Margaret Thatcher's bitter battles with the Tory "wets" are laid bare in official papers made public for the first time.
Files released by the National Archives in Kew, west London, under the 30-year rule show how opponents of her hardline monetarist policies rounded on her in a cabinet showdown.
However, Mrs Thatcher took her revenge by sacking or sidelining her critics in a dramatic reshuffle which turned the tables on her opponents.
The year 1981 was one of the most difficult of her time in office.
As unemployment broke the 2.5 million mark, chancellor Sir Geoffrey Howe used his Budget to tighten the government's economic squeeze, raising an additional £4 billion in taxation.
The policy was condemned in an open letter to The Times signed by 364 leading economists (including the present Governor of the Bank of England, Sir Mervyn King) as having "no basis in economic theory".
Their intervention provided fresh ammunition for the cabinet "wets" - the derisive nickname given to the traditional, one-nation Conservatives who were horrified at the direction Mrs Thatcher was leading the party.
She had already sacked one critic, Norman St John Stevas, and sidelined another, Francis Pym, who was moved from defence to Leader of the Commons, in a mini-reshuffle at the start of the year.
However leading figures still remained, including Jim Prior, the influential employment secretary, and Sir Ian Gilmour, the lord privy seal and senior foreign office minister in the House of Commons, whom Mrs Thatcher believed were privately briefing journalists against her.
Bernard Ingham, her pugnacious press secretary, warned she had "a manifestly divided and warring Cabinet" which was undermining the Government's ability to present a coherent policy.
"The Government is divided and seen to be divided," he wrote in an internal memorandum.
"As I have told the Prime Minister, there is nothing I can do in these circumstances to carry conviction. Not to put too fine a point on it, we need to restore honour and discipline at Cabinet level."
The struggle came to a head when the cabinet met on July 23 - a confrontation which she later described in her memoirs as "one of the bitterest arguments on the economy, or any subject, that I can ever recall taking place at Cabinet during my premiership".
The meeting began with Sir Geoffrey presenting a paper on public expenditure, arguing that they had to keep cutting borrowing if they were to convince the financial markets their determination to get the public finances under control was not weakening.
Other ministers immediately rounded on him. The minutes do not identify who spoke, but - in unusually frank language - they show that his paper was denounced as "inadequate" and his strategy "unrealistic".
Summing up the discussion, the minutes noted that Sir Geoffrey's approach "did not offer a sufficiently imaginative and practicable response to the acute social and political problems now confronting the Government".
A strategy centred on cutting taxes and public spending was, the minutes said, simply "irrelevant" to the problems of Northern Ireland or Merseyside or other areas of urban dereliction and deprivation.
"With unemployment totals rising to three million later in the year, and following the recent rioting in a number of cities, the tolerance of society was now stretched near to its limit," the minutes noted.
"To give people renewed hope and confidence for the future, it was essential to take new and constructive action urgently."
Faced with such concerted opposition Mrs Thatcher chose to play for time, agreeing that Sir Geoffrey should come back after the summer with "a fuller evaluation of the options".
But as ministers left for their holidays, she was already plotting her revenge.
On their return in September, Sir Ian Gilmour, along with education secretary Mark Carlisle and the leader of the lords, Lord Soames, were sacked while Mr Prior was moved to Northern Ireland, cutting off his ability to influence economic strategy.
The departing ministers were replaced by key Thatcher allies, including Norman Tebbit and Nigel Lawson.
As a result, she said afterwards, "the whole nature of the Cabinet changed".
"The 'wets' had been defeated," she wrote in her memoirs, "but they did not yet fully realise it".
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