Enter Un-Sunny Jim

The sense of relief was all but visible last week in the packed confines of Westminster Palace's Committee Room 14 when George Strauss, 74, an elder statesman of Britain's Labor Party, rose to address the assembled Labor M.P.s. By 176 votes to 137, Strauss announced, Foreign Secretary James Callaghan, 64, had, as expected, emerged as the third-ballot victor over Employment Secretary Michael Foot, 62, the voluble leftist ideologue. Thus ended the race for leadership of the party and occupancy of No. 10 Downing Street that had begun three weeks before when Harold Wilson resigned. After 13 years of tutelage by Wilson, master of the cautious choice, most of the voting Labor M.P.s had opted for a few more years of pragmatic caution under Callaghan rather than the financial strains for battered Britain of a more pronounced leftward turn under Foot.

"Sunny Jim" Callaghan's first moves belied both his nickname and his avuncular reputation. Even before making the traditional visit to Queen Elizabeth at Buckingham Palace for the "kissing of hands,"* the new Prime Minister sternly warned factions on both Labor's left and right wings that he intended to maintain party unity at all costs. Said he: "I want no cliques. None of you holds the Ark of the Covenant." But then, in a conciliatory gesture to Foot, who had done surprisingly well in the leadership contest, Callaghan named the Employment Secretary as party leader in the House of Commons, a position second only to his own.

Rising Star. There were surprises in Callaghan's other Cabinet shifts. As Foreign Secretary, the P.M. chose Environment Secretary Anthony Crosland, 57, an aloof, cerebral party theoretician with credentials in economics rather than foreign affairs. The favorite had been Home Secretary Roy Jenkins, but Callaghan's heart is more in the relationship with Washington than with the EEC, whereas the eloquent, sophisticated Jenkins is an ardent pro-Marketeer. Expectations are that Callaghan may nominate Jenkins for presidency of the European Commission when it is Britain's turn to head it next January.

Crosland's old portfolio went to one of Labor's rising stars, Peter Shore, 51, an economics expert who had previously served as Secretary of State for Trade. Also promoted was Labor's ranking woman M.P.: Shirley Williams, 45, who is Secretary for Prices and Consumer Protection, got the additional post of Paymaster General, which in effect makes her first deputy to Chancellor of the Exchequer Denis Healey.

Within 48 hours of taking office, Callaghan seemed to be heading into a domestic political storm. The cause was the latest budgetary attempt by Healey to stabilize the listing British economy. Healey and Callaghan both believe that the new government's highest priority must be, as the fledgling Prime Minister declared in a nationwide television address, "the vital job of bringing down the rate of inflation." The rate, which in the year ending last June was as high as 26%, has dropped over the six months ending Feb. 29 to the less ruinous annual rate of 13.3%. This has largely resulted from the Wilson government's imposition last July of a limit on wage hikes of -L-6 (then worth $ 13.20, or about 10% of the average wage).

Callaghan and Healey must have the support of the country's powerful trade union leaders to get a new agreement to limit wages. Thus the Chancellor in his budget speech proposed $2.4 billion in tax cuts for all citizens--on one rather startling condition. The cuts would be effective only if the unions agreed by June to accept a new 3% ($3.68) limit in wage increases. Conservative Leader Margaret Thatcher immediately denounced the proposal as "taxation without representation." Although usually sympathetic to Healey's proposals, the London Times skeptically observed that "for the first time the budget has become a matter of negotiation between the government and an outside body representative of only one section of the country." Equally skeptical were the union leaders, even though Healey added that he was "not seeking to dictate a particular figure" and was understood to allow for bargaining room somewhere between 3% and 5%.

To make matters worse for Callaghan, his government last week lost its overall majority in the House of Commons. Labor's voting strength was reduced to 314, v. 316 for the other parties, by the sudden death of one M.P. and the resignation from the party of John Stonehouse, the financial operator whose much publicized disappearance and reappearance (TIME, Jan. 6, 1975) were followed by criminal charges of fraud. While the government can still count on opposition disunity and support from two additional independent M.P.s, the loss of the two seats means tougher sledding for Callaghan whenever he wants to put through vital but controversial legislation. The world money market reflected all the gloom: the British pound at week's end sank to its lowest level ever--$ 1.84.

* The custom of actually kissing the Sovereign's hand is defunct. The term remains in the formal description of the first meeting between Queen and Prime Minister.

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