Theresa May's speech to the Police Federation annual conference today was by any standards an extraordinary political moment. It wasn't the first time that this home secretary has made a speech that the combative police representative organisation disliked. But its frankness and toughness reduced the Bournemouth hall to stunned silence – and it underscores that the federation may have driven itself into a cul de sac of opposition and denial.

May's decision to cut off the flow of public funds to the federation – commonly known as the coppers' union – is arguably the single most aggressive act by central government towards the police rank and file since the defeat of the police strike in 1918, nearly a century ago. It is a sign that the heavily divided federation – which faces crucial decisions about new leaders and reform stances this week – is losing its fear factor for governments. And it completes an about-turn towards the police by the Conservative party – forced partly by the urgency of reform, partly by the federation's dunderheaded oppositionism, and partly by the fiscal climate – that would never have seemed possible in the law-and-order era of Margaret Thatcher. To be heading into an election year in a battle with the police would have seemed like a nightmare scenario back in the 1980s. Right now it looks surprisingly smart.

The home secretary's speech was not pre-released to the press. Nor were its contents shared with moderates in the current battle for control of the federation. The secrecy is hardly surprising. May's speech was political dynamite. It is only a slight exaggeration to say that if it had gone wrong it could have started a riot – a police riot – in the hall. It is tempting to call it the bravest speech in British politics since May's last brave one, when as Tory chair in 2002 she told her party conference it was time to get rid of the "nasty party" image. If nothing else it is a reminder, amid all the tedious Boris Johnson hoopla, that shares in May as a potential Tory leader remain a sensible investment.

May's speech is certainly a good read. Better still, watch the choice clip on the BBC in which she reads out the charge sheet of police failures with which the force as a whole is currently confronted, beginning with the warning that "it's time to face up to reality". May then lists a long series of damaging incidents and acts of denial, from Hillsborough and the Lawrence case to the death of Ian Tomlinson and Plebgate – over which a fourth officer was dismissed from the force only yesterday – before concluding that it is time for the police "to show the public that you get it".

But May had more than tough words to offer. She also made serious threats. Back in January, Sir David Normington produced – remarkably, at the federation's own request – a devastatingly critical review listing 36 much-needed reforms. If they do not start implementing Normington, May announced yesterday, "we will impose change on you". May then announced that the public money that goes to the federation for its senior officials' salaries will be turned off in August. She followed that up by announcing that the federation will become an opt-in organisation.

This last move symbolises the truly historic change that May is committed to overseeing. The federation, which nowadays looks so like a trade union, and acts so like a trade union, is in crucial respects not a trade union at all. Uniquely, it is a statutory representative organisation, created by parliament, legally denied the right to strike and legally required to represent the entire police rank and file to discuss police pay and conditions. It has thus enjoyed unprecedented industrial power, including a form of workplace co-determination tragically lacking from the rest of British industrial relations culture, in return for unprecedented legal restraints.

The federation was created after an earlier rank-and-file police union called an all-out strike in the final year of the first world war, and only a few months after the Russian revolution. That strike was faced down, as was another in 1919 – and, in return for a pay rise, the federation was duly imposed on the police (not least out of official fear about strikes in the army).

May's move shows how far things have come, not just since 1919, but since 1979. Thirty-five years ago the federation cast its postwar non-partisan stance aside and effectively enlisted on the Tory side in the general election that brought Thatcher to power. Through the 1980s it became an echo chamber for authoritarian Thatcher-era law and order rhetoric, to the consternation of more thoughtful senior officers, and increasingly to the detriment of police-public relations. But its leaders were always confident that Thatcher shared their view that police were the thin blue line between order and anarchy.

The succession of police failings and scandals that May boldly listed yesterday – though she missed out the policing of the miners' strike – meant there would one day be a reckoning. New Labour was afraid of forcing the issue, anxious not to be pilloried as soft on crime. But May has been more audacious, as Tory reformers can be.

She has also had no choice. Public disapproval of the police has become increasingly widespread. Police reform has been unfinished business for too long. And in the case of pay and recruitment, it is unstarted. But the decisive driver of reform has been cost. Policing is labour-intensive and well-paid. Today even the normally defiant federation bowed the knee, voting in favour of the Normington agenda. All this has made May the most radical and effective police reformer to have occupied the home secretary's chair in at least half a century.