The policy which Ken Clarke finally unveiled in January 1989 had two main features. On the one hand, hospitals were given the power to choose to become self-governing ‘NHS Trusts’ within the health service, funded by the taxpayer but in control of their own budgets, independent of the Regional Health Authority. On the other, doctors were encouraged to become ‘GP fundholders’, managing their own budgets to buy the most appropriate services for their patients: instead of sending them automatically to the local hospital, they should be able to shop around to find the best – or best-value – provider. Money would thus follow the patient, and the most efficient hospitals (those that actually knew what operations cost, for a start) would secure the biggest funding.
Most hospitals did opt to become trusts – fifty-seven came into operation in April 1991 and almost all had followed suit by 1994. The spread of GP fundholding, by contrast, was slow, patchy and unpopular. The more idealistic doctors objected to being asked to run their practices as businesses, while it was widely alleged that preference was given to the patients of fundholders over non-fundholders, creating a two-tier system with more resources going to wealthier practices than to the poorer. In fact, the system gradually settled down and was working quite well when it was abolished by Labour after 1997 and replaced by a not so very different system of Primary Care Groups.
The NHS reforms, ironically, were one of Mrs Thatcher’s most successful achievements, securing, in Simon Jenkins’ words, ‘a real change in the management of the NHS without undermining its principle’.17 Treatment was still delivered free to all patients at the point of service and was overwhelmingly funded out of general taxation. By the mid-1990s the NHS was treating more patients, more efficiently than in the 1980s, and the creaking old service was enabled to stagger on for another decade.
The final verdict on Social Thatcherism is a mixed one. Nicholas Timmins, the ‘biographer’ of the welfare state, concludes that despite her instincts Mrs Thatcher actually strengthened the welfare state – at least the NHS, education and those parts of the social services used by the middle class, making them more efficient in order to keep her key constituency happy. She might have wished that ‘her’ voters did not look to the state for their health and education – and mortgage tax relief – but the fact was that they did: opinion surveys consistently showed that the public remained as firmly wedded to the basic principles of the welfare state as ever.18 As a result services were trimmed at the edges by charging for things like dentals checks and eye tests which had previously been free, and greatly increasing the cost of prescriptions, but the central pillars remained untouched.The main exceptions were those services principally relied on by the poor: public sector housing and the basic state pension, whose value was allowed to wither away, and other forms of income support. Poverty visibly increased as a substantial ‘underclass’ was cut off from the rising prosperity of the majority. But in the big picture the scale of social provision was undiminished over the Thatcher years: it still took around 25 per cent of GDP at the end as it had at the beginning. ‘The welfare state remained remarkably un-rolled back thirteen years after Margaret Thatcher took power… The stark change… was the growth in economic inequality.’19
The poll tax
Meanwhile, the poll tax, launched as the ‘flagship’ of the Government’s programme for the third term, was facing an increasingly difficult passage through Parliament and was building into a major political disaster. Back in 1985 Mrs Thatcher had been slow to be convinced that it was practicable. Once sold on it, however, she set her face against the swelling chorus of opposition and determined to stake her own position and the electoral prospects of the Tory party on forcing it through. She elevated support of it into a test of loyalty to herself, with ultimately fatal results. In particular she insisted – almost alone – on calling it the ‘community charge’. Already within weeks of the election the first whispers of revolt were stirring within the party. Sir George Young emerged as a leading dissenter on grounds of equity, pointing out that his personal liability would fall from £2,000 to around £300 a year while others, much poorer, would pay more. In the Commons Mrs Thatcher agreed that some people would gain under the new system, but insisted that the losers would be those unlucky or foolish enough to live in high-spending boroughs. It was up to the electors in those authorities to vote for lower spending. Moreover, she claimed, the principle that every local resident should pay the same community charge, regardless of income, was not regressive, since the charge still covered only 25 per cent of local-authority expenditure (less in Scotland): the rest was met by central government out of general taxation, so higher-level taxpayers would still pay more.20
At this stage, however, she still envisaged phasing the charge in over several years. But then for the second time on this issue the Government let itself be bounced by the unrepresentative enthusiasm of the party faithful. Ridley and Mrs Thatcher were impressed by speaker after speaker at the Blackpool conference in October 1987 calling for the hated rates to be scrapped without delay. ‘We shall have to look at this again, Nick,’ she whispered to him on the platform.21 A few weeks later Ridley announced that ‘dual running’ would be abandoned and the community charge introduced all at once in April 1990. In her memoirs Lady Thatcher confessed that this ‘may have been a mistake’.22
In fact, the poll tax was not really a flat-rate charge: it did allow means-testing at the bottom of the scale. The Government was never given credit for the fact that around seven million poorer people – later increased to nine million, or one in four of the total number of charge payers – were eligible for rebates of up to 80 per cent of their liability; while those on Income Support had even the remaining 20 per cent taken into account in calculating their benefit. So the very poorest were not greatly affected, though households on low wages certainly were. But these substantial rebates compromised the initial simplicity of the idea, while increasing the burden on those who were liable for the full whack, who still numbered twenty-five million compared with just nineteen million who paid rates. ‘What you vote for, you pay for,’ Mrs Thatcher told her restless backbenchers the following year.23 ‘The community charge is a way of asking people to pay for what they vote for, and when they do they will vote against Labour authorities.’24 The problem was how they were to pay the bill in the meantime.
The Bill finally received the Royal Assent in July 1988. The average charge was then expected to be about £200 per head. A year later that estimate had risen to £278; by January 1990 it was £340, with many councils anticipating even higher levels. In her memoirs Lady Thatcher blamed ‘the perversity, incompetence and often straightforward malice of many local councils’ for seizing the chance to push up spending and let the Government take the blame. But this was precisely what Lawson and Heseltine had predicted they would do. Lawson argues that they should have capped spending first; and in retrospect she agreed.25
Instead, opposition continued to build right across the political spectrum. In April 1989 the charge came into force in Scotland, a year ahead of England and Wales, amid widespread refusal to pay, orchestrated by the Scottish National Party and supported by some left-wing Labour MPs. The Labour leadership, while opposing the tax, was careful to avoid the illegality of being seen to advocate non-payment. But by September between 15 and 20 per cent of those registered had not paid; while a significant number simply did not register. This Scottish resistance fuelled alarm among Tory MPs in England, prompting a series of ever more desperate efforts to cushion the impact by offering transitional relief over the first few years – in effect a return to dual running.
In July 1989, realising that Ridley was a public-relations liability in this area, Mrs Thatcher replaced him with the much more voter-friendly Chris Patten, who warned her that the flagship was threatening to sink the whole fleet but nevertheless took on the job of trying to save a policy he did not believe in. At first she was ‘quite adamant that she was not going to have the Treasury dish out all this
money’ to ease the transition.26 But in October Patten did squeeze substantial additional funding out of Lawson to head off the latest revolt. In theory, Patten now claimed, no one should be more than £3 a week worse off. But that calculation was based on an average bill of £278, which was already out of date. When Labour members pointed out that even Mrs Thatcher’s own Barnet council was preparing to set a charge well above the Government’s guideline, she was reduced to retorting that the charge in neighbouring Labour boroughs was even higher.27
In February 1990 Tory councillors in Oxfordshire and Yorkshire resigned from the party rather than be responsible for introducing the tax. In March there were disturbances in Manchester, Bristol, Birmingham, Hackney, Lambeth, Swindon and even true-blue Maidenhead.The Government’s popularity, which had held up well for two years, went into free fall. The climax came with a huge demonstration in Trafalgar Square which turned into the worst riot seen in the capital for decades. Cars were burned, shops looted and some 450 people injured – mainly police.
Mrs Thatcher was horrified by such ‘wickedness’. By focusing on the violent minority, however, she missed the point: though the far left as usual hijacked a peaceful demonstration to their own pseudo-revolutionary ends, the poll-tax disturbances up and down the country were predominantly a middle-class revolt. ‘I was deeply worried’, she wrote. ‘What hurt me was that the very people who had always looked to me for protection from exploitation by the socialist state were those who were suffering most.’28 Alan Clark nailed the essential flaw in his diary for 25 March:
As usual the burden will fall on the thrifty, the prudent, the responsible, those of ‘fixed address’ who patiently support society and the follies of the chattering class.29
In other words the charge missed those it was intended to hit and punished those it was designed to protect: in Chris Patten’s words, it was ‘targeted like an Exocet missile’ on the middle class in marginal constituencies.30 It was not surprising that Tory MPs began to fear for their seats.
The community charge was finally introduced in England and Wales on 1 April 1990 at an average of £363 per head. Some councils were soon reporting levels of non-payment as high as 50 per cent. Mrs Thatcher set up a Cabinet committee, chaired by herself, to consider further measures of relief, but she still refused to consider any serious retreat from the basic principle. The only alternative was to keep on dishing out money from the Treasury to try to reduce the impact in the second year, which was likely to be election year. In July Patten secured from John Major – the new Chancellor, following Lawson’s resignation the previous October – a further £3.2 billion to extend transitional relief to another four million people (making eleven million in all). This was a grotesque inversion of Thatcherite economics. By now the charge had become a fiasco from which the only escape seemed to be through ditching the Prime Minister herself.
Nothing did more than the poll tax to precipitate Mrs Thatcher’s downfall. It seemed to epitomise the least attractive aspects of her political personality – a hard-faced inegalitarianism combined with a pig-headed authoritarianism – and at the same time demonstrated a fatal loss of political judgement. The last was the most surprising. Despite her cultivated image of bold radicalism and unbending resolution, she had actually shown herself, in office and before that in opposition, a very shrewd and cautious politician who had always taken care not to get too far ahead of public opinion. The poll tax was the one issue on which her normally sensitive political antennae really let her down. It was the most spectacular failure of Mrs Thatcher’s premiership and it cost her her job.
Permanent revolution
As if it had not already got enough on its plate with the reform of education, the health service and local taxation, the third Thatcher Government was also hyperactive on practically every other front of domestic politics. As is the way with Governments when things start to go wrong, however, practically all of these restless interventions ran into difficulties of one sort or another.
Privatisation had been the unexpected triumph of the second term. But the attempt to maintain momentum after 1987 led the Government into more problematic territory. British Steel, sold back to the private sector in December 1988, was the last relatively straightforward operation. At least Mrs Thatcher had the political sense not to rush into privatising the railways: she left that poisoned chalice to her successor. But she was committed to privatising water and electricity, both of which raised sensitivities which had not applied to telephones or gas.
Water was a particularly emotive issue – rather as she had found milk to be when she was Education Secretary. The public had a strong instinctive feeling that water, unlike gas and electricity, was a precious natural resource, a God-given necessity of life like air itself, which should not be owned or even distributed for profit but held by the Government in trust for everyone. Most of this was irrational: water supply was a customer service like any other, and one crying out for new investment to replace antiquated pipework, sewage treatment plants and the like: it made sense to seek this from the private sector. It was not widely realised that a quarter of the industry was privately owned already; or that, as Mrs Thatcher never tired of pointing out, water was privately run in many other countries: ‘Even Socialist France knows that privatised water is a better deal than nationalised water.’31 Nevertheless, there persisted a deeply held belief that private companies were not to be trusted with public health. There were also concerns about continued access to rivers and reservoirs for leisure use: millions of anglers feared being barred from private property.
The solution was not simply to sell off the nine existing Water Authorities, but to separate the commercial business of supplying water from the environmental responsibility for monitoring purity and pollution. Public opinion remained resolutely hostile, and in March 1989 Mrs Thatcher admitted that ‘the subject of privatisation of water has not… been handled well or accurately’.32 One of the first acts of Chris Patten, on taking over as Environment Secretary in July, was to write off the industry’s debts to the tune of £4.4 billion and promise another £1.1 billion of public money – described as a ‘green dowry’ – to tempt investors to risk their money. With this inducement the sale went ahead successfully in December 1989, with a second instalment the following July. Over the next ten years, when steeply increased charges failed to prevent hosepipe bans in summer and flooding in winter, the water companies were regularly criticised for putting profits before investment. But the fact was that much higher investment went into the water industry after privatisation than before; while fears about public health largely melted away.
Electricity posed different problems. The minister responsible in this case was the rehabilitated Cecil Parkinson, who was keen to demonstrate that his Thatcherite credentials were unimpaired. But Mrs Thatcher herself was torn between the desire of Nigel Lawson, on the one hand, to break up the industry (as Peter Walker had failed to do with gas) and the equal determination of Lord Marshall, the chairman of the Central Electricity Generating Board and one of her favourite businessmen, to keep it together. Parkinson devised a compromise involving just two new companies, PowerGen and National Power, the larger of which (the latter) would keep control of nuclear power. The problem was that, when subjected for the first time to proper commercial analysis, the cost of nuclear power turned out to be prohibitive: the private sector would not take it on without open-ended guarantees which the Government could not give. First Parkinson had to remove the cost of decommissioning the nine oldest power stations from the package; then John Wakeham, who succeeded him in July 1989, was forced to exclude nuclear power from the scheme altogether and postpone the planned flotation of the twelve new distribution boards from the spring to the autumn of 1990. This was a huge embarrassment, particularly in view of Mrs Thatcher’s personal commitment to nuclear power. The sale of the two new generating companies, twelve regional distribution companies and the National Grid eventually went ahead in 1991. The nuclear industry w
as finally privatised in 1996.
If privatisation was one Thatcherite policy which was running into rougher water the longer it went on, the reverse was true of trade-union legislation. Norman Fowler, in 1998, followed by Mrs Thatcher’s sixth and last Employment Secretary, Michael Howard, in 1990, tied up some loose ends. Fowler’s Act reinforced the requirement to hold strike ballots, strengthened the rights of individual members against their union and banned the misuse of union funds; Howard’s finally outlawed the closed shop and ended the unions’ legal immunity from civil damages. The fact that these Bills were passed with scarcely a murmur of protest was a measure of how thoroughly the unions had been cowed since 1979.
Another important area of national life which Mrs Thatcher was determined to sort out was broadcasting. Thwarted in her attempt to commercialise the BBC, she still wanted to break up the cosy BBC/ITV duopoly. As Home Secretary, Douglas Hurd weakly allowed himself to be bullied into auctioning off the existing ITV franchises to the highest bidder – with results which even Mrs Thatcher regretted. Meanwhile, she did everything she could to help Rupert Murdoch dominate the new medium of satellite television. Just as John Biffen had allowed Murdoch to buy The Times and Sunday Times without reference to the Monopolies Commission back in 1981, so now Hurd’s successor, David Waddington, bent the Government’s own rules governing satellite broadcasting to allow Sky TV to swallow its only rival, BSB. Whereas other newspaper proprietors were allowed to own no more than 20 per cent of terrestrial television channels, Murdoch’s News International was permitted to own nearly 50 per cent of BSkyB by the device – which Waddington admitted was technically illegal – of classifying it as ‘non-domestic’.33 Mrs Thatcher ‘loves the whole idea’ of Sky, Wyatt recorded, ‘because it whittles down the influence of the BBC. It makes the area of choice more open and it is more difficult for people of left-wing persuasion to mount steady drip-drip campaigns against her.’34 Also in the name of ‘choice’ existing restrictions were relaxed to allow television companies to buy exclusive rights to major sports events – the plums with which Murdoch tried to woo audiences to his satellite channels.
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