Press reports initially blamed the recording on the KGB; according to the Sunday Times, 8 January 1984:
'The tape is heavy with static and puntuated with strange noises, but through it all can be heard the authentic voices of Ronald Reagan on the telephone: "If there is a conflict we shall fire missiles at our allies to see to it that the Soviet Union stays within its borders." At the other end of the telephone is Mrs. Thatcher. "You mean Germany?" she asks increduously. "Mrs. Thatcher, if any country endagers our position we can decide to bomb the problem area and so remove the instability."
If this is not hair-raising enough, we hear Mrs. Thatcher virtually admitting that she had the Belgrano sunk to end any chance of an agreement with Argentina. "Oh God!" says Reagan. The whole conversation is fake. Both voices are real but the words spoken have been doctored, cut, rearranged and then expanded on the transcript of the tape. Every word from Reagan is extracted from his lengthy presidential address on nuclear strategy. When, for instance, he seems to swear at Mrs. Thatcher, he is in fact coming to the end of his speech and quoting a hymn: "Oh God of love, O king of peace." The tape surfaced in Holland just before last year's British general election, but it never quite overcame the suspicions of Dutch journalists. They declined to publish the juicy exclusive, sent to them anonymously. But other journalists across the world have fallen for an increasing flow of such stories based on "authoritative" cables, memo and tapes. The State Department in Washington says they are all products of an increasingly sophisicated Russian campaign'.
But a couple of weeks later on 22 January 1984, the Observer revealed that Crass were behind the tape (and mentions their base at Dial House in Epping Forest):
'A tape recording, purporting to carry details of a secret telephone conversation between Mrs Thatcher and President Reagan, has been revealed as a hoax manufactured deliberately by an anarchist rock group. The recording was taken to newspapers throughout Europe - including The Observer-but, apart from one Italian newspaper, nobody had been taken in by the hoax tape until it appeared in the Sunday Times earlier this month. That newspaper described it as part of a KGB propaganda war. Unfortunately the tape was recorded not in Moscow but in an Essex farmhouse. The quest for the real hand behind the tape led to an isolated farmhouse in north Essex, where the eight members of the band live with their children. Reluctantly the members of the band, who sport names like Joy Be Vivre, G Sus and Sybil Right, admitted faking the tape. They showed how they had put it together over two and a half months, using parts of TV and radio broadcasts made by the two leaders, then overdubbing with telephone noises. 'We wanted to precipitate a debate on those subjects to damage Mrs. Thatcher's position in the election. We also did it because of the appalling way Tam Dalyell was treated over the Belgrano debate,' they said. 'We believe that although the tape is a hoax, what is said in it io in effect true'.
Crass later stated: 'We were overcome with a mixture of fear and elation, should we or should we not expose the hoax? Our indecision was resolved when a journalist from The Observer contacted us in relation to 'a certain tape'. At first we denied knowledge, but eventually decided to admit responsibility. We had been meticulously careful in the production and distribution of the tape to ensure that no one knew about our involvement. How The Observer got hold of information that led to us is a complete mystery. It acted as a substantial warning, if walls did indeed have ears, how much more was known of our activities?" (from 'In Which Crass Voluntarily Blow Their Own', sleeve notes to 'Best Before 1984', 1986)
The National Archives Papers
The newly-released correspondence with the Prime Minister's Office at the time show that there was official confusion about the origins of the tape, with an advisor writing on 11 July 1983 that 'This looks like a rather clumsy operation. We have no evidence so far about who is responsible. SIS [Secret Intelligence Service/MI6] doubt whether this is a Soviet operation. It is possible that one of the Argentine intelligence services might have been behind it; or alternatively it might be the work of left-wing groups in this country.'
A further letter on 21 July 1983 states that 'There is no information to indicate that any subversive group or individual in this country was involved in making this tape'. This letter seems to come from MI5, judging by its 'PO Box 500' address and the instructions that letters to that address 'must be under double cover' (MI5 was, maybe still is, sometimes referred to as 'Box 500' or just 'Box' in Whitehall).
However the final letter on 6 April 1984 was clear that the CIA did not consider it to be the work of the KGB, and repeats the press reports that 'have attributed the production to the anarchist punk band CRASS'
Earlier, in October 1982, a Conservative MP in Parliament 'asked the Attorney-General if he will prosecute Crass Records under section 2 of the Obscene Publications Act in respect of its record "How does it feel to be the mother of 1,000 dead?".' The record was a direct attack on Thatcher for the Falklands War, with lyrics including:
How does it feel to be the mother of a thousand dead?
Young boys rest now, cold graves in cold earth.
How does it feel to be the mother of a thousand dead?
Sunken eyes, lost now; empty sockets in futile death.
Throughout our history you and your kind
Have stolen the young bodies of the living
To be twisted and torn in filthy war.
What right have you to defile those births?
What right have you to devour that flesh?
What right to spit on hope with the gory madness
That you inflicted, you determines, you created, you ordered -
It was your decision to have those young boys slaughtered'.
Like many others including the Labour MP Tom Dalyell, Crass believed that the Belgrano had been sunk on Thatcher's orders (with the death of more than 323 mainly young Argentinian sailors) while it was sailing away from the conflict, in order to scupper an American brokered peace treaty. Thatcher wanted the war to continue until Argentina unconditionally surrendered. A direct consequence of this was the sinking shortly afterwards of the British ship HMS Sheffield, with the death of 20 British sailors. Crass had their own sources about what happened. According to George Berger's book 'The Story of Crass' (2006), a sailor who served in the Falkands contacted the band on his return, and came to Dial House.
Source: full documents at National Archives; transcript of tape and contemporary newspaper articles at Crasspunker; for more on the Belgrano affair see Belgrano Inquiry