Wandering in a wilderness of mirrors: It's not a pretty sight: a government that can neither rescue the economy nor prevent its own party fragmenting on Europe, says Denis Healey

JOHN MAJOR's first year after his victory at the polls will be remembered for spectacular blunders, the betrayal of solemn election promises and an unprecedented series of U-turns. The country and the world are left uncertain whether he has any sense of direction at all.

We are in the longest recession since the great slump of the Thirties: 300,000 people have lost their jobs since the Chancellor claimed to detect the green shoots of recovery a year ago; unemployment is expected to be about 3 million at the next election. Bankruptcies are at record levels and continuing to mount. Yet, at the depth of the recession, record imports have doubled our current account deficit; so if recovery ever does get under way we shall run into a crippling balance of payments crisis.

In Norman Lamont's last Budget the greatest burden of tax increases in British history brought a collapse of consumer confidence. Yet we still face a fiscal deficit of pounds 50bn, and the Treasury has had to admit that all the measures so far announced will not get rid of our structural deficit. Meanwhile our purchasing power is well below the average in Continental Europe. It is likely to decline still further. A report by the Department of Trade and Industry reveals that productivity levels in British manufacturing are at least 25 per cent below those of France and Germany and only half those in the United States.

The Prime Minister's authority in his party, like his popularity in the country, is at rock bottom. A majority of about 20 was hitherto regarded as ideal for party management. Yet the Conservative whips have lost control of their flock as completely as they have lost contact with feeling in the constituencies. It took Michael Heseltine six months to concoct a dishonest formula for making his pit closures acceptable to the the more cowardly of the Tory rebels.

Policies are announced and withdrawn almost overnight if they upset backbenchers. The Royal Navy sees its fighting strength reduced because the Government is spending pounds 150m to keep an unnecessary dockyard open for fear of upsetting a marginal constituency. Waterloo station will be redundant six years after pounds 130m has been spent to refurbish it, if the new proposal for a rail link between Folkestone and St Pancras goes ahead; but no one knows what the Government will contribute to its cost, and no one in the City seems prepared to provide private capital for it. The Cabinet is wandering in a wilderness of mirrors.

The Prime Minister is not alone to blame. He inherited much of the economic mess from Baroness Thatcher, who saddled Britain with a mountain of debt in the late Eighties. Many of his political difficulties can also be laid at her door; she seeks to destroy him as Ted Heath sought to destroy her.

However, Mr Major himself is mainly responsible for the black farce over Maastricht, which has destroyed Britain's influence in Europe and is preventing Parliament from tackling far more important issues. With two exceptions, the Maastricht treaty contains nothing that is not already in the Single European Act, which Margaret Thatcher forced through Parliament with a guillotine.

One exception is a timetable and conditions for a European single currency, which no one now thinks realistic, and which in any case Mr Major secured the right to opt out of; this was no great victory, as the German parliament has given itself the same right, without even consulting the rest of the Community. The other exception is the right to opt out of the Social Chapter, which Mr Major described as a Marxist device for imposing socialism on Britain, although all his fellow Conservatives in Europe embrace it.

There is a crowning irony: Mr Major was so grateful to Germany for getting him these irrelevant opt-outs that, though Lord Carrington strongly opposed it, he surrendered to the German demand for recognition of Croatia without insisting on the agreed conditions regarding human rights; this paved the way for the present tragedy in Bosnia.

The division among the Tories on Europe is now so deep that they cannot get rid of either Mr Major or Mr Lamont, as there are no candidates to replace them who would not divide the party still further.

It is as divided between moderates and extremists as the Labour Party in the Fifties and Eighties - quite like the home life of our dear Queen, indeed] But the Labour Party was then in opposition. Better parallels can be found in the divisions that split Tory and Liberal governments during the century before the Second World War: over the corn laws, tariff reform, Ireland and appeasement - all concerned in different ways with Britain's place in a changing world.

I find the most intriguing parallel in the Labour split of 1931, when the Prime Minister, Ramsay MacDonald, and Chancellor, Philip Snowden, deserted their colleagues to form a coalition with Stanley Baldwin, only to find him abandoning the gold standard on which they had crucified the Labour government. John Major has much of Ramsay MacDonald in him, except the charisma, though Snowden did not sing in his bath when we left the gold standard.

The economic failure of European governments in the Thirties produced Hitler and the Second World War. In the Nineties the dangers lie further east. Then help came eventually from a reforming government in the United States. This could happen again. Let us hope it comes in time.

Lord Healey was Labour Chancellor of the Exchequer from 1974 to 1979.