The Downing Street Years, 1979-1990

THE NEW GOVERNMENT

The first priority after the 1987 election victory was to see that I had the right team of ministers to implement the reforms set out in our manifesto. The reshuffle was a limited one: five Cabinet ministers left the Government, two at their own request. The general balance of the new Cabinet made it clear that ‘consolidation’ was no more my preferred option after the election than before it. John Biffen, whose less than inspiring slogan this had been, left the Cabinet: this was a loss in some ways, for he agreed with me about Europe and had sound instincts on economic matters too, but he had come to prefer commentary to collective responsibility. I lost Norman Tebbit for reasons I have explained. But Cecil Parkinson, a radical of my way of thinking, rejoined the Cabinet as Energy Secretary. I made no change at Education where Ken Baker would make up in presentational flair whatever he lacked in attention to detail, nor Environment where Nick Ridley was obviously the right man to implement the housing reforms which he had conceived. These two areas — schools and housing — were those in which we were proposing the most far-reaching changes. But it was not long before I decided that there must be a major reform of the National Health Service too. In John Moore, whom I had promoted to be Secretary of State for Health and Social Services, I had another radical, anxious to reform the ossified system he had inherited. So the Government soon found itself embarked on even more far-reaching social reforms than we had originally intended.

APPROACHES TO EDUCATION REFORM

The starting point for the education reforms outlined in our general election manifesto was a deep dissatisfaction (which I fully shared) with Britain’s standard of education. There had been improvements in the pupil-teacher ratio and real increases in education spending per child. But increases in public spending had not by and large led to higher standards. The classic case was the left-wing dominated Inner London Education Authority (ILEA) which spent more per pupil than any other education authority and achieved some of the worst examination results. Precisely what conditions and qualities made for good schools was a matter of vigorous debate. I had always been an advocate of relatively small schools as against the giant, characterless comprehensives. I also believed that too many teachers were less competent and more ideological than their predecessors. I distrusted the new ‘child-centred’ teaching techniques, the emphasis on imaginative engagement rather than learning facts, and the modern tendency to blur the lines of discrete subjects and incorporate them in wider, less definable entities like ‘humanities’. And I knew from parents, employers and pupils themselves that too many people left school without a basic knowledge of reading, writing and arithmetic. But it would be no easy matter to change for the better what happened in schools.

One option would in theory have been to advance much further along the path of centralization. In fact, I did come to the conclusion that there had to be some consistency in the curriculum, at least in the core subjects. The state could not just ignore what children learned: they were, after all, its future citizens and we had a duty to them. Moreover, it was disruptive if children who moved from a school in one area to a school elsewhere found themselves confronted with a course of work different in almost all respects from that to which they had become accustomed. Alongside the national curriculum should be a nationally recognized and reliably monitored system of testing at various stages of the child’s school career, which would allow parents, teachers, local authorities and central government to know what was going right and wrong and take remedial action if necessary. The fact that since 1944 the only compulsory subject in the curriculum in Britain had been religious education reflected a healthy distrust of the state using central control of the syllabus as a means of propaganda. But that was hardly the risk now: the propaganda was coming from left-wing local authorities, teachers and pressure groups, not us. What I never believed, though, was that the state should try to regiment every detail of what happened in schools. Some people argued that the French centralized system worked: but, whether it worked for France or not, such arrangements would not be acceptable in Britain. Here even the strictly limited objectives I set for the national curriculum were immediately seen by the vested interests in education as an opportunity to impose their own agenda.

The other possibility was to go much further in the direction of decentralization by giving power and choice to parents. Keith Joseph and I had always been attracted by the education voucher, which would give parents a fixed — perhaps means-tested — sum, so that they could shop around in the public and private sectors of education for the school which was best for their children. The arguments against this were more political than practical. By means testing a voucher one could even reduce the ‘dead weight’ cost — that is the amount lost to the Exchequer in the form of subsidy for parents who would otherwise have sent their children to private schools anyway.

However, Keith Joseph recommended and I accepted that we could not bring in a straightforward education voucher scheme. In the event, we were, through our education reforms, able to realize the objectives of parental choice and educational variety in other ways. Through the assisted places scheme[74] and the rights of parental choice of school under our 1980 Parents’ Charter we were moving some way towards this objective without mentioning the word ‘voucher’.

In the 1988 Education Reform Act we now made further strides in that direction. We introduced open enrolment — that is allowing popular schools to expand to their physical capacity (broadly judged by the numbers of children accommodated in 1979). This significantly widened choice further and prevented local authorities setting arbitrary limits on good schools just to keep unsuccessful schools full. An essential element in the same reforms was per capita funding, which meant that state money followed the child to whatever school he attended. Parents would vote with their children’s feet and schools actually gained resources when they gained pupils. The worse schools in these circumstances would either have to improve or close. In effect we had gone as far as we could towards a ‘public sector voucher’. I would have liked to go further still and decided that we must work up a possible full-scale voucher scheme — I hinted at this in my final Party Conference speech — but did not have the time to take the idea further.

GRANT-MAINTAINED SCHOOLS

But we needed to do one more thing to make parental choice a reality. This was to give more powers and responsibility to individual schools — something very much in line with my instinctive preference for smaller schools rooted in real local communities and, insofar as this was possible in the state sector, reliant on their own efforts and energies. But it was Brian Griffiths who devised the extremely successful model of the ‘grant-maintained (GM) schools’, which are free from local education authority (LEA) control entirely and are directly funded from the DES.[75] With a healthy range of GM schools, City Technology Colleges, denominational schools and private schools (known as ‘public’ schools, much to the confusion of American visitors to Britain) parents would have a much wider choice. But, even more vital, the very fact of having all the important decisions taken at the level closest to parents and teachers, not by a distant and insensitive bureaucracy, would make for better education. This would be true of all schools, which was why we had introduced the Local Management of Schools Initiative (LMS) to give schools more control of their own budgets. But GM schools took it a giant step further.

The governors of a GM school were empowered to manage its budget (receiving their money directly without a service charge deducted by the LEA). They appointed the staff including the head teacher, agreed policy as regards admissions with the Secretary of State, decided the curriculum (subject to the core requirements) and owned the school and its assets. The schools most likely to opt out of LEA control and become GM schools were those which had a distinctive identity, which wished to specialize in some particular subject or which wanted to escape from the clutches of some left-wing local authority keen to impose its own ideological priorities.

The vested interests working against the success of GM schools were strong. The DES, reluctant to endorse a reform that did not extend central control, would have liked to impose all manner of checks and controls on their operation. Local authority officials sometimes campaigned fiercely to prevent opting out by particular schools. And, unexpectedly, the churches also mounted an opposition. In the face of so much hostility I had the Grant-Maintained Schools Trust set up to publicize the GM scheme and advise those interested in making use of it. In fact, GM schools proved increasingly popular, not least with head teachers who were now, in consultation with the governors, able to set their own priorities.

THE NATIONAL CURRICULUM

The decentralizing features of our policy — open enrolment, per capita funding, City Technology Colleges, Local Management of Schools and above all grant-maintained schools — were extraordinarily successful. By contrast, the national curriculum — the most important centralizing measure — soon ran into difficulties. I never envisaged that we would end up with the bureaucracy and the thicket of prescriptive measures which eventually emerged. I wanted the DES to concentrate on establishing a basic syllabus for English, Mathematics and Science with simple tests to show what pupils knew. It always seemed to me that a small committee of good teachers ought to be able to pool their experience and write down a list of the topics and sources to be covered without too much difficulty. There ought then to be plenty of scope left for the individual teacher to concentrate with children on the particular aspects of the subject in which he or she felt a special enthusiasm or interest. I had no wish to put good teachers in a strait jacket. As for testing, I always recognized that no snapshot of a child’s, a class’s or a school’s performance on a particular day was going to tell the whole truth. But tests did provide an independent outside check on what was happening. Nor did it seem to me that the fact that some children would know more than others was something to be shied away from. Of course, not every child had the same potential and certainly not in every subject. But the purpose of testing was not to measure merit but knowledge and the capacity to apply it. Unfortunately, my philosophy turned out to be different from that of those to whom Ken Baker entrusted the drawing-up of the national curriculum and the formulation of the tests alongside it.

There was a basic dilemma. As Ken emphasized in our meetings, it was necessary to take as many as possible of the teachers and Her Majesty’s Inspectorate (HMI) with us in the reforms we were making. After all, it was teachers not politicians who would be implementing them. On the other hand, the educational establishment’s terms for accepting the national curriculum and testing could well prove unacceptable. For them, the new national curriculum would be expected to give legitimacy and universal application to the changes which had been made over the last twenty years or so in the content and methods of teaching. Similarly, testing should in their eyes be ‘diagnostic’ rather than ‘summative’ — and this was only the tip of the jargon iceberg — and should be heavily weighted towards assessment by teachers themselves, rather than by objective outsiders. So by mid-July the papers I was receiving from the DES were proposing a national curriculum of ten subjects which would account for 80–90 per cent of school time. They wanted different ‘attainment targets’, stressing that assessments should not denote ‘passing’ or ‘failing’: much of this assessment would be internal to the school. Two new bodies — the National Curriculum Council and the Schools Examination and Assessment Council — were to be set up. In fact, the original simplicity of the scheme had been lost and the influence of HMI and the teachers’ unions was manifest.

All this was bad enough. But then in September I received a further proposal from Ken Baker for comprehensive monitoring of the national curriculum by the recruitment of 800 extra LEA Inspectors, who themselves would be monitored and controlled by the HMI, which would doubtless have to be expanded as well. I noted: ‘it is utterly ridiculous. The results will come through in the tests and exams.’ I stressed to the DES that all of these proposals would alienate teachers, hold back individual initiative at school level and centralize education to an unacceptable degree. The Cabinet sub-committee which I chaired to oversee the education reforms decided that all of the core and foundation subjects taken together should absorb no more than 70 per cent of the curriculum. But, at Ken Baker’s insistence, I agreed that this figure should not be publicly released — presumably it would have caused offence with the education bureaucrats who were by now ambitiously planning how each hour of school time should properly be spent.

The next problem arose from the report by the ‘Task Group on Assessment and Testing’ which we had established in July 1987 to advise on the practical considerations which would govern assessment, including testing, within the national curriculum. Ken Baker warmly welcomed the report. Whether he had read it properly I do not know: if he had it says much for his stamina. Certainly I had no opportunity to do so before agreeing to its publication, having simply been presented with this weighty, jargon-filled document in my overnight box with a deadline for publication the following day. The fact that it was then welcomed by the Labour Party, the National Union of Teachers and the Times Educational Supplement was enough to confirm for me that its approach was suspect. It proposed an elaborate and complex system of assessment — teacher-dominated and uncosted. It adopted the ‘diagnostic’ view of tests, placed the emphasis on teachers doing their own assessment and was written in an inpenetrable educationalist jargon. I minuted out my concerns to Ken Baker but by now, of course, it had been published and was already the subject of consultation.

In July 1988 I received the Mathematics National Curriculum papers. It was a small mountain. A complicated array of ‘levels’, ‘attainment targets’ and ‘profile components’ based on ‘tasks’ which pupils were expected to perform was surely not what teachers required. In commenting, I stressed the need for greater clarity, simplicity and a more practical approach.

Then in October I read the first report of the National Curriculum English Working Group. This too I found disappointing, as I had the earlier Kingman Committee Report on the teaching of English language — and for the same reasons. Although there was acceptance of a place for Standard English, the traditional learning of grammar and learning by heart, which I considered vital for memory training, seemed to find no favour. Unsatisfactory as all this seemed to me, the fact that many critics considered the direction of these recommendations to be controversial demonstrated just how far things had deteriorated in many classrooms. Moreover, the final report of the English Working Group responded to the criticism made of its first report and gave at least some more emphasis to grammar and spelling.

Perhaps the hardest battle I fought on the national curriculum was about history. Though not an historian myself, I had a very clear — and I had naively imagined uncontroversial — idea of what history was. History is an account of what happened in the past. Learning history, therefore, requires knowledge of events. It is impossible to make sense of such events without absorbing sufficient factual information and without being able to place matters in a clear chronological framework — which means knowing dates. No amount of imaginative sympathy for historical characters or situations can be a substitute for the initially tedious but ultimately rewarding business of memorizing what actually happened. I was, therefore, very concerned when in December 1988 I received Ken Baker’s written proposals for the teaching of history and the composition of the History Working Group on the curriculum. The guidance offered was not rigorous enough. There was also too much emphasis given to ‘cross-curricular’ learning: I felt that history must be taught as a separate subject. Nor was I happy at the list of people Ken Baker was suggesting. His initial names contained no major historian of repute but included the author of the definitive work on the ‘New History’ which, with its emphasis on concepts rather than chronology and empathy rather than facts, was at the root of so much that was going wrong. Ken saw my point and made some changes. But this was only the beginning of the argument.

In July 1989 the History Working Group produced its interim report. I was appalled. It put the emphasis on interpretation and enquiry as against content and knowledge. There was insufficient weight given to British history. There was not enough emphasis on history as chronological study. Ken Baker wanted to give the report a general welcome while urging its chairman to make the attainment targets specify more clearly factual knowledge and increasing the British history content. But this did not in my view go far enough. I considered the document comprehensively flawed and told Ken that there must be major, not just minor, changes. In particular, I wanted to see a clearly set out chronological framework for the whole history curriculum. But the test would of course be the final report.

By the time this arrived in March 1990 John MacGregor had gone to Education. I thought that he would prove more effective than Ken Baker in keeping a grip on how our education reform proposals were implemented, though I knew that he did not have Ken’s special talent for putting our case in public. On this occasion, however, John MacGregor was far more inclined to welcome the report than I had expected. It did now put greater emphasis on British history. But the attainment targets it set out did not specifically include knowledge of historical facts, which seemed to me extraordinary. However, the coverage of some subjects — for example twentieth-century British history — was too skewed to social, religious, cultural and aesthetic matters rather than political events. The detail of the history curriculum would impose too inflexible a framework on teachers. I raised these points at a meeting with John on the afternoon of Monday 19 March. He defended the report’s proposals. But I insisted that it would not be right to impose the sort of approach which it contained. It should go out to consultation but no guidance should at present be issued.

By now I had become thoroughly exasperated with the way in which the national curriculum proposals were being diverted from their original purpose. I made my reservations known in an interview I gave to the Sunday Telegraph in early April. In this I defended the principles of the national curriculum but criticized the detailed prescription in other than core subjects which had now become its least agreeable feature. My comments were greeted with consternation by the DES.

There was no need for the national curriculum proposals and the testing which accompanied them to have developed as they did. Ken Baker paid too much attention to the DES, the HMI and progressive educational theorists in his appointments and early decisions; and once the bureaucratic momentum had begun it was difficult to stop. John MacGregor, under constant pressure from me, did what he could. He made changes to the history curriculum which reinforced the position of British history and reduced some of the unnecessary interference. He insisted that the sciences could be taught separately, not just as one integrated subject. He stipulated that at least 30 per cent of GCSE English should be tested by written examination. Yet the whole system was very different from that which I originally envisaged. By the time I left office I was convinced that there would have to be a new drive to simplify the national curriculum and testing.

THE NEXT WAVE OF EDUCATION REFORM

Education policy was one of the areas in which my Policy Unit and I had begun radical thinking about proposals for the next election manifesto — some of which we envisaged announcing in advance, perhaps at the March 1991 Central Council meeting. Brian Griffiths and I were concentrating on three questions at the time I left office.

First, there was the need to go much further with ‘opting out’ of LEA control. I authorized John MacGregor to announce to the October 1990 Party Conference the extension of the GM schools scheme to cover smaller primary schools as well. But I had much more radical options in mind. Brian Griffiths had written me a paper which envisaged the transfer of many more schools to GM status and the transfer of other schools — which were not yet ready to assume the full responsibility — to the management of special trusts, set up for the purpose. Essentially, this would have meant the unbundling of many of the LEAs’ powers, leaving them with a monitoring and advisory role — perhaps in the long term not even that. It would have been a way to ease the state still further out of education, thus reversing the worst aspects of post-war education policy.

Second, there was the need radically to improve teacher training. Unusually, I had sent a personal minute to Ken Baker in November 1988 expressing my concerns. I said we must go much further in this area and asked him to bring forward proposals. The background to this was that Keith Joseph had set up the Council for the Accreditation of Teacher Education (CATE) in 1984 to approve teacher-training courses. But the position had barely improved. There was still too little emphasis on factual knowledge of the subjects teachers needed to teach, too little practical classroom experience acquired and too much stress on the sociological and psychological aspects. For example, I could barely believe the contents of one of the B.Ed, courses — duly approved by CATE — at Brighton Polytechnic about which one concerned Tory supporter sent in details. Entitled ‘Contexts for learning’, this course claimed to be enabling teachers to come to terms with such challenging questions as ‘To what extent do schools reinforce gender stereotypes?’ It continued: ‘students are then introduced to the debate between protagonists [sic] of education and those who advocate anti-racist education.’ I felt that the ‘protagonists’ of education had a better case.

The effective monopoly exercised by the existing teacher-training routes had to be broken. Ken Baker devised two schemes — that of ‘licensed teachers’ to attract those who wished to enter teaching as a second career and that of ‘articled teachers’ which was essentially an apprenticeship scheme of ‘on the job’ training for younger graduates. These were good proposals. But there was no evidence that there would be a large enough inflow of teachers from these sources significantly to change the ethos and raise the standards of the profession. So I had Brian Griffiths begin work on how to increase the numbers: we wanted to see at least half of the new teachers come through these or similar schemes, as opposed to teacher-training institutions.

The third educational policy issue on which work was being done was the universities. By exerting financial pressure we had increased administrative efficiency and provoked overdue rationalization. Universities were developing closer links with business and becoming more entrepreneurial. Student loans (which topped up grants) had also been introduced: these would make students more discriminating about the courses they chose. A shift of support from university grants to the payment of tuition fees would lead in the same direction of greater sensitivity to the market. Limits placed on the security of tenure enjoyed by university staff also encouraged dons to pay closer attention to satisfying the teaching requirements made of them. All this encountered strong political opposition from within the universities. Some of it was predictable. But undoubtedly other critics were genuinely concerned about the future autonomy and academic integrity of universities.

I had to concede that these critics had a stronger case than I would have liked. It made me concerned that many distinguished academics thought that Thatcherism in education meant a philistine subordination of scholarship to the immediate requirements of vocational training. That was certainly no part of my kind of Thatcherism.[76] That was why before I left office Brian Griffiths, with my encouragement, had started working on a scheme to give the leading universities much more independence. The idea was to allow them to opt out of Treasury financial rules and raise and keep capital, owning their assets as a trust. It would have represented a radical decentralization of the whole system.

IMPLEMENTING THE HOUSING REFORMS

Of the three major social services — Education, the Health Service and Housing — it was, in my view, over the last of these that the most significant question mark hung. By the mid-1980s everything in housing pointed to the need to roll back the existing activities of government. Although the country’s housing stock needed refurbishment and adaptation, there was no pressing need now — as arguably there had been after the war — for massive new house building by the state. Furthermore, rising incomes and capital ownership were placing more and more people in the position to buy their homes with a mortgage.

State intervention to control rents and give tenants security of tenure in the private rented sector had been disastrous in reducing the supply of rented properties. The state in the form of local authorities had frequently proved an insensitive, incompetent and corrupt landlord. And insofar as there were shortages in specific categories of housing, these were in the private rented sector where rent control and security of tenure had reduced the supply. Moreover, new forms of housing had emerged. Housing Associations and the Housing Corporation which financed them — though they could be all too wasteful and bureaucratic on occasion — offered alternative ways of providing ‘social housing’ without the state as landlord. Similarly, tenant involvement in the form of co-operatives and the different kinds of trusts being pioneered in the United States offered new ways of pulling government out of housing management. I believed that the state must continue to provide mortgage tax relief in order to encourage home ownership, which was socially desirable. (Far better and cheaper to help people to help themselves than to provide housing for them.) The state also had to provide assistance for poorer people with housing costs through housing benefit. But as regards the traditional post-war role of government in housing — that is building, ownership, management, and regulation — the state should be withdrawn from these areas just as far and as fast as possible.

This was the philosophical starting point for the housing reforms on which Nick Ridley was working from the autumn of 1986, which he submitted for collective discussion at the end of January 1987, and which after several meetings under my chairmanship were included in the 1987 general election manifesto.[77] The beauty of the package which Nick devised was that it combined a judicious mixture of central government intervention, local authority financial discipline, deregulation and wider choice for tenants. In so doing it achieved a major shift away from the ossified system which had grown up under socialism.

Central government would play a role through Housing Action Trusts (HATs) in redeveloping badly run down council estates and passing them on to other forms of ownership and management — including home ownership, ownership by housing associations and transfer to a private landlord — with no loss of tenant rights. Second, the new ‘ring-fenced’ framework for local authority housing accounts would force councils to raise rents to levels which provided money for repairs. It would also increase the pressure on councils for the disposal of part or all of their housing stock to housing associations, other landlords or indeed home ownership. Third, deregulation of new lets — through development of shorthold and assured tenancies — should at least arrest the decline of the private rented sector: Nick rightly insisted that there should be stronger legal provisions enacted against harassment to balance this deregulation. Finally, opening up the possibility of council tenants changing their landlords, or groups of tenants running their estates through co-operatives under our ‘tenants’ choice’ proposals, could reduce the role of local authority landlords still further.

The most difficult aspect of the package seemed likely to be the higher council rents, which would also mean much higher state spending on housing benefit. More people on housing benefit means more welfare dependency; on the other hand, it seemed better to provide help with housing costs through benefit than through subsidizing the rents of local authority tenants indiscriminately. Moreover, the higher rents paid by those not on benefit would provide an added incentive for them to buy their homes and escape from the net altogether.

These reforms will need time to produce results. But the new arrangements for housing revenue accounts are applying a beneficial new discipline to local authorities. And deregulation of the private rented sector will increase the supply of rented housing gradually, as ideological hostility to private landlordism recedes.[78] But I have to say that I had expected more from ‘tenants’ choice’ and from HATs. The obstacle to both was the same: the deep-rooted hostility of the Left to the improvement and enfranchisement of those who lived in the ghettoes of dependency which they controlled. The propaganda against ‘tenants’ choice’, however, was as nothing compared with that directed against HATs and, sadly, the House of Lords gave the Left the opportunity they needed.

Their lordships amended our legislation to require that a HAT could only go ahead if a majority of eligible tenants voted for it. This would have been an impossibly high hurdle, given the apathy of many tenants and the intimidation of the Left. We finished up by accepting the principle of a ballot, limiting it to the requirement of a majority of those voting. In the summer of 1988 Nick Ridley announced proposals to set up six HATs, of which — after receiving consultants’ reports — he decided to go ahead with four in Lambeth, Southwark, Sunderland and Leeds. I later saw some of the propaganda by left-wing tenants’ groups — strongly backed by the trade unions — which showed how effective their campaigns had been to spread alarm among tenants who were now worried about what would happen when they moved out as their flats were refurbished and about levels of rents and security of tenure. One would never have guessed that we were offering huge sums of taxpayers’ money — it would probably have worked out at £100 million a HAT — to improve the conditions of people living in some of the worst housing in the country. Accordingly, the proposals for HATs in Sunderland, Sandwell, Lambeth, Leeds and finally Southwark had to be dropped, though we knew that a number of local authorities — even Labour-controlled ones — would have liked to obtain access to the HATs money if they could have overcome the opposition of the militants. As a result, no HATs were set up while I was Prime Minister, though three have been since I left office.

FURTHER STEPS IN HOUSING POLICY

By the time of the July 1989 reshuffle the problems with the implementation of our 1987 manifesto housing reforms were all too apparent and it was clear that we should take stock and seek new ways of achieving our objectives. Unfortunately, in Chris Patten as the new Environment Secretary I had someone whose energies were principally (and rightly) directed at trying to smooth out the introduction of the community charge and who in any case was less interested in housing policy than in his other departmental responsibilities. This is not, though, to say that innovative thinking had come to a halt.

Since the spring of 1988 Peter Walker in Wales had been pressing a scheme which he christened ‘flexi-ownership’ under which public sector tenants unable to exercise the ‘Right to Buy’ — even with the large discounts available — would be able to acquire equity stakes in their homes that would increase as the years went by and whose value would be updated in line with local house prices. Initially, I had doubts about the idea — on financial grounds, in that people might choose to use this route rather than the ‘Right to Buy’ and sales and receipts would fall; on political grounds, in that those who had already exercised the ‘Right to Buy’ and made the sacrifices required to do so would be resentful. Both the DoE and the Treasury were strongly against. In Scotland, another variant on the same idea — called ‘Rents to Mortgages’ — had been devised. Under this, rent payments — less a sum for repair and maintenance — would be converted into mortgage repayments.

We discussed the possibilities of both schemes in the summer and autumn of 1988. Scotland was a different case from Wales, for — as I shall explain — home ownership was much lower. Another difference was that in Scotland the Government through ‘Scottish Homes’ was itself a substantial landlord: so no new legislation was needed. I therefore agreed to a Scottish experiment on these lines, while holding fire on Wales.

The ever ingenious Peter Walker now put his ingenuity to good use. He devised a similar Welsh scheme which would operate through the Development Board for Rural Wales at Newtown Powys. The DoE and the Treasury still objected on the ground that the idea could not in the end be limited to Wales and that if it were applied in England substantial ‘Right to Buy’ sales revenues would be lost. But I could see its political attractions; it was fairly modest, and, in any case, it was Peter Walker’s brainchild and I thought he should be allowed to go ahead. I agreed to this at the end of June 1989.

The most disturbing political issue in housing at this time, however, was homelessness. It should immediately be said that the alarmingly large figures for the ‘homeless’ did not by definition reflect the number of people without roofs over their heads. Rather, the published ‘homelessness’ figures described the number of people in certain statutorily determined ‘priority groups’ who were accepted for housing. In other words, far from being homeless they had homes provided by local councils. Sad as the cases of some of these people might be, the problem which worried the general public — and me too — was the growing number of people (especially young people) sleeping rough on the streets of London and other big cities, who were better described as ‘roofless’.

While it was certainly true that there was an insufficiency of short-term ‘direct access’ hostel accommodation — as opposed to the larger, more traditional hostels — and while it was true that the shortage of private rented accommodation had worsened because of rent control, this was essentially a problem of wider social, not housing, policy. Nor are behavioural problems solved by bricks and mortar. I was not prepared to endorse changes in social security benefits relating to the under-25s which were suggested by Tony Newton and the Social Security Department: I thought it vital that we should not add to the already too evident lure of the big city for young people. We wanted them back with their families, not in London living on benefits. I urged the Department of the Environment to bring in the voluntary organizations to see what they rather than the state could do. I was also convinced that far too many disturbed people, who should have been in institutions, had fallen through the central and local government safety net and found themselves with nowhere to go.

In November 1989 Chris Patten announced a package which provided £250 million over two years to London and the South-East, the areas with the worst problems, with help also to improve the management of empty properties by councils and housing associations. But I insisted that whatever Government did to help, there must be a stick as well as a carrot. Crowds of drunken, dirty, often abusive and sometimes violent men must not be allowed to turn central areas of the capital into no-go zones for ordinary citizens. The police must disperse them and prevent their coming back once it was clear that accommodation was available. Unfortunately, there was a persistent tendency in polite circles to consider all the ‘roofless’ as victims of middle-class society, rather than middle-class society as victim of the ‘roofless’.

At the end of July 1990 I asked Chris Patten and Michael Spicer, the Housing minister, to come in and discuss with me the whole of our housing policy — both about where we stood on existing initiatives and where we should go from here. I pinpointed three specific areas — what to do about improving the condition of council estates, whether to extend ‘flexi-ownership’ (or ‘Rents to Mortgages’) in England, and the timetable for getting ‘roofless’ people off the streets and into decent accommodation. In September Chris Patten duly submitted a paper containing his latest thinking. It was immediately clear to me that there were some important differences between his — or more accurately the DoE’s — approach and mine; this was confirmed when he and Michael Spicer came in to see me later that month.

The extension of home ownership over the last decade had been one of the Government’s greatest successes. It had (in England) risen from 57 to 68 per cent of the housing stock. ‘Right to Buy’ sales were still running at about 80,000 a year. Councils had almost completely stopped building new houses and were now concentrating on renovation, a trend which would be accelerated by the new housing finance system. Nine councils had transferred all or part of their housing stock to housing associations — though not in the major urban areas. What was clear, however, was that the DoE saw all this as raising more problems than it solved. In their view — something, indeed, which never seemed to alter — there was a ‘housing shortage’ which required the public sector to provide more new low-cost homes to meet the ‘demand’ from a growing number of households. Consequently, measures to increase home ownership — such as the ‘flexi-ownership’ proposal which would be particularly attractive to poorer families — were considered undesirable because they would reduce the supply of cheap local authority housing to rent. This analysis failed to grasp that selling a house to a tenant reduced the demand for as well as the supply of rented housing and that more home ownership — even partial ownership with a small equity stake — would make even quite bad estates that much more tolerable, as the pride of ownership improved the neighbourhood. More seriously, it also assumed that the ‘demand’ for housing was finite, which was not true if housing was subsidized. Indeed, perverse incentives were operating to encourage the break up of large households and the formation of new smaller ones, for instance in the treatment of the housing needs of unmarried pregnant mothers. To analyse demand and supply without considering the effect of price was a perfect prescription for policy failure.

The other difference of analysis lay in our opposing views of the role of local authorities. The DoE envisaged the main thrust of renovation coming from the extension of the Estate Action programme — which worked through local authorities — under which money was provided to improve the worst estates. Many of these individual schemes were good and imaginative. Indeed, I went further than the DoE in believing that the design of estates was crucial to their success and to reducing the amount of crime. I was a great admirer of the work of Professor Alice Coleman in this area and I had her made an adviser to the DoE, to their dismay. But what I did not believe was that local authorities should be the main agents for improvement. My Policy Unit was working on an interesting alternative route which would have combined a new QUANGO — at arms length from the DoE and not in collusion with the local authorities — which would have backed ‘Community Housing Trusts’. The latter were schemes which we envisaged would combine public and private investment to upgrade the infrastructure of the estate, give residents an equity stake in their homes and under which the estates would be managed by a commercial company. It would thus be a different route to the objective for which HATs had been created, but this time bringing in private enterprise from the start and giving residents a direct financial stake in its success.

The September 1990 discussion with Chris Patten and Michael Spicer was not an inspiring one. Michael was keen to concentrate on new measures to revive the private rented sector. I agreed with him on this, but I thought that in the short term it was more important to tackle the problems of public sector housing. Chris, I suspect, thought that the best way of doing this was simply to build more public sector houses. In any case, he seemed content to work within the present local authority dominated framework. After the meeting I had a discussion with my advisers and penned a personal minute to Chris Patten in which I noted my disappointment. I added:

I drew particular attention to the importance of extending home ownership through the ‘Right to Buy’, ‘Rents to Mortgages’ and home-steading — providing people with the money to renovate and then become the owners of derelict properties. I reaffirmed that I wanted to get local authorities out of managing and owning housing. It was clear to me that we must now get back to the kind of fundamental policy thinking which Nick Ridley — now no longer a member of the Government — had once supplied. I said that I was going to call in outside experts and businessmen to talk through all these issues at a dinner which Chris would, of course, attend; but I had left No. 10 before the planned dinner could take place. The inertia of the DoE had won out in the end.

REFORMING THE NATIONAL HEALTH SERVICE (NHS)

Housing, like Education, had been at the top of the list for reform in 1987. But I had reserved Health for detailed consideration later. I believed that the NHS was a service of which we could genuinely be proud. It delivered a high quality of care — especially when it came to acute illnesses — and at a reasonably modest unit cost, at least compared with some insurance-based systems. Yet there were large and on the face of it unjustifiable differences between performance in one area and another. Consequently, I was much more reluctant to envisage fundamental changes than I was in the nation’s schools. Although I wanted to see a flourishing private sector of health alongside the National Health Service, I always regarded the NHS and its basic principles as a fixed point in our policies. And so, whereas I felt under no obligation to defend the performance of our schools when criticism was made, I peppered my speeches and interviews with the figures for extra doctors, dentists and midwives, patients treated, operations performed and new hospitals built. I felt that on this record we ought to be able to stand our ground.

Some of the political difficulties we faced on the Health Service could be put down to exploitation of hard cases by Opposition politicians and the press. But there was, of course, more to it than that. There was bound to be a potentially limitless demand for health care (in the broadest sense) for as long as it was provided free at the point of delivery. The number of elderly people — the group who made greatest call on the NHS — was increasing and this added to the pressure. Advances in medicine opened up the possibility of- and demand for — new and often expensive forms of treatment.

In significant ways, the NHS lacked the right economic signals to respond to these pressures. Dedicated its staff generally were; cost conscious they were not. Indeed, there was no reason why doctors, nurses or patients should be in a monolithic state-provided system. Moreover, although people who were seriously ill could usually rely on first-class treatment, in other ways there was too little sensitivity to the preferences and convenience of patients.

If one were to recreate the National Health Service, starting from fundamentals, one would have allowed for a bigger private sector — both at the level of general practitioners (GPs) and in the provision of hospitals; and one would have given much closer consideration to additional sources of finance for health, apart from general taxation. But we were not faced by an empty slate. The NHS was a huge organization which inspired at least as much affection as exasperation, whose emergency services reassured even those who hoped they would not have to use them, and whose basic structure was felt by most people to be sound. Any reforms must not undermine public confidence.

I had had several long-range discussions with Norman Fowler, then Secretary of State at the DHSS, in the summer and autumn of 1986 about the future of the National Health Service. It was a time of renewed interest in the economics of health care. Professor Alain Enthoven of Stanford University had been advancing ideas about creating an internal market in the NHS, whereby market disciplines would be applied even though a full-scale free market would not. Some of the think-tanks were refining these concepts. So there was much to talk about. Norman provided a paper which I discussed with him and others at the end of January 1987. The objective of reform, which we even now distinguished as central, was that we should work towards a new way of allocating money within the NHS, so that hospitals treating more patients received more income. There also needed to be a closer, clearer connection between the demand for health care, its cost and the method for paying for it. We discussed whether the NHS might be funded by a ‘health stamp’ rather than through general taxation. Yet these were very theoretical debates. I did not believe that we were yet in a position to advance significant proposals for the manifesto. I was not even sure that we would be able to do so at an early stage in the next Parliament. Even the possibility of a Royal Commission — not a device which I would generally have preferred but one which had been used by the previous Labour Government in considering the Health Service — held some attractions for me.

Norman Fowler was much better at publicly defending the NHS than he would have been at reforming it. But his successor, John Moore, was very keen to have a fundamental review. John and I had our first general discussion on the subject at the end of July 1987. At this stage I still wanted him to concentrate on trying to ensure better value for money from the existing system. But as the year went on it became clear to me also that we needed to have a proper long-term review. During the winter of 1987–8 the press began serving up horror stories about the NHS on a daily basis. I asked for a note from the DHSS on where the extra money the Government had provided was actually going. Instead, I received a report on all of the extra pressures which the NHS was facing — not at all the same thing. I said that the DHSS must make a real effort to respond quickly to the attacks on our record and the performance of the NHS. After all, we had increased real spending on the NHS by 40 per cent in less than a decade.

But the pressure to provide more money for the Health Service was proving all but irresistible. Many of the District Health Authorities (DHAs)[79] which ran the hospitals overspent in the first half of the year and then cut back by closing wards and postponing operations. They promptly blamed us, publicizing the sad cases of patients whose operations had been postponed, or, in the ghoulish phrase used among doctors, ‘shroud waving’. It seemed that the NHS had become a bottomless financial pit. If more money had to be provided, I was determined that there must at least be strings attached — and the best way those strings could be woven together was in the form of a full scale NHS review.

There was another strong reason for favouring a review at this time. There was good evidence that public opinion accepted that the NHS’s problems went far deeper than a need for more cash. Many of our critics in the press admitted as much. If we acted quickly we could take the initiative, put reforms in place and see benefits flowing from them before the next election.

There was a setback, however, before the review had even been decided on. John Moore fell seriously ill with pneumonia in November, almost collapsing during a meeting at No. 10. With characteristic gallantry, John insisted on returning to work as soon as he could — in my view too soon. Not fully recovered, he could never bring enough energy to bear on the complex and arduous process of reform and produced several below par performances in the Commons. The tragedy of this was that his ideas for reform were in general the right ones, and indeed he deserves much more of the credit for the final package than he has ever been given.

I made the final decision to go ahead with a Health review at the end of January 1988: we would set up a ministerial group, which I would chair. I made it clear from the start that medical care should continue to be readily available to all who needed it and free at the point of consumption. The review would seek to reform the administrative structure of the NHS so that the best of intentions could become the best of practice. With this in mind I set out four principles which should inform its work. First, there must be a high standard of medical care available to all, regardless of income. Second, the arrangements agreed must be such as to give the users of health services, whether in the private or the public sectors, the greatest possible choice. Third, any changes must be made in such a way that they led to genuine improvements in health care, not just to higher incomes for those working in the Health Service. Fourth, responsibility, whether for medical decisions or for budgets, should be exercised at the lowest appropriate level closest to the patient.

The ministerial group met first in February. John Moore and Tony Newton represented the DHSS with Nigel Lawson and John Major for the Treasury, working with officials and advisers. Twelve background papers were commissioned covering consultants’ contracts, financial information, efficiency audit, waiting times and the scope for increased charging. The Treasury representatives were especially keen on increasing and extending charges throughout the NHS. This would have discredited any other proposals for reform and ditched the review. I stamped firmly on it. Otherwise, the danger quickly appeared that we had too much information before us on secondary matters and too little about the principles of reform. Accordingly, I asked John Moore for a paper on the long-term options for the NHS for my next meeting. This duly arrived in mid-March and set out the very differing routes along which we might go.

For intellectual completeness all such reviews list virtually every conceivable bright idea for reform. This contained, if I recall aright, about eighteen. But the serious possibilities boiled down to two broad approaches in John Moore’s paper. On the one hand we could attempt to reform the way the NHS was financed, perhaps by wholly replacing the existing tax-based system with insurance or, less radically, by providing tax incentives to individuals who wished to take out cover privately. There were several possible models. On the other hand, we could concentrate on reforming the structure of the NHS, leaving the existing system of finance more or less unchanged. Or we could seek to combine changes of both kinds.

I decided early in the review that the emphasis should be on changing the structure of the NHS rather than its finance. There was, admittedly, some attraction in the idea of funding the NHS by national insurance or an hypothecated tax, which would have brought home to people the true cost of health care and, under some models, allowed them to contract out of certain state services if they chose. In the early stages John Moore and the DHSS strongly favoured such a contracted out, hypothecated tax model for the not very mysterious reason that it would have guaranteed them a large, stable and increasing income for the DHSS. In effect, the DHSS would have contracted out of the annual public spending round. It was a real mystery, however, why the Treasury seemed to smile on such an approach in the early stages. If we rule out genuine disinterested intellectual curiosity, perhaps unfairly, the Treasury’s motive may have been to strike an alliance with the DHSS in order to get control of the review and curb any radicalism of which it disapproved. It could then abandon its apparent support for the hypothecated tax — which indeed is exactly what it did a month or two into the review. We decided during the summer that further work on the finance side should concentrate on the possibility of tax reliefs for private health insurance premiums paid by the elderly and incentives to boost company health insurance schemes.[80]

On the other side of the equation — reforming the structure of the NHS — two possibilities seemed to have most appeal. The first was the possible setting-up of ‘Local Health Funds’ (LHFs). These were essentially a variant on the American idea of Health Maintenance Organizations (HMOs). People would be free to decide to which LHF they subscribed. LHFs would offer comprehensive health care services for their subscribers — whether provided by the LHF itself, purchased from other LHFs, or purchased from independent suppliers. The advantage of this system — which was also claimed for the American HMOs — was that it had built-in incentives for efficiency and so for keeping down the costs which would otherwise escalate as they had in some health insurance systems. What was not so clear was whether if they were public sector bodies there would be any obvious advantage over a reformed structure of the DHAs.

So I was impressed by a suggestion in John’s paper that we should make NHS hospitals self-governing and independent of DHA control. This was a proposal — somewhat more ambitious than that which we finally adopted — by which all hospitals would (perhaps with limited exceptions) be contracted out individually or in groups through charities, privatization or management buy-outs, or perhaps leased to operating companies formed by the staff. This would loosen the excessively rigid control of the hospital service from the centre and introduce greater diversity in the provision of health care. But, most important, it would create a clear distinction between buyers and providers. The DHAs would cease to be involved in the provision of health care and would become buyers, placing contracts with the most efficient hospitals to provide care for their patients.

This buyer/provider distinction was designed to eliminate the worst features of the existing system: the absence of incentives to improve performance and indeed of simple information. The crudity of this system becomes clear when one realizes that there was at that time virtually no information about costs within the NHS. We had already begun to remedy this. But when I asked the DHSS at one review meeting how long it would be before we had a fully working information flow and was told six years, I exploded involuntarily: ‘Good heavens! We won the Second World War in six years!’

Within the NHS money was allocated from regions to districts and then to hospitals by complicated formulas based on theoretical measures of need. A hospital which treated more patients received no extra money for doing so; in fact it would be likely to spend over budget and be forced to cut services. The financial mechanism for reimbursing DHAs when they treated patients from other areas was to adjust their future spending allocations several years after the event — a hopelessly unresponsive system. But with DHAs acting as buyers money could follow the patient and patients from one area treated in another would be paid for straight away. Hospitals treating more patients would generate a higher income and thus improve their services rather than having to cut back. The resulting competition between hospitals — both within the NHS and between the public and private sectors — would increase efficiency and benefit patients.

I held two seminars on the NHS at Chequers — one in March with doctors and the other in April with administrators — to brief myself more fully. Then in May we began our next round of discussions with papers from John Moore and Nigel Lawson.

Nigel took a critical view of John Moore’s ideas. By now, the Treasury had become thoroughly alarmed that opening up the existing NHS structure might lead to much higher public expenditure. Despite apparent Treasury interest earlier in the idea of an ‘internal market’, at the end of May Nigel sent me a paper questioning the whole direction of our thinking. John Major followed up the attack with a proposal for a system of ‘top-slicing’ by which the existing system of allocating funds to health authorities would continue, but the extra element provided for growth in the health budget each year would be held back (‘top-sliced’) and allocated separately to hospitals which fulfilled performance targets set down from the centre. This was presented as a more practical and immediate way of realizing the objective of ‘money following the patient’. It was, of course, nothing of the sort. Relative to the overall hospital budget the amount of money paid in relation to performance would have been small. Central control of the hospital service would if anything have been increased. And there would have been no attempt to separate buyers from providers — in the short term at any rate — and thus no real provision to make money follow the patient. In short, a characteristic Treasury device to assert its central control of spending and disguise it as extending consumer choice.

In the face of these challenges John Moore did not defend his approach very robustly and I too began to doubt whether it had been properly thought through. We had a particularly difficult meeting on Wednesday 25 May which ended with a decision to commission further work on ‘top-slicing’. Meanwhile, the Treasury did not have it all their own way. I asked them for a paper on possible new tax incentives for the private sector — an idea which Nigel fiercely opposed.

Nigel’s objection to tax relief for private medical insurance was essentially twofold. First, he was — as I have said earlier — a convinced fiscal purist. Tax reliefs in his view distorted the system and should be eroded and if possible removed. Second, he argued that tax relief for private health insurance would in many cases help those who could already afford private cover and so fail to deliver a net increase in private sector provision. In those cases where it did provide an incentive, it would increase the demand for health care, but without corresponding efforts to improve supply the result would just be higher prices. Neither of these objections was trivial — though taken to its logical conclusion the Treasury position implied that we should have been trying to discourage the growth in private sector provision that was already taking place. In any case, both objections missed the point that unless we achieved a growth in private sector health care, which had been slow over the past few years, all the extra demands would fall to be met by the NHS. In the long term it would be impossible to resist that pressure and public expenditure would have to rise much further than it otherwise would. I was not arguing for across the board tax relief for private health insurance premiums — though in principle that would be justified — but rather for a targetted measure. If we could encourage people over sixty to maintain the health insurance which they had subscribed to before their retirement, that would reduce the demand on the NHS from the limited group which put most pressure on its services.

Nor, of course, were we neglecting the ‘supply side’. The whole approach we were taking in the review was designed to remove obstacles to supply. And in addition the review was considering a significant increase in the number of consultants’ posts, which would have an impact on the private sector as well as the NHS. We had further plans to tackle restrictive practices and other inefficiencies in the medical profession, directing the system of merit awards more to merit and less to retirement bonuses, and we planned the general introduction of ‘medical audit’.[81]

Nigel fought hard even against these limited tax reliefs but I got it through with John Moore’s help in the first part of July. In other areas I was less happy. The DHSS had been shaken by the Treasury’s criticisms and responded by seeking to obtain Treasury support for their proposals at a formative stage before they presented the review. This gave the Treasury an effective power of veto. Accordingly, the DHSS put forward, with Treasury agreement, a much more evolutionary approach. Though money following the patient and self-governing hospitals remained goals of policy, they were relegated to the indefinite future and ‘top-slicing’ took centre stage in the short term. (Indeed, this idea staggered on, ever more feebly, through almost the entire length of the review. But it failed in its purpose of diverting us from a genuine system of money following the patient, and never made its way into the white paper.)

I had no objection, in principle, to an evolutionary approach to the introduction of self-governing hospitals. We already had a model from our education reforms: hospitals could opt out of DHA control while remaining within the NHS, just as grant-maintained schools opted out of local authority control while remaining in the state sector. But I was suspicious of the distinction that was emerging between short-and long-term changes, generally worried about the slow pace of the review and thought we were losing our way.

What made me uneasy was that my Policy Unit — which had from the first championed the three reforms of the buyer/provider distinction, money following the patient and independent hospital trusts — presented me with two worrying criticisms. First, we were in danger of letting these ideas be overwhelmed by Treasury considerations of short-term cost control. Second, the reforms under discussion, while vital, extended choice to the doctor and to health service managers but not to the patient who would continue to be the dependant of a locally monopolistic DHA. What was needed to remedy this was some variant of the old idea of the GP as budget holder. In the Policy Unit’s version, the GP would, like the hospital, be able to opt out of DHA control and make his own arrangements with hospitals for the treatment of his patients. The patient would therefore be able to choose between a GP who held his own budget or one who worked under the DHA. At first, this idea struck me as too radical, but it worried me that we seemed, under Treasury pressure, to be moving away from, rather than towards, radical reforms.

At the end of July 1988 I made the difficult decision to replace John Moore on the review. I took this opportunity to split the unwieldy DHSS into separate Health and Social Security departments, leaving John in charge of the latter and bringing in Ken Clarke as Health Secretary. There can no question that John had made a very important contribution to the review. The idea of money following the patient, the distinction between buyers and providers and the concept of self-governing hospitals all emerged in the review during his period as Secretary of State. Also he had pushed hard for tax reliefs, which Ken Clarke would not have done. As he was to demonstrate during the short period in which he was my Secretary of State for Education (when he publicly discounted my advocacy of education vouchers), Ken Clarke was a firm believer in state provision. But whatever the philosophical differences between us, Ken’s appointment was a useful one. His arrival at the Department of Health undoubtedly helped our deliberations. He was an extremely effective Health minister — tough in dealing with vested interests and trade unions, direct and persuasive in his exposition of government policy.

Ken Clarke now revived the idea which the Policy Unit had been urging: that GPs should be given budgets. In Ken’s version GPs would hold budgets to buy from hospitals ‘elective acute services’ — surgery for non-life-threatening conditions such as hip replacements and cataract operations. These were the services for which the patient had (in theory at least) some choice as to timing, location and consultant and for which GPs could advise between competing providers in the public and private sector. This approach had a number of advantages. It would bring the choice of services nearer to patients and make GPs more responsive to their wishes. It would maintain the traditional freedom of GPs to decide to which hospitals and consultants they wanted to refer their patients. It also improved the prospects for hospitals which had opted to leave DHA control and become self-governing: otherwise it was all too likely that if District Health Authorities were the only buyers they would discriminate against any of their own hospitals which opted out.

Giving GPs budgets of their own also promised to make it possible for the first time to put reasonable limits on their spending — provided we could find ways of having some limit to the number of GPs within the NHS and to how much they spent on drugs, although there was always provision for emergencies. Nevertheless, the Treasury objected to practice budgets, foreseeing the creation of a powerful new lobby for extra health spending, and argued for a more direct way of cash limiting GPs. They also doubted whether all GPs would be able to manage their affairs with sufficient competence and whether many practices would be big enough to cope financially with the unpredictabilities of patient needs. If there were such problems, the patient would suffer.

I myself had initially been cautious and wanted more detail. However, the more closely we examined the concept of having GPs shop around for the best quality and value treatment for their patients, the more fruitful the idea seemed. We decided in the end to proceed again by an ‘opting out’ mechanism, limiting the option to the larger GP practices but extending the services covered by budgets beyond what Ken had originally proposed to include ‘out-patient’ services. We also gave opted-out practices an additional budget to cover the cost of prescriptions.

By the autumn of 1988 it was clear to me that the moves to self-governing hospitals and GPs’ budgets, the buyer/provider distinction with the DHA as buyer, and money following the patient were the pillars on which the NHS could be transformed in the future. They were the means to provide better and more cost-effective treatment.

A good deal of work had by now been done on the self-governing hospitals. As with our education reforms, we wanted all hospitals to have greater responsibility for their affairs but the self-governing hospitals to be virtually independent within the NHS. I wanted to see the simplest possible procedure for hospitals to change their status and become independent — what I preferred to call ‘trust’ — hospitals. They should also own their assets, though I agreed with the Treasury that there should be some overall limits on borrowing. It was also important that the system should be got under way soon and that we had a significant number of trust hospitals by the time of the next election. By December we were in the position to start commenting on the first draft of the white paper which would set out our proposals. In January 1989 we discussed proposals for giving a proper management structure to the NHS. Then at the end of the month — after the twenty-fourth ministerial meeting I had chaired on the subject — the white paper was finally published.

Henceforth the provision and financing of health care were to be separated, with money following the patient. The old, overelaborate and distorting RAWP (Resource Allocation Working Party) funding system would be ended and replaced by a new system based on population, weighted for age and health, with some special provision for London which had its own problems. Hospitals would be free to opt out of District Health Authority control to become self-governing trusts, funded from general taxation, free to settle the pay and conditions of staff and able to sell their services in the public and private sectors. GPs in large practices would have the opportunity to hold their own NHS budgets. The remit of the independent Audit Commission would now be extended to include the NHS. There would be tax relief for the over-60s on private health insurance premiums. Throughout the system, more powers would be devolved to local hospital management.

The white paper proposals essentially simulated within the NHS as many as possible of the advantages which the private sector and market choice offered but without privatization, without large-scale extra charging and without going against those basic principles which I had set down just before Christmas 1987 as essential to a satisfactory result. But there was an outcry from the British Medical Association, health trade unions and the Opposition, based squarely on a deliberate and self-interested distortion of what we were doing. In the face of this campaign of misinformation Ken Clarke was the best possible advocate we would have. Not being a right-winger himself, he was unlikely to talk the kind of free-market language which might alarm the general public and play into the hands of the trade unions. But he had the energy and enthusiasm to argue, explain and defend what we were doing night after night on television.

What I was less convinced about, however, was whether Ken Clarke and the Department of Health had really thought through the detailed implementation of what we were doing and foreseen the transitional difficulties which might arise as we moved from one system of finance and organization to another. David Wolfson and others doubted whether District Health Authorities and hospitals had the information technology, accounting systems and general administrative expertise required to cope with the changes. Clearly, if the information on the flows of patients between districts and the costs of their treatment were inaccurate the consequences for budgets could be horrendous. I had papers prepared for me on this and arranged for a presentation from the Department of Health in June 1990, which I did not find very reassuring. With all the political problems which the community charge was causing, we could not afford to run the risk of disruption in London and the possible closure of hospital wards because the service was not capable of managing in the new more competitive environment. In the end, I decided against slowing down the reforms, while urging that the closest attention should be paid to what was happening in London.

In their different ways, the white paper reforms will lead to a fundamental change in the culture of the NHS to the benefit of patients, taxpayers and those who work in the service. By the time I left office the results were starting to come through. Fifty-seven hospitals were in the process of becoming trusts. Moreover, the political climate was changing. The stridency of the BMA’s campaigns against our reforms was leading to a backlash among moderate doctors. The Labour Party had been put on the defensive and had begun themselves to talk about the need for reforms, though not of course ours.

I was determined to build on what had been achieved. I had my Policy Unit working on further proposals. We were considering the possible further encouragement of private health insurance through tax reliefs, structural reforms of the NHS to cut bureaucracy, more contracting-out of NHS ancillary services and — most far reaching — the introduction of a measure whereby anyone who waited more than a specified time for certain sorts of operation would be given a credit from their District Health Authority to be used for treatment either elsewhere within the NHS or in the private sector. The health debate was moving on and — for the first time in my lifetime — it was the Right which was winning it.

THATCHERISM REBUFFED — THE CASE OF SCOTLAND

In Education, Housing and Health the common themes of my policies were the extension of choice, the dispersal of power and the encouragement of responsibility. This was the application of a philosophy not just an administrative programme. Though there were teething troubles and mistakes along the way, this approach was successful: it was also popular. Indeed, if it had not been the Conservative Party would have lost the three general election elections it fought under my leadership, not won them. But there were regional exceptions, most notably Scotland. There was no Tartan Thatcherite revolution.

That might seem strange. For Scotland in the eighteenth century was the home of the very same Scottish Enlightenment which produced Adam Smith, the greatest exponent of free enterprise economics till Hayek and Friedman. It had been a country humming with science, invention and enterprise — a theme to which I used time and again to return in my Scottish speeches. But on top of decline in Scotland’s heavy industry came socialism — intended as cure, but itself developing quite new strains of social and economic disease, not least militant trade unionism. Only in the 1980s did things really begin to change for the better as Britain’s transformed reputation started to attract foreign — often high technology — companies to Scotland and Edinburgh became a prosperous financial centre. Earlier, private enterprise had developed a prosperous and thriving oil industry. Even then, jobs in uncompetitive industry continued to be shed and unemployment remained higher than in England.

The fortunes of Scottish Toryism had declined in line with these long-term economic difficulties. So whereas in 1955 Conservative candidates took just over 50 per cent of the vote, in 1987 we were down to 24 per cent. And this reflected short-term as well as long-term economic conditions. Unemployment in Scotland had only started to fall four months before the 1987 general election — there was still too little economic confidence to start a recovery for the Scottish Tories.

There were now only ten Conservative MPs north of the border and this presented real difficulties in finding enough Tory back-benchers to take part in the House of Commons Select Committee monitoring the Scottish Office, which consequently could not be set up at all during the 1987 Parliament given that there were the ministries of the Scottish Office to fill. The real question now was whether the falling unemployment and economic recovery taking place would of themselves be sufficient to revive the Conservative Party’s fortunes in Scotland. I never believed that they would and this indeed proved to be the case. So if it was not all a matter of economics, what was wrong?

It was certainly possible — even plausible — to point to changes in social and religious attitudes to explain this decline. The old Glaswegian Orange foundations of Unionist support which had in earlier decades been so important had irreparably crumbled. Moreover, whereas in the past it might have been possible for the Conservatives in Scotland to rely on a mixture of deference, tradition and paternalism to see them through, this was just no longer an option — and none the worse for that. But that did not explain why Scotland was so different from England now, that is after eight years of Tory government.

Although there was a much better economic record in Scotland than was usually admitted, the statistics which were most revealing were those which showed that about half Scotland’s population were living in highly subsidized local authority housing compared with about a quarter in England. In short the conditions of dependency were strongly present. And the conditions of dependency are conditions for socialism. In Scotland the Left still formed its own establishment which intruders challenged at their peril. The Labour Party and the trade unions had a powerful grip on office and influence at every level — from the local authorities, through QUANGOs, right into the Scottish Office. In practice, the Left, not the Right, had held on to the levers of patronage. It had its arguments voiced by both Catholic and Protestant churches in Scotland and parrotted in the media — hardly any Scottish newspapers supported us and the electronic media were largely hostile.

The reaction of Scottish Office ministers to these difficulties had cumulatively worsened the problem. Feeling isolated and vulnerable in the face of so much left-wing hostility, they regularly portrayed themselves as standing up for Scotland against me and the parsimony of Whitehall. Yielding to this temptation brought instant gratification but long-term grief. For in adopting this tactic they increased the underlying Scottish antipathy to the Conservative Party and indeed the Union. The pride of the Scottish Office — whose very structure added a layer of bureaucracy, standing in the way of the reforms which were paying such dividends in England — was that public expenditure per head in Scotland was far higher than in England. But they never seemed to grasp — as their opponents certainly did — that if public spending was a ‘good thing’ there should be lots more of it. That effectively conceded the fundamental argument to the socialists. But the truth was that more public spending in a dependency culture had not solved Scotland’s problems, but added to them.

There was only one answer. If a small state, low taxes, less intervention and more choice were right then we should argue for them and do so without apology. There must also be the same drive to implement this programme north as south of the border.

George Younger (who for all his decency and common sense was very much of the paternalist school of Scottish Tory politician) left the Scottish Office in 1986 to become Secretary of State for Defence. Malcolm Rifkind was the heir apparent. But I appointed him with mixed feelings. He had been a passionate supporter of Scottish devolution when we were in Opposition. He was one of the Party’s most brilliant and persuasive debaters. No one could doubt his intellect or his grasp of ideas. Unfortunately he was as sensitive and highly strung as he was eloquent. His judgement was erratic and his behaviour unpredictable. Nor did he implement the radical Thatcherite approach he publicly espoused; for espouse it he certainly did. After the 1987 election Malcolm made speeches up and down Scotland attacking dependency and extolling enterprise. But as political pressures mounted he changed his tune.

The real powerhouse for Thatcherism at the Scottish Office was Michael Forsyth, whom I appointed a Parliamentary Under-Secretary in 1987, with responsibility for Scottish Education and Health. It was Michael, Brian Griffiths and I who were convinced of the need to intervene to protect Paisley Grammar School — a popular school of high academic standards and traditional ethos — which (doubtless for these very reasons) the socialist Strathclyde Council wanted to close. I was moved by the appeals I received from the staff and parents. I also saw this as a test case. We must show that we were not prepared to see the Scottish left-wing establishment lord it over people it was our duty to protect. I sent a personal minute to Malcolm Rifkind on Friday 22 January 1988 registering the strength of my views. As a result of my intervention regulations were laid so that where a Scottish education authority proposed to close, change the site or vary the catchment area of any school where the number of pupils at the school was greater than 80 per cent of its capacity, the proposal should be referred to the Secretary of State for Scotland.

I also had to take a very firm line on the issue of whether Scottish schools should be allowed to opt out of local authority control, like their English counterparts. Before this could happen in Scotland, school boards in which parents had a powerful role had to be substituted for the direct local authority control which had previously existed. But once this had been done and schools had effective governing bodies there was no reason to prevent their seeking grant-maintained status. Yet Malcolm resisted this. After receiving advice from the parliamentary business managers about the pressure on the legislative timetable, I reluctantly agreed that opting out provisions should not be included in his first Education Bill. But I pressed that such a provision should be included in the next session’s Scottish Education Bill. Malcolm claimed that there was not sufficient demand for opting out in Scotland. However, from my postbag and Brian Griffiths’s enquiries I knew otherwise. I insisted and had my way. In 1989 legislation was accordingly introduced to bring the opportunity of grant-maintained schools to Scotland.

Whatever the obstruction from Malcolm Rifkind, Michael Forsyth and I were not alone in believing that real changes to reduce the role of the state in Scotland were both necessary and possible. In housing, for example, ‘Scottish Homes’ — established in May 1989 — developed attractive and imaginative schemes to provide more choice for public sector tenants and to renovate run-down houses, selling some and letting others. Indeed, the organization generally proved more innovative than DoE efforts through Estate Action programmes in England. As regards the Government’s role in industry, Bill Hughes — Chairman of the Scottish CBI whom I later appointed Deputy Chairman of the Scottish Conservative Party — devised ‘Scottish Enterprise’, which mobilized private sector business to take over the functions of the old, more interventionist, Scottish Development Agency and other bodies.

I became convinced, however, that it was only by having someone who shared my commitment to fundamental change in Scotland spearheading the Party’s efforts there that real progress would be made. I did not want to move Malcolm Rifkind who, for better or worse, had established himself as a major political force. But the Chairman of the Scottish Conservative Party, Sir James (now Lord) Goold, for whose loyalty and dependability I always had the highest regard, had told me that he wished to stand down when I had found a suitable successor. Both he and I believed that that successor was now available in the form of Michael Forsyth.

Malcolm, however, was strongly opposed to this. I discussed the matter with him in January 1989. He went away to think of his own preferred candidates and decided to press for the appointment of Professor Ross Harper, shortly to be chosen as President of the Scottish Conservative and Unionist Association, the top post of the voluntary party in Scotland. Malcolm repeatedly argued that Michael Forsyth could not be spared from his ministerial duties in the Scottish Office. I was not satisfied by this and insisted that Michael should become Chairman. He could run his ministerial duties in parallel, as others had done before him. So in July I overrode Malcolm Rifkind’s objections and appointed Michael Chairman and Bill Hughes his Deputy.

Michael was the only Conservative politician in Scotland whom the Labour Party really feared. He was, therefore, bound to be the object of unrelenting attack in the left-wing media. But it was the opposition he faced from Conservatives which was to prove his undoing. The personal friction between him and Malcolm became steadily worse. A full-scale campaign of vilification was launched by Michael’s enemies and the Scottish press was full of talk of splits and factions.

Malcolm Rifkind now also fell back with a vengeance on the old counterproductive tactic of proving his Scottish virility by posturing as Scotland’s defender against Thatcherism. In March 1990, John Major delivered his first budget. Coming on the eve of the introduction of the community charge in England and Wales, it doubled from £8,000 to £16,000 the amount of savings a person could have and still not lose entitlement to community charge benefit. This reflected the argument — with which I had much sympathy — that too great a squeeze was being exerted on those who had been prudent enough to put aside some savings. Malcolm Rifkind raised no objection when this was announced to Cabinet before the budget. Nor did he make any special demands for Scotland. But the announcement provoked an outcry in Scotland where the community charge had been introduced one year earlier and where the critics accordingly wanted the community charge benefit change backdated. Under fire, Malcolm did not stand by John Major’s decision. He now entered into heavily leaked discussions with me and John to have the change made retrospective for Scotland. Very reluctantly, I agreed that a special payment should be made to those concerned in Scotland from within the Scottish Office budget. Having damaged the reception of John’s skilfully conceived budget, Malcolm then went on to revel publicly in Scotland in his ‘victory’. It was suggested that he had only secured these changes by threatening resignation. He also told the press that I had fallen into line with his better judgement. This childish behaviour did the Conservative cause in Scotland great harm and prompted letters of protest from outraged Scottish Tories.

In May he entered into a public row with the British Steel Corporation over the future of the Ravenscraig steel plant, which should have been a matter for BSC to decide on commercial grounds, and even went so far — I was told — as to ask Scottish Conservative back-benchers to vote for a Labour Early Day Motion in the House of Commons on the subject. At the Scottish Party Conference the week before Malcolm also made some delphic remarks which were interpreted as suggesting that devolution was back on the agenda in Scotland. He was reverting to type.

The pressure on me to get rid of Michael Forsyth mounted during the summer of 1990. He himself was becoming depressed at the constant difficulties with Malcolm Rifkind and the unrelenting campaign pursued against him and his supporters. In August my office was flooded with letters from friends and opponents of Michael, obviously being geared up by their respective factions. By now it was clear that the opposition to him had enlisted the Scottish Tory Party establishment including Willie Whitelaw, George Younger and the senior members of the voluntary party. I had my own troubles. It had been a brave attempt to bring the Scottish Tory Party into the latter half of the twentieth century and offer leadership and vision to people who had become all too used to losing or — even worse — winning on their opponents’ terms. In October 1990 I promoted Michael Forsyth to be a Minister of State at the Scottish Office with extended duties and replaced him as Chairman with (Lord) Russell Sanderson who relinquished his ministerial job at the Scottish Office. His appointment was taken as a sign that the attempt to extend Thatcherism to Scotland had come to an end. This combination of the Left and the traditional establishment of the Party to rebuff Thatcherism in Scotland was a prelude to the formation of the same alliance to oust me as leader of the Conservative Party a few weeks later — although I did not know it at the time.

The balance sheet of Thatcherism in Scotland is a lopsided one: economically positive but politically negative. After a decade of Thatcherism, Scotland had been economically transformed for the better. People moved in large numbers from the older declining industries such as steel and shipbuilding to new industries with a future such as electronics and finance. Almost all the economic statistics — productivity, inward investment, self-employment — showed a marked improvement. As a result, Scottish living standards reached an all-time high, rising by 30 per cent from 1981 to 1989, outperforming most of the English regions.

A slower start was made on reducing dependency and encouraging ownership. As late as 1979 only a third of Scots owned their own home. By the time I had left office this had risen to over half — thanks in part to the ‘Right to Buy’ scheme. And we had begun to enable still more local authority tenants to become home owners through ‘Rents to Mortgages’.

Yet however valuable socially those initiatives were, they had little political impact. The 1992 election showed that the fall in Tory support had been halted; it had yet to be reversed. Some part of this unpopularity must be attributed to the national question on which the Tories are seen as an English party and on which I myself was apparently seen as a quintessential English figure.

About the second point I could — and I can — do nothing. I am what I am and I have no intention of wearing tartan camouflage. Nor do I think that most Scots would like me, or any English politician, the better for doing so. The Tory Party is not, of course, an English party but a Unionist one. If it sometimes seems English to some Scots that is because the Union is inevitably dominated by England by reason of its greater population. The Scots, being an historic nation with a proud past, will inevitably resent some expressions of this fact from time to time. As a nation, they have an undoubted right to national self-determination; thus far they have exercised that right by joining and remaining in the Union. Should they determine on independence no English party or politician would stand in their way, however much we might regret their departure. What the Scots (nor indeed the English) cannot do, however, is to insist upon their own terms for remaining in the Union, regardless of the views of the others. If the rest of the United Kingdom does not favour devolved government, then the Scottish nation may seek to persuade the rest of us of its virtues; it may even succeed in doing so; but it cannot claim devolution as a right of nationhood inside the Union.

It is understandable that when I come out with these kind of hard truths many Scots should resent it. But it has nothing whatever to do with my being English. A lot of Englishmen resent it too.