It Happens Every Spring

By Marguerite Johnson

After a hard winter, Thatcher finds a little sunshine for all

The daffodils were abloom in London's Hyde Park, and over at Downing Street, Prime Minister Margaret Thatcher put on her brightest smile for the tourists. It was, after all, nearly the end of one of Britain's bitterest winters, and she had reason to think that sunnier days might be ahead for her government. Chancellor of the Exchequer Sir Geoffrey Howe had just presented the House of Commons with a new budget. It shrewdly offered a little something for everyone, effectively assuaging dissidents within the Tories' own ranks and taking the steam out of expected Labor opposition. A few days later, a new Market and Opinion Research International poll showed Thatcher's Tories ahead of the opposition for the first time since the 1979 national election.

Last year's budget was rated the most unpopular in 30 years, so Howe had only to be fairly moderate and evenhanded to come out ahead. In fact, his modest proposal for a $2.35 billion expansion of the economy managed to win approval from business leaders and even backbench conservatives who have been critical of Thatcher's harsh economic policies. "This will be a budget for industry, and so a budget for jobs," Howe declared in his address to the Commons. "But it will be a budget for people as well."

It was skillfully, if parsimoniously, crafted to give industry a teaspoonful of relief with cheaper electricity and gas rates and provide modest assistance for the ailing construction business. It contains a raise in income tax exemptions of 14%, and a cut in the payroll tax, or social security surcharge paid by employers, from 3.5% to 2.5%. Child allowances, old-age pensions and unemployment benefits will receive a slight boost. But Britons, who already pay a 15% value-added tax on all but essential goods and services, will have to pay excise taxes averaging about 12% on beer, cigarettes and gasoline.

Still, the average Briton did a little hasty calculation and concluded that the budget was tolerable. "It's a case of losing on the swings and gaining on the roundabouts," said a self-employed street vendor. The main complaint about the budget is that it fails to take strong measures to combat unemployment, now at a record 3 million (a rate of nearly 13%) and' still rising. Labor Party Leader Michael Foot, borrowing from Gilbert and Sullivan's The Mikado, scorned Howe's cost-and-balance sheet as "a thing of shreds and patches." The government, he said, still showed "no proper understanding of the scale of the catastrophe which has befallen our country and our people."

Labor's shadow chancellor, Peter Shore, offered his party's alternative budget, calling for $16.3 billion in additional spending to generate a 5% growth in the economy next year. (The Tories' projections call for only 1.5% growth.) Moreover, Shore charged, tables issued by the government's own tax office showed Howe's figures on tax benefits to be a fraud. Only Britons with incomes of more than $36,000 would actually benefit from the Tories' budget. Scoffed he: "So much for this 'budget for the people.' "

Economists generally doubt that Britain has begun to shake off its worst recession in decades. But Thatcher's spokesmen insist that the economic indicators are on their side. Inflation, for instance, has dropped from a high of 13% last year to 12%, and seems headed for single-digit territory. Building-industry lenders lowered mortgage rates late last week by 1.5%, to 13.5%. Not least, Thatcherites argue, the pound has remained quite steady despite the $4-per-bbl. cut in North Sea oil prices (to $31 per bbl.) earlier this month. Even those oil cuts, which gouged $1.6 billion in revenues out of Howe's budget, were being touted by the Tories as good news. Asserted one of Thatcher's aides: "It's going to stimulate the economy, and expansion is the securest form of revenue." The government last week also confidently committed Britain to buying $14 billion worth of U.S. Trident II missiles for its nuclear submarines.

The sudden surge in Tory popularity did not bode well for Roy Jenkins, the former Labor Cabinet minister who quit the party last year to help found the centrist Social Democrats. Jenkins is running in a by-election March 25 in the Glasgow constituency of Billhead, and he must win a seat in Parliament if he is to be a candidate in the leadership stakes of the Social Democratic/Liberal Party alliance. But the Social Democrats' popularity has dropped off markedly, and the polls showed him slipping to third place behind the Tory and Labor candidates.

The budget's favorable reception, along with the Tory lead in Glasgow, helped compensate for a major embarrassment to Thatcher: the premature White House announcement last week that President Reagan would address a joint session of the Houses of Parliament in Westminster Hall when he visits Europe in June. Such invitations are rare and reserved for rather special statesmen. (The only foreign head of state to be so honored was French President Charles de Gaulle in 1960.) In this case, the invitation to Reagan had not even been formally issued, much less taken up in obligatory consultation with Labor M.P.s, whose outrage just about dashed any prospects that the Reagan appearance would take place in that historic setting. Explained one irritated Labor M.P: "It would be like having Mrs. Thatcher announce that she would speak to a joint session of Congress before anybody had checked with [Speaker of the House] Tip O'Neill."

Despite such minor storms, the weather clearly seems to be warming for Thatcher and her embattled party. The major remaining cloud is the economy, and the Tories must perform a minor miracle in that department before Thatcher dares face a general election. She has until May 1984 to call one, but could act by late next year. So no matter how promising the next few months appear, there will still be another winter to endure. Indeed, as every Prime Minister knows, one budget does not make a spring.

--By Marguerite Johnson. Reported by Bonnie Angelo/London

With reporting by Bonnie Angelo

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