James Larkin (Jack) Jones, once one of the "terrible twins" of trade unionism and more recently a Companion of Honour, yesterday retired as head of the Transport and General Workers. The government has just announced a single figure inflation rate for the first time since October 1973.

The man and the statistic are intimately related.

It was Jones head of Britain's biggest union, who persuaded the labor movement to accept two years of formal wage restraint and a current third year of unacknowledged curbs.

If Jones and the unions had held out and exerted their full bargaining strength Britain might still be racked by an inflation heading toward 30 percent and social breakdown.

To be sure the reduced pace of inflation here can't be attributed to Jones and the unions alone.

Powerful help has come from the flow of North Sea oil, cutting Britain's import bill and helping to reverse the decline in the pound. More than 25 percent of Britain's total production rests on imports - food and raw materials - and a rising pound cuts costs.

But the very rise in the pound is a reflection in part of union wage restraint and Jones is the undisputed architect of Britain's incomes policy. A grateful Prime Minister James Calaghan recognized as much and turned up for the farewell bash Jones was given yesterday at the Royal Festival Hall.

Jones, 65, used to be regarded with horror and loathing by most Conservatives here. He and Hugh Scanlon, the soon-to-be retiring chief of the Engineering Workers, were the "terrible twins" the militant leftists out to deliver Britain to Moscow. Jones, in fact, never joined the Communist Party but he fought with the Republicans in Spain and had always been a militant unionist.

In fact, like most socialist leaders here. Jones and Scanlon are small and conservatives, determined to enlarge workers' dignity and their share of the national pie but equally determined to preserve a democratic Britain.

So when the country was plunged into a staggering inflation with wild increases in the supply of money during the Conservative Party government of Edward Heath, Jones inverted a "social contract" to pull Britain back from disaster.

In its first year of operation, the "contract" was an empty, verbal formula. By the summer of 1975, Jones got his fellow unionists to agree that wages would no longer try to keep pace with prices. Instead, the unions would agree to limit their demands to 10 percent. That summer, the inflation rate hit its peak, 26.9 percent.

The policy meant sharp cuts in worker living standards. But the inflation rate began coming down. The next year, Jones and the unions accepted a five percent ceiling. But the fall in inflation was stopped by a perverse plunge in the pound. The only constant was a further harsh cut in the real income of workers.

Last summer, in his final appearance before a convention of his TGWU, Jones pleaded for a third year of limits, this time 10 per cent. A man who had been called "the most powerful in Britain" was voted down by his own union. 3 to 2.

Scanlon, the other "terrible twin," saved a shell of the restraint principle at a meeting of all the unions. A more confident Callaghan government, applying cajolery and threat, carrot and stick, is now succeeding in getting settlements close to the 10 percent target.

When the latest consumer price index, for January, stood at 9.9 percent above the level of a year ago. Jones could look at his work with some satisfaction. If the trend continues, workers this year will recapture some of the income they have lost and Britain's inflation will have fallen to the European level. Since the underlying inflation rate is running at 7.4 percent, there is every reason to believe that the trend of slower price increases will go on.

It is typical of Jones, who likes to spend his evenings discussing tactics and strategy with rank and file dockers, auto workers and others in his catch-all union, that he chose to be a Companion of Honour. It is the highest rank that a prime minister can ask the queen to bestow without attaching a "Sir" or "Lord" to the recipient's name.

Apart from the short-term triumph over a runaway inflation. Jones has probably made a lasting contribution to the way wages will be determined here. The government is already planning a fourth year of incomes policy, recognizing that unfettered bargaining can't exist in a society of strong unions.

Only the far left and the ideological right believe that Britain, alone in Europe can survive without an incomes policy. Margaret Thatcher, the present Conservative Party leader, has been delighting the right by calling for an end to any incomes policy.

If Thatcher comes to power, many here expect she will sing a different tune. Her labor spokesman, for example, is a convinced advocate of incomes policy. When Conservatives in Power follow Labor's lead, the tool forged by the supposedly radical Jones will have become another conventional instrument of modern government.