Wait, I know the Doctor doesn’t generally like the Time Lords that much, but it does seem weird he would utterly betray them while laughing evilly. He must have a plan, right?
Duh. Of course he does. The Vardans only seem to be vaguely there, and there’s a reason for that in that they aren’t fully there. The Doctor asks them about it, but they blow him off. They did kill a guard without much effort, and while the Doctor’s old teacher Borusa is deeply disappointed in his former protege, but the Castellan, Kelner, sees this as an opportunity to lock up his political opponents.
But there’s more going on. The Doctor meets Borusa in the presidential offices, now surrounded by lead decorations, and there the Doctor can tell the truth: the Vardans are mind readers, and the lead walls will shield the Doctor from their ways. When he’s out and about, he can use a combination of Borusa’s teachings on mental protection and his own ability to tell jokes and be unpredictable. Most Time Lords can’t do that second part, and even Borusa admits his own mind would be easily read. And that was why the Doctor suggests Borusa allow himself to be banished from the Citadel.
Heck, that was why the Doctor wanted Leela expelled. She can go outside (which she does with new friend Rodan), and meets up with the Outsiders, former Time Lords who decided technology was for suckers, and from there, Leela can put together a rebel army.
And all the while, K9 keeps rolling around doing…something.
So, it looks like things are working out. Of course, as the Doctor and K9 work away in the TARDIS, captain of the guards Andred walks into the TARDIS to assassinate the Doctor for the greater good of Gallifrey.
You know, a guy like that may be helpful if he wasn’t trying to murder the series’ hero.