WORLD

Bloody January in Britain

Despite a year of economic hardship and more to come, Maggie stands firm

Carol Kennedy January 19 1981
WORLD

Bloody January in Britain

Despite a year of economic hardship and more to come, Maggie stands firm

Carol Kennedy January 19 1981

Bloody January in Britain

Despite a year of economic hardship and more to come, Maggie stands firm

WORLD

Carol Kennedy

Alan Walters gave a small frosty smile for the cameras as he alighted from a taxi at 10 Downing Street one day last week, briefcase in hand and just off the overnight plane from Washington. The economics professor from Baltimore’s Johns Hopkins University, in Britain for a two-year stint as Prime Minister Margaret Thatcher’s personal adviser, had reason to smile: he will make $142,660 a year and have an office at the seat of power. But those who hoped for a softening of Thatcherite strategy in 1981 could hardly smile with him: Walters, 54, is a 22-carat, hard-line monetarist. Few in Britain, except the gilded high-spenders, had much to celebrate. Economic prospects looked even worse than a year ago. In the words of the old Flanders and Swann song, it was Bloody January again.

The year just gone had produced the highest unemployment since the 1930s—2.2 million; the largest decline in manufacturing output on record—10 per cent; the most company bankruptcies ever—6,814; and the fastest-ever growth in the money supply—over 20 per cent. As the economic soothsayers shuffled their tarot cards for 1981, the Treasury, the Paris-based Organization for Economic Co-operation and Development (OECD) and the Bank of England all predicted a further drop in output. The OECD said unemployment would reach three million in the first half of

1982, but the respected City of London stockbrokers Phillips and Drew, said it would be near three million by the end of this year. The firm also assessed the cumulative decline in manufacturing output at 14 per cent from 1979 to 1981, a sharper rate of recession than the 11 per cent registered between 1929 and 1931.

Thatcher blandly ignored these Cassandras. In a defiantly upbeat message on TV and radio, she insisted that the economy was beginning to recover. More new companies had started up in 1980 than at any time in the past four years, she claimed. But where was the new growth? The Industrial and Commercial Finance Corporation (ICFC), which provides equity finance, currently has approximately $1 billion invested in 3,000 companies. But the biggest sector to which it lends—“insurance, banking, finance, business, professional and scientific services”—provides little scope for offsetting the big industrial layoffs of 1980. As if to

underline that bleak message, Fisons, Britain’s second biggest fertilizer manufacturer, began the year by axing 1,100 jobs—more than a quarter of its work force.

There was no sign either, at the Treasury, of moves to “recycle” Britain’s North Sea oil revenues—expected I to peak in 1983—out of general governo ment revenue and into specific schemes o of industrial regeneration. Other indis cators of economic hope being brano dished by Thatcherite optimists were z equally ambiguous. The money supply

was showing lower monthly growth, but as The Guardian pointed out, this merely reflected less demand for money as the recession bit deeper. Lower inflation (15.3 per cent in 1980) likewise mirrored desperation to sell to people who were not buying. Fewer working days lost in strikes last year sounded good— but then hundreds of thousands fewer were working.

There were some bright spots. British Leyland’s Sir Michael (Supermike) Edwardes once again faced down recalcitrant workers who had threatened a strike that would have destroyed the buoyant market for the company’s new Metro model. Ian MacGregor, the tough new Scottish-American boss of British Steel, was expected to get the votes he wanted next week for his survival plan, which involves considerable job losses in return for a further infusion of public money.

Thatcher, meanwhile, moved last week to face down rebellious elements in her own cabinet. In what Liberal leader David Steel sardonically dubbed “The night of the long hatpin,” she demoted a prominent cabinet critic, House of Commons leader Norman St. John Stevas, and Paymaster-General Angus Maude. Others shifted sideways, or promoted, included the capable Francis Pym (from defence to leader of the Commons). John Nott and John Biffen, both unflinching monetarists, went respectively from trade to defence and from treasury to trade.

In a way there was a parable for the country in the cliff-hanging serial of Times Newspapers, which lurched on toward its March 31 deadline with no clues as to who had bid for what and how much. The rival Financial Times reported that some 30 bids had been received, and at week’s end Gordon Brunton, chief executive of Lord Thomson’s British holding company, appeared cautiously optimistic. But the only publicly announced bidder so far was a consortium of journalists from The Times headed by editor William Rees-Mogg and backed by such industrialists as Sir John Sainsbury of the food store chain and Lord Weinstock of General Electric.

But perhaps the most apt metaphor for the explosive potential of the British mood was a parcel addressed to the prime minister at No. 10 by an obscure Scottish left-wing splinter group. After an alert postal sorter had voiced his suspicions, it was opened before delivery. Inside was a 1.36-kilo bomb.