The paper considers the relationships between the uneven development of the British economy, the political strategies pursued by the Conservative government, and the changes to the character of the NHS in the 1980s which culminated in the NHS reforms. It describes the context in which spatial resource allocation policies in the NHS were operating—one of heightened uneven development, with particularly rapid growth taking place in South East England with harmful effects on the NHS. It shows that one response was pressure by backbench MPs on government for a more equitable distribution of funds. Developments within the NHS are interpreted as strategic attempts to prioritize the interests of key geographical locations within a broader ‘two nations’ political strategy. Three issues are raised: the usefulness of the idea of ‘spatial coalitions’ in understanding pressures for change in health care policy; the extent to which spatially-uneven development and the ‘two-nations’ political strategy influenced the character and timing of changes in health care policy; and the possibility that the politics of the welfare state will increasingly be shaped by territorially-based conflicts.