Economic Decline Prompts Tory Slide In British Polls

BRITAIN'S Conservatives are sinking at the polls and many worry the party that has held power here for more than 12 years will be unable to rebound before the 1992 general election.

"We must now depend on the politics of hope," a senior Conservative backbencher in the House of Commons said when asked to rate his party's chances of closing the Labour opposition's lead in time for the coming election.

The member of Parliament (MP), who declined to be named, voiced "deepening concern" at the likely electoral impact of a series of setbacks undermining Prime Minister John Major as the New Year begins. Most worrying, he said, was a Mori public opinion poll Dec. 29, showing Neil Kinnock's Labour Party 6 percentage points ahead of the government in the last two weeks of last year.

That finding, which fueled Labour's hopes of winning a clear majority at the polls, reflected public response to economic difficulties undercutting the government as it plans for an election which constitutionally must be held before July. High among the government's problems are declining North Sea oil revenues, a yawning trade gap, and a deepening housing crisis as home repossessions reached record levels. And a leading employment agency, Manpower Inc., forecast Dec. 29 that 1 in 5 employers is expe cted to lay off workers in the next six months. Less than 1 in 10 is expected to take on more staff.

The findings of the Mori poll revealed how steep the hill is the government must climb to restore its standing among voters. The poll gave Labour 44 percent and the Conservatives 38 percent - a four-point gain by the opposition in four weeks.

Such sentiments, if demonstrated in a general election, would give Labour a comfortable parliamentary majority. The poll suggested that Major's stance at the European Community summit in Maastricht in early December had not helped him with voters.

The Mori numbers also reflected the worst drop in economic optimism since the recession began in mid-1990. Only 24 percent of those polled expect the economy to improve in the next year, and 41 percent are convinced it will get worse, according to Mori.

Faced with these figures, Major asked the Treasury for advice on how to boost the economy between now and the general election. Chancellor of the Exchequer Norman Lamont is due to present the annual budget in March and is under pressure to take drastic steps, such as cutting the standard income-tax rate or raising tax thresholds to help low income groups.

There were clear signs as the year ended that the prime minister was at odds with Mr. Lamont on such measures. The Chancellor, officials said, had warned Major against steps that could not be justified on economic grounds. Widespread reports circulated before Christmas that Lamont had opposed canceling the stamp duty on home purchases, but had been overruled by Major for political reasons.

While government ministers focused on domestic woes, Germany's Bundesbank raised its interest rate last week, putting pressure on Britain to do the same. Britain is not allowed to lower interest rates in competition with other EC members.

Some Conservative MPs, worried by the adverse economic trends, are urging Major to authorize an emergency "mini-budget" in early January, aimed at kick-starting the economy.

Others say Britain's membership in the European exchange-rate mechanism has eliminated its room for maneuver economically. When Germany's Bundesbank raised interest rates last week, it put pressure on Britain to do the same.

Terence Higgins, chairman of the Commons Treasury committee, said cited an "urgent need" for fiscal improvements.

Major and Lamont, however, announced Jan. 1 that they had ruled out short-term measures to boost the economy. The two leaders are pinning their hopes on being able to ride out January without ordering interest rate cuts or other measures certain to be attacked by the Labour opposition as symptoms of panic.