This week: Margaret Thatcher and the birth of the internal market

Why it mattersHerself alone is the third and final volume of the authorised biography of Margaret Thatcher. Author Charles Moore had unique access to the former PM’s private papers which sheds new light on many of her most important policy reforms, including those affecting the NHS. 

The internal market is on its last legs and the purchaser-provider split is looking pretty peaky. Regardless of the result of the next general election, we are likely to see legislation which fundamentally alters the basis on which the NHS has operated on for the last 30 years. 

The service’s 30-year experiment with commissioning began during Margaret Thatcher’s last term as prime minister. Now, thanks to Charles Moore, we can see that many of the issues and problems that have beset it were subject to fierce debate from the very start. 

Mrs Thatcher was famously cautious when it came to reforming the NHS. Mr Moore claims that even after her 1987 electoral triumph, “the PM never ceased to worry that the NHS had the potential to destroy her politically and electorally”, should she do something rash.

But she was in a bind. Some clumsy answers during the election campaign had helped create the impression she was pro-privatisation.  

Advisor, and future minister, David Willetts wrote to Mrs Thatcher in frustration, saying the government was “in the worst of both worlds [allowing itself] to be attacked for having a secret plan when we did not have one”. It is a feeling that will be familiar to the senior health advisors of the Cameron, May and Johnson governments.

When one of her advisors suggested breaking up the service, expecting to be applauded for his Thatcherite reforming zeal, she told him: “Oh no, the health service is safe in our hands.” When the Treasury suggested changing the NHS’ name, Mrs Thatcher said no. 

But the PM was equally determined that her wave of public sector reform should not founder on the rocks of the NHS. 

Her policy unit was clear that the task she gave them was not – as with other public services – to privatise the NHS. “Everyone knew you couldn’t [do that],” one of the unit’s members recalls. Instead they proposed widening choice and competition to tackle “provider power”, especially – adds Mr Moore – the lifetime tenure of medical consultants – and that “money should follow the patient”. 

Veering all over the place

Mrs Thatcher was soon “veering all over the place” according to her biographer, unable to make up her mind about the best course of action. 

With bad news stories about the NHS becoming a daily basis, it was left to David Wolfson, her chief of staff, to challenge her.

“I believe you are now more at risk than with the Falklands or Westland,” he wrote. “You are now unable to formulate a strategy to deal with a crisis which you maintain does not exist.”

This kick up the backside returned Mrs Thatcher to her usual decisive self and she made a historic appearance on Panorama to declare a working group would be formed to overhaul the struggling service. 

The only members of the working group with any sort of health knowledge were the sickly and marginalised health secretary John Moore, and government advisor Sir Roy Griffiths, whose introduction of general management into the service now looks likely to be the most enduring legacy of the Thatcher years for the NHS.

The first problem the working group – which included chancellor Nigel Lawson as well as Mrs Thatcher herself – encountered was a lack of information. One of the group complained: “[The NHS] couldn’t tell you how much a hip operation cost. We had to go to BUPA to find out.”

When Mrs Thatcher was told that establishing a reliable flow of information would take six years she exclaimed: “We won the Second World War in six years!”

Various alternative funding reforms were countenanced, including a “hypothecated” lottery for the NHS suggested by a young Rothschilds banker called Oliver Letwin. None received the PM’s approval. 

The central battle turned out to be over the freedoms of the proposed “NHS trusts” and the new “purchasers” of care, “GP fundholders”. 

Mr Lawson proved to be the greatest sceptic. “What happens if the money runs out before the end of the year?”, he asked of the commissioning plans, “Is it realistic to think that we can tell a profligate buyer that he has made his bed and must lie in it?” 

Foreshadowing Blair and Lansley

Foreshadowing the battles between prime minister and chancellor 15 years later over foundation trusts, the Treasury was profoundly nervous about what might happen should an “independent” NHS hospital become bankrupt.

John Moore, who claimed Mrs Thatcher simply wanted “peace” rather than change when it came to the NHS, was replaced by Kenneth Clarke.  

The PM nevertheless pressed ahead, writing that she wanted “to distance decision making to the point of delivery of health service care” and to move from “political to medical management of the NHS” – a theme writ large in the 2010-13 Lansley reforms.

Eventually the reforms were agreed and – on the back of a then record 4.5 per cent real terms increase in NHS funding – revealed to the world in 1989’s Working for Patients white paper. Mrs Thatcher had acted as the document’s editor removing words which struck the wrong tone like “customers” and “competition” and replacing or adding more empathetic language. And so, for example, the idea of “patient choice” entered the NHS lexicon.  

Charles Moore ends the chapter dealing with Mrs Thatcher’s NHS reforms on a valedictory note, stating: “Thirty years on, the basic principles of the ‘purchaser-provider split’… endures.”

HSJ readers will know however that, just like Mrs T in 1989, its days are now numbered. 

Mr Moore also fails to acknowledge that many of the problems identified during the creation of these reforms were never resolved and that the introduction of the internal market to the NHS was, at best, only a very qualified success. 

PS: Immediately preceding the section on the NHS, the book explores Mrs Thatcher’s response to the AIDS crisis. It is notable for how the PM used her background as a chemist to focus on the scientific evidence for what needed to be done, therefore overcoming the squeamishness she and others on the right felt about the moral implications of public health messaging on sexual matters.

However, perhaps the most striking revelation is that the background music of the famous “don’t die of ignorance” advert was in fact the tune to Dies Irae, a medieval Christian hymn… about the day of judgement. Willie Whitelaw assured Mrs Thatcher that no-one would notice.  


Coming up: The public leadership challenge of the Grenfell fire.

If there is any political or influential figure you would like HSJ to interview, please email

The past five Bedpans

Doctors for Extinction Rebellion

Mayor of Greater Manchester, Andy Burnham

Jess Phillips MP

NHS ‘privatisation’ documentary ‘Under the Knife’

David Cameron’s autobiography

You can read all 41 Bedpans here