The 'Wilson Plot'
One of the most persistent controversies involving the Security Service during the 1970s and 1980s was the so-called "Wilson Plot", in which officers of the Service were accused of having conspired against the Labour Prime Minister Sir Harold Wilson.
Prime Minister Harold Wilson in 1964
During his second term in office (1974-1976), Wilson appears to have become convinced that he was under constant electronic surveillance. His official biographer Philip Ziegler relates an account of Wilson's caution in the lavatory in Number 10, where "the Prime Minister pointed at the electric light fitting and made an exaggerated gesture of caution, putting his finger to his lips and indicating that confidential talk would be unsafe." Former US President George H. W. Bush, then director of the CIA, reportedly emerged from a meeting at Downing Street expressing amazement that "He did nothing but complain about being spied on!" 
Wilson's fears were publicised in July 1977 in an article in The Observer, in which he was quoted as claiming that a faction in the Service was mounting a "whispering campaign" against him and that he had been bugged. The allegations sparked an immediate political controversy to which the Prime Minister, James Callaghan, responded by instigating an internal inquiry. He issued a statement on 23 August 1977 which read:
"The Prime Minister has conducted detailed inquiries into the recent allegations about the Security Service and is satisfied that they do not constitute grounds for lack of confidence in the competence and impartiality of the Security Service, or for instigating a special inquiry.
In particular, the Prime Minister is satisfied that at no time has the Security Service or any other British intelligence or security agency, either of its own accord or at someone else's request, undertaken electronic surveillance in 10 Downing Street or in the Prime Minister's room in the House of Commons."
The allegations resurfaced ten years later with the publication of Spycatcher, a book by former Security Service officer Peter Wright. He claimed that thirty Service officers "had given their approval to a plot" against Wilson. Once again the matter was investigated, in a fresh internal inquiry ordered by the Service's then-Director General, Sir Anthony Duff. Dame Stella Rimington, one of Sir Anthony's successors, later recalled:
"Extensive interviews were conducted with those who had known Peter Wright and were still working; white-haired gentlemen were dug out of their retirement all over the country and asked to cast their minds back but though much reminiscing went on, no-one could recall anything that sounded like what Peter Wright was claiming had happened. Files were trawled through with the same result. Finally, a detailed report was written for Whitehall and ministers felt sufficiently confident to state that no such plot had ever existed." 
On the basis of the Service's report, the Prime Minister, Margaret Thatcher, made a statement to the House of Commons on 6 May 1987 in which she said:
"[T]he Director General of the Security Service has reported to me that, over the last four months, he has conducted a thorough investigation into all these stories, taking account of the earlier allegations and of the other material given recent currency. There has been a comprehensive examination of all the papers relevant to that time. There have been interviews with officers in post in the relevant parts of the Security Service at that time, including officers whose names have been made public.
The Director General has advised me that he has found no evidence of any truth in the allegations. He has given me his personal assurance that the stories are false. In particular, he has advised me that all the Security Service officers who have been interviewed have categorically denied that they were involved in, or were aware of, any activities or plans to undermine or discredit Lord Wilson and his Government when he was Prime Minister. The then Director General has categorically denied the allegation that he confirmed the existence within the Security Service of a disaffected faction with extreme Right-wing views. He has further stated that he had no reason to believe that any such faction existed. No evidence or indication has been found of any plot or conspiracy against Lord Wilson by or within the Security Service.
Further, the Director General has also advised me that Lord Wilson has never been the subject of a Security Service investigation or of any form of electronic or other surveillance by the Security Service."
Wright effectively discredited his own evidence the following year in an interview on the BBC's Panorama programme of 13 October 1988. He admitted that his figure of thirty officers was greatly exaggerated: "The maximum number was eight or nine. Very often it was only three." When pressed further and asked, "How many people, when all the talking died down, were still serious in joining you in trying to get rid of Wilson?", Wright replied, "One, I should say." The interviewer asked, "Is that part of the book perhaps an exaggeration of what you recall now?" to which Wright responded, "I would say it is unreliable."