LONDON, OCT. 29 -- Faced with intense political pressure today to cut British interest rates, Prime Minister Margaret Thatcher told Parliament that action on the U.S. budget deficit was "the most important single thing" needed to restore stability to international financial markets.
In an acrimonious exchange, opposition Labor Party leader Neil Kinnock called for "significant cuts" in interest rates, beyond the "inconsequential" half percentage point reduction that brought British base rates down to 9.5 percent last week.
But Thatcher fended off the questions and quickly focused on the "vital" need for "early and decisive action" in Washington.
"I welcome the talks President Reagan is having with Congress about cutting the U.S. budget deficit," Thatcher said. She called for measures that, "both in scale and content, go beyond what has previously been envisaged, yet would do more than anything else to bring back confidence."
American economists and politicians, including many who have long urged the administration to raise taxes and cut government spending, now are debating whether those measures might actually deepen the current crisis by throwing the economy into a recessionary deep freeze.
But to Thatcher, for whom a balanced budget is essential to a healthy economy, the need to lower the U.S. budget and trade deficits is more urgent than ever.
"I don't think anybody has been in any doubt of British views on this one," an aide to Thatcher said. "This government has been pressing the United States consistently to deal with the double deficit problem."
In her discussions with Reagan over the years, the aide said, Thatcher has "not prescribed the way in which it should be done." But "one obvious way is tax increases," he said.
Since the international financial crisis began on Oct. 19 with the successive crash of stock exchanges around the world, Thatcher has made few public statements.
"We're not going to get into the position of undermining Ronald Reagan," an aide said yesterday. But senior aides have been working behind the scenes to emphasis the distance between what they describe as U.S. failure and as Britain's success in economic management.
To demonstrate Thatcher's prescience, aides have been redistributing the text of a statement she made to Parliament nearly four years ago.
Asked in December 1983 why Britain should not copy the then apparently successful U.S. economic strategy, Thatcher replied that "the United States has a fantastic balance-of-trade deficit, in contrast to the figures for this country. I would rather be in our position, which is sustainable, than in that of the United States, which, I believe, will cause great trouble."
While her government got off to a somewhat shaky economic start during her first term, from 1979 to 1983, an image of fiscal rectitude has been one of Thatcher's most valuable political assets ever since.
Few Britons have forgotten the national shame felt in 1976 when the Labor government had to turn to the International Monetary Fund for a bailout. Disgust with inflation and nationwide strikes during the late 1970s helped propel Thatcher into office.
On a personal level, Thatcher subscribes to a housewife theory of economics. French officials chided her after a recent European Community budget argument for acting like a housewife counting pennies out of her pocketbook.
Thatcher said she was proud of the comparison. Housewives are successful economic managers, she said, because they always know how many pennies they have in hand and never spend more.
Her visceral dislike of deficits in the past has overcome the fondness for tax cuts that she shares with Reagan. Despite her 1979 campaign promise of reduced taxation, her zeal to balance the budget and lessen public-sector borrowing led to an increase in the overall tax burden from about 34 percent of gross domestic product in 1978-79 to nearly 40 percent in 1982-83.
Since then, despite politically popular reductions in the basic income tax rate, increased indirect taxes have meant that Britons have paid more under Thatcher.