Thatcher may shake up her Cabinet

Margaret Thatcher is mulling over a vital strategic decision nearly always required of British prime ministers halfway through a parliamentary term -- a Cabinet reshuffle designed to convince the country that the government is in good heart and has fresh ideas.

With the annual Conservative Party conference only six weeks away, the moment for a reshaping of the government is fast approaching, and Mrs. Thatcher is using part of her summer vacation to consider her options.

The odds are that some important heads will roll.

At the top of the list of the prime minister's likely changes are two men: Lord Thorneycroft, the party chairman, and Mr. james Prior, employment secretary. Each in his own way has annoyed Mrs. Thatcher by failing to reflect as fully as she would have liked her own ideas on how the government -- and Britain -- should be run.

Lord Thorneycroft, a Tory grandee, dared a month ago to criticize the government's handling of the economy and came close to receiving a public rebuke from 10 Downing Street. There is a strong chance he will be asked to make way for someone else, and if that happens it will probably be the end of his long political career.

The case of Mr. Prior is different. He is widely regarded as an economic "wet," unwilling to accept Mrs. Thatcher's views on the need for an economy run on monetarist lines. he has also resisted Mrs. Thatcher's demand for a tough line with the trade unions.

But because he is vigorous and well connected within the Tory Party, it will not be possible for the prime minister merely to shunt Prior aside.

A case for moving Prior to the Northern ireland office is being made among officials with Mrs. Thatcher's ear. He is both determined and capable of a conciliatory style.

If she decides to confront the trade unions and launch a new initiative in Ulster, it would make sense to replace Prior at Employment with a more hawkish figure and give Prior the problems of Northern Ireland.

The present Ulster secretary, Humphrey Atkins, wants a quieter berth. He could take on the Energy post, unseating David howell, or he might shift to Environment.

Environment is currently in the charge of Michael Heseltine, who recently has been on speical assignment in Merseyside devising ways to boost industrial development and cut unemployment in the Liverpool area. Appoint him to Thorneycroft's job as party chairman would be regarded as a stroke of genius by the Tory Party grass roots.

Heseltine is a rousing speaker capable of whipping up the Tory conference to near-frenzy. He is a vigorous character, in tune with Mrs. Thatcher's wish to pump new life into the government at midterm.

Moreover, with him to head the Tory organization in the country, the prime minister could leave the impression that she has placed the emphasis on party unity rather than attempts change her government's face.

It is here that Mrs. Thatcher has to tread warily. If she were to drop her chancellor of the exchequer, Sir Geoffrey Howe, or the industries secretary, Sir Keith Joseph, she might leave the impression that she was abandoning monetarism and recognizing that past policies were wrong.

Part of her tactics will probably be to stress Conservative Party unity and consistency, in contrast with the opposition Labour Party's public anguish as its left and right wings battle for supremacy in coming weeks.