The first priority for the Thatcher Government in 1979 was the economy and the enterprise culture. Changes were proposed to decrease direct taxation (i.e. income tax) and increase indirect taxation (i.e. VAT). The Government also began a policy of privatisation and proposed to sell-off council houses to their tenants. A prime objective was to reduce the inflation rate which had peaked briefly over a three month period in 1976 at the equivalent rate of 27% per annum. It seemed the Government was keen to reduce the power of Local Authorities, which were often Labour, especially in the big conurbations, and increase the power of central government.

Mrs Margaret Thatcher had a clear notion of the relationship between the individual and society :

There is no such thing as society. There are individual men and women, and there are families. And no government can do anything except through people, and people must look after themselves first. It is our duty to look after ourselves and then to look after our neighbour. (M. Thatcher, Woman’s Own, October 31, 1987)

I was an individualist in the sense that individuals are ultimately accountable for their actions and must behave like it. But I always refused to accept that there was some kind of conflict between this kind of individualism and social responsibility. I was reinforced in this view by the writings of conservative thinkers in the United States on the growth of an ‘underclass’ and the development of a dependency culture. If irresponsible behaviour does not involve penalty of some kind, irresponsibility will for a large number of people become the norm. More important still, the attitudes may be passed on to their children, setting them off in the wrong direction.

I had great regard for the Victorians for many reasons – not least their civic spirit to which the increase in voluntary and charitable societies and the great buildings and endowments of our cities pay eloquent tribute. I never felt uneasy about praising ‘Victorian values’ or – the phrase I originally used – ‘Victorian virtues’, not least because they were by no means just Victorian. But the Victorians also had away of talking which summed up what we were now rediscovering – they distinguished between the ‘deserving’ and the ‘undeserving poor’. Both groups should be given help : but it must be help of very different kinds if public spending is not just going to reinforce the dependency culture. The problem with our welfare state was that – perhaps to some degree inevitably we had failed to remember that distinction and so we provided the same ‘help’ to those who had genuinely fallen into difficulties and needed some support till they could get out of them, as to those who had simply lost the will or habit of work and self-improvement. The purpose of help must not be to allow people merely to live a half-life, but to restore their self-discipline and through that their self-esteem.

I was also impressed by the writing of the American theologian and social scientist Michael Novak who put into new and striking language what I had always believed about individuals and communities. Mr Novak stressed the fact that what he called ‘democratic capitalism’ was a moral and social, not just an economic system, that it encouraged a range of virtues and that it depended upon co-operation not just ‘going it alone’. These were important insights which, along with our thinking about the effects of the dependency culture, provided the intellectual basis for my approach to those great questions brought together in political parlance as ‘the quality of life’. (M. Thatcher, The Downing Street Years, 1995)

The reinforcement of central government can be seen in the Conservative Government’s approach to urban policy. Thornley first mentions the Labour Government’s White Paper entitled Policy For the Inner Cities (1977) which was a serious attempt to set out and understand the causes of inner city problems. Its diagnosis was that the problem was multicausal and had to be addressed on a number of levels including economic, physical and social… However the solutions advocated were still area located. The White Paper led to the Labour Government’s Inner Urban Areas Act (1978),which set up Partnership Areas, Programme Areas and Designated Areas. When Thatcher came to power in 1979, two new and seemingly antithetical ideologies came to the fore : the market-led liberal ideology based on individualism and the authoritarian strong central state. "Both strands …agree on the limitation of ‘social citizenship rights’, that is the economic and welfare expectations that have built up within the Welfare State.

Therefore, previous initiatives in the field of urban planning were eliminated and replaced by policies which adhered to the two new strands. "The key features of this new approach to urban policy can be summarised as a greatly enhanced role for the private sector and a property-led approach to urban regeneration". This follows the notion of "the culture of enterprise". The Enterprise Zone (EZ) idea was launched originally in 1978 : it entailed identifying certain areas "where it was hoped to attract new economic activity and removing planning regulations from them". Another attraction was the ten year moratorium on local taxes. The Urban Development Corporation (UDC) was launched in1980 : a number of UDCs were set up, with responsibility for fast-track regeneration in the hands of central rather than local government, and dominated by the business sector. They were to manage and develop the Urban Development Areas (UDA). The story of Canary Wharf (Docklands) is of particular interest in this context.

The Conservative Government also introduced YTS (the Youth Training Scheme) to all those 16 and 17 year-olds not in work or education, accompanied by a subsequent withdrawal of their right to income support. This policy showed the influence of Lord Young who had read Beveridge and concluded that the balance between favouring unemployment or employment had tilted too far towards the former. According to him, it was financially more rewarding to be unemployed than to be in low-paid jobs. In1988 the term "benefit culture" gained widespread use. This right-wing idea was contested by others who pointed out that the UK was becoming a more unequal society and the institute of Fiscal Studies showed that the single unemployed were worse off in real terms in1989 than in 1979. Nevertheless, the Conservative Government set out, through YTS, a new adult training programme, an extension of the period during which people quitting their job lose benefits and the introduction of the new social fund, whose aim was to introduce discretionary loans rather than mandatory grants for the special needs of people on supplementary benefit, to reduce welfare dependency. In addition, there was the influence of the so-called guru of the American right, Charles Murray, who believed the 60s Great Society in the USA and elsewhere had not improved the lot of the poor but conversely, had made it worse, by creating an underclass. Murray, from the New York-based Manhattan Institute for Policy Research, argued that the problem of the American underclass – the unemployment, the crime and the illegitimacy that characterise American ghettos – were largely the fault of welfare programmes themselves. The policies born of compassion and guilt were flawed. People should not be told : "It’s not your fault". People were not owed a decent standard of living, it was something they had to work for. State welfare systems remove work incentives and undermine family and individual responsibility.

Murray’s ideas influenced Conservative thinking, just as the ideas of Hayek and Friedman had influenced Mrs Thatcher. It was David Willetts, Director of Studies at the Conservative Centre for Policy Studies, who propagated Murray’s ideas in Britain. In March 1987, Willetts invited Murray to a seminar with representatives of the Department of Health and Social Services (DHSS), the Treasury and N°10. This seminar was instrumental in shifting the emphasis of thinking away from the old agenda of integrating tax and benefits and towards the new American agenda, with a questioning of the notion of welfare dependency and how much it is right to spend on the poor. Conservatives were particularly interested in "workfare", where single mothers were obliged to work on state-run schemes in order to qualify for benefits. The proposals concerning YTS were a step in this direction.

The proposed adult training programme was also a move in this direction. Professor Patrick Minford, another monetarist, believed the scheme should be compulsory and that the Government should admit that their aim was to drive down wages. The social fund replaced existing grants to those on benefits, to cover purchases of a cooker or furniture, by discretionary loans, repayable from benefits. The social fund represented an attempt to devise a system to offer limited help for the poor while not exacerbating what was seen as their main problem, dependency. Loans would teach the poor the value of budgeting, and the discretionary factor sent out a clear signal that money was limited, with an end to the notion of "rights" and "entitlement". John Redwood, a right-wing Conservative MP, felt that these measures would have been unthinkable in the early 80s, seen as tough in the mid 80s, but accepted as common sense in the late 80s. Mrs Thatcher constantly wished to cut back on overspending, especially overspending (Labour) Local Authorities. She accused such Authorities of taxing local inhabitants and local firms to excess, with a subsequent damaging effect on employment.

It might be imagined that the devastating effect of such policies of overspending on employment would discourage Labour authorities from such action. But I never forgot that the unspoken objective of socialism – municipal or national – was to increase dependency. Poverty was not just the breeding ground of socialism : it was the deliberately engineered effect of it. (M. Thatcher, The Downing Street Years, 1995)

She therefore believed that the only way to reduce or indeed limit poverty was through elimination of the dependency culture. As regards the NHS, there was little done in the early years : in the period 1975-1982, Thatcher was not particularly sure of her position as Conservative leader to plunge herself into major reforms of a national institution which was well liked by the British public. Also, Thatcher was by no means a specialist on health matters and so was unsure of the route to follow. When she eventually set about reforming the NHS she adopted the same principles she had followed in the rest of her policies. The key idea was internal competition. In 1987, the NHS was facing a real crisis : for example, there were severe difficulties in recruiting enough nursing staff because of low pay and conditions. In 1987, Riverside Health Authority, covering central London north of the Thames, was more than 600 nurses short. For 20 years nursing had been a buyer’s market : the NHS had been besieged by young girls eager to join. It did not matter that one in three student nurses never finished the course or that a thousand gave up as soon as they passed their examinations. There were always more recruits. In the mid 80s however market forces started to thin out the ranks of nurses. With the explosion in "white blouse employment" (service industries), more and more trained young women are being employed in department stores, banking, insurance offices … And in the period 1985-1987, the Government rejected the pay increases proposed by the Nurses’ Pay review Body. The tight cash limits imposed on the public sector would be blown away if nurses were given the increase they should have received. And the private health sector in Britain, and even in the USA, is busy recruiting as many nurses in Britain as possible…

It was felt by many that the NHS had created a culture of dependency. The British Conservatives therefore set about transferring the emphasis from "dependence" to "independence", by ending the "benefit culture". They encouraged people to make provision themselves for their own health and insurance, either through company or private cover. Personal pensions and private medicine were steps in this direction. General state welfare should be targeted at those in real need ("the safety net"), the very poorest, through a new form of means test. The first area to be targeted was child benefit (a benefit which had never been means-tested) : it was frozen despite a 1987 General Election promise to maintain it. Means-tested family credit was expanded. Housing benefit was cut. The budget of 1988 reduced top-rate income tax from 46% to 40%, whilst at the same time reducing benefits for some poor families.

It has always been difficult to be rational and objective about the NHS : "The NHS is the closest thing the English (sic) have to a religion, with those who practise in it regarding themselves as a priesthood. ‘this made it quite extraordinarily difficult to reform" (N. Lawson – Chancellor of the Exchequer- , The View from Number Eleven, 1992).

In the 80s, Health Authorities were constantly forced to squeeze budgets because of direct budget restrictions on central government and local government expenditure. Demand was rising more quickly than the budgets (which actually were also rising but not enough to keep up with the higher demand). Most people, if asked, would have said that the Conservative Government had reduced expenditure on the NHS. In fact, between 1979 and1987, there was an increase of 21% in real terms. The real problem was that demand was increasing at an unstoppable rate. In 1987 the situation in the NHS was dire. Eventually charges for eye-tests and dental check-ups were introduced. Even some wards and beds were closed down. People were encouraged to take out private health insurance to be treated more quickly.

The Centre for Policy Studies, a Conservative think-tank, suggested the introduction of an "internal market", an idea launched initially by an American, Professor Alain Enthoven. The money allocated for health care should follow the patient through the system, in a similar way to the new policy on education, pursued after 1988. The new Secretary of State for health, Kenneth Clarke, suggested management by GP fund-holders : family doctors would be offered budgets within which to buy a range of services and treatments, with a limit set on the amount they could commit. Emergencies were excluded. There was opposition from many quarters including the BMA (British Medical Association). The Government replied that they were trying to get value for money and reduce waiting-lists.