Answering a growing chorus of criticism here and abroad, Prime Minister Margaret Thatcher's top economic lieutenant has insisted that her strategy for restructuring Britian's battered economy is working and has predicted that recovery from the country's worst recession in 50 years will begin soon.
"There are now signs that the worst of the recession in Britian is over," the chancellor of the Exchequer, Sir Geoffrey Howe, told a group of American correspondents last week. He said the latest British Treasury forecast, based on encouraging new economic indicators, shows that industrial output finally will begin increasing again during the second half of this year.
Because of the Thatcher government's success in reducing inflation and because "many firms have responded to the difficulties of the recession by reducing unnecessary manning levels and improv[ing] working methods," industry will be "in a good position to take advantage of the upturn," Howe said.
Howe's upbeat assessment, echoed by other Thatcher advisers and Cabinet members in recent public speeches and private conversations, clearly was aimed at countering what one of them described as the widely reported impression that "the Thatcher experiment has somehow failed."
Independent economic analysts, a group of 364 British economists, business and labor leaders, and prominent politicians -- including some in Thatcher's own Conservative Party and Cabinet -- have warned that her unbending survival-of-the-fittest policies are endangering real recovery from the recession, inflicting irreversible damage on industry, and risking social and political upheaval with high unemployment.
Howe responded to these charges by saying that it was taking a long time for the Thatcher government "to tackle long-standing and deep-seated problems" in the British economy. He said the government has not abandoned its intention to improve the supply side of the economy, even though the severe recession has impeded its efforts to curb government spending and cut taxes.
Although the government's repeated trimming of education, housing and other expenditures has been offset by the cost of the rapidly rising number of unemployed and emergency aid for government-owned industries, Howe said public spending still has been held below the levels projected by the previous Labor government and will be reduced further. Although the total tax burden on Britons actually has increased under Thatcher, Howe noted that it has been shifted somewhat from income to consumption taxes, with the top rates reduced considerably.
But Howe and other Thatcher economic advisers said the government will resist mounting pressure from business, Labor and some Conservative politicians and Cabinet members to stimulate the economy with government investment in public-works projects and high-technology development.
Without this stimulus, the economy "may show some recovery in the short term, but it is hard to discern any engine of sustained recovery," argued a recent economic report by an all-party parliamentary committee headed by a senior Conservative back-bencher in the House of Commons.
Thatcher's economic advisers insist, however, that industry will be able to take advantage of the greater efficiency forced on it by the recession. They point to a number of firms whose executives already claim greater productivity and more flexible labor-management relations.
Many business leaders have agreed with this analysis for industries able to survive the recession, but say they still fear that too many well-run businesses and the jobs they provide will perish without some government stimulus of the economy. Howe answered that because "the money to do this would have to come from somewhere," it would hinder the government's fight against inflation.
Calling high inflation "the No. 1 enemy in Britian," Howe said "we must put the defeat of inflation first, ahead even of the important goal of reducing the burden of taxation on the supply side of the economy." He noted that Britain's underlying inflation rate and its minimum lending rate now are lower than those in the United States.
"It would be criminal to slacken off at this stage, despite the high level of unemployment," Howe said. He added that his controversial recent budget, which raised taxes and some business costs, was "designed to consolidate our success in reducing the inflation rate" by preventing a big increase in government borrowing and the growth of the money supply.
An aide to Howe, Treasury Minister Nigel Lawson, predicted in Parliament that inflation, which has fallen from a peak of 22 percent to nearly 12 percent, will be reduced to 8 percent in another year. Meanwhile, he added, the latest economic indicators "clearly signaled the turning point in the economy" from the bottom of the recession.
Howe acknowledged that complete recovery is not possible by the time Thatcher's Conversations must face another national election in 1984. But he predicted that inflation will be falling, industrial output rising and the number of jobs growing, although unemployment -- now above 10 percent of the work force and increasing -- still will be high. The Conservative government then will argue that it could continue making progress if re-elected, he said.