The Iron Lady

already beginning to overheat, cutting interest rates at all turned out to be the wrong medicine at the wrong time.

Social Thatcherism: education, housing and health

In November all the key planks of the Government’s programme were unveiled, starting with Baker’s Education Bill, known as the Great Education Reform Bill, or ‘Gerbil’ for short. It was really five Bills in one, each one of which – setting up a National Curriculum, giving schools the right to opt out of local-authority control, establishing City Technology Colleges, reforming the universities, and (as an afterthought) abolishing the Inner London Education Authority – could have been a substantial measure on its own. But the perils of introducing major legislation with inadequate prior consultation were illustrated as Baker and his colleagues, battered by conflicting pressures from various parts of the educational establishment on the one hand and the Prime Minister on the other, were forced to improvise policy as they went along. By the time the Bill finally concluded its passage through Parliament in July 1988 it had swollen from 137 clauses to 238 and taken up 370 hours of parliamentary time – a post-war record.

By comparison with Baker’s monster, Ridley’s Housing Bill was modest and attracted relatively little controversy. Here too council tenants were empowered to opt out of local-authority control. Housing Action Trusts (HATs) were supposed to improve rundown estates by converting them to private ownership. At the same time new forms of rented tenure (‘assured’ and ‘shorthold’ tenancies) were designed to bring more private rented property on to the market. In fact, little of this came to pass. Despite large sums of public money on offer as an inducement, tenants proved unwilling to exchange the public-sector landlord they knew for the uncertainty of the private sector: as a result, no HATs at all were set up before November 1990 and only four by 1996, while the amount of private renting increased only marginally.

The real story of housing in the late 1980s was a shocking increase in the number of people without homes at all, who resorted to sleeping on the streets, under flyovers and in shop doorways in London and other big cities. This sudden phenomenon of visible homelessness was due to a combination of reasons, at least three of them the direct result of Government policy: the reduction in the public housing stock due to the non-replacement of the million former council houses sold to their tenants; higher rents in both council and private rented housing; and the withdrawal of benefits from several categories of claimant, specifically the young and single unemployed. In addition, an increasing rate of family break-up was creating more demand for homes, while more young people, for a variety of reasons, good and bad, were leaving home. The situation was further exacerbated towards the end of the decade by the number of homes repossessed when their proud purchasers – who had been encouraged to buy their houses in the heyday of council-house sales a few years earlier – were unable to keep up the mortgage payments when interest rates soared after 1988. All these factors together made homelessness a disturbingly visible – and for the Government politically embarrassing – problem by 1990.

Mrs Thatcher was extraordinarily unsympathetic towards the homeless. In the Commons she regularly listed all the measures the Government was taking to provide alternatives: hostels, bed-and-breakfast accommodation and the like. But she revealed her true feelings in her memoirs. ‘Unfortunately there was a persistent tendency in polite circles to consider all the “roofless” as victims of middle class society’, she wrote, ‘rather than middle class society as victim of the “roofless”.’¹² From her cosy suburban perspective she regarded the young homeless on the streets as social misfits who should go back to their families – ignoring the fact that many had not got families, had been thrown out, abused by their families, or simply (in approved Thatcherite manner) had left homes in areas of high unemployment and moved to London or other big cities looking for work. She lumped them all together as suffering from ‘behavioural problems’.

Nor was poverty merely a matter of income. The 1987 edition of Social Trends, published by the Central Statistical Office, reported not only a widening gap between rich and poor but specifically a widening health gap, with the poor showing much greater liability to illness and shorter life expectancy, while a number of poverty-related illnesses like rickets and even consumption, previously eradicated, were making a comeback.¹³ The Government’s Chief Medical Officer, Sir Donald Acheson, blamed the effect of poor diet and poor housing.¹⁴ Back in 1980 a report on inequalities in health commissioned by the Labour Government from Professor Sir Douglas Black had sounded the same warning: the DHSS, on Mrs Thatcher’s instructions, had buried it. Seven years later, after repeated cuts in benefits, the position was very much worse.

Meanwhile, very much against Mrs Thatcher’s will, the Government was drawn into major reform of the National Health Service. It was already clear during the election that the state of the NHS was at the top of the public’s concerns. However strenuously the Prime Minister insisted that the NHS was not merely ‘safe’ in her hands but was being funded with unprecedented generosity, the public saw only underfunding, deteriorating services and mounting crisis. That autumn the situation deteriorated further, with seemingly daily stories of staff shortages, long waiting lists, bed closures, postponed operations and deaths – all attributed to a deliberate policy of ‘Tory cuts’. At first Mrs Thatcher kept on reeling off her statistics, claiming that real spending on the NHS had risen by 30 per cent since 1979. But increasingly, as the Annual Register commented, ‘this tactic began to seem arid and repetitious’.¹⁵ Her figures were also misleading: health spending had indeed increased between 1979 and 1983 – reaching 6.7 per cent of GNP that year – but it had fallen over the past four years, while the British Medical Association (BMA) reckoned that the NHS needed to grow by 2 per cent a year just to keep up with the demands of an ageing population and new medical developments. International comparisons showed that Britain’s per capita spending on health was now the lowest in northern Europe. In December the combined Royal Colleges published a report entitled Crisis in the NHS; the British Medical Journal declared the service to be ‘in terminal decline’; while in the Commons Neil Kinnock told Mrs Thatcher that she was ‘making a fool of herself’ by continuing to deny what every shade of expert opinion was telling her.¹⁶ In the end she had to be seen to respond.

In the short term there was nothing for it but to inject more money. But more money alone could not be the whole answer – and it was certainly not one that Mrs Thatcher or her Chancellor were prepared to contemplate. Opinion polls indicated public willingness to pay higher taxes to fund the health service, and some – though by no means all – Tory MPs were urging Lawson to put higher NHS spending before further tax cuts in his next budget. But this was contrary to everything Mrs Thatcher believed in. In her heart she was perfectly clear what she would have liked to do: she would have liked to move away from tax-funded health care altogether. But in practice she knew that privatisation on any significant scale was out of the question. Public opinion demanded that the NHS must remain essentially taxation-based and free to patients at the point of service. That being so, and the tax base being finite, the only alternative was to look at ways of improving delivery of the service.

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