Sherman was critical of Ted Heath's Conservative government because of its public spending and its failure to implement free market policies. In 1974 he co-founded the Centre for Policy Studies with Sir Keith Joseph and Margaret Thatcher. Sherman was subsequently Director of the CPS and a member of the Conservative Philosophy Group. The CPS was the real launching pad for Margaret Thatcher, gradually transforming her from the untried party leader of 1974 into a prime-minister-in-waiting. More than any one man, Sherman provided her with the strategy for capturing the leadership of the Party and winning the general election of 1979. However he was a loose cannon when it came to the media and an early display of his outspoken racism was when he told the Soviet newspaper "Pravda", in 1974: "As for the lumpen proletariat, coloured people and the Irish, let's face it, the only way to hold them in check is to have enough well-armed and properly trained police."