tax demands in his archive, despite the evidence of debt and profligate gambling they reveal.
In contrast to his well-documented periods of anxiety and depression, when the ‘black dog’ struck him, there were phases when he gambled or traded shares and currencies with such intensity that he appeared to be on a ‘high’ — devoid of inhibition, brimming with self-confidence and energy.
As a result, he left behind a trail of financial failures that required numerous bailouts by friends, family and admirers.
And it was only by a wildly improbable intervention, almost an act of God, that he wasn’t bankrupt in 1940 instead of Prime Minister: as war loomed, a secret benefactor wrote two cheques for well over £1 million to clear Churchill’s debts.
His inventive efforts at tax avoidance would spell scandal if attempted by any politician today.
Though he wrestled to control his spending all his life, the defining disaster of Winston’s financial career was the Wall Street Crash of 1929.
Churchill always told his friends his losses in the Stock Market collapse amounted to $50,000 — or £500,000 today. But that is only part of the story.
These were Winston’s years in the wilderness when, having served for a term as Chancellor of the Exchequer, he was suddenly out of power.
This was not without its benefits, for at last he was able to devote time to writing books and churning out newspaper columns to keep the bank at bay.
In return for his high fees as a journalist, Churchill’s friends among the press proprietors expected colourful copy that ran against the conventional political wisdom. He delivered it, but his trenchant commentaries made rehabilitation within the political establishment very difficult.
The problems began when he embarked on a North American tour to promote his book on World War I, The World Crisis, accompanied by his brother Jack and son Randolph.
He travelled through Canada by private railcar, sleeping in a double bed on board with a private bathroom. ‘There is a fine parlour with an observation room at the end,’ he wrote to his wife Clemmie, ‘and a large dining room which I use as the office. The car has splendid wireless installation, refrigerators, fans, etc.’
Surrounded by these modern marvels, Churchill began to trade again in shares and commodities. He was intoxicated by Canada’s money-making opportunities, especially in exploration for oil and gas.
Gripped by investment fever as he reached the prairies, he wired his publisher to demand an advance on his royalties, boasting of the profits he could grasp if he acted without delay.
To allay Clemmie’s concerns, he told her of the cash he was making by selling his book at public appearances — 600 copies in Montreal alone — and casually announced he had ‘found a little capital’ with which he ‘hoped to make some successful investments’.
He plunged tens of thousands of dollars into oilfields and rolling stock, assuring his bankers that, ‘I do not expect to hold these shares for more than a few weeks’.
In the States, he stayed with media tycoon William Randolph Hearst and bought stakes in electrical ventures and gas companies, before heading to California where he indulged in late-night parties with Hollywood’s movie elite and toured the studios.
After lunch with Charlie Chaplin on the set of his latest film, City Lights, Churchill boarded Hearst’s yacht and wrote to Clemmie that he had banked £1,000 (£50,000 today) by cashing in some shares in a furniture business called Simmons.
‘You can’t go wrong on a Simmons mattress,’ he crowed — but failed to mention that he had $35,000 (a third of a million pounds today) still invested with them.
His buying had spiralled out of control. Everything he could raise was plunged into U.S. stocks, in businesses from foundries to department stores.
His brokers sounded warnings by telegraph: ‘Market heavy. Liquidating becoming more urgent. Will await your telephone. Your bank still losing gold & there are rumours of increase in bank rate.’
Churchill ignored them. In four days he bought and sold $420,000 in shares — or more than £4 million-worth now.
It was like a drug to him. ‘In every hotel,’ he told Clemmie, ‘there is a stock exchange. You go and sit and watch the figures being marked up on slates every few minutes.’
The crash was inevitable. At the opening bell in the New York Stock Exchange on Thursday, October 24, 1929, prices fell by an average of 11 per cent.
Churchill kept buying, confident of recouping his losses, right up to the moment he boarded an Atlantic liner to return home. By the time he reached Chartwell, his home in Kent, he was poorer by $75,000 (£750,000).
But instead of pulling in his horns, he tried to recoup — and within six months had lost another $35,000 (£350,000).
Churchill with Montague Brown and President Eisenhower in 1959.
His efforts to cling to some kind of solvency became desperate. He borrowed money wherever he could — from his brother, his bank, his brokers, his publishers and newspaper editors. He arranged another speaking tour in America and took out insurance against its cancellation — then used the General Election of 1931 as an excuse for postponing and claiming his £5,000 (£250,000) indemnity.
He traded the insurers one of his oil paintings, in a deal he described as ‘highly confidential’.
Once the election was behind him, he set off to America — but, in his fraught state, stumbled into disaster.
Having arranged to meet a business associate in New York, he grabbed a taxi. But in his hurry, he forgot to take the man’s address. After a fruitless hour trying to find the building, he climbed out of the cab — and was hit by a car.
Even this was used as a means to scrape money together. He wrote a newspaper article about the accident, syndicated it worldwide for £600 (£30,000) and then claimed medical insurance on the spurious grounds he was ‘totally disabled’.
When the underwriters protested that he was still able to earn money from journalism, his broker retorted that he could not physically write — the article had been dictated to a secretary. Mere talking, he insisted, should not be classed as work. The insurers paid up.
Such sharp practice was not confined to his insurance claims. He told the Inland Revenue he had retired as an author, which entitled him to defer a large income tax bill.
To avoid paying tax on book royalties, he sold the rights and successfully argued that the money he received was not income but capital gains, which at the time was exempt from tax.
He borrowed money from his children’s trusts, and even cut down his drinking — not to curb his expenses, but to win a bet with the press baron Lord Rothermere, who wagered him £600 that Churchill would not drink any brandy or undiluted spirits for a whole year.
Churchill took the bet, reasoning to Clemmie that money won gambling was not subject to tax. But he turned down a bigger bet, £2,000 [£100,000], that he could not remain teetotal for 12 months.
‘I refused,’ he explained, ‘as I think life would not be worth living.’
In fact, his accumulated bills for alcohol came to £900 (£54,000). His gambling was even more costly — 66,000 francs (about £50,000) in a single holiday at a casino in Cannes in 1936, for example.
Clementine’s excesses were little better. That year, her bill at Harrods ran to more than 80 pages, with accounts, too, at Selfridge’s, Harvey Nichols, Peter Jones, Lillywhite’s and John Lewis.
Attempts at economising were feeble. Three servants were dismissed, with a saving of £240 [£14,400] and the same amount was cut from the laundry bill. The temperature of the swimming pool at Chartwell was also reduced in a bid to halve heating costs.
But by 1938, as the European situation with Hitler and Mussolini became critical, Churchill had run out of resources. Both Chartwell and his house in London were up for sale but had attracted no buyers.
His journalism could no longer even cover his back-taxes, and he had borrowed to the limit against his life insurance policies. Creditors were clamouring on all sides.
His overdraft had reached £35,000 (more than £2million) and his brokers were demanding an immediate payment of £12,000 (£720,000). His attempts to bargain were ignored.
‘For a while,’ he admitted, ‘the dark waters of despair overwhelmed me. I watched the daylight creep slowly in through the windows and saw before me in mental gaze the vision of Death.’
Salvation came from an unexpected quarter. Churchill turned to his friend Brendan Bracken, co-owner of The Economist, to find him a rescuer. Bracken, in turn, approached his business partner, Sir Henry Strakosch, who was a fervent admirer of Churchill. He was also immensely wealthy.
Two months earlier, at Bracken’s request, Churchill had visited Sir Henry at his house in Cannes. The 68-year-old, who had made his fortune at the helm of South Africa’s gold-mining Union Corporation, had been unwell and Bracken described him as a ‘lonely old bird’.
This slightest of introductions paid colossal dividends.
Sir Henry, a naturalised Briton born in Austria, regarded Churchill as the one politician in Europe with the vision, energy and courage to resist the Nazi threat.
He had no hesitation in paying off £12,000 (about £660,000 today) of his share-trading debts.
Neither man ever spoke publicly about the rescue. Churchill kept knowledge of it to a very tight circle that did not include his bank or his lawyers.
Sir Henry’s only reward was to be nominated for The Other Club, the dining society based at the Savoy in London that Churchill had founded with his fellow political maverick F. E. Smith.
At the outbreak of war in 1939, Churchill was appointed First Lord of the Admirality, with a salary of £5,000 (£250,000 today) — exactly what it was when he was last given this Cabinet post, 25 years earlier in 1912. The pay, though substantial, was nowhere near enough to cover his expenditure, let alone the interest on his outstanding loans, which totalled £27,000 [£1.6 million].
For years he had been working on his three-volume History Of The English-Speaking Peoples, but despite his prodigious output, he had been unable to deliver the finished manuscript and collect his fee. The book had got no further than the American Civil War, but undaunted, Churchill declared it to be finished.
His publisher, Cassell’s, was dismayed at such an abrupt ending.
All protests were dismissed: Churchill was too busy to write any more. Reluctantly, Cassell’s paid up, which enabled him to pay £2,000 (£100,000 today) of overdue taxes and settle wine merchants’ bills that topped £3,000 (£150,000).
On May 10, 1940, as Hitler’s armies surged through Holland and Belgium, Prime Minister Neville Chamberlain resigned, and by evening King George VI had asked Churchill to form a government. Today, the choice of man seems inevitable, but at the time there was consternation.
‘Seldom can a Prime Minister have taken office with the Establishment so dubious of the choice and so prepared to find its doubts justified,’ wrote one of Downing Street’s private secretaries, Jock Colville.
Churchill’s salary as PM might have doubled to £10,000 (£500,000), but with the highest rate of income tax standing at 97.5 per cent, virtually all of it went to the Inland Revenue.
Just two weeks after the Dunkirk evacuation, in June 1940, the Prime Minister was facing an ultimatum from Lloyd’s Bank for interest on his £5,602 overdraft (£280,100).
Once again, Sir Henry came to the rescue with a cheque for £5,000 (£250,000). The receipts show a flurry of payments to shirt-makers, watch-repairers and, naturally, wine merchants.
Despite rationing, food and drink flowed at Chequers, the Prime Minister’s official residence. King George sent pheasant and venison from Balmoral, and the Admiralty agreed to double the wine budget, providing that all consumption was for diplomatic purposes.
That condition proved no problem: Churchill was determined to enlist the military might of the United States and American guests became frequent visitors to Chequers.
To pare back the tax demands, Churchill tried every possible ruse, even assigning some of his earnings as an author to his son Randolph, who was taxed at a lower rate.
This subterfuge could save £1,500 (£75,000) but it made Churchill uneasy — not least because Randolph’s gambling was even more reckless than his own.
What finally rescued Churchill’s finances, and put him on a stable footing for the rest of his life, was Hollywood.
In 1943, an Italian immigrant film producer paid him £50,000 (£2.5million) for the movie rights to his biography of his ancestor, the military genius Lord Marlborough.
Churchill in the late fifties with Greek tycoon Aristotle Onassis
The death of Sir Henry Strakosch in October 1943 brought a legacy of £20,000 (£1million) as well as cancelling a loan.
As D-Day approached, Churchill was solvent for the first time in 20 years. By the end of the war, he had collected another £50,000 (£2.5million) for the film rights to his History Of The English-Speaking Peoples.
And a further colossal bonus came when he was unexpectedly ousted from Downing Street by the voters in July 1945: on the day of his resignation, offers began to flood in from publishers around the world for his war memoirs.
Traditionally, generals and admirals who won great victories were rewarded by Parliament. Earl Haig, the Army’s commander-in-chief during World War I, was awarded £100,000 (£500,000) in 1918.
There could be no such payment for an ex-Prime Minister. But a group of his admirers came up with a scheme to buy Chartwell for the National Trust, then rent it back to the Churchills for a nominal sum. Churchill was delighted.
Despite this unaccustomed security, he was not above seizing a chance to bypass the taxman.
As bidding for his memoirs topped $1 million (£12.5million) from an American consortium, Churchill was investigating another scheme: by gifting his entire personal papers, including future memoirs and diaries, to a trust in his children’s name, he figured he could avoid most tax on his writings.
He planned to pen his books for a smaller fee, under the pretext of ‘editing’ them.
This editing proved to be thirsty work. When Churchill decamped to Marrakech in Morocco to work on the manuscript in 1947, his entourage’s drinks bill for five weeks came to more than £2,100 (£73,500).
One of his secretaries wrote home: ‘The money here aren’t ’arf going!’
It continued to ‘go’ for the rest of his life. By the time he became PM again in 1951, his annual expenses were about £40,000 (£1 million), much of it on a staff of Swiss nurses and footmen, all of them vetted by MI5.
But now the honours flowed in. He won the Nobel Prize for Literature, a tax-free £12,000 (£300,000). He turned down a dukedom on the grounds that a dukedom without a great landed estate would be an embarrassment.
When he died aged 90 on January 24, 1965, the world mourned. But some had a particular reason to regret his passing: they would never see such a customer again.
In France, Madame Odette Pol-Roger instructed that a black band of mourning should be placed around the label of every bottle of her family’s champagne.
An Adapted by Christopher Stevens from No More Champagne: Churchill And His Money, by David Lough, published by Head of Zeus at £25. © 2015 David Lough.