As far as the Doctor's concerned, at some point between 27.0, the TV Movie, and X1.1, "Rose", a great Time War occurred between the Time Lords and the Daleks, wiping out both races (sort of: see, among others, X1.12/X1.13, "Bad Wolf"/"The Parting of the Ways", X2.12/X2.13, "Army of Ghosts"/"Doomsday", and X3.11/X3.12/X3.13, "Utopia"/"The Sound of Drums"/"Last of the Time Lords" for why this isn't exactly true). While bits and pieces of the events of the War have been revealed over the course of the BBC Wales series, the trigger of the conflict remains unknown. But perhaps more importantly, the question remains: why was there a war at all?
Initially, it seems odd because the Time Lords are often portrayed in the series as observing the timelines and intervening when they deem it necessary (such as 8.2, "Colony in Space", or 22.4, "The Two Doctors"). If they have this power, then surely they should have seen the Daleks coming? Shouldn’t they have prepared themselves?
Well, maybe they tried. In 12.4, "Genesis of the Daleks," the Time Lords send the Doctor on a mission to either prevent the Daleks from being created, make them less aggressive as a race, or find a weakness in their origin - the reasoning being that the Time Lords foresee a time when the Daleks will become the supreme power in the universe. Presumably this would mean that the Time Lords were threatened as well as other races. Despite the fact that the Doctor doesn’t outright destroy the Daleks at their inception, the Time Lords aren’t seen to attempt to interfere in Dalek history after this, so it would seem that they’re reasonably satisfied with the results and must not feel the Daleks would become a threat to them. Which means that we’re back to wondering why there was a war in the first place.
Perhaps in order to better understand the question, we should first ask how the Time Lords monitor the timelines at all. We can probably safely assume that the Time Lords' monitoring device is the Matrix, the repository of Time Lord knowledge. "The Deadly Assassin" (14.3) mentions that the Matrix can predict future events, such as the assassination of the President of the Time Lords in that story. Presumably if the Matrix has this capability, then it would be the main tool which the Time Lords use to monitor the timelines - they examine the future with the Matrix and see what results from certain events. But "The Deadly Assassin" also shows that these predictions can be intercepted and redirected - although, as Coordinator Engin points out, you would need a living mind to do it, someone who actively wished ill upon the Time Lords. Who then would be the candidates for such a person?
Going by Occam's razor, let's assume that it has to be a fellow Time Lord. We can eliminate most of the likely candidates right away. The Monk's more mischievous than evil, and the Rani's far too scientifically-minded to get caught up in that sort of thing - plus it's not clear what she would gain from such an action. The Master's more likely, but "The Sound of Drums" (X3.12) seems to scotch that notion (unless you think the Time Lords would seriously resurrect the betrayer of their people to fight on their side). And no other Time Lords that we've seen would be interested/capable of diverting the Matrix in such a manner.
No, hang on. There is one possibility. At the risk of being unbearably fannish, it could be the Valeyard from the Doctor’s trial. After all, at the end of "The Ultimate Foe" (23.4) it was revealed that he had taken over the body of the Keeper of the Matrix - the guardian of the sum of Time Lord knowledge. He would have power over the predictive powers of the Matrix as well, which would mean he could very well link into the Matrix - supplying it with the "living mind" required - and divert any predictions about the impending Time War. As for his motivation for doing this, it’s possible that the Valeyard would be attempting to withhold vital information from the Time Lords to use as bargaining chips in exchange for a full Time Lord lifespan, similar to what he was promised in "The Ultimate Foe." Or he could just be doing it out of spite.
(If that doesn't work for you, there is an alternative. In the wake of "The Ultimate Foe", the Time Lords could now be simply mistrustful of what the Matrix predicts. After all, it’s been shown that it can be tampered with - something that the Time Lords haven’t considered as a possibility before - and they might therefore dismiss a prediction of the Time War as either an artifact of the tampering or simply inaccurate. Or they may be simply unwilling to believe that a force could actually threaten them in the face of the facts - simple denial. Or maybe that was the part of the Matrix that the Valeyard blew up.
(No? One additional possibility then. This is the least workable theory, but we include it in the interest of full disclosure. The Time Lords do know that something big is approaching, but they're too powerless/scared to do anything about it. This would be the reason why Time Lords aren't supposed to travel to the very far future (21.3, "Frontios") - it's not actually because (say) interfering with the colony on Frontios is forbidden, but because a Time Lord might learn something about the Time War. This theory has major drawbacks though, not least of which is that it requires Gallifrey to adopt an unusually lax and defeatist attitude toward their own future. For one thing, it plays all sorts of havoc with the idea of Gallifreyan Mean Time (the rough idea of which says that (a) Time Lords and Gallifrey travel in time at the same rate - so when a year passes for the Doctor, it also passes on Gallifrey - and (b) the timeline of Gallifrey isn't necessarily at a one-to-one correspondence with the rest of the Universe), some version of which is required if you want to make any sense of the Gallifrey-based stories. After all, if Gallifrey's not linked up to the rest of the Universe, why should it matter if the Doctor travels to Frontios?)
So we now have a workable theory as to why the Time Lords wouldn’t have seen the Time War coming. But why would the Daleks attempt to destroy specifically the Time Lords (as opposed to just incorporating them into their general plans for universal conquest)? Russell T Davies has suggested that the events in "Genesis of the Daleks" were the catalyst for the Time War, but this doesn’t really make sense, as it would then follow that all of the Daleks’ actions have been with the ultimate goal of wiping out the Time Lords — a nice idea thematically, implicating that the Time Lords are ultimately responsible for the Daleks’ thirst for conquest, but rather at odds with most of what the series (including "Genesis of the Daleks" itself) tells us about the Daleks.
There is, however, a logical alternative. What if the Daleks’ antipathy toward Gallifrey didn’t stem from the actions of "Genesis of the Daleks", but rather "Remembrance of the Daleks" (25.1)? In that story, the Doctor, a Time Lord, not only destroys Skaro’s sun, but he does so with a Time Lord device, namely the Hand of Omega. Presumably there are Daleks who weren’t in the vicinity of Skaro when its sun went supernova - despite what the Doctor might claim to the Black Dalek - and they could easily discover what had happened to Skaro and who was responsible - particularly if Davros survived at the end, as it appears he did, and told the other Daleks. (We could go into the War of the Daleks version of events here with its two Skaros, but as nothing there seems to contradict this theory, we won't bother.) So this then could very well be the catalyst that leads to the Daleks taking up arms against the Time Lords. This has the added bonus of fitting in well with the Doctor’s personal timeline, explaining why he wasn’t fighting the Time War back as the Third Doctor.
Two additional points we feel we should mention: first, the Daleks’ plan to assassinate the High Council in 21.4, "Resurrection of the Daleks." Ignoring the fact that the Daleks have set a trap for specifically the Doctor, the one being in the universe who has defeated the Daleks time and time again and would therefore probably be the least likely person they would want to involve themselves with, even if all they want to do is duplicate him and use him as their agent...this still doesn’t really feel like it’s part of a large war effort, because the whole tone of the piece seems less focused and centralized than what you’d expect from a Dalek war, particularly one that will eventually end in the destruction of the Time Lords and the Daleks. It's possible that this is an initial skirmish by the Daleks before they make their intent plain, buried amidst numerous other plots and counterplots, but it hardly seems like the coordinated effort the Daleks must surely know they would need to make against Gallifrey. (There's also the matter of how the increasingly divided Dalek forces on display in the '80s Who stories could possibly become the major threat of the Time War - especially since we now know that Davros was alive and active during the War (X4.12, "The Stolen Earth"/X4.13, "Journey's End") - but never mind about that now.)
Second, the throwaway line from the beginning of the TV Movie (27.0) which shows the Daleks exterminating the Master for his crimes, but then allowing the Doctor to take his remains back to Gallifrey, is a bit of a puzzle if we assume that the Daleks bear this intense animosity toward the Time Lords. (Actually, given what we know of the Daleks, this is a puzzle - to put it mildly - in any event.) But if we can turn to secondary material for a moment, we could note that the end of Lungbarrow includes a discussion about the difficulty of retrieving the Master’s remains from Skaro. Which means that we don’t need to entertain any possibilities about there being temporary peaces between the Daleks and the Time Lords, during which the Daleks' greatest enemy can pop in and collect the Master.
So, to sum up. Given what we know, it seems that the Time War was probably sparked by the Doctor’s actions in "Remembrance of the Daleks", which led to the Daleks waging a full-blown war against the Time Lords. The Time Lords were insufficiently prepared for this, most likely stemming from the events of "The Trial of a Time Lord" (23.1-4) and probably involving the Valeyard, and so weren’t able to initiate any action (like a preemptive strike) to prevent the Time War from occurring. The events of the TV Movie and the lack of any ongoing Time War there suggests that the majority of the War almost certainly happens during the Eighth Doctor’s lifespan. Which, if you accept the BBC books as canon (and fair enough if you don't), means he’s seen Gallifrey and the Time Lords destroyed twice in one regeneration. No wonder he regenerates into Christopher Eccleston.
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