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Clear blue water?The Conservative Party and the welfare state since 1940$

Robert M. Page

Print publication date: 2015

Print ISBN-13: 9781847429865

Published to Policy Press Scholarship Online: January 2016

DOI: 10.1332/policypress/9781847429865.001.0001

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The Conservative (counter-) revolution

The Conservative (counter-) revolution

neo-liberal Conservatism and the welfare state, 1974-97

(p.77) Five The Conservative (counter-) revolution
Clear blue water?

Robert M. Page

Policy Press

Abstract and Keywords

This chapter charts the rise of the neo-liberal Conservatism approach to the welfare state under the Thatcher and Major governments. While emphasis was given to economic reforms during the first and second term Thatcher governments, there were clear indications of a neo-liberal turn in social policy. These included enabling council house tenants to buy their homes under the 1980 Housing Act, reforms to the social security system and the adoption of a more `business-like’ approach to running the NHS. In the third term social policy took centre stage with changes in health and social care. The Education Reform Act of 1980 led to the introduction of a national curriculum and national testing of pupil performance. Thatcher’s downfall led to Major taking the reins in 1992. After securing victory in the General Election, Major embedded Thatcher’s neo-liberal social reforms years, maintaining public funding whilst seeking cost savings and more `efficient’ non-state forms of delivery.

Keywords:   margaret thatcher, the welfare state, privatisation and de-regulation, neo liberal conservative approach to the welfare state, john major and the welfare state

The Conservatives’ defeat in the October 1974 General Election served to strengthen the resolve of those who believed that a new ‘ideological’ and policy direction was needed in order to restore the fortunes of both the party and the nation. This chapter will explore the emergence of the neo-liberal Conservative alternative as the influence of One Nation Conservatism and the technocratic modernisation approach that had been adopted under Edward Heath waned. The apparent failure of Keynesian-style interventionism to provide economic and social stability gave neo-liberal Conservatives the opportunity to press their claims for a more ‘radical’ alternative to the previous strands of post-war Conservatism. This took the form of both a ‘counter’-revolution in the sense of returning to a position prior to the ‘suffocating’ embrace of post-war social democracy and a revolution in the sense of moving swiftly to the creation of a more individualistic, entrepreneurial, property-owning society in which any remaining embers of socialism would be extinguished.

The seeds of discontent

The perceived failure of the Heath government to move in the neo-liberal Conservative direction outlined in the 1970 General Election manifesto led many of those on the right to campaign more vigorously for the party to abandon the post-war drift towards collectivism. Indeed, even before the infamous ‘U-turns’ in policy undertaken by the Heath government, there were signs of growing discontent on the right of the party. For example, Rhodes Boyson, Ralph Harris and Ross McWhirter1 had set up the Constitutional Book Club in 1970 in an effort to bolster the neo-liberal cause. They published a series of pamphlets and books including Right turn (Boyson, 1970), Goodbye to nationalisation (O’Sullivan and Hodgson, 1971), Must history repeat itself? (Fisher, 1974) and Rape of reason (Jacka et al, 1975).

The lack of neo-liberal direction in the government’s economic policy led Nicholas Ridley, Jock Bruce-Gardyne and John Biffen (p.78) to establish the Economic Dining Club2 in 1972, which became a forum for monetarist and supply-side ideas. Subsequently, a more wide-ranging organisation – the Selsdon Group – was formed in the summer of 1973. This group, which included Lord Coleraine, Nicholas Ridley and Ronald Bell,3 published the ‘Selsdon’ manifesto at its first official meeting at the Selsdon Park Hotel in September 1973 (The Selsdon Group, 1973). It emphasised the growing sense of crisis in British society and the failure of the government to ‘reduce the size of the public sector or do anything really radical about extending the private sector in welfare and education’. It was feared that ‘if present trends continue, the electorate will only have a choice between two brands of collectivism at the next General Election: Socialism V. The Tory Corporate State’ (The Selsdon Group, 1973, np). To counter this ‘intolerable’ development, the group called on the party to ‘devote itself to the cause of personal freedom and to embrace economic and social policies which extend the boundaries of personal choice’ (The Selsdon Group, 1973, np).

The longer-established right-wing think tank, the Institute of Economic Affairs (IEA), also continued to advance the neo-liberal cause with publications such as Whatever happened to the quiet revolution? (Bruce-Gardyne, 1974) and Government and the market economy (Brittan, 1971). Their hopes that the Heath government, which included neo-liberal sympathisers such as Keith Joseph, might pursue a more anti-collectivist agenda were soon dashed (much to the dismay of one leading light of the IEA, Arthur Seldon, who had even decided to vote Conservative for the first time in 1970 in anticipation of a decisive change in policy).4

Under the chairmanship of Peter Lilley (1973-75), the Bow Group5 also began to devote more attention to neo-liberal Conservative thought, publishing a number of pamphlets extolling the virtues of monetarism including the Alternative manifesto (Lilley et al, 1973), No more tick: A Conservative solution to inflation (Durant et al, 1974) and Lessons for power (Hodgson, 1974). The neo-liberal cause was also championed by a group of influential economic ‘monetarists’ including Alan Waters (who had been removed from a part-time government position with the Central Policy Review Staff) and Brian Griffiths. They drafted a ‘Memorial to the Prime Minister’ in 1973, suggesting that the Heath government’s misguided expansionary policies would lead to higher inflation and an unsustainable current account deficit.6

By the early 1970s, many neo-liberal Conservatives had come to the conclusion that one of the major factors holding back their ‘ideological’ advance within the party was the lack of a senior party (p.79) figure to promote their cause. Following Enoch Powell’s departure to the political wilderness after his controversial ‘rivers of blood’ speech in Birmingham in 1968 (which led Heath to remove him from the shadow Cabinet) there was no obvious neo-liberal figurehead. Help was now at hand, though, albeit in the somewhat unlikely shape of Sir Keith Joseph. Despite being one of ‘the most discerning and inquisitive consumers of the IEA’s literature’ (Cockett, 1995, p 168), Joseph’s failure to implement some of its neo-liberal policy prescriptions during his tenure as secretary of State for Health and Social Security (1970-74) had, as was noted above, proved a major disappointment to neo-liberal sympathisers. Alfred Sherman ‘despaired’ of Joseph’s timidity in government, describing him as a ‘lion in opposition but a lamb in government’ (Garnett, 2005, p 11) and as a ‘good man fallen amongst civil servants’ (Cockett, 1995, p 206).

After the Conservative Party’s defeat in the February 1974 General Election, Joseph sought a far from painless rapprochement with leading neo-liberal advocates such as Alan Walters and Ralph Harris.7 Overlooked for the post as chancellor in Heath’s new shadow Cabinet team, Joseph had, at his own request, been granted a roving commission to consider future party policy. Recognising the difficulties he faced in persuading fellow shadow Cabinet colleagues to follow a new economic and social direction, Joseph, decided, after consulting Alfred Sherman,8 to establish (with the financial support of Nigel Vinson and with the acquiescence of the party leader)9 a new think tank, the Centre for Policy Studies (CPS), in June 1974. With Joseph as its Chairman, Margaret Thatcher as Vice-Chair and Sherman as Director of Studies, this new organisation sought to promote the case for a ‘social market’ economy within the Conservative Party.10 The new think tank ‘quickly became the crucible of Joseph’s intellectual revolution – a meeting place where those interested in changing the party’s thinking could meet to discuss their ideas before separating to write papers and pamphlets’ (Campbell, 2000, p 266). To coincide with the establishment of the CPS (and to attract the interest of prospective donors), Joseph delivered the first of a series of influential speeches (drafted in collaboration with Sherman), on economic and social policy at Upminster on 22 June 1974. In this speech, which was reprinted in full in The Times, Joseph argued that

Since the end of the Second World War we have had altogether too much Socialism. There is no point in my trying to evade what everybody knows. For half of that 30 years Conservative Governments, for understandable (p.80) reasons, did not consider it practicable to reverse the vast bulk of the accumulating detritus of Socialism on which on each occasion they found when they returned to office. So we tried to build on its uncertain foundations instead. Socialist measures and Socialist attitudes have been very pervasive.

I must take my share of the blame for following too many of the fashions.

We are now more Socialist in many ways than any other developed country outside the Communist bloc – in the size of the public sector, the range of controls and the telescoping of net income.

(Cited in Sherman, 2005, p 163)

With regard to the social services, he argued that ‘we seem to have generated more problems than we have solved’ (cited in Sherman, 2005, p 166).

By arguing that both he and his party were partly responsible for betraying the nation, Joseph was clearly signalling his abandonment of the One Nation Conservative cause.11 Joseph’s suggestion that the leftward ‘ratchet’ effect of Labour’ egalitarian economic and social policies had been accepted rather than challenged by the Conservatives in the post-1945 era helped to legitimise his promotion of neo-liberal, rather than One Nation, Conservatism. As he reflected in a foreword to a collection of his speeches in 1975, ‘It was only in April 1974 that I was converted to Conservatism. I had thought I was a Conservative but I now see that I was not really one at all’ (Joseph, 1975, cited in Denham and Garnett, 2001, p 250).

Given that Joseph had always been sympathetic to free market ideas, his vociferous support for neo-liberal economic policies is arguably less significant than his growing disillusionment with the impact of the post-war welfare state. During his tenure at the Department of Health and Social Security (DHSS), for example, Joseph began to focus on what he termed as the ‘cycle of deprivation’. In a speech to the Pre-School Playgroups Association in London in 1972, he argued that vulnerable children, brought up in families where parental skills were deficient, education opportunities limited and resources scarce, were also likely to become the parents of the next generation of deprived children. Joseph commissioned research to explore whether there was firm evidence of such cyclical disadvantage, hoping that this would pave the way for more targeted forms of assistance. Significantly, this emphasis on individual and familial causes of deprivation served to shift the poverty discourse from the impersonal structural factors promoted (p.81) by democratic socialists to individualistic (blameworthy) reasons favoured by the neo-liberals.12 The One Nation principle of noblesse oblige, based on a dutiful, compassionate approach to the poor, was now being superseded by a harsher doctrine of individual responsibility that was more in keeping with the views of newer Conservative MPs who believed that if they had managed to succeed in life through ‘hard work, individual effort, self-restraint and sobriety’, the same outcomes could be achieved by those who were equally determined to improve their own lives (Dorey, 2011, pp 130).

Joseph’s speech at Upminster served to alienate many of his Cabinet colleagues, as did a subsequent speech at Preston on 5 September 1974, which was seen as opening up internal divisions over economic policy at a time when party ‘unity’ was deemed paramount given the proximity of the General Election. Although Joseph toned down a section of the speech (which had been drafted by Sherman with contributions from Walters and Samuel Brittan of The Financial Times) relating to incomes policy, his core argument about the need to prioritise the fight against inflation by monetarist means, even at the expense of high levels of unemployment, remained undiluted.13

Although Heath made some concessions to neo-liberal Conservative ideas in the October 1974 General Election manifesto, most notably in his declaration that inflation should be viewed as ‘a moral and political evil as well as a social and economic evil. Everything else is secondary to the battle against inflation and to helping those who have been wounded in it’ (Dale, 2000, p 230), the party’s second consecutive defeat only served to galvanise those who believed that a seismic change of direction was required. Certainly Joseph showed no signs of moderating his criticisms of the direction of post-war economic and social policy, which he believed was leading ‘towards moral decline’. In a speech to the Edgbaston Conservative Association at the Grand Hotel in Birmingham14 on 19 October 1974 shortly after the October General Election, he drew attention to the dangers of the permissive society that had engendered a growth in ‘delinquency, truancy, vandalism, hooliganism, illiteracy’ and a ‘decline in educational standards’ (Joseph, 1974). While accepting that government still had a duty to help the poor, he expressed concern about the emergence of what has come to be known as a dependency culture: ‘I am not saying that we should not help the poor, far from it. But the only really lasting help we can give to the poor is helping them to help themselves; to do the opposite, to create more dependency is to destroy them morally while throwing an unfair burden on society.’ Towards the end of his speech, Joseph turned his attention to an issue which was posing a (p.82) threat to ‘our human stock,’ namely, the ‘high and rising proportion of children being born to mothers least fitted to bring children into the world and bring them up’. These lower-working-class mothers were seen as producing problem children who would become the unmarried mothers of tomorrow or the inmates of ‘borstals, subnormal educational establishments’ and prisons. While Joseph accepted that extending ‘birth-control facilities to these classes of people’ would evoke concerns about the encouragement of immorality, he suggested that it might be the lesser of two evils until ‘we are able to remoralise whole groups and classes of people’ (Joseph, 1974).

The potentially explosive nature of the phrase ‘our human stock’, with its eugenic undertones, prompted the Evening Standard to break a press embargo and publish the story in its Saturday edition. Although the speech was well received by some fellow MPs, members of the general public and by Sir Laurence Olivier, who ‘sent a supportive telegram’ (Denham and Garnett, 2001, p 268), questions were raised about the accuracy of Joseph’s remarks by the Child Poverty Action Group, some sections of the media and opposition MPs (Denham and Garnett, 2001, pp 268-9). Although Joseph attempted to clarify his proposals for the remoralisation of society in subsequent interviews and speeches, doubts had been raised, even amongst trusted colleagues such as Geoffrey Howe, about his political judgement. The furore surrounding the Birmingham speech seems likely to have contributed to Joseph’s subsequent decision not to contest the leadership of the party. When the other leading neo-liberal Conservative candidate, Edward Du Cann, also declined to stand, fearing that his candidature might have given rise to further unwanted media and opposition intrusion into his business affairs,15 it was left to Margaret Thatcher to put herself forward as the standard bearer of the ‘Right’.

Although Heath was confident that he could rebuff the challenge of Margaret Thatcher in the leadership election in January 1975,16 it was the member for Grantham who emerged triumphant in what had been described as the ‘peasants’ revolt’. Following an astute campaign masterminded by Airey Neave, Thatcher secured the support of 130 MPs on the first ballot compared with 119 for Heath.17 Although the margin of victory was insufficient to secure an outright victory under the party’s prevailing electoral rules, it provided the platform for Thatcher’s second-round triumph where she saw off four new challengers: Willie Whitelaw, Geoffrey Howe, Jim Prior and John Peyton.18

Thatcher’s accession to the party leadership did not result in an immediate shift to the right in party policy. Although unwavering (p.83) in her determination to move both party and the nation in a neo-liberal Conservative direction, Thatcher recognised that this could not be achieved overnight. Faced with a disgruntled former leader19 who was to prove anything but ‘a loyal and distinguished member of his successor’s team’ (Thatcher, 2011a, p 282), as well as a number of ‘sceptical’ shadow Cabinet members (such as Ian Gilmour, Michael Heseltine, Jim Prior and Francis Pym) who did not share her political philosophy, not to mention the need to persuade a wary electorate that she could be entrusted to restore the nation’s fortunes, Thatcher opted for a gradualist strategy. She did make a number of changes to strengthen neo-liberal Conservative representation in key areas. Within the shadow Cabinet, for example, Howe was made shadow chancellor and Joseph retained his broad policy and research brief, while Airey Neave was asked to oversee her personal office. Peter Thornycroft took over as Party Chairman and Angus Maude replaced Gilmour as Chair of the Conservative Research Department (Conservative Central Office, 1976).

The publication of a lengthy statement on party policy, drafted by Chris Patten in October 1976, The right approach (Conservative Party Central Office, 1976) represented a concerted attempt to outline the neo-liberal Conservative economic and social agenda that the party would now pursue. It was argued that the time had come to reverse the socialist advance in British society in which high public spending and redistributive taxation had delivered ‘neither equality nor prosperity – only inflation, unemployment and growing bureaucratic threats to individual liberties’. A neo-liberal Conservative administration would pursue policies designed to promote ‘individual freedom and responsibility’:

We mean to protect the individual from excessive interference by the State or by organisations licensed by the state, to stop the drift of power away from the people and their democratic institutions, and to give them more power as citizens, as owners and as consumers. We shall do this by better financial management, by reducing the proportion of the nation’s wealth consumed by the State, by steadily easing the burden of Britain’s debts, by lowering taxes when we can, by encouraging home ownership, by taking the first steps towards making the country a nation of worker owners, by giving parents a greater say in the better education of their children.

(Conservative Central Office, 1976)

(p.84) The desire to ‘free’ citizens from the suffocating embrace of the state through tax cuts, higher profits and rewards and reductions in public expenditure was portrayed as a necessary form of rebalancing rather than as covert support for the doctrine of laissez-faire.

In an effort to reassure traditionalists, and to counter anticipated criticisms that the party was abandoning ‘true’ conservatism,20 the report made clear that the current emphasis on individualism should not be interpreted as an attempt to weaken support for the ‘complex network of small communities which go up to make society’ such as the family, the neighbourhood, the church and voluntary organisations.

In terms of social policy, The right approach highlighted the need for ‘very large reductions’ in spending that would be achieved through the imposition of cash limits and a refusal on the part of central government to ‘bail out’ those local authorities ‘which have been extravagant or have mismanaged their affairs’. The report also highlighted the changes a neo-liberal Conservative government would introduce in relation to specific welfare services. In the case of housing, priority would be given to encouraging home ownership by such means as a ‘statutory right to buy’ for existing council tenants, a reduction in rent subsidies and reinvigoration of the privately rented sector. In social security, support for ‘the retired, the disabled, the sick and the very poor’ was seen as a priority for government action. The social security system was deemed to be at its most ineffective in dealing with working-age adults ‘with the result that many people are now better off on social security than working’. Raising tax thresholds and cutting the basic rate of tax were seen as short-term solutions to this problem, while tax credits were regarded as a longer-term remedy on the grounds that they would ‘simplify’ the system and help cut ‘through the thickets of means-tested benefits’ and reduce administrative costs (Conservative Central Office, 1976).

The growing cost of the NHS was deemed to require increases in prescription and other charges, and an expansion of private and voluntary sector provision. In education, the focus would be on raising standards and extending parental choice within the state sector. A Parents’ Charter would be established ‘setting out existing and additional rights for parents regarding the education of their children’ and schools would be expected to provide a simple prospectus and an annual report that would enable parents to familiarise themselves with the institution’s ‘educational aims and achievements’. The report also promised to restore direct grants to the schools affected by Labour’s decision to abandon this scheme, and to encourage experimental (p.85) education voucher schemes to see whether this might enhance ‘parental influence and choice’ (Conservative Central Office, 1976).

It was in the economic rather than social realm, however, that the neo-liberal Conservatives focused most of their attention in the run-up to the General Election of 1979. In a companion document entitled The right approach to the economy, (Maude, 1977) the key elements of the party’s ‘new approach’ based on the creation of ‘a more stable economic climate’ were laid out. This involved strict control of the money supply, curbs on government spending, ‘lower taxes on earnings, capital and savings’, the ‘removal of unnecessary restrictions on business expansion’, ‘varied rates of pay’ to ‘reflect supply and demand, skill, effort, experience and risk’ and ‘better methods of collective bargaining’ (Maude, 1977). The report emphasised that the Conservatives were seeking to work with, rather than against, the trade unions: ‘We see the trade unions as a very important economic interest group whose co-operation and understanding we must work constantly to win and to keep, as we have done in the past. We see no need for confrontation and have no wish for it’ (Maude, 1977). Although this sentiment may have accurately reflected the views of key contributors to the document (Geoffrey Howe, Keith Joseph, Jim Prior and David Howell), some cheerleaders of the neo-liberal Conservative cause such as Norman Tebbit believed that a showdown with the unions was both necessary and inevitable.21 The industrial disputes that plagued the Callaghan-led Labour government during the ‘Winter of Discontent’22 only served to strength the hand of those inclined to the latter position. A more ‘resolute’ approach to the ‘problem’ of the trade unions was included in the Conservative manifesto of 1979 (Dale, 2000, pp 265-82). In an effort to curb ‘trade union power and privileges’ reforms on picketing, the closed shop and strike ballots were proposed as well as the withdrawal of state support for ‘strikers and their families’ (Dale, 2000, pp 268-9).

The passages on social policy within this manifesto echoed the themes and direction of The right approach. It reiterated the Conservatives’ commitment to greater home ownership and confirmed that tenants would be given the ‘right to buy’ their council home, with discounts ranging from 33% to 50% depending on their length of tenure.23 The private rented sector was to be stimulated by the introduction of regulations designed to make it much easier for landlords to offer short-term lets. In education, the emphasis was to be on improving the quality of schooling, particularly in relation to basic skills. Those parts of Labour’s 1976 Education Act that compelled ‘local authorities to reorganise along comprehensive lines’ and that restricted their freedom (p.86) to ‘take up places at independent schools’ were to be abolished, while an Assisted Places scheme would be introduced to enable poorer parents to claim back some or all of the fees associated with sending their child to a designated independent school. There was no promise of extra funding for the NHS, though it was envisaged that better use could be made of existing resources through decentralisation and cutting back bureaucracy. Private provision was to be encouraged by allowing pay beds in NHS hospitals and by restoring ‘tax relief on employer-employee medical insurance schemes’ (Dale, 2000, p 279). In social security, tax credits would be introduced ‘as and when resources become available’. In the interim, efforts would be made to ‘simplify the system, restore the incentive to work, reduce the poverty trap and bring more effective help to those in greatest need’ (Dale, 2000, p 280).

Improved opinion poll ratings in the autumn of 1976 suggested that Margaret Thatcher’s baptism of fire as opposition leader, in which she had often came off second best when confronting two of Labour’s ‘wiliest’ leaders (Harold Wilson and Jim Callaghan) over the dispatch box, and struggled to convince party sceptics that she was more than a ‘narrow minded dogmatist’ with ‘simple minded remedies’ (Campbell, 2000, p 2), was finally over. However, Labour’s opinion poll revival occasioned by the formation of the Liberal-Labour (Lib-Lab) pact in March 1977, led to uncertainty as to whether Thatcher could seize the opportunity to become Britain’s first woman Prime Minister. The pendulum swung back to Thatcher and the Conservatives following Callaghan’s reluctance to call an election in the autumn of 1978 and the negative impact of the ‘Winter of Discontent’.

In the General Election of May 1979, the Conservatives secured an overall majority of 43 seats, having achieved 43.9% of the popular vote (339 seats) compared with just 36.9% for Labour (269 seats).

The first Thatcher government (1979-83)

Implementing a neo-liberal Conservative economic agenda

Reform of the welfare state was not the main concern for the first Thatcher government. Instead, the emphasis was very much on the economic themes that had been highlighted in The right approach to the economy, such as trade union reform and privatisation. Thatcher’s cautious approach to change was reflected in the composition of her Cabinet, which included ministers who were fully signed up to the neo-liberal Conservative cause (such as Geoffrey Howe, Keith Joseph and John Biffen) as well as those of a One Nation (Ian Gilmour, Mark (p.87) Carlisle) or ‘modern technocratic’ (Michael Heseltine, Peter Walker) disposition. Significantly, those who came to be known as ‘drys’ by virtue of their commitment to the pursuit of neo-liberal Conservative goals such as rolling back the state, cutting taxes, curbing inflation and reducing public expenditure were appointed to key economic portfolios. In contrast, those perceived as ‘wets’24 on account of their ‘paternalistic’ ‘One Nation’ sympathies, which led them to oppose ‘extreme measures, such as severe anti-union laws, and unfamiliar conditions such as high unemployment’ (Young, 1993, p 199), were dispatched to less strategically significant departments such as education and agriculture.

In his first budget in June 1979, the new Chancellor Geoffrey Howe demonstrated his clear determination to pursue a neo-liberal Conservative economic agenda by making it clear that interest rates and monetary policy25 would be used to control inflation and that the Public Sector Borrowing Requirement (PSBR) would be brought under control. As Green (2006) points out, the ‘tight control of the money supply’ meant that ‘labour costs could not simply rise, whether in the shape of an expanded labour force or increased wages and benefits for those in work. If they did, for example as a consequence of trade union wage claims, then employers and firms would run into the barrier of the non-availability of funds or the prohibitive cost of borrowing’ (p 63). The basic rate of income tax was cut from 33% to 30% (with the aim of introducing a 25% rate in the medium term) and the top rate was reduced from 83% to 60%. A unified, higher VAT rate of 15% was introduced to reflect the government’s preference for indirect, as opposed to direct, taxes. Interest rates were to rise from 12% to 14%, while prescription charges were increased from 20p to 45p. The budget also sought to cut public expenditure, which had risen as a result of the government’s decision to honour the recommendations of the Clegg Commission on public sector pay (which led to a 25% rise over 12 months – see Campbell, 2000, pp 438-9) and a manifesto commitment to increase police and service pay. Later in the year, Howe also took the bold step of abolishing exchange controls. As Campbell (2003) notes:

This was arguably the single most important step that the Thatcher Government took to give practical effect to its belief in free markets: by doing away with the restrictions on the movement of capital which had been in place since 1939, the Government dared to expose the British economy to the judgement of the global market. (p 50)

(p.88) In Howe’s second budget in March 1980, the medium-term financial strategy (which had been formulated by Nigel Lawson, the then Financial Secretary to the Treasury) was laid out, committing the government to ‘a monetary growth target of around 6%’ by 1983-84. As part of this strategy, the Chancellor continued to bear down heavily on public spending. Prescription charges were increased to £1, sickness and unemployment benefits were made taxable and supplementary benefit payments to strikers’ families were cut by £12 a week on the questionable assumption that such claimants would receive an equivalent amount in strike pay from their trade union. Howe’s third, and most controversial, budget in March 1981 came at a time when output was falling and manufacturing was in steep decline. Interest rates and exchange rates remained high at this time (not least as a result of sterling becoming a petro currency in the wake of North sea oil) and unemployment was rising. While previous ‘interventionist’ governments would have opted to stimulate the economy at such a time, Howe, prompted by a resolute Prime Minister and her chief economic adviser Alan Walters, pressed ahead with his anti-inflationary strategy (much to the dismay of 364 economists who had written to The Times calling for the government to abandon its ‘monetarist’ experiment).26 The PSBR was reduced by £4,000 million through such means as the non-uprating of personal tax allowances, which, given that inflation was hovering at around the 15% mark, represented a hefty tax ‘increase’.

The harsh economic medicine being administered to the nation led to the first significant Cabinet ‘rebellion’ at a meeting to review the government’s public spending strategy shortly before the summer recess on 23 July 1981. A paper was presented to the meeting by Howe and Leon Brittan ‘outlining a further package of spending cuts for 1982-3’ (Campbell, 2003, p 119). Virtually the whole Cabinet27 united in rejecting the proposals. In the light of the sharp rise in unemployment, which was set to top three million, and the eruption of rioting in Brixton in April 1981 (and subsequently in Toxteth and Moss Side), the ‘rebels’ urged Thatcher and her Chancellor to take their foot off the neo-liberal accelerator if the party was to retain a serious chance of winning the next General Election. It was left to Thatcher’s loyal deputy, Willie Whitelaw, who in his role as Home Secretary had been dealing with the aftermath of the riots, to defuse this potentially damaging challenge to Margaret Thatcher’s leadership by reiterating the importance of Cabinet loyalty to the leader, an intervention that enabled ‘Thatcher to close the meeting without conceding any ground’ (Campbell, 2003, p 120). A subsequent critique in the shape of a (p.89) strongly worded memorandum from trusted aides John Hoskyns28 and David Wolfson and speechwriter Ronnie Millar in August, drawing attention to deficiencies in the Prime Minister’s leadership and management qualities, only served to galvanise Thatcher’s resolve, albeit in a predictable way.29 By the time the Cabinet sat again in the autumn, ‘wets’ such as Gilmour, Soames and Carlisle had been axed. Prior had been shipped off to Northern Ireland, while ‘dry’ newcomers such as Lawson (energy), Tebbit (employment), Cecil Parkinson (Paymaster General and Party Chairman) joined the government.

The first Thatcher government adopted a two-pronged approach to trade union reform based on non-intervention in pay negotiations, which it hoped would encourage workers (and employers) to arrive at ‘realistic’ pay settlements, and in legislative changes that would curtail the powers of organised labour. Disputes at British Steel and in the civil service confirmed that the ‘non-interventionist’ strategy would take time to bear fruit. The strike at British Steel in January 1980 over a 2% pay offer and looming job cuts that led to secondary picketing at private steel works resulted in improved offers of 6% and, subsequently, 10%. Eventually a 16% award was agreed following an inquiry conducted by former Labour Cabinet minister Harold Lever. Although this result seemed like a defeat for the government, it did set in train a longer-term ‘rationalisation’ of the industry under Ian MacGregor, who cut the workforce by half and returned the company to the private sector.30 The government also had to deal with a civil service strike in the early part of 1981, which was triggered by a 7% pay offer that the unions deemed unacceptable.31 The Cabinet minister with responsible for the civil service, Christopher Soames, attempted to settle this damaging dispute by increasing the offer to 7.5%, thereby breaching government pay guidelines. Thatcher opposed this settlement and threatened to resign rather than accept a deal that undermined the government’s cash limits policy. However, she backed down a few weeks later and agreed to the deal.32 Significantly, Thatcher and her ministers were wary of tackling the miners head on at this time. They agreed a 13% pay settlement in November 1980 and quickly withdrew pit closure plans when strike action was threatened in February 1981. However, plans were being put in train at the Civil Contingencies Unit chaired by Willie Whitelaw to prepare for a future conflict, which Thatcher was determined to win.33

Recognising the shortcomings of the 1971 Industrial Act, the neo-liberal Conservatives opted for Fabian-style changes to trade union law that involved ‘tying down the trade unions with a thousand silken cords’ (Clarke, 1996, p 3) rather than administering a swift single blow (p.90) to the neck. Thatcher’s desire to avoid premature confrontation with the trade unions helps to explain why Jim Prior, who was far from being a cheerleader for the neo-liberal Conservative cause, was initially entrusted with the task of bringing forward the new government’s legislative agenda. Under the 1980 Employment Act, secondary picketing was outlawed and so-called ‘closed shop’ arrangements (where employees were obliged to join the designated trade union in their workplace) could only be enforced if the workers concerned had agreed to the arrangement through a ballot.

Acknowledging that Prior was unlikely to be a reliable ally for her longer-term trade union reforms, Thatcher appointed Norman Tebbit (affectionately known as the Chingford ‘skinhead’ or ‘Rottweiller’34 because of his ‘confrontational’ approach to political debate) as her new Employment Secretary in September 1981 (following Prior’s redeployment to the Northern Ireland office). Tebbit’s 1982 Employment Act did not herald any significant change to the government’s gradualist strategy, though it did confirm that continuous reform would remain the order of the day until the threat of ‘political’ trade unionism had been quelled. Under the 1982 Act, the definition of a lawful strike was restricted in the main to disputes arising between employers and their own contracted employees, thereby restricting ‘sympathy’ action by other workers. The Act also made it more difficult to operate a closed shop. Individuals who were dismissed from their jobs for refusing to join a union also became entitled to generous rates of compensation.

The first Thatcher government also took some initial steps in what came to be known as privatisation. Although many rank-and-file and backbench Conservatives had remained hostile to nationalisation throughout the post-war era, the party had tended to take a pragmatic stance on public ownership.35 The initial forms of privatisation undertaken by the Thatcher government were not focused on the loss-making major nationalised industries such as British Rail, British Steel and the National Coal Board, but rather on smaller enterprises that were thought suitable for denationalisation. These included a number of companies that had been brought under public control through Labour’s National Enterprise Board, such as ICL computers, Ferranti engineering, Amersham International and Cable and Wireless.36

First-term neo-liberal Conservatism and the welfare state (1979-83)

Although Thatcher was unwilling to contemplate any major reconstruction of the welfare state during her first term in office for fear (p.91) that it might detract from more urgent economic considerations,37 this did not mean that this sphere of activity remained immune to change. The publication of The government’s expenditure plans 1980-81 (HM Treasury, 1979) signalled its commitment to cutting public expenditure, which was deemed to be at the ‘heart of Britain’s economic difficulties’. To the alarm of his departmental officials, Patrick Jenkin, the Secretary of State at the DHSS, proved to be a willing advocate of reductions in social security spending. Jenkin agreed to the severing of the link between pensions and average earnings (announced in Howe’s first budget), the freezing of Child Benefit, the withdrawal of earnings-related additions for unemployment and sickness benefits and a 5% cut in invalidity and other benefits, as a prelude to making them taxable. Employers were also required to bear some of the cost of statutory sick pay. Other changes were introduced to secure cost savings rather than to fulfil any ‘ideological’ blueprint. The semi-independent Supplementary Benefits Commission was abolished and replaced with a more transparent, rule-based administrative system. Increased payments for families with dependent children were introduced, though these were to be ‘funded’ by reductions in pensioner benefits.38

In contrast to his ‘hawkish’ approach to social security, Jenkin was keen to protect the NHS budget and succeeded in persuading the Chancellor of the political necessity of matching Labour’s proposed spending plans. As a result, he was able to secure a three-year respite from Treasury demands for economies, which were restricted solely to increased prescription and dental charges.

Jenkin proved, willing, however, to consider alternative forms of funding for the NHS and in 1981 set up a working party to examine such possibilities. Jenkin’s successor, Norman Fowler, was not, however, persuaded of the advantages of moving to an alternative funding system, given that ‘taxation would still have to finance a giant share of the service’ (Timmins, 2001, p 388). He was also sensitive to the potential political fallout from any such move. He underlined this stance in a subsequent Cabinet discussion of a Central Policy Review Staff paper relating to the control of public expenditure in September 1982, which advocated moving away from a tax financed health service to some form of private health insurance. The leak of this report at the time of an ongoing pay dispute with the nurses led to accusations that the government was intent on privatising the NHS, a suggestion that had to be vigorously refuted by Fowler and eventually by the Prime Minister herself at the party’s annual conference in October 1992 when she famously declared that the NHS was ‘safe’ in Conservative hands.39 Henceforth, despite Thatcher’s personal inclination to ‘revolutionise’ (p.92) the NHS, it was ‘reform’, albeit infused with neo-liberal rather than social democratic ingredients, that was to become the established modus operandi for future health policy.

Given projected falls in both primary and secondary school numbers, education was targeted as an area for budget savings. The introduction of the Education Act in 1980, under which local authorities were no longer obliged to provide schoolchildren with milk, meals and transport, helped to meet the initial £280 million spending reductions in this area of government activity. Cuts to the tune of 13% over three years were also imposed on the university sector, though the ‘selective’ nature of these measures meant that the pain was particularly acute for universities such as Aston and Salford, which experienced severe funding reductions.40

There were some modest attempts to nudge education in a neo-liberal Conservative direction by halting the advance of compehensivisation and by enhancing parental choice through the use of vouchers. Labour’s previous stipulation (under the 1976 Education Act) requiring councils to submit plans for comprehensive education was abolished, while Mark Carlisle introduced, in the face of significant Cabinet opposition, an Assisted Places scheme to help poorer children attend independent schools. Moreover, in an attempt to improve parental choice in state education, Carlisle’s successor, Keith Joseph (with the assistance of his two special advisors, Stuart Sexton [who had been closely involved with the Black papers referred to earlier] and Oliver Letwin), sought to introduce a system of school vouchers. Joseph was, however, forced to abandon this policy after acknowledging that his department was unable to overcome the numerous practical problems involved in implementing such a scheme.

In housing, hefty cuts were made in capital expenditure and in the subsidies provided to local councils. Public sector housing was seen as an area ripe for neo-liberal Conservative reform. The growth of subsidised local authority housing was seen as distorting the housing market by deterring investors from supplying privately rented accommodation. Subsidised provision of this kind was also seen as engendering a ‘low rent’ culture among tenants, who believed they had a ‘right’ to live in expensive areas at tax payers ‘expense’. According to Ridley (1991):

Absurdly low rents, and a monopoly position in providing rented housing, allowed some councils to make their tenants entirely dependent upon them. They received a rotten service – repairs and maintenance and improvements were minimal – yet the tenants were trapped in their houses by (p.93) the lack of availability of alternative accommodation to rent, and by such cheap rents that no other landlord could match them, even if he had a house to offer them. The tenants felt beholden to the council, and most paid the price expected of them giving their political support to them. (p 87)

The 1980 Housing Act attempted to deal with this issue by ‘encouraging’ local authorities to charge higher rents by withdrawing central government subsidies from local authorities, though the longer-term consequence of this was to push up the cost of Housing Benefit.41

The government’s flagship ‘right to buy’ policy was also introduced under the 1980 Housing Act. Council tenants of three years’ standing or more were given the right to buy their council homes at substantial discounts. Opposed by Labour, this policy proved popular with many tenants. By 1983, some 500,000 tenants had exercised their ‘right to buy’. As Timmins (2001) notes, this policy proved to be ‘though no one knew it then, the biggest single privatisation of the Thatcher era, raising £28 billion over thirteen years – more than the sale of gas, electricity and British Telecom put together’ (p 378).

It seems unlikely that the Thatcher government’s welfare reforms played a significant role in her second electoral victory in 1983 in which the Conservatives achieved ‘a majority just two short of Labour’s 1945 post-war record of 146, at a time when three million people were out of work’ (Timmins, 2001, pp 391-2). Thatcher’s electoral triumph can be better explained by her success in ‘turning around’ the economy42, a divided opposition43 and by her effective handling of the Falklands conflict, which, Moore (2014) contends, persuaded the electorate of ‘her special gifts of leadership’ (p 752).

Although the Conservative share of the vote in the 1983 General Election (42.4%, 397 seats) was slightly less than in 1979, it proved sufficient to extend the party’s overall majority. Labour’s performance proved to be its worst since 1918 (27.6% of the votes, 209 seats). It only narrowly succeeded in holding on to second place in the poll, with the alliance a whisker away in third place (25.9% of the vote, 23 seats).44

The second Thatcher government (1983-87)

The Conservative manifesto 1983 (Dale, 2000) confirmed the party’s determination to move the country in a neo-liberal Conservative direction. On the economic front, voters were advised to stick with the government that had presided over a national recovery in the face of a world recession and rapid technological change. The Conservatives (p.94) would, it was argued, continue to restore ‘sound money’, secure a ‘better balance between trade unions and the rest of society’, bring ‘efficiency to the nationalised industries’ and develop ‘effective policies to mitigate the curse of unemployment’ as well as ‘resist unreasonable pay claims in the public sector’ (Dale, 2000, pp 287-8). While rising unemployment was seen as regrettable, this was deemed to be an inevitable consequence of being ‘one of the least efficient and over-manned of industrialised nations’ (Dale, 2000, p 290) and of continued trade union resistance to economic change. Further reform was deemed necessary to ensure that trade union power was used ‘democratically and responsibly’ (Dale, 2000, p 289).

In terms of social policy, the manifesto rejected the claim that the Conservatives were seeking to ‘dismantle the welfare state’ (Dale, 2000, p 296). Their declared aim was to ‘return more choice to individuals and their families’ (Dale, 2000, p 296) while ensuring that efficient state-funded provision was focused more sharply on ‘those who are least able to help themselves’.

The manifesto pledged ‘to protect retirement pensions and other linked long-term benefits against rising prices’ (Dale, 2000, p 297), though voters were reminded that the government’s ability to help those in need ‘depends on the wealth that the country produces’ and that ‘40p in every pound of public spending is already devoted to health and social security’ (Dale, 2000, p 298). The party’s commitment to creating a ‘property-owning democracy’ (Dale, 2000, p 296) was underlined by a pledge to ‘give many thousand more families the chance to buy their homes’ by extending and expanding the ‘right to buy’ scheme (Dale, 2000, p 297). In education, the Conservatives promised to ‘seek ways of widening parental choice and influence over their child’s schooling’ (Dale, 2000, p 299). In the NHS, efficiency savings were seen as the key to ensuring ‘that all patients receive the best possible value for the money that is spent’. To this end, health authorities would be encouraged to put services such as ‘laundry, catering and hospital cleaning out to competitive tender’, and more stringent control exercised over management costs and staff numbers.

Into government

Second-term economic and industrial issues

Economic and industrial issues continued to be at the forefront of the Conservative government’s agenda during the period 1983-87. In terms of the latter, the government’s finely orchestrated showdown with the (p.95) National Union of Mineworkers (NUM) proved to have the most long-term significance. In preparing for this dispute, the government adhered closely to what came to be known as the ‘Ridley formula’ for defeating the miners. As Milne (2004) explains, this involved the ‘build up of coal stocks and imports, the encouragement of non-union road hauliers to move coal, the rapid introduction of dual coal-oil firing at all power stations, the withdrawal of social security benefits from strikers’ families and the creation of a large, mobile squad of police’ (Milne, 2004, p 9). The announcement of a number of pit closures by Ian Macgregor (the former chair of British Steel, who had been appointed chair of British Coal in 1983) triggered local walk-outs in Yorkshire and led the miners’ leader Arthur Scargill to call a national strike in March 1984 without a ballot (in defiance of the requirements of the new Trade Union Act of 1984 ). This led to the eventual sequestration of union funds that hampered the NUM’s ability to provide long-term financial support to those taking part in strike action. Although the strike lasted for nearly a year, this was a dispute that the NUM was unable to win despite a vigorous campaign that was supported by a wide cross-section of the British public. Lack of support from the Labour Party and the Trades Union Congress, as well as the decision of some miners to form a breakaway Union of Democratic Mineworkers in December 1984, fatally wounded the NUM cause. The Conservative-led victory over the miners signified a watershed in British industrial relations. Over time, the days lost to industrial action fell sharply, union membership plummeted and the ‘political’ influence of the trade unions declined markedly.

There was a change of emphasis in the neo-liberal Conservative approach to privatisation during the second term of the Thatcher government. The ‘denationalisation’ narrative of the first term, which had focused on the need to counter the problems associated with efficiency and monopoly in public provision, was supplanted by an emphasis on the ‘cultural’ and political benefits that privatisation could bring. Giving ordinary citizens the opportunity to buy shares and build up their own personal wealth was seen as a way of creating a ‘One Nation’ capital-owning democracy.45 The sale of shares in British Telecom and British Gas were exemplars in this regard. Despite protests from the Labour Party and the trade unions, a slick advertising campaign by Dorland (a subsidiary of Saatchi and Saatchi, which had played an influential part in the upturn in the party’s fortunes in 1979)46 and an attractive share price ensured that the first tranche of BT shares were heavily oversubscribed when offered for sale in November 1984. As Campbell (2003) points out, ‘more than a million small investors (p.96) applied for shares, including 95 per cent of BT employees, defying the advice of their union; most of these had never owned shares before, but the sale was weighted to favour those who applied for the smallest number’ (p 237). In the same way that bookies express delight when a new punter returns home with sizeable winnings after their first day at the races (which it is hoped will lead to a lifetime of gambling), the government derived much satisfaction from the success of the first part of its popular capitalist strategy (the BT share price rose by 90% on the opening day of trading, yielding £4 billion in revenue). A subsequent sale of British Gas shares, which proved equally popular with the public following a ‘Tell Sid’ advertising campaign, raised £5.4 billion in 1986.47

By extoling the virtues of popular capitalism, the neo-liberal Conservatives also sought to persuade the public of the benefits that could accrue if a market-orientated approach were adopted towards the welfare state. However, there were few signs that the Thatcher government was ready to accelerate its neo-liberal Conservative overhaul of the welfare state. Indeed, some of those most committed to more fundamental reform began to express their frustration at the lack of progress. According to Ridley (1991), the Prime Minister ‘ought to have put in place alternative methods of provision based on the private sector which gave the people both choice and the quality of service they wanted. Her steps in this direction were too late, too hesitant, and not radical enough’ (p 257).48

Second-term social policy

The lack of major second-term structural reform of the welfare state should, not, however, lead one to conclude that the attitude of the Thatcher government towards collective provision of this kind was softening. Efforts to constrain spending were maintained under Thatcher’s new Chancellor Nigel Lawson, while opportunities to shift policy in a neo-liberal Conservative direction were pursued in the areas of social security, the NHS, education and housing when it was deemed practicable to do so.

Social security was a key Treasury target for savings, given that it represented a sizeable proportion of government expenditure. While the Minister for Health and Social Security, Norman Fowler, was prepared to curb unnecessary departmental spending, he remained committed to preventing ‘unnecessary’ cuts.49 He launched a major, cost-neutral, review of social security in 1985, which focused on four areas of spending – pensions, housing benefit, supplementary benefit (p.97) and allowances for children and young people. The subsequent Green Paper (Department of Health and Social Security, 1985) recommended some significant changes including the withdrawal of the State Earnings Related Pension Scheme (SERPS), the ‘abolition’ of Supplementary Benefit ([SB], to be replaced by Income Support), the introduction of a Social Fund (which would replace various discretionary SB grants with loans), a new Family Credit benefit (to replace Family Income Supplement) and a modified Housing Benefit scheme. Older people and families with children stood to gain from these changes ‘at the expense of the unemployed, those without children and particularly those under twenty-five, whose benefit was cut markedly in an attempt to cajole them to either stay in the parental home or get into work’ (Timmins, 2001, p 399). Various objections were raised about these proposals, particularly the abolition of SERPS. Treasury concerns that the abolition of SERPS would prove costly in the short run coupled with questions about the viability of alternative, private forms of support led to the retention of a modified version of this scheme in the subsequent Social Security Act of 1986. While Fowler’s review of some key features of the social security system confirmed it was perfectly possible to steer the service in a neo-liberal direction, it also suggested that this was likely to be a lengthy process.

The Prime Minister’s earlier pledge to ‘protect’ the NHS meant that the ‘reform’ agenda in this sphere of social policy had to be carefully formulated. The strategy that was followed was to reassure the public that the service would remain ‘free’ at the point of delivery but made more cost-effective. A number of efficiency measures were introduced into the NHS during the second Thatcher government. In line with manifesto commitments, health authorities were required to generate annual efficiency savings and to compare their performance in terms of length of hospital stay, treatment costs and waiting lists with other authorities. In September 1983, they were also required to put non-medical services such as cleaning, catering and laundry out to competitive tendering – a process that generated £86 million worth of ‘savings’ by 1986.50 As part of the cost containment process the government had put in place, Derek Rayner was seconded from Marks and Spencer in 1979 to advise on how NHS expenditure could be reduced in areas such as transport, advertising and staff accommodation. Another private sector retailer, Roy Griffiths (the then Managing Director of the food chain Sainsbury’s), headed up a major inquiry into NHS administration in 1983 and recommended the introduction of a more commercial style of management based on command and (p.98) control as opposed to the ‘inefficient’, ‘consensual’ arrangements that were currently operating.

Plans were also unveiled for the reform of General Practice in a Green Paper entitled Primary health care: An agenda for discussion (Department of Health and Social Security, 1986), which aimed to give patients more choice and a better standard of service by reforming GP financial arrangements. The subsequent White Paper, Promoting better health (Department of Health and Social Security, 1987), confirmed the government’s ‘managerial’ direction of travel, with Family Practitioner Committees being required ‘to set disease prevention targets, to carry out surveys of consumer satisfaction and to monitor, with the help of professional advice, patterns of prescribing and hospital referrals’ (Klein, 1995, p 167). The title of the White Paper also reflected the government’s recognition that the costs of the NHS could be reduced by a greater emphasis on the prevention of ill health.

Given Keith Joseph’s lengthy tenure as Secretary of State in the Department of Education one might have anticipated a robust neo-liberal agenda to emerge from this sphere of social policy. However, despite his personal enthusiasm for spending cuts and reform, Joseph found it difficult to press ahead with the changes he wanted. After formally conceding defeat on his plans to introduce education vouchers at the party’s annual conference in 1983, Joseph was subsequently forced to withdraw his proposals to require high-income parents to contribute towards the university tuition fees of their children (1984) following vociferous parental and backbench opposition.51 He also had to contend with a protracted industrial dispute with the teaching unions following his decision to stand firm over a `final’ pay offer (which was only resolved by the offer of a more generous settlement by his successor Kenneth Baker).

Joseph enjoyed greater success in providing parents with more information about the performance of individual schools. The reports compiled on all schools by Her Majesty’s Inspectorate (HMI) were placed in the public domain and schools were required to provide parents with an annual report on their activities. Joseph also published a Green Paper on higher education (Department of Education and Science, 1985), which highlighted the need for universities to respond more directly to the nation’s economic priorities rather than to ‘blue skies’ research. Joseph’s desire to counter what he regarded as the ‘socialist’ research agendas of the Social Science Research Council (SSRC) led him to appoint Lord Rothschild to consider whether such research might in future be undertaken by the private sector. Joseph’s hope that Rothschild might recommend the closure of the SSRC did (p.99) not, however, materialise and he had to settle for the symbolic renaming of the organisation as the Economic and Social Research Council, which he hoped might prove more amenable to the commissioning of investigations (and results) more in keeping with the neo-liberal Conservative view of the world.52

In the sphere of housing, the success of the ‘right to buy’ policy during the first term led the second Thatcher administration to maintain the momentum that had been built up by offering even more generous discounts. The majority of new house building was to be concentrated in the private sector, while housing associations were to take a major role in the limited amount of new public sector construction that was envisaged on the grounds than they were more effective landlords than their local authority counterparts. Public sector rents continued on an upward trajectory as result of reduced central government subsidies. By 1986-87, only a quarter of all local authorities were still receiving such subsidies.53

The third Thatcher government (1987-90)

The manifesto

The title of the Conservative Party’s 1987 General Election manifesto, The next moves forward (Dale, 2000, pp 311-51), served to reaffirm its determination to press ahead with the neo-liberal economic and social ‘revolution’ that had proved ‘outstandingly successful’ during the first two terms (p 351). It was predicted that continuing along this path would eventually give rise to a ‘capital-owning democracy of people and families who exercise power over their own lives in the most direct ways’ (p 316). On the economic and industrial front, the Conservatives reaffirmed their commitment to bear down on inflation, cut taxes and borrowing, ‘reduce the share of the nation’s income taken by the state’ (p 326), press ahead with their ‘successful programme of privatisation’ (p 3), extend share ownership and continue their ‘popular’ programme of trade union reform by enhancing the individual rights of union members.

In social policy further pressure was applied to the neo-liberal accelerator pedal. Major reform was promised, for example, in education. A National Curriculum was to be introduced for all five-to 16-year-olds, with regular testing of pupils at the ages of seven, 11 and 14 prior to GCSE examinations at 16. Over a five-year period, the governors and head teachers of all secondary schools (and many in the primary sector) would be given budgetary control. Schools (p.100) would be required to admit as many pupils as could be accommodated to stimulate parental choice, with ‘good’ schools being encouraged to ‘expand beyond present pupil numbers’. State schools would also be given the right to opt out of local authority control and receive funding directly from the Department of Education and Science. In higher education, a new University Funding Council would be set up to allocate funding and the possible introduction of top-up loans for students was mooted.

The Conservatives also promised to increase home ownership, stimulate the private rented sector, give council tenants the right to ‘choose’ their landlord and create Housing Action Trusts, which would be empowered to take over, and then renovate, run-down housing estates. It was envisaged that the latter initiative would lead to the control of such dwellings passing to ‘housing associations, tenant cooperatives, owner-occupiers or approved private landlords’ (Dale, 2000, p 319). In the NHS, there was to be greater emphasis on prevention, better financial and training support for staff, more capital building, reductions in long-term hospital stays, more ‘business-like’ management to help improve efficiency and minimise waste and a reduction in waiting times. In social security, the aim was to provide a secure standard of living for retirement pensioners through a combination of state and occupational pensions and personal savings. More help was to be provided for low-income families, unemployment and benefit traps were to be tackled and the ‘tangled web of income-related benefits which has grown up piecemeal over forty years’ reformed (Dale, 2000, p 339). Finally, and significantly in the light of subsequent events, an attempt was to be made to ‘strengthen local democracy and accountability’ (Dale, 2000, p 344) by replacing domestic rates with a Community Charge for local services that was to be levied on all adults aged 18 or over with reductions for students and benefit recipients.

The 1987 General Election and Thatcher’s last stand

Margaret Thatcher achieved a third successive electoral victory in the June 1987 General Election, although her majority was cut to 101 seats and the share of the vote declined to 43.4%.54

A number of commentators have argued that it was only in Thatcher’s third term that a determined effort was made to undertake a neo-liberal inspired reform of the welfare state.55 Unquestionably, there was a flurry of activity in areas such as education, health and community care, which owed much to the fact that the ‘completion’ of the economic and industrial transformation of Britain had been achieved during the (p.101) first two terms. However, the third-term ‘social’ initiatives owed much to the preparations that had been made during the first two terms.

The Education Reform Act of 198856 activated the educational changes that had been outlined in the party’s manifesto with one significant addition – the abolition of the Inner London Education Authority. State schools would in future follow a 10-subject National Curriculum (favoured by Baker but not by Thatcher57, who wanted the focus to be on English, Maths and Science), with designated attainment standards (knowledge, skills and understanding) that would be measured through national testing for pupils aged seven, 10, 14 and 16. The test results would be published to provide parents with more information on the relative performance of a particular school. Schools would also be able to apply for grant maintained status, subject to parental approval being expressed through a ballot. Non-grant maintained schools were to be given increased financial autonomy. Parental choice was to be enhanced by allowing popular schools with ‘spare’ capacity to admit more pupils. Privately sponsored (but still mainly state-funded) City Technology Colleges were to be established to improve the educational attainment of pupils living in disadvantaged areas, where the comprehensive system was deemed to be failing. This initiative failed to take off and only 15 such institutions were established.58 Thatcher was disappointed by Baker’s over-elaborate educational reforms and chivvied his successor, John Macgregor, to overhaul some of Baker’s changes. Although Macgregor was able to cut the number of subjects covered by the National Curriculum and to reduce testing in line with Thatcher’s preferences, the Prime Minister was frustrated that her third-term school reforms, which were designed ‘to ease the state still further out of education’, proved so difficult to achieve (Thatcher, 2011b, p 597). She was also dismayed to find that so many well-respected academics had come to regard her government’s approach to the universities as little more than the ‘philistine subordination of scholarship’ (Thatcher, 2011b, p 599). It is hard, however, to refute this claim in the light of the decisions to abolish academic tenure, the promotion of a more entrepreneurial ethos and the introduction of business-like modes of governance.

The new Health and Social Security Secretary, John Moore (who was only left with responsibility for the latter service after his department was split in two in July 1988), was a committed neo-liberal Conservative who favoured a smaller state and greater selectivity. He criticised the so-called poverty lobby (and the Institute for Fiscal Studies)59 for their failure to distinguish between poverty, which he contended had virtually been abolished, and inequality, which was deemed to be an (p.102) essential feature of liberal societies. Moore,60 along with the influential American commentator Charles Murray (1980), can be credited with ensuring that the US definition of the term ‘welfare’ (which is used ‘exclusively’ to describe ‘less eligible’ means-tested benefits claimed by ‘undeserving’ groups such as lone mothers who are ineligible for contributory social security payments) came to greater prominence in UK social policy discourse.61

Although there were no major structural reforms of social security during Moore’s term of office (efforts were directed to embedding Fowler’s earlier reforms), his commitment to the neo-liberal Conservative cause was evident in a number of his policy pronouncements. As part of the 1987 spending round, for example, he agreed to the freezing of Child Benefit (an allowance he would have liked to have seen abolished)62 and, following the introduction of guaranteed youth training places, he moved speedily to withdraw Income Support from all 16- and 17-year-olds in September 1988.

Given its popularity with the British public, the NHS proved to be the biggest challenge to neo-liberal Conservatives who wanted to ‘reform’ this ‘sacred’ part of the welfare state. During the first two terms, radical changes such as outright privatisation or the introduction of an insurance-based funding scheme had been ruled out. As a consequence, the government was always vulnerable to the charge that it was neglecting the NHS unless it made the generous financial provision needed to cope with the ageing of the British population, technological advances and the growing costs of a labour-intensive service. After its third-term victory, the government was subjected to renewed criticism about under-funding, including a well-publicised missive from the Presidents of the Royal Colleges in December 1987. In response to growing concern about under-funding, Tony Newton, who was deputising for John Moore, announced additional emergency NHS funding.

Thatcher’s frustration at the failure to make progress on workable reforms to create a more ‘efficient’ health service led her to take personal charge of the process. During an interview on the BBC’s Panorama programme in January 1988, she announced that she would chair a review of the NHS. The other members of the review team were John Moore (subsequently Kenneth Clarke), Tony Newton (subsequently David Mellor) Chancellor Nigel Lawson (who believed that the NHS remained a highly effective service in terms of cost containment),63 John Major (the other Treasury representative), three civil servants, Roy Griffiths (Thatcher’s health service adviser) and members of the Policy Unit. Its preferred option was to reform the NHS along the lines (p.103) suggested by the influential health economist Alain Enthoven (1985). This involved the creation of an internal market with a clear division between purchasers (tax-funded health authorities and providers (GPs and hospitals). It was envisaged that a division of this kind would increase efficiency and help to contain costs. It was only after Clarke joined the team in July 1989, following Moore’s departure from the government because of ill health, that a workable scheme was devised in which District Health Authorities were to become purchasers of care from self-governing hospital trusts. GPs would also become fundholders and would be able to ‘buy’ services for their patients from a range of ‘competitor’ providers. These ideas were incorporated into the White Paper Working for patients (Department for Health, 1989) and the subsequent National Health and Community Care Act of 1990, which Clarke was able to implement with few concessions despite concerted opposition from the medical profession,64 the trade unions and the Labour Party.

The changes to community care that occurred under the 1990 Act also reflected the neo-liberal Conservative reform agenda. Although the principle of public funding was retained, the pattern of delivery was altered to ensure greater reliance on non-state providers. In response to a rapid growth in social security support for residential care (up from £10 million in 1981 to £2 billion by 1991), the government adviser, Roy Griffiths, was charged with coming up with cost-effective changes. His initial recommendations, which included the appointment of a Minister for Social Care, local authority oversight and a ring-fenced budget, were not greeted with any enthusiasm by the government. As a compromise, local authorities were given budgetary and regulatory responsibilities (for example, need assessments and inspections) for social care but they were expected to make extensive use of private and third-sector providers in the hope that this would stimulate competition and innovation and drive down costs.

The Conservatives also continued to seek ways to reduce the state’s role in the construction, ownership, administration and regulation of housing. The 1988 Housing Act allowed private landlords and housing associations to take over the running of council-owned properties provided the tenants had given their consent through a ballot. In practice, such transfers were rarely initiated by local tenants but rather by Conservative-controlled local authorities keen to dispose of their properties. The Act also permitted the establishment of Housing Action Trusts, but these did not prove particularly successful (only five had been established by 1994). Rent controls were abolished and the interests of landlords were strengthened by the introduction (p.104) of ‘assured’ and shorthold tenancies. The rents of tenants not eligible for Housing Benefit also rose sharply as central government subsidies were pared back and local authorities were prevented from subsiding rents through general revenues.

Thatcher’s position as Prime Minister and party leader seemed impregnable after her third consecutive General Election victory in 1987. She seemed set fair to fulfil her long-term objectives of stemming the post-war socialist advance, shrinking the welfare state and reigniting the entrepreneurial spirit of the nation. However, a combination of events led to her dramatic downfall in 1990. The post-election economic boom proved short-lived and the unpopularity of the ‘Poll Tax’ (Community Charge),65 which was seen as imposing unfair burdens on those with modest means, resulted in her political judgement being questioned. More significantly, she was weakened by a series of ministerial resignations, some of which were tendered by individuals who had once been among her staunchest supporters. Having already ‘lost’ Michael Heseltine and Leon Britton following the Westland Helicopter saga in 1986,66 as well as Norman Tebbit (who had left the government at the end of her second term to care for his wife who had been seriously injured in the Brighton bombing in 1984), Thatcher now had to contend with additional departures. Chancellor Nigel Lawson, who resented her reliance on the advice of Alan Walters rather than his own over issues such as membership of the Exchange Rate Mechanism, left the government, as did Norman Fowler, Peter Walker and Nicholas Ridley (who was forced to resign after making some disparaging comments about ‘the Germans’ in The Spectator). Thatcher’s denouement occurred when her longest standing, and arguably most ‘put upon’ minister, Geoffrey Howe (who had been ‘demoted’ to Leader of the House and Lord President of the Council in 1989 after a spell at the Foreign Office), resigned from the government after yet another prime ministerial tirade against the European Union.67

Unease among a number of backbench MPs about Thatcher’s direction of travel led to two leadership challenges. The first, from the ‘stalking horse’ Sir Anthony Meyer in November 1989, was easily rebuffed. The second, and more significant one, from Michael Heseltine, led to her downfall. Although Thatcher managed to defeat her ex-Cabinet colleague by 204 votes to 152, her failure (by just four votes) to meet the victory ‘threshold’ triggered a second ballot. After initially indicating that she was prepared to ‘fight on’, she subsequently changed her mind and decided to tender her resignation following a series of individual meetings with Cabinet colleagues (and even with one Labour MP, Frank Field) that convinced her that she could not (p.105) even command unqualified support even from ‘loyalists’ such as Peter Lilley. Although Thatcher’s ‘anointed’ successor, John Major, fell two votes short (185 votes) of the absolute majority he needed to defeat Michael Heseltine (131 votes) and Douglas Hurd (56 votes) in the second leadership ballot, he was elected as the new leader following the withdrawal of his two rivals.

The neo-liberal ‘revolution’ and the welfare state under Thatcher

The idea that the Thatcher government, committed as it was to the free market and individualism, had succeeded in transforming the welfare state between 1979 and 1990 was treated with scepticism by neo-liberal enthusiasts such as Alfred Sherman and Nicholas Ridley. Both contended that ministers did not make sufficient effort to dismantle this institution. In contrast, a number of academic commentators have suggested that although there was a concerted attack on the welfare state at this time, it proved to be a storm-resilient institution.68 While it is unquestionably the case that total social spending remained broadly constant during the Thatcher era and that institutions like the NHS managed to survive the neo-liberal assault, the impact of the changes that occurred during this period should not be underestimated. The ‘decision’ to adopt a gradualist, ‘Fabian’ approach to welfare state reform in the belief that this would lead eventually to a residual range of publicly funded social services delivered by providers primarily from the private and voluntary sectors proved to be an astute one. ‘Grandmother’ footstep reforms avoided the political pitfalls of seismic ‘revolutionary’ change without compromising the broader long-term objective of reversing the post-war social democratic grip on British society. While it is difficult to assess the precise impact of a gradualist strategy of this kind, neo-liberal Conservatives can point to New Labour’s embrace of much of their economic agenda policy and their subsequent adoption of a ‘consumerist’ (rather than egalitarian or ethical) defence of the welfare state as evidence of a slow leap ‘forward’ for the political Right. Moreover, neo-liberal Conservatives will take heart from more recent surveys of public attitudes69 that suggest that a neo-liberal mind-set is beginning to taking hold in the British population, particularly in relation to the issue of welfare state ‘dependency’. Neo-liberal Conservatives are likely to be particularly encouraged by the fact that younger age groups seem to accept that they now need to be personally responsibility for meeting their own (p.106) welfare ‘needs’ and that they regard individual, rather than structural, explanations of poverty and disadvantage as more plausible.

Consolidating the neo-liberal Conservative revolution: the Major era, 1990-97

Like a football manager appointed midway through the season to revive a club’s fortunes following the ‘(in)voluntary’ retirement of a once successful coach, John Major, a self-professed One Nation Conservative,70 was faced with the unenviable choice of deciding whether to retain the playing squad he had inherited from his predecessor but alter the tactics or make wholesale changes in both areas. He opted to retain most of the Thatcher Cabinet while simultaneously pushing the party back to its ‘compassionate roots’ (Major, 2000, p 214). In pursuit of this strategy, Major recognised that he would run the risk of alienating some die-hard Thatcherites who would regard any deviation from ‘deep’ neo-liberal Conservatism as a retreat to the comfort zone of One Nation Conservatism. However, Major was convinced that a change of tone was essential if the party was to shed its image as a ‘vehicle for intolerance’, prejudice and unfairness (Major, 2000, p 213) and thereby enhance its prospects of securing a fourth consecutive electoral victory.

In pursuit of his ‘nudge’ strategy, Major decided to ‘unfreeze’ Child Benefit, ‘compensate haemophiliacs who had been infected with the HIV virus as a result of contaminated blood transfusions’ (Major, 2000, p 212) and, more significantly, jettison the Poll Tax. While the Poll Tax had the superficial attraction of ensuring that ‘everyone should pay something towards the cost of services that everyone used’ (Major, 2000, p 216), it was recognised that a ‘universal flat-rate tax could only be sustainable at a level the poorest could bear’ (Major, 2000, p 216). Given that low payments of this kind would not generate sufficient revenue or be ‘economic to collect’, it was concluded that a new scheme needed to be devised. A fairer eight-banded property tax scheme with discounts for single-person households was eventually formulated by Michael Heseltine (the new Secretary of State for the Environment) for implementation after the General Election. To quell public hostility towards this tax, Major instructed his new Chancellor, Norman Lamont, to use central government funding (some £4.5 billion in total) to ensure that community charges reached reach ‘sane levels’ in the interim (Major, 2000, p 218).

While there were no dramatic changes in social policy up until the 1992 General Election,71 Major did attempt to formulate a more (p.107) ‘progressive’ version of the neo-liberal Conservative approach to the welfare state. While supportive of the principle of privatisation and the contracting out of some state welfare services, Major believed that the public needed to be reassured that any significant reform of a public services such as education or health should not be viewed as a prelude to privatisation.72 Accordingly, reforms were presented as a long overdue attempt to ensure that citizens received high-quality services from their providers at a cost the taxpayer could afford. Although Major accepted that the majority of public sector workers were dedicated and hard-working, he believed that that too many services continued to be delivered in ‘patronising and arrogant’ ways (Major, 2000, p 245). As he contended,

Some officials seemed to have the attitude that as the service was ‘free’, everyone should be grateful for whatever they received, even if it was sloppy. There was a mentality in parts of the public service that that no one had responsibility to give better services to the public, unless, of course, they were bribed with more pay or shorter hours. Complaints were treated with an anonymity and disdain that would have fast brought a private company to its knees for lack of customers. Working methods were often slapdash and inefficient, because there was neither the stimulus of competition nor true accountability for performance. New ideas were seen as threats. Services were run carelessly, wastefully, arrogantly and, so it seemed to me, more for the convenience of the providers than the users, whether they were parents, pupils or patients.

(Major, 2000, p 245)

In order to transform the ‘quality and standing of public services’ (Major, 2000, p 258), Major introduced a Citizen’s Charter in 1991, under which public service providers were required to comply with agreed performance targets (monitored by independent inspectors), deal with complaints in a timely and responsive way and provide redress where appropriate.73 Charter marks (which could be held for three years) were to be awarded to public service organisations that were deemed to have delivered high-quality services.

The Conservatives’ 1992 General Election manifesto, The best future for Britain (Dale, 2000), served to confirm that Major would continue to pursue a modern neo-liberal Conservative direction in both economic and social policy. In terms of the former, it was announced that the party would maintain price stability, ‘keep firm control over public spending’, (p.108) reduce taxes in a speedy and prudent way, and ensure that ‘market mechanisms and incentives’ were allowed to operate as effectively as possible (Major, 2000, p 362). Efforts would be made to ‘encourage the wider distribution of wealth throughout society’ by sustaining home ownership and promoting a ‘capital owning democracy’ (Major, 2000, p 365). The privatisation programme would continue, with British Coal, local authority-owned bus companies and airports and British Rail being targeted for full or partial ownership transfers. Deregulation would continue and trade union reforms were promised in order to strengthen the rights of individual members and reduce ‘wildcat’ strikes. In social policy, an expanded role for citizens’ charters was envisaged to promote a consumerist ethos among service users. In education, the need for a strong school–parent relationships was emphasised as well as a ‘good grounding’ in basic skills. The need for a ‘widening’ of opportunities ‘without compromising academic standards’ was also highlighted. A further expansion of higher education and training (Major, 2000, p 376), including the ending of the artificial ‘binary’ divide between universities and polytechnics, was also promised.

The manifesto also pledged to increase spending on the NHS in real terms, ‘develop the NHS Trust movement’ and ensure that the ‘benefits of fund-holding arrangements were available’ to all GPs (Major, 2000, pp 390-1). Under the Patient’s Charter, the wait for hip or knee replacements or cataract treatment was to be reduced from two years to 18 months from March 1993 and better information would be provided relating to service availability and standards of care. In housing, the importance of home ownership was emphasised and a range of innovative schemes such as a ‘nation-wide “rents to mortgages” scheme’ and a do-it-yourself shared-ownership initiative (Major, 2000, p 397) were to be developed to extend this form of tenure. Similar initiatives were also to be developed to improve opportunities for those renting in the private sector, such as a ‘rent a room’ scheme under which a home owner could let a room ‘tax-free’ to a lodger. Initiatives to tackle the problem of rough sleepers were to be introduced, while existing schemes to improve the quality of affordable housing such as the voluntary transfer of ‘batches’ of council properties to housing associations and the establishment of Housing Action Trusts would be continued.

An improved and modernised social security system was also promised, with extra help being directed towards ‘less well-off’ pensioners, disabled people and low-income families. The government’s commitment to Child Benefit was underlined by a pledge to raise this benefit each year in line with prices while the introduction of new (p.109) or revamped disability benefits was seen as a way of directing extra help to this growing group of claimants. A Child Support Agency was also to be established to ensure that absent parents contributed to the upkeep of all their dependent children, not just those with whom they currently resided.

While the Major government was convinced of the need to maintain the momentum of public sector reform, the anti-state and anti-poor rhetoric of the Thatcher era was discarded and replaced by a narrative that focused on effectiveness and efficiency.

The 1992 General Election

Although the majority of political pundits predicted that Major would lose the 1992 General Election, voters seemed to heed Conservative warnings that the return of a Kinnock-led Labour government would undermine the achievements and reforms of the Thatcher era and signal a return to outmoded policies that would impoverish and divide the nation (Major, 2000, p 417). The departure of Mrs Thatcher, the withdrawal of the Poll Tax and the understated assurance exuded by Major himself helped to focus media attention on the shortcomings of the Labour leader Neil Kinnock74 and on his party’s tax and spend ‘bombshells’. Voters opted to hold tightly onto the hand of ‘nurse’, in the shape of Major and the Conservatives, for fear of something worse (Kinnock and the Labour Party).75 On a 77.7% turnout, the Conservatives secured more votes (14,092,891) than any other party in British political history. However, their 42.3% share of the vote (compared with 35.2% for Labour) only yielded ‘a miserly majority’ of 21 seats (Major, 2000, p 307).

The Major government, 1992-97

At the party’s first post-election conference in Brighton in October 1992, there was little evidence in many of the conference speeches of the more emollient version of neo-liberal conservatism that Major had seemed keen to pursue. In his own speech, Major condemned ‘sponging’ New Age Travellers – a group that was also targeted by the new Social Security Secretary Peter Lilley in his now infamous rendition of a song (‘I’ve got a little list’) adapted from the Gilbert and Sullivan opera The Mikado. According to Lilley, New Age Travellers were apt to ‘descend like locusts demanding money with menaces’ from law abiding citizens. He also took aim at ‘bogus asylum seekers’, ‘councillors who claim the dole to run left wing campaigns’, ‘young (p.110) ladies who get pregnant to jump the housing queue’ and ‘dads who won’t support the ladies they have “kissed”’.76 Single mothers were also subjected to criticism in other well-publicised speeches by John Redwood (Minister for Wales), Michael Howard and George Young.77

These attacks on what were regarded as ‘undeserving’ claimants were prompted in part by the need to curb social security spending in the light of a projected £50 billion budget deficit in 1993 that had been triggered by Britain’s decision to withdraw from the Exchange Rate Mechanism on ‘Black Monday’ (16 September 1992), during which £15 billion worth of reserves were used up in what proved to be a fruitless attempt to protect the value of the pound. Neo-liberal Conservative groups such as No Turning Back (a staunchly neo-liberal Conservative organisation that had been established in 1985 to carry forward the torch of ‘Thatcherism’) were quick to offer deficit-reducing solutions such as the abolition of SERPS and greater reliance on non-state provision for those whose financial needs arose from unemployment or disability.78

The deteriorating state of the public finances led Michael Portillo, the Chief Secretary to the Treasury, to announce a fundamental review of welfare spending in February 1993 with a view to identifying those areas of provision where resources could be better targeted or where the state might withdraw altogether. Lilley, a close ally of Portillo, accepted the case for expenditure restraint and reform. He was particularly attracted to the principle of ‘conditionality’,79 in which the ‘right’ to benefits was dependent on claimants making determined efforts to find, and retain, paid work. Jobseekers Allowance, which was eventually introduced in 1996, required claimants to demonstrate that they had been actively seeking work by providing documentary evidence that they had been in contact with prospective employers. Those deemed to have made insufficient efforts to find paid work faced the prospect of having their benefits cut or withdrawn. Lilley also drew up plans for a pared back SERPS scheme and announced plans to replace invalidity and sickness benefits with a less generous Incapacity Benefit scheme. Entitlements to Unemployment Benefit were reduced from 12 months to six months and Housing Benefit allowances were cut. In an effort to encourage more claimants to return to work, Family Credit payments were enhanced and ‘back to work bonuses’ were introduced.

The consolidation of earlier neo-liberal Conservative education reforms proved far from straightforward. The decision of the new Education Secretary John Patten to press ahead with national testing of English for all 14-year-olds despite professional concerns about its effectiveness led to a national teachers’ boycott of all testing. The (p.111) dispute was only resolved following the intervention of one of the government’s ‘fire-fighters’, Sir Ron Dearing, the newly appointed head of the School Curriculum and Assessment Authority.80 The introduction of a new external inspection regime for schools also proved controversial. The first Head of the Office for Standards in Education, Chris Woodhead, adopted a confrontational approach to inspections that differed markedly from the ‘collaborative’ methods favoured by HMI. Following the first round of inspections, Woodhead announced that improvements were needed in 50% of primary schools and 40% of secondary schools. Schools deemed to be ‘failing’ were liable to be put into ‘special measures’ or even closed.

The government faced an uphill battle in its efforts to persuade state schools, particularly in the primary sector and in Scotland, to apply for grant maintained status, which had been proposed in the 1987 manifesto. Despite financial incentives, just 4% of all schools had become grant maintained by 1997. In addition, a national nursery voucher scheme intended to increase parental choice failed to stimulate much interest when it was introduced in 1997.

Neo-liberal Conservative ideas were, however, more warmly embraced by the entrepreneurial management teams that had come to prominence in the university sector. They proved more than willing to trade off academic autonomy and scholarly endeavour for the promise of secure or enhanced forms of funding. The binary divide between universities and polytechnics ended in 1993 when the latter were permitted to opt for ‘university’ status.

Consolidation of the Thatcher legacy also proved far from straightforward in the NHS, where the new minister Virginia Bottomley had to deal with growing public and professional concern that the introduction of the purchaser–provider split and GP fundholding were undermining the ethos of the service. Although some additional funding was made available to meet the initial costs of these reforms, especially the greatly increased managerial wage bill, this was not sustained. As Timmins (2001) notes,

NHS growth dropped from a real terms increase of almost 6% in 1992-3 to a tenth of that a year later. Bottomley got it up to 3.78 percent the following year, but it then slid away to barely 1.5% in 1995-6 and 0.6% in the run up to the 1997 election. (p 516)

To counter the growing uneasiness about the adverse impact of the reforms, Bottomley’s successor, Stephen Dorrell, published a White (p.112) Paper, The National Health Service: A service with ambitions, (Department of Health, 1996), which attempted to reassure both the general public and clinicians that the government was more interested in providing a first-rate health service than in introducing ‘market’ reforms.

Fewer consolidation problems emerged in the area of housing. An additional 300,000 council houses were sold off in this period and 170,000 tenants acquired a new landlord under the government’s voluntary transfer scheme.81 Housing associations cemented their place as the largest provider of new ‘social’ housing, supplying nearly 168,000 homes between 1992 and 1996 compared with just 10,500 in the local authority sector.82 The rents for such properties steadily increased, however, given that housing associations were forced to rely on more expensive forms of private finance, rather than public subsidies, to finance their building programmes. The deregulation of the private rented sector also appeared to ‘revive’ this part of the housing sector.83

John Major also championed a return to more traditional forms of practice in areas such as education and social work. In his 1992 party conference speech, he declared that if his critics sought to portray him as ‘old fashioned, well so be it’. As he pointed out:

‘I have this message for the progressives who are trying to change the exams. English exams should be about literature, not soap opera. And I promise you this. There’ll be no GCSEs in Eldorado84 – even assuming anyone is still watching it!… Let us return to basic subject teaching, not courses in the theory of education. Primary teachers should learn how to teach children to read, not waste their time on the politics of gender, race and class.’

In his conference speech a year later, Major launched his infamous ‘Back to Basics’ campaign in which he sought to ‘activate’ the traditionalist agenda he had promoted in 1992. Much to Major’s consternation, though, his attack on ‘progressivism’ was seen by many sections of the media as a deep-rooted desire to return to the ‘stability’ and ‘moral’ climate of the 1950s following the permissive excesses of the 1960s and ’70s. Although Major had no desire to berate single mothers or ‘preach sexual fidelity’ to private citizens (Major, 2000, p 555), this proved to be the narrative that found favour in the media. Following a concerted media campaign, the junior minister Tim Yeo (who had previously drawn attention to the ‘damage’ caused by broken families) was forced to resign from his post in January 1994 after it was revealed that he had fathered an ‘illegitimate’ child. Intense media coverage (p.113) was also devoted to the death of another junior minister, Stephen Milligan, following a sexual misadventure. Further exposés relating to ministerial wrongdoing – including allowing innocent businessmen to be imprisoned in order to cover up ‘illegal’ government actions surrounding ‘arms for Iraq’ (the Matrix Churchill case), the receiving of cash for the asking of parliamentary questions (Graham Riddick, David Tredinnick, Tim Smith and Neil Hamilton), and accepting ‘undeclared’ hospitality from a Saudi Arabian arms dealer (Jonathan Aitken) – led to the Major government becoming engulfed in questions of ‘sleaze’ in the run-up to the 1997 General Election.

Since becoming leader in 1992, Major had endured a continuous struggle with the ‘Eurosceptic’ wing of the party. The party’s agreed (manifesto) position on ratifying the Maastricht Treaty (which Major had signed in 1991 after securing an opt-out from the social chapter and joining the currency union) unravelled following a backbench revolt (aided and abetted by Margaret Thatcher) that had gathered momentum following the decision of the Danish electorate to reject, in a referendum, their own government’s backing of the new accord. Following the loss of a key Commons vote, Major only succeeded in gaining parliamentary ‘approval’ for ratification by calling for, and winning, a vote of confidence.85

Following persistent sniping, Major opted for a ‘pre-emptive strike’ against his critics by calling a snap leadership contest in June 1995. Although he secured a comfortable victory over his sole, Eurosceptic, rival John Redwood, there was a general perception that the party lacked the cohesion to function as an effective government. Faced with a vibrant, media-savvy ‘New Labour’ leader, Tony Blair, who promised to combine a neo-liberal economic policy with a sprinkling of social democratic social justice, it was no longer a question of whether the Conservatives would lose the 1997 General Election but merely the likely margin of their defeat.

Assessing the Major era, 1992-97

Between 1992 and 1997, the Major governments attempted to consolidate the neo-liberal Conservative reforms of the welfare state that had been introduced by the previous Thatcher administrations. Although Major was more sympathetic to the welfare state given his own first-hand experience of the protection it could afford to ordinary citizens in times of need, and was keen to dismantle opportunity barriers in order to secure a ‘classless’ society, he remained committed to the neo-liberal reform agenda that the previous governments (p.114) had set in motion. Major believed that market disciplines such as performance-related pay, competition, audit and external inspection would improve the quality of public services and keep a downward pressure on costs. Major’s best-known ‘cultural’ initiative – the Citizen’s Charter – was intended to embed an active consumerist, as opposed to passive citizenship, mind-set among the British public. Although it can be argued that the charters failed to excite the public, they may well have contributed to the ‘cultural’ revolution that was, arguably, the main achievement of both the Thatcher and Major governments. By the end of the 1990s, it seemed that public support for the welfare state had become decidedly instrumental rather than ideological.

The neo-liberal direction in Conservative economic and social policy was reaffirmed in the party’s General Election manifesto of 1997 – You can only be sure with the Conservatives (Dale, 2000). Once again, the virtues of the free market, low taxes, privatisation, deregulation, minimal inflation, trade union reform, and law and order were proclaimed. In social policy, the drive for a smaller state ‘doing fewer things and doing them better’ (Dale, 2000, p 441) was to continue. A more affordable and efficient social security system was promised, as was a further round of council house sales. Higher standards and greater choice were promised in both education and healthcare. It was clear, however, that this message no longer resonated with the public, who voted decisively for New Labour. In a dramatic change in the party’s fortunes, the Conservatives secured just 30.2% of the popular vote in 1997, losing 182 seats. It was the biggest swing to an opposition party since Labour’s post-war landslide in 1945.

Conclusion: breaking the One Nation stranglehold – neo-Liberal Conservatism and the welfare state

Neo-Liberal Conservatives contend that the ‘social democratic’ economic and social policies pursued by both Labour and acquiescent, paternalist, One Nation Conservative governments in the 30-year period following the Second World War quashed enterprise and aspiration (which proved particularly detrimental to a beleaguered middle class) and stifled economic advance and created a state dependency culture. A swing of the pendulum in a laissez-faire direction was deemed necessary if this creeping socialist advance was to be halted. Rejecting the One Nation Conservative contention that pragmatic forms of state intervention could bolster rather than undermine free market activity, the neo-liberal Conservatives set in (p.115) train their economic and social counter-revolution when the political tide turned in their favour at the end of the 1970s.

The neo-liberal Conservative approach to the welfare state that became so influential in the 1980s and 90s did, however, share some common ground with the One Nation Conservative tradition that had preceded it. Both schools of thought agreed that an egalitarian universal welfare state was undesirable and that public funds should be concentrated on assisting those most in acute need by providing a safety net for those who had fallen on hard times through no fault of their own. However, while One Nation Conservatives were also prepared to extend the scope and generosity of state provision in areas such as education and healthcare on the basis that this had become the settled will of the British people, neo-liberal Conservatives believed that the British public could, and indeed should, be persuaded to take greater responsibility for their own welfare needs. The rapid post-war expansion of the welfare state was seen as having fostered a damaging culture of state dependency in which the drum beat of ‘citizenship’ had led large numbers of non-needy citizens to rely on tax-financed state support. One of the reasons why Margaret Thatcher so despised the word society was not because of an underlying hostility towards voluntary civic engagement but rather because this term was too often used as a code word for the idea that individuals and families should, in the face of unmet need, seek assistance from the state in the first instance rather than rely on their own resources, ingenuity and endeavour.86 However, for One Nation progressives such as Gilmour and Macmillan,87 (who had witnessed at first hand the toxic effects of laissez-faire economic policies in the 1930s) the neo-liberal turn in government policy at this time was seen as ‘alien’ to the true spirit of Conservatism.

Despite their ideological predispositions, the neo-liberal Conservatives recognised the political backlash they would face if they attempted to move too swiftly towards the residualisation of the welfare state. As a consequence, an incremental strategy was adopted in the hope that some of the other ‘individualistic’ changes that they had put in train (right to buy, wider share ownership and lower taxation) would eventually create a citizenry more willing to accept fundamental reform of the welfare state. (p.116)


(1) Ralph Harris was Director of the Institute of Economic Affairs. Rhodes Boyson was the head teacher of High Grove comprehensive school in Islington (1967-74) before becoming Conservative MP for Brent North in 1974. Ross McWhirter stood, unsuccessfully, as the Conservative candidate for Edmonton in the 1964 General Election. He went on to establish the Freedom Association in 1975. He was assassinated by the IRA in 1975.

(2) The club had been established by Nicholas Ridley, Jock Bruce-Gardyne and John Biffen.

(3) Lord Coleraine, who had published the influential anti-collectivist text Return from utopia in 1950 (Law, 1950), became patron of the group. The Vice Presidents included Richard Body, William Clark and Sir Frederick Corfield. Some younger libertarians acted as officers: David Alexander, Stephen Ayers, Richard Henderson and Anthony and Philip Vander Elst; see Cockett (1995).

(5) See Barr (2001).

(p.164) (8) Sherman was a former Communist and Spanish civil war veteran, who had helped Joseph with some of his speeches during his time in opposition in 1969/70.

(9) Although Heath agreed to the setting up of the CPS, he was sceptical as to whether it would focus, as Joseph had insisted, on the reasons why the social market had brought prosperity to West Germany. Accordingly, he insisted that Adam Ridley of the Conservative Research Department should become a member of the CPS board to oversee its activities..

(14) The same venue in which Enoch Powell’s ‘rivers of blood’ speech had been delivered in 1968.

(17) Hugh Fraser obtained 19 votes and there were 11 abstentions.

(19) During a brief meeting with Edward Heath at his Wilton Street flat, Thatcher’s offers of a shadow Cabinet post of his choice and the opportunity to lead the party’s campaign in the forthcoming European referendum were firmly rebuffed by Heath. In order to avoid damaging media speculation about the reason for the brevity of this meeting, Thatcher decided to remain for a further 15 minutes engaging in polite conversation with Heath’s PPS, Tim Kitson, before departing through the press cordon that had formed outside; see Thatcher (2011a, pp 282-3), Aitken (2013, p 179).

(22) The term ‘Winter of Discontent’ was used to describe the series of public sector strikes during the harsh winter of 1978-79 that were called in response to a further round of pay restraint by the Callaghan government; see Sandbrook (2012, chs 30 and 31), Hay (2010), Lipsey (2012).

(23) A discount of 33% was offered to those with a minimum of three years’ occupancy and 50% to those who had rented their home for 20 years.

(24) To their neo-liberal critics, the wets were regarded as soft or even spineless. According to Aitken (2013), the term originated from Thatcher herself, who used to scrawl the adjective ‘in the margins of memoranda and letters received from Jim Prior during her time as leader of the opposition’ (p 307).

(25) The government decided to rely on a broad money supply measure known as M3 (a measure that included all bank account holdings but not those in building societies). M0, in contrast, measured the amount of cash in the economy and M1, a measure used by the Heath government, included some bank account holdings; see Vinen (2009, pp 111-13).

(27) This was one of the few occasions in which leading ‘wets’ such as Walker, Heseltine and Soames (who thought a pay freeze preferable to further expenditure reductions) joined forces with ‘tinder box’ drys such as John Nott and John Biffen in opposing the Prime Minister (Thatcher, 2011b, pp 148-9).

(28) Hoskyns and Norman Strauss had been responsible for the Stepping stones paper in 1977, which had detailed the incremental actions needed to transform British society; see Vinen (2009, pp 90-1); Berlinski (2011), Thatcher (2011a, pp 420-3).

(31) The Chancellor, Geoffrey Howe, had previously announced in 1979 that 100,000 civil service jobs would be lost over the following five years.

(32) Thatcher exacted her ‘revenge’ on Soames, whom she thought had mishandled the dispute, by subsequently dismissing him from the Cabinet in an acrimonious meeting in which his bitter tirade ‘could be heard out of the open window halfway across Horseguards Parade’ (Young, 1993, p 221).

(34) Tebbit served as Conservative member for the constituency of Chingford in Essex from 1974 to 1992, having previously been MP for Epping from 1970-74. His reputation as a ‘hardman’ was bolstered by his portrayal as a leather-jacketed ‘bovver’ boy on the satirical ITV programme, Spitting Image.

(35) It should be noted that pre-war Conservative attempts to exercise greater control over private industry were not driven by an ‘ideological’ conversion to public ownership but rather were premised on the merits of the ‘rationalisation’ of industry, which would result in greater economies of scale. Moreover, the fact that the progressive, post-1945, One Nation Conservative governments accepted that ‘utilities’ as well as the railways and coal industries should remain under public ownership should not be interpreted as an ‘ideological’ conversion to the merits of nationalisation. Their default position was that that with some minor exceptions, state involvement in the running of industry was a recipe for inefficiency and poor service. Not surprisingly, therefore, progressive One Nation Conservatives opposed Labour’s attempt to nationalise the iron and steel and road haulage Industries. They also supported Tate and Lyle’s successful ‘Mr Cube’ campaign against the proposed nationalisation of the sugar industry in 1950 – ‘Tate not State’; see Green (2006, pp 84-5).

(36) Associated British Ports, the National Freight Corporation, British Rail Hotels and British Aerospace were also privatised, though a majority shareholding was retained in the latter case. The British National Oil Corporation was transformed into Britoil prior to eventual privatisation in 1981; see Lawson (1992, ch 18).

(41) Housing Benefit was introduced in 1982/83 to amalgamate the various housing allowances that were being provided by local authorities or through the Supplementary Benefits scheme; see Hills (1998).

(42) The 1981 recession had ended, with a return to growth and inflation under control.

(43) The formation of the Social Democratic Party in 1981 by ‘disillusioned’ former Labour ministers Roy Jenkins, David Owen, Shirley Williams and Bill Rogers (see Crewe and King, 1995; Campbell, 2014) and their subsequent electoral ‘alliance’ with the Liberal Party posed a serious threat to Labour’s status as the main opposition party. Labour’s leader at that time, Michael Foot, was regarded as not being sufficiently ‘prime ministerial’, while the party’s left-leaning election manifesto was famously dubbed by Gerald Kauffman as ‘the longest suicide note’ in political history.

(44) The Liberal party and the Social Democratic party entered into a formal electoral pact (the alliance) in the 1983 General Election.

(p.166) (47) According to Francis (2012) the Conservative government’s commitment to wider share ownership took priority over any perceived need to maximise the receipts from such sales.

(54) Under the leadership of Neil Kinnock, Labour managed to increase both its share of the vote (30.8%) and its number of parliamentary seats (229).

(56) The passage of the Act took up ‘370 hours of parliamentary time’, which was a ‘post-war record’ as ‘Kenneth Baker and his ministerial colleagues, battered by conflicting pressures from various parts of the educational establishment on the one side and the Prime Minister on the other, were forced to improvise policy as they went along’ (Campbell, 2003, p 542).

(60) Moore had lived in the US for several years and was married to an American.

(64) A British Medical Association campaign poster at this time used the image of a steamroller to depict the government’s plans for the NHS.

(67) In a memorable resignation speech in the Commons, Howe expressed his frustration when conducting negotiations on European Monetary Union on behalf of Britain. He compared this experience to that of an opening batsman arriving at the crease to face the opening bowling only to discover that your team captain had broken your bat before the match.

(69) See Park et al (2012, 2014).

(71) Though the needs for improvements in education provision were highlighted; see Dorey (1999).

(72) Major conceded that the neo-liberal Conservative policy of privatising some parts of the public sector led people to believe that his party was ‘hostile to all of it’ (2000, p 246).

(76) See Page (1997).

(84) In an attempt to emulate the success of the television programme EastEnders, the BBC launched a new soap opera, Eldorado, based on the lives of British and European expatriates living in the fictional town of Los Barcos on the Costa del Sol in Spain. Ratings proved ‘disappointing’ and the programme was axed by the new Controller of BBC1, Alan Yentob, in July 1993, just 12 months after its much-vaunted launch.

(86) See Maude, cited in Green (2006, p 45).

(87) Macmillan reissued his influential book, The middle way, in 1978 (which had first been published in 1938) to highlight his concerns about the direction of contemporary Conservatism.