THE BRITISH Parliament this week decided by a surprisingly large margin not to restore the death penalty. Murder rates in Great Britain are minuscule compared with those in the United States, but an increase in terrorism--particularly in Northern Ireland--has been responsible for a rise in public opinion favoring the ultimate punishment. Prime Minister Margaret Thatcher advocates a restoration of the death penalty, but perhaps realizing that her large majority would not hold on this question, freed party members to vote their conscience. This they did, by a vote of 361 to 245.

A week ago the London Economist reminded readers that capital punishment was accepted in only three of the large, white-ruled countries of the world --South Africa, the Soviet Union and the United States. That article, reprinted in part on these pages, reminded us of the embarrassing company this country keeps on the question and surely had an impact on the legislators to whom it was directed.

The interesting aspect of this story is less the reaffirmation of a policy that is, after all, 20 years old, than the focus on terrorism and what to do about it. Many Conservatives, and the Rev. Ian Paisley, a Protestant MP from Northern Ireland, argued that only the sanction of the rope would stop the religiously motivated violence in the islands. Others, including John Hume, the Catholic MP from Northern Ireland, saw a more complicated scenario and cautioned that terrorists, especially the IRA, would welcome the return of capital punishment as a means of dramatizing their cause. Many warned that the IRA would attempt to inflame public opinion on the eve of the vote in order to sway legislators, and, sure enough, shortly before the debate began, terrorists blew up a convoy of jeeps, killing four members of the Ulster Defense Regiment. The tactic failed; the Parliament was not provoked.

Some political terrorists--and the IRA is famous for this--prefer martyrdom to long prison sentences. Ten IRA prisoners who starved themselves to death two years ago were the center of world attention for many weeks and heroes to their followers. By allowing them to die, the British may have opened themselves to criticism. But that reaction was mild compared with the impact that would follow a legally sanctioned execution by British authorities on Northern Irish soil.

Erecting a scaffold to hang murderers who claim they have a political cause would, according to Catholics like Mr. Hume who oppose the IRA, be playing directly into the hands of the terrorists. His wise advice was persuasive at Westminster. So were the broader arguments against capital punishment, which have application here as well as in Great Britain. How much longer do Americans want to remain in the same category as South Africa and the Soviet Union when it comes to this most basic of human rights?