During his time in prison, Smallwoods, who was described by other inmates as a deep-thinking introvert who struggled with being apart from his family for so long, spent a long time contemplating the UDA's weaknesses and considering other strategies, including political ones. Following his release from prison in 1990, Smallwoods found the UDA to be greatly changed, with his ally McMichael dead and
Andy Tyrie removed as leader and replaced by an Inner Council. Smallwoods was promptly attached to this body as an adviser and played a leading role in shaping UDA strategy over the next few years as a result. At the time, Smallwoods was still advocating continued armed struggle by the UDA, arguing that their role was to ensure that the British government did not agree to a united Ireland, and was advising in the Inner Council in favour of the UDA's ongoing bombing campaign. He also argued that the IRA's structure had changed to become subordinate to
Sinn Féin and, as such, advocated a strategy of targeting Sinn Féin members, who were more vulnerable to assassination. Smallwoods' strategy was influenced by the "shopping list" idea of John McMichael. Amongst those to be killed as a result of this strategy were Sinn Féin activists Tommy Casey, Councillor
Eddie Fullerton and Thomas Donaghy, as well as Robert Shaw, the father of an SF worker but not himself a member. During early 1992, Smallwoods, and others close to him in the Inner Council, held a series of meetings with
Presbyterian ministers Jack Weir and Godfrey Browne. At these meetings, facilitated by Reverend
Roy Magee, a former member of the
Ulster Vanguard and campaigner against the
Anglo-Irish Agreement who had become a peace advocate, the ministers pressed Smallwoods to lead the Inner Council towards a ceasefire. The proposal was rejected by the Inner Council and Smallwoods ended the discussions in March after learning that Weir and Browne had also been negotiating with Sinn Féin, a fact that Smallwoods feared might lead to suggestions that he had been passing information to the IRA. Nonetheless, Magee remained in regular contact with Smallwoods, whom he believed to be one of the main moderates on the Inner Council. Father Reid had already built a relationship with
Robert "Basher" Bates, one of the
Shankill Butchers whose conversion to
born-again Christianity had seen the two co-operate on ecumenical initiatives, but Smallwoods was the first active, high-ranking loyalist to hold regular dialogue with Catholic clergy. The
Greysteel massacre of October 1993 almost led to the initiative breaking down as a disgusted Magee decided to break off contact with the UDA altogether but he was dissuaded by Smallwoods, who convinced him that there was a growing willingness to embrace peace on the Inner Council. Magee would later state that, despite his endorsement of a policy of targeting Sinn Féin members, Smallwoods proved to be an important voice for moderation on the Inner Council and a prime architect of the eventual loyalist ceasefire. ==Political involvement==