THE WITCH OF EXMOOR.<i> By Margaret Drabble</i> .<i> Harcourt Brace: 282 pp., $23</i>

Frieda Haxby Palmer has lost her mind, or so her children suspect. She has retreated to a dilapidated castle on a cliff’s edge to live “alone among the unfiled documentation of her past,” surviving on mussels and mold. This should not worry Daniel, Grace and Rosemary, who are selfish, rich adults with families of their own. But there is the matter of Frieda’s will--and of propriety. “Had she the right to go mad?” her children ask.

If this sounds decidedly Victorian (there is even that old melodramatic shocker: a dead baby in a gas oven), that does not mean the reader is in for a pastiche or a melodrama. “The Witch of Exmoor,” Margaret Drabble’s indictment of post-Thatcher Britain, is an old-fashioned comedy in the truest, but not derivative, sense of the word. Often as meticulous as Jane Austen and as deadly as Evelyn Waugh, Drabble writes in the tradition of George Meredith, who exposed what he called “the morbid intricacies of human feeling.” As does Meredith, Drabble skewers the egoism of her characters and of the society they inhabit with subtle humor and elegant psychological analysis.

“Let them have everything that is pleasant,” Drabble begins. She introduces the Palmers as they finish a perfect dinner on a perfect summer evening in the perfectly manicured Hampshire countryside. They have convened to address the problem of Mother but are happily diverted by a game invented by their Guyanese brother-in-law called “The Veil of Ignorance,” in which each player assumes ignorance to imagine a society based on justice and not self-interest. This is the kind of parlor game that exists only in English novels. Meanwhile, upstairs, the Palmer youngsters are playing their own transcendental power game with toy soldiers. For an uneasy moment, Meaning--the kind most often found in the philosophical novels of Iris Murdoch--looms as the family ponders existential, moral and epistemological questions.

But Drabble is too much of a dramatist to let abstraction take over. Instead, she gives us the character of Frieda, the radical, always an embarrassment to her children and now determined to shatter their complacency. Part King Lear, part Miss Havisham, Frieda begins writing her memoirs so that “her nice clean ambitious well-educated offspring will be appalled by their hideous ancestry.”

She has already unsettled them, in a highly Dickensian luncheon scene, by serving “Butler’s Bumperburgers . . . made of gristle, fat, chicken scraps, and water from cows’ heads.” Too disgusting to eat, the mock luncheon’s not disgusting enough to change their complacent attitudes. Only Frieda’s bequest can irrevocably alter the lives of her children and grandchildren in ways that she never intends. Dividing the family, the will makes her favorite grandchild and all-round golden boy, Benjamin, the unlikely focus of resentment and suspicion. A husband dies, a grandchild is killed and marriages fray.

As the family members’ lives unravel, the Palmers are denied the pastoral redemption traditionally available to comic actors. Nature itself has been defiled in Drabble’s Britain and the Forest of Arden paved over. Deformed fish wash up on radioactive beaches, and Exmoor is grazed by mad cows and “rotten sheep . . . subsidy sheep.”

Against that backdrop, Daniel Palmer’s quaint Hampshire garden--with its dubious air of antiquity--is as fake as any theme park. It is as fake as Daniel himself: “Daniel owes his considerable comforts to capable superwoman Patsy, and to a counterfeit, college-acquired, Middle-Temple-reinforced and slightly ironic vision of himself as country squire, a vision as compulsive as it is archaic.”

Drabble’s characters are described affectionately at times, but they are always at the mercy of Drabble’s narrative voice, which is mercilessly acute. Of Frieda and her children, we learn that “it did not often occur to them that they did not loom as large in her life as she in theirs.” Of saintly Patsy: “She likes problems that are not her own, and when they come too near home she rejects and denies them.”

“The Witch of Exmoor” is not quite as delicate when it targets the entire population: “The pure-bred English are a motley, mottled, mongrel ugly breed, blotched with all the wrong pigments, with hair that does not do much for them at all . . . their faces either pinched and beaky like mean birds or shapeless as potatoes.” They are not like Will Paine, the “beautiful hybrid”; not like handsome Guyanese David d’Anger or the sexy Jewish advertising man, Nathan Herz.

But middle-class life eventually suffocates even those energetic outsiders. As Nathan observes: “They are all of them already, irrevocably, halfway up to their necks in the mud of the past of their own lives.” The Palmer world is tilted, not annihilated, by Frieda’s legacy. And, this being comedy, most of the characters hang on, paying in various ways for their carelessness. Only Frieda’s grandchildren, sensitive Benjamin and sensible Emily, seem capable of making a fresh start.

Comic irony--what V.S. Pritchett called the “most militant and graceful gift”--is rare in contemporary fiction, perhaps because it appeals to the head, not the heart, and because it is a difficult balancing act. To succeed, it must repel sentiment without sacrificing compassion. In “The Witch of Exmoor,” Margaret Drabble gets the balance just right and proves herself a master of the art.