British Cabinet Member Resigns After Budget Information Leak

Date May 20, 1936

Cabinet secretary James Henry Thomas was alleged to have provided hints perhaps unwittingly about the British government budget to speculators who made quick, unseemly profits on the information. After a parliamentary tribunal issued an incriminating report, Thomas left the government in disgrace.

Locale London, England

Key Figures

• James Henry Thomas (1874-1949), British trade union leader, cabinet secretary, and member of Parliament, 1910-1936
• Sir Leslie Thomas (1906-1971), son of James Henry Thomas and British member of Parliament, 1953-1966
• Sir Alfred Butt (1878-1962), British member of Parliament, 1922-1936
• Alfred Bates (fl. 1930’s), British businessman
• Reginald Marriott (fl. 1930’s), British stockbroker
• Neville Chamberlain (1869-1940), British prime minister, 1937-1940

Summary of Event

The budget scandal of 1936 brought a disgraceful end to the career of James Henry Thomas, one of Great Britain’s most successful trade-union politicians. Born in Newport, Wales, in 1874 in straitened circumstances, Thomas had become a railway worker at the age of fifteen. Rising quickly through the ranks of the railway trade unions, he was elected a Labour Party member of Parliament from Derby in 1910 and would remain a member until 1936. In 1913 he helped found the National Union of Railwaymen, and as its general secretary from 1916 he oversaw its initial successes.

In 1924, Thomas was appointed to the king’s cabinet as secretary of state for the colonies in the first Labour government, and in 1930 he was promoted to secretary of state for the dominions. In 1931 he controversially joined the emergency coalition National Government, which was seen as antagonistic to the labor movement and for which he was expelled with great acrimony from both the trade unions and the Labour Party. Thomas remained popular in his home district, but his indulgence in fine living, horse racing, and gambling came under increased scrutiny from his colleagues and the press.

Thomas spent much of a weekend in April, 1936, sporting with an old friend, Alfred Bates, a wealthy businessman. A week later, on April 21, a member of Parliament and well-known racehorse owner and gambler, Sir Alfred Butt, visited Thomas in his cabinet office. Later that day, Chancellor of the Exchequer Neville Chamberlain presented to the House of Commons the government budget, which included an increase on the taxes on income and tea.

Preparation of the British budget was a closely guarded government secret. However, two days later, London newspapers accused the government of allowing a leak of the budget, a leak that led to numerous insurance policies being taken out against a rise in taxes. Bates had taken out several insurances policies, worth four thousand pounds, through Thomas’s son, Leslie Thomas, a stockbroker, and Butt had taken out similar policies worth eight thousand pounds. Both men made quick profits. Suspiciously, both Bates and Butt had taken out policies in other people’s names as well. Lloyds Insurance alone lost over £100,000. (At the time, one British pound was worth about five U.S. dollars.)

On May 5, Parliament instituted a tribunal, presided over by Judge Sir Samuel Porter, to investigate the leak. Holding hearings at the King’s Bench, the tribunal called Thomas, his son Leslie, Bates, Butt, and others to testify. The most damaging testimony came from Bates and a stockbroker named Reginald Marriott. Bates testified that he had paid Thomas over fifteen thousand pounds to assist Thomas in purchasing his luxurious country manor, purportedly as an advance on Thomas’s autobiography. Marriott testified that he had heard from a customer who had heard from Bates’s secretary that Thomas leaked the tax increase. (The oft-repeated but apocryphal story that Thomas leaked the tea increase by shouting “Tee up!” during a golf game originated in jest.)

On May 20, Thomas resigned his cabinet position. In presenting his resignation to King Edward VIII, Thomas protested that the scandal was a “bloody conspiracy.” Nevertheless, on May 27, the tribunal issued a twenty-four-page report that found Bates had obtained information about the budget from Thomas and had used this information for financial gain.

Because there was no direct evidence that Thomas had deliberately disclosed budget information, no one could be prosecuted under the Official Secrets Act. Marriott’s hearsay testimony, for example, could not have been admitted in a criminal trial. However, Thomas was compelled to resign from Parliament, which he did on June 11. His spirits were crushed by this disgraceful end to his political career, by the public exposure of his carelessness with state secrets and of his habits of gambling and drink, and by the venom with which some of his opponents welcomed his fall. A communist member of Parliament, Willie Gallagher, implied that Thomas was a traitor to his class and bid him good riddance; another member called Thomas “a little swine.”

There was considerable sympathy for Thomas as well. Member of Parliament and future prime ministerWinston Churchill wiped away tears when Thomas bowed to the Commons speaker for the last time. Edward VIII wrote in his book A King’s Story (1951) of trying to console Thomas when he returned the cabinet seal. However, no concerted support for Thomas emerged.

Thomas’s deficiencies in dealing with the questions of foreign dominions such as Ireland had already been exposed, and he was not considered indispensable to the government. His speaking abilities, which had enraptured his local constituents and the trade unionists, had declined considerably. His moderation in government policy already had alienated the more extreme elements of the labor movement and socialist parties. His unpopular decision to join the emergency National Government had already gotten him expelled from the trade unions he had helped lead for thirty years. In sum, he had lost the support of his working-class allies. To the middle and upper-class English citizens, he must have seemed simply a vulgar politician, the first to be punished for disclosing budget secrets.

Thomas immediately set out writing his autobiography My Story (1937), an unrelated series of reminiscences of his public life, emphasizing his lifelong resistance to “despotic capitalism” and his support of the trade unions and Labour Party. He did not mention the budget scandal except to call it the “greatest trial experienced by any public man, humiliated by a morbid and sensational press.”

Thomas lived privately with his wife, Agnes, often visited by his children and grandchildren, until his death in 1949 at the age of seventy-four. Although his son, Leslie, was implicated in the scandal, he would be elected to Parliament in 1953.

Impact

The budget scandal of 1936 brought about the sad end of the career of one of Great Britain’s more remarkable interwar politicians. Thomas had emerged from unlikely circumstances to become a leading trade-union official, one of the rising Labour Party’s key parliament members, and an influential cabinet secretary. His oratorical abilities, his witty personality, and his gruff but diplomatic manner had won the affection of his working-class constituency and charmed aristocrats and King George V. As the leading conciliator in the labor movement, Thomas was a truly beneficial influence in government and the economy. Although Thomas’s abilities were clearly in decline by 1936 and he could expect no higher office, the scandal brought his career to a wretched end.

The scandal was not without its symbolic effect. Although Thomas had used his political talents to secure favorable compromises for workers, to the more radical elements he was a renegade who had been purchased by the attentions of the king, the favors of the rich, and the emoluments of office, which his extravagant lifestyle demanded. His fall, therefore, was his just deserts. To the more conservative British, the scandal revealed a man out of his depth, unaccustomed to the discretions of wealth, whose habits of drink, gambling, and horse-playing made the possibility of bribery inevitable.

Perhaps more would have been made of this symbolic fall but for the year in which it occurred. Chamberlain became prime minister in May, 1937, with the English public already in the middle of a crisis brought on by the aggression of Nazi Germany. If the actions of Chamberlain and his cabinet during this ensuing crisis would be much criticized in years to come, it would not be for the mistakes of the likes of Thomas.

Bibliography

Blaxland, Gregory. J. H. Thomas: A Life for Unity. London: Frederick Muller, 1964. A full-length biography of Thomas that sympathetically suggests that he was careless but not culpable in the budget scandal.

Fraser, W. Hamish. A History of British Trade Unionism, 1700-1998. New York: St. Martin’s Press, 1999. Scholarly history of the British trade-union movement, in which Thomas was a pivotal figure.

“Friend’s Friend’s Friend.” Time, May 25, 1936. Contemporary American news account that chronicles incriminating evidence against Thomas, including the testimony of Reginald Marriott.

Leventhal, Fred, ed. Twentieth-Century Britain: An Encyclopedia. Rev. ed. New York: Peter Lang, 2002. A biographical entry on Thomas emphasizes his political skills.

Stewart, Graham. Buying Caesar: The Churchill-Chamberlain Rivalry. Woodstock, N.Y.: Overlook Press, 2001. Highlights the venomous hatred directed toward Labour Party members, such as Thomas, who joined the National Government of 1931, resulting in their acrimonious expulsion from the labor movement.

Thomas, J. H. My Story. London: Hutchison, 1937. In this hastily written memoir, allegedly written with an advancement that figured in the scandal, Thomas focuses on his relationship with famous English politicians without explaining the budget scandal that ended his career.