1st August, 1929 (Due to arrive Canberra 30.8.29)
My dear P.M.,
I think I have now got the story fairly complete of Lloyd's  dismissal from the High Commissionership in Egypt. Lloyd lunched with me this week and talked freely-and I have also talked at length to Hankey  and others. It is an interesting story and I venture to give it to you in some detail.
I think I have made it clear to you in my letters from time to time that the Foreign Office has in the past much resented Lloyd's independence of mind and lack of inclination to put their instructions into effect without comment. He has had frequent clashes during the four years of his High Commissionership, both with Chamberlain  and with the Egyptian Department of the Foreign Office. Where he did not agree with their views and instructions as to policy, he was in the habit of so informing them-giving reason and instance to support his own views. The Foreign Office policy with regard to Egypt generally for the last four years has been considered, outside the Foreign Office, to have been one of gentility and trust, whereas Lloyd has always maintained a somewhat harsh attitude towards the Egyptians as being, in his mind, the only way to keep our end up in Egypt and maintain our prestige. By constant countering of the Foreign Office policy, he has incurred the hostility of the Egyptian Department of the Foreign Office and of the Permanent Head of the office.
This situation resulted in the drafting of a strongly worded Cabinet Paper by the Foreign Office, reviewing the history of events in Egypt in the last few years and pointing out, at the close of the history of each incident, the fact that 'Lord Lloyd was in disagreement with the policy of His Majesty's Government in this regard'-or something of this nature. This rather ungenerous document was one of the first papers to be laid before the new Cabinet.
Immediately Lloyd arrived in this country a fortnight ago, he was told privately by Lindsay  (Permanent Head of the Foreign Office) that he was expected to resign-which he not unnaturally refused to do until he had had an interview with the Foreign Secretary. He had this interview after a few days and was given to understand by Henderson  that, in view of the impossibility of his (Lloyd's) views being able to coincide with those of the Labour Government, his resignation would be acceptable to them. At this interview Lloyd made the natural request that his views be heard an the subject of policy in Egypt and that he might have the courtesy of hearing the views of the Foreign Secretary as to their proposed policy in Egypt in the future. Henderson refused to discuss the matter on these lines and the interview ended by Lloyd writing out his resignation and Henderson accepting it in writing.
The next day Lloyd called on Ramsay MacDonald , who received him in a very friendly way, told him how much he regretted the whole business, and, after some hesitation, told him the most interesting fact that, within an hour of his arriving at Downing Street for the first time as Prime Minister, he was visited by Austen Chamberlain who volunteered the statement that affairs in Egypt were not at all to the liking of the late Government, due to the fact that Lloyd was at odds with them with regard to their policy, and that he would do well, if he might suggest it, to review the question of the continuity of Lloyd's appointment at an early date.
Ramsay MacDonald went on to tell Lloyd with great friendliness that no sooner had he communicated this to Arthur Henderson than the Foreign Office officials started in full cry after Lloyd's blood. This coincided with a drive on the part of the Left Wing members of his party to get rid of Lloyd and he had had to bow to the combined onslaught.
Lloyd told me all this in his own words and at some length. It is corroborated by the fact that Ramsay MacDonald said to Hankey about this same time that he much regretted the whole business and that it had all been grievously mishandled by the Foreign Office.
As you will know, Lloyd's resignation was followed by most acrimonious debates both in the House of Lords and in the House of Commons, during which Lloyd's friends rallied round him and produced an effective if rather embittered defence of his administration.
Now as regards Mahmoud  and the situation in Egypt. Lloyd tells me that before Mahmoud left Egypt for London, he asked him what he proposed to discuss, if anything, with His Majesty's Government.
Mahmoud told him that he would talk about nothing but the Capitulations -so Lloyd did not pursue the subject further. On arrival in London, Mahmoud's scouts found that the feeling in the Foreign Office and in the Government was very much against Lloyd, and Mahmoud therefore readily agreed to discuss the terms of a treaty, although I understand that he had the grace to enquire whether Lord Lloyd was au fait with the business. He was told that he was not but that, in the circumstances that were about to obtain, this did not affect the matter. So Mahmoud, like any Oriental, willing to swim with the tide, readily agreed to sketch out the terms of a treaty that would be acceptable to his people.
I hear, and I believe it is true, that Mahmoud has had Lloyd to thank for sufficient support to maintain him in power during the last year-and it is Lloyd's opinion (and that of many others here) that Mahmoud will go down before the combined oposition of King Fuad and his enemies before many months, now that Lloyd's support has disappeared. Lloyd thinks that King Fuad (who is an active politician) proposes to work matters so that Hafez Afifi, now Egyptian Foreign Secretary, will form a composite government which will be in power at the dictation of the Palace, and which will be far from amenable to our interests. 
Lloyd naturally talks with considerable bitterness about the events of the past month-although he has refrained from making any public statement in the House of Lords or elsewhere. He proposes to reserve his thunder until October or November when the treaty (in accordance with the Government's promise) will be debated in Parliament.
In accordance with the views that he has always held, Lloyd is most critical of any treaty which contains the stipulation that British troops shall evacuate Cairo and Alexandria. He rehearsed to me at great length the many reasons why evacuation would be detrimental to our interests-the most telling of which is that, in his opinion, troops cannot live for any protracted period contentedly or healthily on or near the Canal. The arguments as to the necessity of controlling Cairo will be well known to you.
The Treaty in its present form has been examined by the Chiefs of Staff and their remarks form the subject of a highly important C.I.D. Paper which I pressed Hankey to be allowed to send you.
However, he very rightly said that it would be risky for him to agree to do this and he asked me to do no more than send you extracts from it-which I attach to this letter. The 'extracts', as you will see, are considerable-I have been generous in interpreting his wishes, whilst keeping to the fact that I have not sent you the whole paper-but you can rest assured that you are not missing much.
I shall probably telegraph you today, basing what I have to say on the Chiefs of Staff's Report.
As far as Australia is concerned, I know that you have always taken the reasonable attitude that we are interested only in the sanctity of the Canal and we are not concerned with the means that the British Government take to effect this. However, it appears to me that when such a radical change of policy as is entailed by the evacuation of Cairo is being seriously considered, it would not be out of place for Australia to ask to be informed in some detail as to how this re-orientation of policy comes to be accepted by the military advisers of His Majesty's Government-and whether their review of the new situation that will obtain is subject to any reservations.
Of course Australia strictly has not got a very definite status in the matter, in that we make no direct contribution to the defence of the Canal. However, these matters cannot be dealt with piecemeal-we do make a generous contribution towards Imperial Defence generally, and our voice should be heard in respect of any particular item of Imperial Defence with which we consider ourselves particularly concerned.
Hankey does not like the proposed Treaty, as he thinks it is defeatist and he is worried about the proposed evacuation of Cairo and Alexandria. However, he thinks it will be five years before the necessary amenities can be provided on the Canal, and this is a breathing space in which much may happen.
I have seen Sir Ronald Lindsay (Permanent Head of the Foreign Office) who takes the point of view that I have told you-that a treaty is essential to us in order to regularise our position vis- a-vis Egypt, and that a treaty is only possible to negotiate with the Egyptians on the basis of evacuation of Cairo and Alexandria.
The Foreign Office have been worried for years about the fact that, on paper and in the eyes of the world, we have no right to be in Egypt at all, and with world opinion against us, we might well be arbitrated out of Egypt altogether before many more years.
I met Sir John Maffey at dinner this week-the Governor-General of the Sudan. In a long conversation he gave me to understand that he thought that whereas Lloyd had been a most valuable person in Cairo over this past period, the time for the 'strong arm' business was over and that we now wanted some more conventional type of representation. He thought that the fort had been given away when we promised the Egyptians independence years ago and that pressure of world opinion would gradually make it impossible for us to retain troops in Cairo and Alexandria, and that, in his opinion, it was better to evacuate these places now and make sure of a defined area on the Canal where we could permanently entrench ourselves and from which we could not only secure the Canal but dominate Cairo. He has always opposed Lloyd-his detractors say in order to keep in with the Foreign Office. Certainly he seems to me to be rather over-willing to give away points both as regards Egypt and the Sudan.
At the C.I.D. meeting on 25th July at which the question of Egypt was on the Agenda, the High Commissioner did not have an opportunity to put his views, as the Prime Minister did not, apparently, wish to have a discussion on the matter.
The probable course of events as regards the proposed Treaty is as under.
It has been taken in a very cursory way by the C.I.D. and has since been considered by the Chiefs of Staff Sub-Committee of the C.I.D. It is now being considered by a Cabinet Sub-Committee-after which its future is obscure. It is said that it will be telegraphed textually to the Dominions at that stage. It may possibly go back to the C.I.D., in which event the High Commissioner will no doubt be able to make an opportunity to be heard.
I am told by Lindsay (Foreign Office) that it is hoped to get it initialled by Mahmoud and probably the Foreign Secretary (Henderson) before Mahmoud goes back to Egypt in about a month's time. It will presumably be debated in Parliament in October.
Lindsay tells me that Mahmoud proposes to organise Parliamentary elections in Egypt at once on his return to Cairo-to take place in October or November-and that he will (if, as he presumes, he is returned to power) place the Treaty before his Parliament at once and do all in his power to get it accepted.
I regret the length of this letter and also that I have not had time to put it into better shape-the departure of the 'Discovery'  having complicated the compilation of this mail.
I am, Yours sincerely, R.G. CASEY
P.S. I attach copy of a Note (marked 'A') prepared in the Foreign Office on the Egyptian question, which was circulated to the C.I.D. Meeting on 25th July.