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Vernon Kell, the report was a great relief. At first the committee had been ‘sceptical as to the necessity at the present juncture of maintaining a counter-espionage organisation’, but, advised ‘that the agents of at least four Powers are already showing activity in this country’ and, alerted to ‘the new factor of bolshevism in the navy and army’, the committee concluded that there was ‘justification for the continuance of M.I.5’, albeit with a reduced budget. For Basil Thomson the outcome was not so good. The committee suggested that his Directorate of Intelligence should lose its independent existence and be incorporated into ‘the general organisation of the Metropolitan Police’. Facing sharp criticism from his titular superior, the Commissioner of the Metropolitan Police, and having lost the confidence of the Prime Minister, Thomson was forced out of office. ‘I did not resign,’ he told his friend Hugh Sinclair, the Director of Naval Intelligence, ‘but was the victim of the usual intrigue with which I[ntelligence] O[fficer]s are familiar.’16

Cumming’s organisation faced further pressure for economies in the next financial year. At the beginning of 1922 the Treasury proposed cutting his budget to £65,000 for 1922-3, rehearsing a familiar series of arguments against the necessity for a continued high level of Secret Service expenditure. All government departments were being required to economise and ‘on general grounds’ it was ‘essential that economies should be effected on Secret Service as on other Services’. Bearing this in mind, it was ‘not reasonable to ask that every risk should be guarded against’. It was equally unreasonable ‘to maintain 3½ years after the Armistice an organisation far more elaborate than was found sufficient in pre-war days’. Finally, the increasing difficulty was noted of defending in parliament ‘the present large provision for Secret Service’, as well as the ‘considerable danger that if reductions cannot be made the House will press for details of expenditure, and thus make it exceedingly difficult for Departments to preserve the necessary secrecy for such work’.17 The Secretary of State for War, Sir Laming Worthington-Evans (who had succeeded Churchill in February 1921), sprang to the defence of ‘S.I.S.’. Even before the proposed cut it had not been ‘possible to maintain a S.I.S. service in all countries’; though ‘war no longer exists the situations all over the world are so complex that greater vigilance on the part of S.I.S. is required than in 1914’; and if the grant were reduced to £65,000, it would mean ‘that the whole of the system will have to be re-cast’ and ‘the spade work already put in will be completely lost and the money previously spent on it thus wasted’. Worthington-Evans estimated that ‘to produce the military and political information demanded’ SIS would need a total of £150,000, comprising the £125,000 he asserted it had actually received in 1921-2, plus £25,000 due to the absorption of work previously done by Army Intelligence in Constantinople, Egypt and Germany. His figures were in fact an overestimate, since the entire Foreign Office portion of the Secret Service Vote had been £125,000, of which Cumming had been advanced £100,000.18

Deciding that total secret service spending should be just £200,000, the Cabinet once again asked Fisher, Crowe and Hankey to look into the matter. With the continual struggle for funding since the end of the war understandably beginning to take its toll, at their first meeting Crowe stressed ‘the disadvantages of the present hand-to-mouth arrangements’. The ‘absolute uncertainty prevailing from year to year as to future Secret Service votes made it impossible to offer any security of tenure to agents so that the better class of man fought shy of taking service in this capacity’. His colleagues agreed in principle that ‘some guarantee of permanency’ was required, but conceded that this was a matter for the Cabinet to decide. Nevile Bland (again serving as secretary) drew up budget projections for Cumming’s organisation on a £65,000, £85,000