Cabinet runs scared from dogmatic P.M.

Press, 11 July 1979, Page 10

Cabinet runs scared from dogmatic P.M.

By

ADAM RAPHAEL,

of the Observer Foreign News Service

London . When Cat was safely thousands of kilometres away in Tokyo, there was a distinct air of the mice enjoying themselves in Whitehall. ft is not that the Prime Minister (Mrs Margaret Thatcher) exactly terrorises her Ministers. Ask even the more timorous of them whether they are prepared to stand up to her and they will fix you with an eagle eye and declare that on the right issue they will fight to the last man. But the British Cabinet collectively has been running scared. Those who might be prepared to resist are lyihg low. Like the country at large, the 23 men around the Cabinet table are still getting used to the novel experience of being ruled by a woman. Mrs Thatcher, moreover, is not your usual genteel chairwoman. Unlike her predecessors at Downing Street, who tended to listen to the views expressed and then sum up, she prefers to lead from the front. It is a style that does not encourage dissent. To be fair, she gave full warning while leading the Opposition of her approach: “As Prime Minister, I couldn’t waste time having any interna! arguments. . .” She will, it seems, if tactfully approached in the right way, and in a much smaller forum than the Cabinet, listen and take advice. But blunt, open disagreement with her own views is not to her liking. The problems caused by this imperious approach to Government have not yet fully emerged. But there are obvious risks. One such difficulty, from which the Cabinet is now trying to extricate itself, concerns the pay of members of Parliament. Several Ministers knew that the Government’s rejection of the Boyle Committee’s proposals for large rises would lead to serious trouble. But if doubts were raised, they were not forcibly enough expressed. Mrs Thatcher then somewhat brusquely informed Mr James Callaghan, the Labour leader, of the Cabinet’s decision.

without first taking the precaution of consulting him to see whether the Opposition would support it. The unhappy result is that the Government will now have to retreat in the full glare of publicity, getting the worst of al! worlds. A more fundamental worry concerns the Budget strategy since the latest oil increases, by the Organisation of Petroleum Exporting Countries, which will further depress an already gloomy economic outlook. The Prime Minister is proud to declare herself to be a politician of conviction. That conviction centres on the belief that improvement in Britain’s economic performance will come only through incentives. But the instinctive response is dangerous in politics. Mrs Thatcher is said to have eyed the heap of cautionary Treasury briefing papers that piled up on her desk before the Budget and dismissed them with her favourite phrases: “Lousy .. . and wet.” Listening, however, to the debate on the Finance Bill, it was hard to resist the thought that it might have been prudent, given the treacherous state of the economy, if she had decided to be less dogmatic. Perhaps it was just that the Opposition was having

the better of the argument, but the Budget judgments have begun to look increasingly precarious. The case for raising Value Added Tax — a kind of sales tax — to 15 per cent was that only by raising it that high could a reduction in direct taxation be financed. But how real are these incentives when the official minimum lending rate is pushed to a nearrecord high of 14 per cent? Moreover, though it is clearly desirable to shift the burden from direct to expenditure taxes, is the incentive effect of the Budget sufficient to outweigh the damage that will be done by the predicted 17J per cent inflation rate this November? The Chancellor of the Exchequer’s claim that the average family man earning $2OO a week will be $2.50 better off as a result of the Budget has been achieved only by considerable “massaging” of the figures. It takes no account of other price consequences of the Budget, including food, rents, and mortgages. The reduction in the highest rates of tax on earned income is also, I believe, common sense. But it has to be admitted that the incentive argument at the top rests on even shakier foundations. The Chief Secretary of the Treasury (Mr John Biffen), admitted as much on television when he said there was no evidence that executives will work harder or will cease to play golf. A poll of 700 middle managers earning around $20,000 done by the “Financial Times’’ found that only 16 per cent said that the depressed level of their net pay had reduced their will to work. Rather more (25 per cent) said that it had increased their ambitions. Mrs Thatcher’s incentive society is going to take a long time coming to fruition. If and when a big row over wages does come, the Government will need to be fighting on firmer ground than rapid inflation — O.F.N.S. Copyright.