One Percent Difference

In his single year as Britain's Chancellor of the Exchequer, persuasive, even-tempered Peter Thorneycroft, 48, had established himself as a prospective Tory Prime Minister. His sponsorship of the British plan for a free trade area embracing all Western Europe (TIME, Jan. 28) earned him a reputation for vision; he won the admiration of Britain's business community by his unflinching fight against the domestic inflation that lies at the root of Britain's economic difficulties. Early last week the Times of London gave Prime Minister Harold Macmillan high marks for "coolly and firmly backing a courageous Chancellor of the Exchequer." But even as subscribers were reading these flattering words over their morning tea, Peter Thorneycroft had ceased to be Chancellor of the Exchequer.

The cause of Thorneycroft's abrupt departure from the Cabinet was his insistence that government expenditures must be maintained at exactly the same level as last year's. But in the new estimates, expenditures came out almost -L-50 million ($140,000,000) higher. This was not because of new extravagances but because standard welfare-state services would cost more. To cut the last -L-50 million would mean cutting into such programs as free milk for children and expectant mothers, reducing the family allowances that pay parents $1.12 a week for their second child, $1.40 for each subsequent child. To cut such payments, argued Thorneycroft's opponents, would cause deep resentment, might provoke the unions into demands for wage increases.

Thorneycroft was adamant. In his fight to choke off the inflationary spiral he had drastically limited private bank loans, upped the Bank of England interest rate to its highest level in 37 years, asked industry to reduce investment. Now, he argued, the government must do its part by refusing to increase its spending by so much as a penny. His opponents, keenly aware of the votes that could be lost by cutting family allowances, retorted that the amount involved was trifling--less than 1% of the projected budget. The showdown came at a late-night Cabinet meeting at 10 Downing Street. Peter Thorneycroft found all 17 of the other ministers present arrayed against him. Taut and white-faced, he announced that the Prime Minister would have his resignation forthwith.

"Little Local Difficulties." Next day, in a stiff letter to Macmillan, Thorneycroft wrote: "My reason can be shortly stated . . . The government itself must, in my view, accept the same measure of financial discipline as it seeks to impose on others." No less curtly, Macmillan replied: "You say that the [budget] for the next year must be the exact equivalent of the sum spent this year. The rigid application of this formula would do more harm than good . . . This is not a matter of popularity . . . This is a matter of good judgment ... I particularly regret that you should think it necessary to take this step when the difference between you and the rest of the Cabinet is such a narrow one."

True to his favorite political formula--when in trouble, play it down--Harold Macmillan promptly replaced Thorneycroft with 58-year-old Derick Heathcoat (pronounced "Hethcut") Amory, who had been Minister of Agriculture. Then, refusing even to contemplate the slightest alteration in his schedule, Macmillan departed on a five-week tour of Commonwealth nations. As he boarded his plane, he said: "I thought the best thing to do was to settle up these little local difficulties and then turn to the wider vision of the Commonwealth."

"Not a Revolt." Macmillan's nonchalance was not reflected in the government he left behind. Snapped Nigel Birch, one of two senior Treasury officials who resigned along with Thorneycroft: "The Treasury ministers were out to win the battle of inflation. The others were not. That is what the basic quarrel was about." The Times, its brief love affair with Macmillan ended, said: "If, as we believe, a principle is at stake, the smallness of the amount involved becomes an argument for strict observance of the principle, not an argument that it does not really matter anyway." In rebuttal, Home Secretary "Rab" Butler, acting chief of government during Macmillan's absence, insisted that the Cabinet "is united and determined to continue with its battle against inflation," added waspishly: "Other people besides the retired chancellor are entitled to their own convictions and their own particular brand of courage."

Rubbing hands gleefully at the spectacle of Tory disunity, Britain's Laborites plunged into the fray with ringing demands for Macmillan's resignation and a general election. As the Laborites well knew, such demands were unlikely to be fulfilled. By week's end party ranks closed. Even bitter Nigel Birch had publicly stated that "this is not a revolt against the government. We intend to support the new government by voice and vote." While 30 Tory M.P.s sent congratulations to Thorneycroft, only one threatened to desert the Conservative Party.

Second Choice. Macmillan's choice of stooped, spectacled Derick Heathcoat Amory as Thorneycroft's successor was well calculated to reassure the financial community if any man could. A shy, reticent Etonian who was wounded and captured while fighting with Britain's paratrooping Red Devils at Arnhem during World War II, Heathcoat Amory is a successful businessman who has helped make his family textile company one of Britain's most progressive. A staunch friend of the U.S. and an enthusiastic champion of the European free trade area, he has earned wide respect for his ability in administering the thorny ministries of Pensions and Agriculture, has been described as "everybody's second choice for every senior post in the government." Thorneycroft was the first Chancellor of the Exchequer to resign in protest against government policy since 1886, when Lord Randolph Churchill. Sir Winston's father, quit the Cabinet of Lord Salisbury.* Despite all Harold Macmillan's reassurances, so drastic a protest inevitably stirred fears that the government was, in fact, backing away from the stern fiscal policies that have halted the drain on Britain's gold and dollar reserves and stabilized the pound. The pound dipped briefly, then steadied at $2.81 as Heathcoat Amory reiterated his determination to defend sterling. "Nothing whatever will take precedence," he said. At week's end the Economist was commenting reassuringly: "This has been primarily a politicians' and administrators', not an economists' quarrel."

* Grandfather of the present Lord Salisbury, who last year as Tory leader of the House of Lords and Lord President of the Council resigned in protest against Harold Macmillan's Cyprus policy.

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