The Downing Street Years, 1979-1990

by Margaret Thatcher

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

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

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

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

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

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

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

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

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

  THATCHERISM REBUFFED — THE CASE OF SCOTLAND

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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