Tories plan for third Thatcher term. Optimistic party officials forecast a quick Cabinet shuffle

Conservative party confidence is running so high that in the immediate wake of local council elections held in Britain May 7, Westminster insiders were already beginning to reflect on the likely shape of a third Thatcher administration. The two opposition parties - Labour and the Alliance - continue to insist that public opinion polls showing the Tories as much as 13 points ahead of their rivals nationwide are a poor index to the mood of the country. But in the Conservative's central office, where the strategy for the coming general election has already been worked out, the mood this past week was almost boundlessly optimistic.

It was being forecast, for example, that a victorious Margaret Thatcher would move quickly to shake up her Cabinet. It is widely believed that Lord Chancellor Lord Hailsham will be retired. The leading candidate for his job is Sir Geoffrey Howe, currently foreign secretary and a former chancellor of the exchequer. (The lord chancellor combines the functions of head of the legal profession, senior judge, speaker of the House of Lords, and the government's chief legal adviser.)

Mrs. Thatcher would also feel politically strong enough to bring back into her government two leading figures who were forced out during her second administration. Cecil Parkinson, who was chairman of the Tory party until he had to resign in 1983 when it was revealed that his unmarried former secretary was pregnant with his child, is a Thatcher favorite. He is being tipped to return in a top ministerial post, possibly social services secretary.

Leon Brittan is also seen as a probable returnee to high ministerial rank. He had to resign last year from his post as home secretary because of his involvement in a scandal over British helicopter firm Westland. As a former treasury secretary, he has the qualifications to become chancellor of the exchequer.

Some believe the present chancellor, Nigel Lawson, may wish to continue in that job. This could make it hard for Thatcher to find a suitable place for Mr. Brittan. Few believe she would offer him the Foreign Office, although he could become defense secretary if incumbent George Younger goes to some other Cabinet job.

It is clear that Tory policy-planning for a third Thatcher administration is well advanced. Key features are expected to be:

A further ``tidying up'' of industrial legislation to ensure that the trade unions do not recoup their positions and cause disruption in the economy.

Heavy emphasis on raising teaching standards in schools.

A further reduction in the standard income tax rate to eventually make it 30 percent.

Possible extension of Value Added Tax to include food, which has so far been exempt.

As the parties proceeded on the assumption that the announcement of a general election date could not be long delayed, there were signs of a major row building up over VAT on food. Thatcher has refused to rule out such a measure, and Labour has already begun accusing her of paying for reduced income taxes by raising taxes on consumer goods - a policy, Labour's leader Neil Kinnock says, that will hit less affluent citizens hardest.

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