Profile: The Cabinet's last true Thatcherite: Peter Lilley, daring enough to cut the dole

Peter Bruce Lilley, Secretary of State for Social Security, has an image problem - a Spitting Image problem. Most people who recognise the man who wants to cut unemployment benefit do so because of the television programme. With his blond hair, pale face, cold gaze, clipped speech and ramrod back, Mr Lilley looks positively Teutonic. Given his Thatcherite economic views and his role as head of what some left-wingers facetiously call the SS, it is unsurprising - though cruelly unfair - that the puppeteers should dress Mr Lilley in a black uniform with silver shoulder flashes and have him goose-stepping about the place like a refugee from 'Allo, 'Allo.

In fact Mr Lilley is quietly Christian, with liberal views on many social matters - although he did vote against divorced men being ordained in the Church of England. He is convinced that there is such a thing as society, whatever Lady Thatcher may feel. He has never hidden his opposition to capital punishment, which was one reason for the difficulty he had in finding a winnable constituency in the Seventies.

This week it became apparent why the Prime Minister moved the last unreconstructed Thatcherite in his Cabinet away from Trade and Industry. John Major wants him to bring both restraint and new thinking to a department that has seemed unsympathetic to the changes of the past decade. 'Don't get it wrong - there isn't going to be a Big Bang or a counter-revolution,' says a friend. 'Peter is sceptical about global solutions. He is an incremental changes man. But changes there will be. He is particularly interested in targeting benefits to focus on those most in need.'

Mr Lilley finds himself among the big ministerial spenders - a thought that amuses some of his colleagues. One said: 'He is interested in containing his budget, making the money he is given work efficiently. He really feels that this is a moral imperative. He sees himself as the steward of money extracted from the taxpayer to help those in genuine distress. His predecessor, Tony Newton, (now Leader of the House) appeared to be interested primarily in getting a bigger slice of the cake for the poor and needy, and not so concerned about what happened to it.'

For Mr Lilley the size of the cake may be less important, but he is convinced of the moral legitimacy and the potental effectiveness of significant social expenditure. A pamphlet he wrote three years ago for the Centre for Policy Studies, Thatcherism: The Next Agenda, quoted with approval Dr Johnson's dictum: 'A decent provision for the poor is the true test of civilisation.'

At the DTI, by contrast, he was openly sceptical about the value of much of the expenditure for which he was responsible. He felt it was too often money wasted on trying to second-guess the market. Although a highly intelligent and thoughtful man who enjoys playing with ideas, he is also something of an ideologue.

One former Thatcherite minister was awed by Lilley's single- minded firmness of purpose at Trade and Industry. 'His dream of perfection was an infinite number of small businesses all competing in a perfect market. He did not realise that the world ain't like that, and that if he pushed competition policy too hard he would destroy great UK businesses like British Telecom and British Airways.'

Another recalls Lord Tebbit exchanging 'brusque and harsh words' with his successor on this subject. When Chingford Man is reduced to pleading for an end to ideology in the name of pragmatic common sense, you know he is dealing with an intellectual hard case.

Mr Lilley has been nothing if not consistent. His first published works included two pamphlets in 1972 which attacked Edward Heath for turning from the true free-market faith towards interventionism and economic planning. With the economic journalist Sam Brittan (Leon's elder brother) he wrote an influential study, Delusions of Incomes Policy, five years later. He drafted speeches for Margaret Thatcher for years before he entered Parliament in 1983. He was a founding member of the right-wing No Turning Back group and the first of them to enter the Cabinet.

Setting his undoubted ability and tenacity of purpose to one side, Mr Lilley's survival in a post-Thatcher environment owes much to the fact that he decided after the first round of the Tory leadership ballot that Margaret Thatcher was doomed. He urged John Major to run - and told Mrs Thatcher that he had done so. The Prime Minister owes Mr Lilley a considerable debt of gratitude, and Mr Major is good about paying debts.

How will Mr Lilley handle his new department? So far he has mantained his reputation as a cerebral man who keeps himself to himself. 'I am not saying he is arrogant or a shit. But you are not invited to get too close', according to one person who works directly to him. He has a strong sense of humour, but it takes the form of dry and deflating asides - to be fair, often directed against himself as well as aides who arouse his momentary ire. He does not encourage them to demonstrate wit or informality in return.

The meticulous way in which Mr Lilley maintains the distinction between political matters, which are handled by his special advisors, and administrative issues, which fall to career civil servants, has attracted much comment. He even cancelled the regular weekly meetings at which the two teams compared notes. Few politicans are as scrupulous.

As far as specific issues are concerned, unemployment benefit entitlement is likely to be reduced from one year to six months and there will be greater pressure on all claimants (not just hippies and travellers) to demonstrate that they are actively seeking work. In the longer run Mr Lilley is said to favour some variant of workfare under which those who do not accept jobs or training lose all benefit.

In mid-recession this is politically dangerous, and has attracted predictable sniping from the Opposition. Frank Dobson, the Labour employment spokesman, accused him of punishing the victims, adding: 'If he were a pension fund manager he would be jailed.'

There will be a lot more of this sort of stuff as the changes are made. But Mr Lilley appears impervious to criticism. According to a colleague, he is not interested in mending political fences, building bridges or defining a constituency. 'There are politicians and journalists he has clashed with. He makes no attempt to woo them. He simply ignores them.'

Friends attribute this style to a mixture of shyness and an inner intellectual and moral certainty. Others point out that he came late to parliamentary politics and is not driven by ambition. Still others quote the security given by his suburban, middle-class family background.

Peter Lilley's father was a personnel officer with the BBC and his mother a secretary. Born in 1943, he grew up quietly in Hayes, Kent, on the outskirts of London, and attended a local primary school before going to Dulwich College and then on to Clare College, where he was part of the so-called Cambridge mafia. This dominated the Conservative Association and the Union in the Sixties and went on to become influential in the Bow Group. Other members included Norman Lamont, John Gummer, Kenneth Clarke, Michael Howard, Leon Brittan and Norman Fowler.

Mr Lilley is remembered as the quiet one who served on committees and generated bright ideas but did not shine in Union debates as he was chronically shy. 'At the time we thought of him as a junior partner. Now it looks as if he could be more of a late developer.'

Although he became interested in Milton Friedman's then unfashionable monetarist economic theories while an undergraduate, Mr Lilley spent the late Sixties abroad as a consultant on aid to developing countries. On his return he joined W Greenwell and Co, a City stockbroking house, where he stayed for 15 years as an oil industry analyst, working his way steadily up the ladder to a partnership. His wife, Gail, whom he married in 1979, is a fashion designer turned professional painter. She specialises in still lifes and is particularly good at portraying food.

Mr Lilley's strong opposition to closer European integration conceals a personal affection for things French. The Lilleys have a house in Normandy, where they are currently spending their summer holiday. A large portrait of General de Gaulle hangs in pride of place in the Secretary of State's grand office in Richmond House, the Postmodernist block in Whitehall. He does not explain his choice of pin-up, but a friend says that it is not a joke. 'Peter genuinely admires the General as a European statesman who knew when to say 'No'.' Mr Lilley's vision of Europe has much in common with

de Gaulle's desire for a Europe des patries.

Since entering Parliament for St Albans in 1983 Mr Lilley has supported the EC as a free trade area but consistently opposed the Common Agricultural Policy, a centralised bank and any form of federal union. His maiden speech in the Commons urged cuts in the UK's payments to the EC budget, while his fears about Maastricht were an open secret in the run-up to November 1991.

Many believe Mr Lilley would resign if the Government moved closer to monetary union. He makes no secret of his belief that those who sit in Cabinet are not there merely as ambassadors or supplicants from their departments - they are there to influence policy across the board. He certainly intends to do so. 'Peter has only been in the House for nine years but he has suddenly realised that he is playing with the big boys.'

It is precisely because Mr Lilley is an ideologue that he has been given the task of bringing Thatcherite rigour to an area of social policy that survived the past 13 years largely untouched. If he succeeds, he will have done more to set the Tory agenda for the Nineties and beyond than many of his better-known Thatcherite colleagues now in the Lords.