Bracing for Trouble

By Marguerite Johnson

Thatcher staves off a challenge, but has little to cheer about

Jaw thrust forward, spoiling for a fight, British Prime Minister Margaret Thatcher did not mince any words. "It is no good dreaming about U-turns," she shouted at the Labor M.P.s who had been demanding a radical reversal of her economic policies. "Far from demoralizing the country, we are doing what the country elected us to do, and this government will have the guts to see it through." The buoyant show of indomitability was occasioned last week by a vote of no confidence in the House of Commons, the second called by the opposition in five months. The outcome was never really in question. With the Tories' 43-seat majority, plus a handful of Ulster Unionists, Thatcher was able to beat back the challenge with a hefty margin of 59 votes in the 635-seat Commons.

Still, the victory left little to cheer about. The indications were that the heated debate signaled an intensifying round of battles over Thatcher's unflinching dedication to her strict monetarist policies, following the doctrine of U.S. Economist Milton Friedman. She has rigidly controlled the money supply, doubled the value-added tax, cut benefits for striking workers, and slashed $20 billion in public spending for all manner of education, housing and municipal programs. Thatcher defends the brutal cuts on the grounds that she won the election with the candid promise that "things will get worse before they get better," and Britons should not be surprised that they have. But even some of her close supporters are now beginning to wonder how much worse that means.

The fact is that Britain is plunging into a deep recession, and the likelihood of a bitter winter ahead. Unemployment has reached 1.9 million, or 7.8% of the work force, the highest since the soup-kitchen days of the 1930s; it now seems inevitable that by next year the figure will rise to 2.5 million. Complaints are pouring in from businessmen as well as union chiefs. In its quarterly report released last week, the Confederation of British Industry painted what one business leader called "as gloomy a picture as it is possible for anyone to paint." Says Len Murray, general secretary of the Trades Union Congress, which represents Britain's 12 million unionized workers: "The prospects are deteriorating. The resemblances between the 1980s and the 1930s are more and more alarming."

The opposition Labor Party has been battling for some ameliorative measures, such as more job subsidies, a quick cut in interest rates, and the use of North Sea oil revenues to help ailing industries. In last week's Commons debate, Labor Party Leader James Callaghan castigated Thatcher's "miserable penny-pinching policies that have closed old people's homes and stopped school meals." He ticked off the economic ills that have developed since Thatcher took office 15 months ago: unemployment up by 600,000; inflation doubled to 21%; interest rates up four points to 16%; industrial output down by 8%; bankruptcies increasing at an alarming rate. Added Liberal Leader David Steel, whose party joined with Labor in the opposition vote: "In certain parts of Britain, the government is creating a desert and calling it 'freedom.' " Steel compared Thatcher's team of economic advisers to a group of "medieval philosophers insisting the world is flat, and when told it was not, they say, 'Well, it damn well should be.' "

To appease her critics and show she is not uncaring, Thatcher offered a few palliatives, among them a $60 million microchip manufacturing plant for Wales, the creation of seven new "enterprise zones," blighted areas marked for special grants, and a $145 million injection for Dunlop Tires to modernize deteriorated plants in high-unemployment cities. But the image of a hardhearted leader who is interested in only the bottom line is a potent weapon in the hands of the opposition. On a recent visit to Wales, the Prime Minister rather too blithely remarked that if people could not find jobs they should simply move to where the jobs are. That suggestion prompted an angry letter from the Anglican and Catholic bishops of Liverpool to the London Times. Urging people to stay put, the clergymen charged that the government's policy was creating "an increasingly cynical community of the left-behind." Cried Liberal Steel: " 'Let them move house!' That deserves to go down in history with 'Let them eat cake!' "

In addition to more unemployment, the bottom line is also going to mean that many companies and businesses will fold this year. Denis Healey, former Chancellor of the Exchequer, predicts 6,000 bankruptcies -- 1,500 more than last year. Profits reports are already grim for many industrial giants. Courtaulds, Ltd., Britain's huge textiles group, was reported to have had a drop in profits of at least 50% for the past year. The beleaguered British Steel Corporation had record losses of -L- 545 million ($1.3 billion), creating a special problem for the government because the company is nationalized.

It will take strong nerves for Thatcher to stick to her monetarist guns as industries go bankrupt and dole lines lengthen. Will she change course? Some British observers believe it inevitable; others say never. Remarkably, the Prime Minister's popularity in the polls has held firm. The reliable MORI poll puts Thatcher one point ahead of Callaghan in public approval, and Gallup also shows Thatcher picking up 1% in her rating. The favorable showings are attributed partly to her strong personal leadership and partly to the sorry state of the opposition Labor Party, which is itself engaged in an internal battle between its left and right wings. But there is already agitation among a number of Tory M.P.s for some kind of relief. Moreover, a few of Thatcher's closest advisers -- devoted as they are to her economic policy -- are beginning to fear that things may get so bad before they get better that it could cost the Tories the next election. For that problem, Thatcher has one golden elixir in her kit: by election time 1984, North Sea oil revenues should be pouring in at full force, enabling her to grant a handsome tax cut. First, of course, she and her government have to make it through the winter of 1981.

By Marguerite Johnson.

Reported by Bonnie Angela/London

With reporting by Bonnie Angelo/London

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