LEADING British economists who used to command the confidence of Margaret Thatcher, the former prime minister, are training their guns on John Major, her successor. Without urgent steps, they say the country - already in a severe recession - will slide into a 1930s-style depression.
The Thatcherite challenge is being led by Sir Alan Walters, the former prime minister's personal economic adviser, with the support of five other prominent monetarists.
So far the campaign has resulted in a cut of half a percentage point in base interest rates (from 14 percent to 13.5 percent) ordered Feb. 13 by Norman Lamont, chancellor of the exchequer.
The government, however, is resisting Thatcherite demands for much lower interest rates, and for a reduction of up to 10 percent in the value of the pound sterling within the exchange rate mechanism (ERM) of the European Monetary System.
The economists' broadside took the form of a letter to the London Times in which they said Britain was on the brink of economic disaster.
Ideally, Mr. Walters said in an interview, the country should leave the ERM altogether. Failing that, it should realign its ``overvalued'' currency within the mechanism to make Britain more competitive in world markets.
The letter argues that in fighting inflation Britain ``should adhere to soundly based monetary targets.'' During the past year, ``broad money'' growth fell from an annual rate of 15 percent to about 11 percent, and ``narrow money'' from 4.5 percent to a tight 2.5 percent.
The economists' letter has stirred a lively debate. For example, Gavyn Davies, chief economist at Goldman Sachs in London, calls the letter ``silly.''
The challenge to the government's policies comes amid increasing signs of economic weakness. Industrial output is falling, unemployment is near 2 million, and business confidence at ``an alarmingly low ebb,'' according to the Confederation of British Industry.
The economists' warning also confirms that the economic disputes that troubled the last year or two of the Thatcher administration are far from being resolved. All the signatories of the Times letter are Conservative Party supporters and all had the ear of the former prime minister.
But the day their letter was published, Mr. Lamont said its arguments were unsustainable. He ordered a a marginal interest rate cut, but said that was all that could be justified. Lamont also said Britain would meet its ERM obligations: ``We joined it because it has a good track record for helping to close the inflation gap between its members.''
Prof. Patrick Minford of the University of Liverpool, another signatory of the Times letter, said it was ``arrant nonsense'' to claim that Britain should stick to its ERM obligations.
A central issue in the debate is the level at which Britain entered the mechanism last October. Thatcher, reluctantly, and shortly before she was voted out of the premiership, accepted a rate of 2.95 deutsche marks to the pound. Walters says it should be closer to 2.65 DM - in effect a 10 percent devaluation.
Mr. Major is aware of the high political stakes underlying the debate. If the recession continues to deepen, his ruling Conservative party may have little chance of winning the next general election, due to be held by mid-1992.
Britain has been under pressure from Germany's Bundesbank to realign sterling within the ERM. The Bundesbank put up its interest rate by half a percentage point last month.
But Major and Lamont are said by their officials to believe that yielding to German pressure would be interpreted in Britain and abroad as a sign of economic weakness, and might undermine government attempts to stage an early economic recovery.
Lamont told the House of Commons last week that the government's ``overriding objective'' was to reduce inflation. A Treasury official said that inflation could be ``expected to go on falling'' from its current rate of around 10 percent ``through the rest of 1991.''
Export profit margins are under pressure, Mr. Davies says, but sterling is not overvalued against European currencies - only against the US dollar.