Britain's 'Iron Lady' displays her mettle

Across Western Europe, governments have fallen or are in deep trouble because voters blame them for economic woes - in West Germany, in France, in Sweden, in Denmark.

Yet in Britain, which now has the only one-party, noncoalition government in a major European nation, the Conservative Party believes it can swim against the tide.

On the face of it, the question it must answer is a formidable one:

Can any political party in today's recession-hit world win reelection when its country's unemployment is at record levels, when spending on social welfare threatens to go through the roof, and when it publicly refuses to lower taxes?

Tory confidence was on show at its latest annual conference in Brighton, where the slogan across the television blue backdrop to the main dais was ''the resolute approach.''

Strategists led by Prime Minister Margaret Thatcher tried to exploit two factors - the spirit of the Falklands war victory over Argentina, and success in cutting government spending and interest rates and reducing inflation to 7.5 percent from a level of 22 percent only a year ago.

These have helped to buoy the party fortunes remarkably at mid-term, despite unemployment running at 14 percent (3.3 million).

The latest polls show Mrs. Thatcher, and Tory popularity, defying past experience of governments at midterm.

So the mood in Brighton was one of Thatcherite, jut-jawed determination to avoid the ''easy way'' of tax cuts or of reducing spending on defense.

Sir Geoffrey Howe, chancellor of the exchequer, won a standing ovation Oct. 6 after telling delegates that taxes could not be lowered during the fight against inflation.

That very morning, a report in The Times of London reflected the Howe (and Thatcher) view that unless government spending is cut even more radically in the years ahead, income tax could soar to 45 percent, and indirect value-added tax, now 15 percent, could leap to 25.

The day before Sir Geoffrey spoke, the Bank of England clearly signaled commercial banks to cut lending rates, which they proceeded to do Oct 6.

Yet the Tories face difficult obstacles as they prepare for an election late next year or in early 1984.

They need, political analysts agree, a more compassionate public image on unemployment. They need to retain the allegiance of the skilled Midlands workers who switched to them in 1979 and enabled them to regain power. Those workers now are hard-hit by unemployment.

The Tories also have a political need to face both ways at once on government spending.

Like other European governments, they must spend more and more to sustain social secuity, old age, and illness benefits as well as defense.

But they simply cannot go on doing it forever, analysts say, unless spending comes down.

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