Harold Wilson, the KGB and the British ‘Watergate’ break-in that was the REAL reason he quit: New book on former UK spymaster reveals details of the 1974 burglary which changed the course of history 

The central London offices of former Prime Minister Harold Wilson were mysteriously broken into in 1974

When the offices of a serving Prime Minister are burgled, you might expect a clamour of concern, an official inquiry or even a crisis. Yet the public knew nothing when, in 1974, thieves broke in to Harold Wilson’s offices on Buckingham Palace Road in Victoria – a stone’s throw from the Palace itself. Nor when a cache of stolen documents from the burglary went on sale to the foreign press.

Even the police were kept in the dark, initially at least.

Yet this mysterious break-in, which took place in the months leading up to the 1974 General Election, would change the course of political history. Among the stolen documents was an explosive letter from one of Wilson’s many powerful friends and it hinted at criminal actions which touched the Prime Minister himself.

With echoes of America’s recent Watergate scandal, dark insinuations followed, as did a potentially incriminating court case – events that helped force Wilson’s shock resignation just a year after his Election victory.

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This was already a time of fear, paranoia and poisonous suspicion, of course. Wilson faced claims not just of cronyism but of high-level links between the Labour Party and the KGB.

And standing, invisible, at the heart of events was the man trusted to clean up the mess, a short, tubby character with the face of an owl and an unrivalled devotion to duty. This was Maurice Oldfield, the legendary Chief or ‘C’ of the Secret Intelligence Service, better known as MI6.

In 1974, Labour had been returned to power with the narrowest of margins – Wilson winning a majority of only three seats. Just weeks into the job, new Foreign Secretary James Callaghan summoned Maurice Oldfield to his office.

‘Tell me, Maurice,’ said Callaghan, who, despite serving as Home Secretary and Chancellor in the previous Wilson government, had little experience of foreign affairs. ‘What, exactly, is it that you do?’

‘My job, Foreign Secretary,’ the mild-mannered spymaster replied, ‘is to bring you unwelcome news.’

What Callaghan didn’t know was that Oldfield had been digging into Wilson and his staff for some time – and with good reason.

Among the documents stolen from Wilson's office was an explosive letter from one of his powerful friends and it hinted at criminal actions which touched the Prime Minister himself

The high-profile Soviet KGB defector Anatoliy Golitsyn had claimed Wilson was a Soviet agent. MI5 was already looking into his connections, whether friends, political contacts or employees.

Dark practices were rife. In Northern Ireland, for example, the Army psychological warfare expert and information officer Colin Wallace was involved in a black propaganda campaign called Clockwork Orange during 1973 and 1974.

It started out spreading misinformation about the terrorist groups but Wallace became concerned when it began to smear senior politicians. Wilson was one of the prime targets. The scope of Oldfield’s knowledge on Wilson’s staff surprised many. One new face in No 10 was the Head of the Policy Unit, Bernard Donoughue.

One Monday morning, Donoughue had been surprised when the MI6 chief passed him, smiled, and asked: ‘Did you enjoy your football game yesterday?’

Donoughue used to play football every Sunday morning on Hampstead Heath.

He first assumed that Oldfield perhaps lived nearby. When told that Maurice lived a stone’s throw from the Houses of Parliament, Donoughue realised that ‘the man knew everything. Nothing was left to chance’.

Suspicions surrounding Wilson, along with a fear of the trade unions and their alleged links to the Soviet Bloc, served to stoke a feeling of paranoia.

And it seems the circle around the Prime Minister didn’t do an awful lot to calm the situation. Donoughue says that Wilson’s long-term private and political secretary, Marcia Williams, was a significant figure in fuelling the problem.

Wilson's long-term private and political secretary, Marcia Williams,  was said to have had a disproportionate influence on the honours system

She told Wilson that the security services were not to be trusted and was said to have had a disproportionate influence on the honours system, which saw Wilson accused of handing out peerages to friends and associates of dubious character. Certainly Wilson’s choice of friends, however innocent he may have thought them, left him wide open to accusations of harbouring Soviet sympathies.

The Conservative MP Winston Churchill, grandson of the wartime leader, wrote to Wilson late in 1974 to warn him that one of his closest associates, Lithuanian-born businessman Joe Kagan (formerly Juozapas Kaganas), was having KGB officials as house guests.

Wilson asked the security services not to speak to Kagan directly but agreed to warn him personally about his contacts.

In a pointed note, lest anyone thought him naive, Wilson added: ‘For the record, I always assume that Russians I speak to may be connected to the KGB.’

An investigation found that the KGB had been trying to use Kagan as an ‘agent of influence’, but cleared him of being a conscious agent.

Given the prevailing sensitivities, Wilson might have tried to distance himself from the likes of Kagan. In fact, the reverse was true: Wilson continued almost defiantly to associate with controversial business leaders with Eastern Bloc connections such as Kagan and the industrialist Rudy Sternberg.

He proudly wore his trademark Gannex raincoats from Kagan’s West Yorkshire factory. Sternberg was elevated to the Lords in 1975; Kagan followed in Wilson’s resignation honours the following year. Donoughue was sceptical: ‘There’s no doubt in my mind that Kagan and Sternberg were KGB agents,’ he says. ‘I was even told that Marcia Williams’s first house was paid for by the KGB.’

MI6 BOSS WHO TIPPED OFF PM... AND INSPIRED TV'S SMILEY 

With his mild-mannered, dumpy persona and thick spectacles, MI6 chief Sir Maurice Oldfield, came too late to be the inspiration for John le Carré’s George Smiley in the novel Tinker, Tailor, Soldier, Spy.

However, Alec Guinness used him as a model for his portayal of Smiley in the acclaimed 1970s TV series, right. 

Mild-mannered MI6 chief Sir Maurice Oldfield was used by actor Alec Guinness as a model for his portayal of George Smiley in Tinker, Tailor, Soldier, Spy

Sir Maurice got on well with Harold Wilson and in an atmosphere made poisonous by rumours of Soviet infiltration, made it his business to know every detail about the PM and his staff. 

When thieves broke into Wilson’s private office, he acted swiftly on a damage-limitation exercise that went to the top of the Government.

Sections of the press were quite blasé when it came to talking about Wilson as a would-be traitor.

Auberon Waugh’s HP Sauce column in the satirical magazine Private Eye would say that it had long suspected Wilson of being a KGB agent and reported that Wilson was planning to merge MI5 and MI6 into a ‘super’ intelligence agency, with Maurice Oldfield as its chief.

Of all the prime ministers with whom he had direct dealings – Eden, Macmillan, Douglas-Home, Wilson, Heath, Callaghan and Thatcher – Oldfield would happily say he got along best with Wilson. He found it genuinely upsetting that in the dying days of his government, Wilson would cross the street rather than talk to him, owing – assuming Donoughue is correct – to his suspicions about the security services, with whom relations had become so strained that the PM began to see conspiracies wherever he looked.

Oldfield told his sister Sadie, who would sometimes accompany him to lunch with Wilson or his Ministers, that he rather missed the talks he once had with the Prime Minister.

He related how, freed from his ‘man of the people’ image, Wilson liked to put away his pipe and draw deeply on a large, opulent cigar.

Oldfield never married and later admitted to having had gay relationships as a student.

Having no public facade to maintain, he chain smoked cigarillos.

By the summer of 1975, however, things were changing. MI5’s Peter Wright wanted to confront Wilson with what he considered to be evidence of the Prime Minister’s ‘treachery’ – his connections with the Soviets (which amounted to some trade contacts) and his dubious associates such as Joe Kagan. This was all encompassed in the Henry Worthington File, as it was s known in MI5.

Wright had hoped to personally convince Wilson to resign, but claimed Oldfield and Lord (Victor) Rothschild, a wartime officer for MI5, talked him out of it and told him to take his proposal to his own chief at MI5, Michael Hanley, instead. Wilson got to hear of the machinations against him and in his own words: ‘I sent for Oldfield.’

HOW GATE-KEEPER MARCIA FUELLED FEARS OF MI5 PLOT 

Marcia Williams was a highly divisive figure at the centre of Government

As Wilson’s private secretary and later the head of his political office, Marcia Williams – later Lady Falkender, right – was a highly divisive figure at the centre of Government. 

Some believed she had an affair with the PM, others said she was a KGB spy, many said she wielded too much influence. 

Wilson’s press secretary, Joe Haines, accused Marcia of preparing Wilson’s notorious ‘Lavender List’, his 1976 resignation honours, said to have been written on coloured notepaper, which included a number of controversial businessmen.

He was the safe pair of hands seen to bring order to the intelligence services after a turbulent period for MI6 when senior officers failed to identify the likes of Kim Philby as traitors. After being asked directly by Wilson if he had heard of any plots against him, Oldfield was as diplomatic as he could be, but confirmed that ‘there is a section of MI5 that is unreliable’.

It seems likely that Oldfield was referring to Wright and his mole-hunters.

The second Wilson government was only to last a few more months and there are those who are convinced that Oldfield was somehow involved in the Prime Minister’s unexpected resignation the following spring.

There has been speculation that by March 1976, Wilson was already aware that he was afflicted by early-onset dementia and wanted to quit before he visibly deteriorated.

Yet some, including the academic and writer Stephen Dorril, have suggested the Prime Minister’s intellectual capacity was never in doubt and that he wanted to return to academia and planned to do that irrespective of what was happening to his premiership.

Those things may well have contributed to his departure. What seems more plausible now, though, is that Wilson’s business connections had finally caught up with him and that Oldfield helped him to take a dignified way out.

In August 1975, Oldfield called round on a neighbour of his, the barrister Desmond de Silva, and related how the Prime Minister’s offices had been burgled the previous year, saying that documents stolen in the raid were about to be sold to magazines in Holland and West Germany.

At the time, de Silva assumed his friend was joking when Oldfield said that he expected him to be called upon to represent the burglars in due course.

The burglars were arrested in March 1976 and, sure enough, Oldfield arranged for de Silva to represent them in court.

SOVIET STOOGE... WHO MADE HAROLD'S RAINCOAT

Born Juozapas Kaganas in Lithuania, Joseph Kagan survived the Jewish ghettos of the Nazi Holocaust and moved to Huddersfield, where he became a multi-millionaire thanks to his invention of Gannex raincoats – as worn by his friend Harold Wilson. Kagan, above, helped fund Wilson’s private office. 

Raincoat tycoon Joseph Kagan was a friend of Prime Minister Harold Wilson and was also suspected of being a KGB agent

He was made Baron Kagan, a life peer, in the infamous ‘Lavender List’, but was jailed for tax evasion and fraud in 1980. He was also suspected of being a KGB agent.

The barrister recalled that there were no state secrets among the stolen documents but that there were messages from a business associate of Harold Wilson’s, a developer named Eric Miller, who had helped fund Wilson’s private office, advising the sale of shares in a company called Peachey Property Ltd.

While there were no direct accusations of wrongdoing against Wilson, in the hands of the wrong barrister, the messages could have exposed the Prime Minister and his government to hugely embarrassing allegations of insider trading.

This could have been Britain’s own Watergate. Miller would go on to be knighted in the so-called ‘Lavender List’ – Wilson’s controversial resignation honours alleged to have been written by Marcia Williams on her lavender-coloured notepaper – and subsequently committed suicide when facing charges of fraud.

Regardless of whether Wilson had been planning to resign, something seemed to concentrate his mind.

On March 15, Oldfield presented the PM with evidence that was potentially about to be brought before a court and Wilson resigned the following day, maintaining his reputation as Labour’s most electorally successful Prime Minister, with four victories, and its most politically astute.

Much has been written about the so-called Wilson Plot. The official history of MI5 concludes that there wasn’t one; the conspiracy theorists maintain there was.

It seems to me that the truth lies somewhere in the middle. There is little evidence of a co-ordinated, managed, top-down MI5-sanctioned plot against Wilson, but there is plenty of evidence that individual officers, or groups of officers, were genuinely concerned about Wilson, or more precisely the company he kept.

Equally, in keeping that company, and by his reliance on certain key advisers, Wilson gave sustenance to those who already regarded him with suspicion.

The evidence would seem to suggest that Oldfield helped to find a tired, paranoid Prime Minister a respectable way out, and his country a respectable way forward.

© 2016 Martin Pearce

• Spymaster: The Life Of Britain’s Most Decorated Cold War Spy And Head Of MI6, Sir Maurice Oldfield, by Martin Pearce, is published by Bantam Press on August 25, priced £20. Offer price £15 (25 per cent discount) until August 21, 2016. Order at mailbookshop.co.uk or call 0844 571 0640; p&p is free on orders over £15.