asked the Chancellor of the Exchequer if he will make a statement concerning the operations to date of the European monetary system.

The EMS has not yet started to operate.

Do not the complicated delays over the system show how prudent it was for Her Majesty's Government to remain outside the system, and how foolish it was of the Opposition to advocate our entry? Does my right hon. Friend agree that if the system went ahead on the conditions that the French are now asking—namely, the phasing out of MCAs—it would mean an increase of farm gate prices in the United Kingdom of at least 30 per cent. to 40 per cent.? As the Opposition have already advocated the phasing out of the green currencies, they would be causing immense inflation that would be against the interests of housewives and consumers as a whole and the entire nation.

Beyond saying "Yes, Sir", which I say with the greatest pleasure, I add that it is true that developments since the summit conference was held in December have shown that the views of the Shadow Foreign Secretary, as he expressed them on 19th December, were as fatuous as they were anti-British. It is true that if certain proposals for the phasing out of MCAs were accepted and the common price was allowed to rise, that could have a damaging effect on the cost of living in Britain and on British food prices. I have no doubt that my hon. Friends will be referring to that in debate whenever they have the opportunity. My right hon. Friend the Secretary of State for Foreign and Commonwealth Affairs has already made it clear in Brussels that there can be no question of the British Government agreeing to a resolution of the current dispute over MCAs leading to an increase in food prices for Britain.

Has the right hon. Gentleman given any assurances to the EEC Finance Ministers that he will keep sterling within the present band of the basket of European currencies?

No. I made it clear when I spoke to the House on this matter before Christmas that the Prime Minister and I have given assurances to our Common Market colleagues that we intend to maintain the present stability of sterling, which has been stable within a narrower band than is permitted even inside the EMS, against not a basket of European currencies but a basket composed of the currencies of the countries with which we trade.

To what extent are we now pursuing policies that are virtually indistinguishable from those that we should have to pursue if we were members of the EMS? Given the overwhelming case made against our joining the EMS, is not the case against those parallel policies equally damaging?

To quote the poet Marvell on love:

"But ours so truly parellel Though infinite can never meet."

The fact that we are pursuing the stability of sterling does not mean that we are pursuing policies that could lead to Britain joining the exchange rate regime of the EMS. The important difference is that the parity grid system of the EMS would commit countries with currencies not divergent from the general trend to lose reserves to make the deutschemark more competitive. That does not seem to be in Britain's interests. That is a general view.

Am I right in assuming that the British Government can block these proposals by the French?

There are no specific proposals by the French. The French Government have certain objectives on MCAs which have been resisted by a number of other Community countries. We have made clear that there can be no question of our agreeing to the increase of the common price as a result of that, and we have the power to prevent it.

asked the Chancellor of the Exchequer how many employers he has subjected to sanctions to date in the current pay round.

asked the Chancellor of the Exchequer whether he has decided to impose sanctions as a result of other wage settlements subsequent to his statement relating to the Ford Motor Company.

Only the Ford Motor Company was ever subject to discretionary action for a breach of the current pay guidelines, and the Government have announced that discretionary action in support of pay policy has now ceased.

Why are the Government proposing new action against employers through the price code? Employers are being bludgeoned into paying excessive pay claims. Does the Minister think that the road hauliers are rushing around trying to force pound notes into the pockets of their reluctant employees? Would it not be better to try clipping the wings of over-powerful, over-arrogant and totally unworthy leaders of the trade union movement in this country today? [HON. MEMBERS: "No, no."]—Yes, that is unless the Minister thinks that these union leaders are worthy.

I think I heard most of that. It might be helpful if the hon. Member for Chingford (Mr. Tebbit) were to put a constructive point in the House occasionally. I have never yet heard one from him.

Is my right hon. Friend aware that the reason for the strike at Ford's, as with the newspapers and as with the road hauliers, was the massive profits that these firms have been making? How does he expect trade unions to stick to a 5 per cent. pay rise when the profits of their companies in many cases have risen by over 50 per cent.? How can he guarantee that some of this surplus profit will be used to keep down prices in future, or at least will be transferred to the nurses, who are entitled to a decent pay rise?

Whatever my hon. Friend may feel about the pay guidelines and what happened at the Ford Motor Company, the fact must be that if we have an excessive pay outturn in the current round or any other round, this would be disastrous for the nurses and every other worker in this country. The sooner we recognise that the better.

asked the Chancellor of the Exchequer if he is satisfied with the current rate of inflation, and if he will make a statement.

asked the Chancellor of the Exchequer what is the present rate of inflation.

The retail price index rose at an annual rate of 8·4 per cent. in the 12 months to December. The rate should remain around this level for the next few months ; thereafter the rate will depend crucially on the level of pay settlements.

Will the Chancellor give lie to the oft-repeated claim by many people in this House and outside that a 15 per cent. increase in wages equals 15 per cent. inflation? Will he explain that last year wages went up about 15 per cent. in total while inflation was down to 8 per cent.? Were there not some other important factors involved, such as a strong pound, terms of trade in our favour, and currency reserves relatively high, which helped to ensure that inflation was kept down to 8 per cent.? Will not these factors together assist this year just as they did last year?

It is certainly true that our rate of inflation last year was assisted by the strnegth of sterling, which in itself improved our terms of trade. I am glad that my hon. Friend supports this element in the Government's policy and presumably also the measures such as those that I took in June and November to ensure that the money supply was kept under control and that sterling remained strong.

It is the Government's policy in the current year, as I have already made clear, to conduct our affairs in such a way that we keep sterling strong. The strength of sterling is bound to be affected by the rate of inflation which will depend this year very largely on pay settlements. Some of the factors that helped us last year, such as a fall in world prices, are unlikely to be so favourable this year. Already, for example, there is likely to be a substantial increase in oil prices where there was no increase last year.

Does the Chancellor agree that there is no hope whatsoever of continuing with the present rate of inflation while his Government are quite unable to reach any agreement with the trade unions of this country? Does he agree that that possible agreement represents the only claim that his party has to remain the Government of this country?

indicated dissent.

I do not entirely agree with the hon. Member, and certainly his neighbour but one on his right, the right hon. Member for Down, South (Mr. Powell), disagrees very profoundly. I am glad to see that the right hon. Member dissociates himself totally from what has just been said by the hon. Member for Leominster (Mr. Temple-Morris).

It is very important for the House to recognise that, as the Secretary of State for Employment confirmed yesterday, the great majority of settlements have been within the Government guidelines. Those that have been outside have been mainly settlements by groups which exceeded the guidelines last year, and in all cases except that of the Ford Motor Company the resulting settlement has been well below the level of last year.

Now that we have the retail price index for the calender year 1978, namely, 8·4 per cent., will the Chancellor of the Exchequer allow the provisions of section 22 of the Finance Act 1977 to carry through, thereby giving the low-paid a rise in personal tax allowances in line with the rate of inflation? He knows as I do that this benefits the low paid proportionately more than the well off.

I hope that that will be possible, but I have made it clear, and so has the Prime Minister, that if we had anything like the wage explosion that we had in 1975 the Government would be required to take fiscal or monetary measures in order to correct the situation.

The Chancellor mentioned the strength of sterling. Does he accept that there is a real possibility that sterling is over-valued, and whereas that may help with the inflation battle it does encourage imports from overseas, thereby losing jobs in this country?

I do not accept that view, although I know it is widely held on both sides of the House. In fact one or two of my hon. Friends not a thousand miles from where I am standing now agree with the hon. Member. But, in spite of the fact that sterling remained strong throughout last year and that, as a result of increases in wage costs that were higher than those in other countries, we lost some of the competitiveness we had earlier in the year, our non-oil exports rose in volume by almost as much as they had the previous year. In fact, we maintained the increased share of world trade which many people thought we achieved in 1977 entirely from the depreciation of sterling in the previous year. The lesson of experience is that the advantages of depreciation as a cure for competitiveness have been grossly exaggerated.

Does my right hon. Friend accept that his incomes policy might be received with greater enthusiasm by working people if it were seen to apply equally to those in the upper income brackets? Is it not so that a company director in possession of a dozen or so company directorships can always accumulate another dozen directorships with a fat fee to go with them? What will he do to remedy this situation?

It is true that some people in the higher income brackets have, by various devices, been able to increase their incomes by more than the Government would wish. This has also been true of many self-employed people at very much lower levels of income. Inevitably there is some leakage there, but a study of the general distribution of incomes in recent years shows that as a result of inflation and tax changes the better off have suffered a greater erosion of their purchasing power than those lower down the scale.

Does the Chancellor remember telling the country—indeed, boasting to the country—at the time of the last election that he had succeeded in getting the rate of inflation down to 8·4 per cent.? Has he noted that the figures announced last week take the figure of inflation back up to 8·4 per cent. and that it is universally expected to rise above that? Does he also accept that the figures announced last week mean that since this Government came into office the value of the pound has been exactly halved? Is that not a fitting epitaph on the Chancellor's tenure of the Treasury?

No, I do not think that that is a fitting epitaph. I well remember sitting where the right hon. and learned Gentleman now sits and hearing the then Conservative Chancellor trying to justify a 20 per cent. depreciation in one day in the value of the £ sterling. The fact is that we have succeeded, after many years, in stabilising the value of our currency—something which previous Governments did not succeed in doing. When the right hon. and learned Gentleman refers to the current rate of inflation, he should pay some tribute to the efforts of all those who contributed to that—not least those in the trade union movement. He should be ashamed to make the remarks he has made as he and his right hon. Friends are consistently pressing policies on us which would raise prices—a very good example being their approach to agricultural policy in the European Community.

asked the Chancellor of the Exchequer when he intends next to meet the Governor of the Bank of England.

I maintain close contact with the Governor of the Bank of England, meeting him on a regular basis and also as and when circumstances require.

Will my right hon. Friend tell the Governor of the Bank of England, when he next meets him, that he is not prepared to act on all the advice offered by the governor, and particularly on the advice given by the Treasury man- darins? Will the Chancellor instead act on the policies of the Labour Party conference and the TUC, and particularly on the advice given by myself and my hon. Friends? If he had done that, we would not be in the mess we are in today.

I find myself subjected to advice from many quarters and from many personalities, including the governor of the Bank of England and my hon. Friend. I came to the conclusion, quite soon after taking up the office I hold that the sensible thing was to make up my own mind on the merits of the cases put to me. That is what I have done and I think that that is responsible for the enormous improvement in our performance over the last 12 months.

Can the right hon. Gentleman say whether during his consultations with the governor of the Bank of England,, he was able to make an estimate of the amount of money involved in the decision recently announced by the Irish Government to register, and probably withdraw, all Irish nationals' funds in Britain as a result of Ireland's entry into the EMS while we stayed out?

By saying "probably withdraw" the hon. Gentleman recognised the impossibility of making estimates of very uncertain quantities. What I can say is that the decision of the Irish Government to introduce exchange controls on certain transactions between Britain and Ireland is not likely to damage our interests. If we saw any risk of our interests being damaged as a result of the Irish Government's being a member of the EMS, when we were not, we would, as I have made clear to the House, complement their exchange controls with some of our own. At the moment the Irish Government are sticking to their declared policy of keeping their exchange rate parallel with ours. They have succeeded in doing so exactly since they took their decision and I see no reason for our taking the kind of action I have referred to.

Does not the Chancellor agree that, like the Treasury, the governor has become obsessed with anti-Socialist policies which seek to minimise the public sector borrowing requirement? Does he not recollect that early this week he published figures showing that next year's public expenditure will represent no more than 4½ per cent. of what he estimates to be our gross domestic product, and that, of that 4½ per cent., no less than 2½ per cent. must be deducted for capital expenditure? Is it not an absolute disgrace that a Socialist Government should want to minimise their public sector borrowing requirement to no more than 2 per cent. of the gross domestic product for expenditure purposes?

I think, with respect, that my hon. Friend is making a great mistake if he thinks that the views which the Government hold on the appropriate size of the PSBR have anything to do with party politics. The only countries in the world which have a higher percentage of gross domestic product in their public sector borrowing requirement, or their CGBR, are Japan, which has a 25 per cent. savings ratio—about twice the size of ours—and Canada, which has much higher unemployment than ours, high inflation, and a currency which is weaker than the American dollar. I believe that our level of PSBR is appropriate to the level of capacity use and our ability to finance it without excessive increases in interest rates.

In the light of recent events, will the Chancellor give the House an assurance that he will take whatever steps are necessary to ensure that, at the very least, the public sector borrowing requirement does not exceed the figure given for 1979–80 in table 7 of the public expenditure White Paper published yesterday?

Yes, Sir.

asked the Chancellor of the Exchequer whether he will make a statement on the progress of his departmental review of the staffing of the Development Land Tax office.

The Inland Revenue's present review of development land tax, which covers administration and financial procedures, is still in its early stages and I cannot usefully add to what I said in reply to the hon. Member's Question on 11th December.

Is there not a scandalous bureaucratic situation here in that, when a secret Inland Revenue inquiry made a recommendation that the staff should be cut by 30, the Government's response was to increase it by 20 and set up another inquiry?

No. That inquiry was conducted on the basis of the work of the office between May and June 1977. By October 1978, the number of working cases had doubled. It was therefore necessary to increase the staff in order that people who dealt with that office should, in turn, be dealt with in a proper and efficient manner.

asked the Chancellor of the Exchequer whether he will introduce further measures to control inflation.

asked the Chancellor of the Exchequer, whether he is satisfied that his economic policies will result in a further reduction in the rate of inflation.

I believe that the Government's current policies of encouraging pay settlements within the pay guidelines combined with monetary and fiscal restraint will stabilise and gradually reduce inflation. However, the Government will not hesitate to bring in further measures should they consider them necessary.

As the majority of union leaders are reasonable people, and as few employers wish to pay more than is justified by commercial considerations, why are the Government in such difficulty over their pay policy?

The Government are in difficulty for two reasons. First, a powerful argument has been deployed by the party opposite that free collective bargaining is consistent with holding the rate of inflation where it is. I do not believe that even the Conservative Party could maintain the truth of that proposition in the face of recent events and I gather that the hon. Gentleman does not do so. Secondly, the Government's ability to influence the level of settlements in the private sector was gravely damaged by the decision of parties opposite to remove pay sanctions. If the hon. Gentleman would like other explanations, I shall be glad to give them to him.

Does the right hon. Gentleman consider that the current level of wage and salary settlements will cause higher inflation, higher unemployment, or both?

As I said a moment ago, the great majority of settlements have been within the guidelines. Those that have been outside so far have been mainly in groups, or companies, which broke the guidelines last year. In all those cases—except that of the Ford Motor Company —the resulting settlement has been a great deal lower than last year. There is still time to recover control of the situation if the Government are assisted by all those with influence in the community to achieve the necessary control. For that reason, I hope that the Conservative Party will stop encouraging people to make use of their market bargaining power to produce excessive settlements which are totally inconsistent with keeping inflation down.

Will my right hon. Friend be wary of claims from the Conservative Party opposite that inflation can be kept under control by slashing further public expenditure? Does he not agree that his own White Paper shows that one of the principal problems relating to public expenditure is not excessive spending, but underspending, and are Departments taking measures to ensure that the sums are actually spent?

One of the problems that we face all the time is to persuade Departments—and this is not a problem unique to the present Government—to announce spending plans which they are satisfied they can carry out. There have been cases—some are displayed in the current White Paper—where individual Departments have failed to make use of the spending powers which were given to them. The House will have seen that there has been much less underspending in the past 12 months than there was in the previous 12 months. On the other hand, my hon. Friend will recognise that, if the White Paper does nothing else, it demonstrates the effects on growth, output and the possible level of public expenditure of the level of inflation and, therefore, the immense importance of keeping pay settlements to a level that is consistent with keeping down the rate of inflation.

Does not the Chancellor of the Exchequer agree that, because of the difficult political situation in which he finds himself, it will be impossible for him to carry out his threats of stern fiscal measures in the near future and that therefore the only way that he can curb inflation will be to impose even higher interest rates?

No, I do not accept anything of the sort. I hope that if it became necessary, for the sake of keeping control of inflation, to ask the House to approve difficult and unpopular measures, there would be at least one or two Conservative Members who would be prepared to respond to a call for responsibility.

Will my right hon. Friend and his right hon. Friends come off the cloud on which they have been sitting for some time and recognise the fact that the trade union movement was prepared to accept voluntary incomes policies for two and a half or three years but gave adequate notice to the Government that it was not prepared to accept a phase 4? Is it not clear that if we are to get out of the present situation we must recognise that reality, allow settlements to be reached on a free collective basis and face the fact that we shall have to deal with the resulting situation on the basis of those of us who pay rates having to pay more to meet the costs of wage settlements for people in the public services and elsewhere? We must not dodge the realities of the situation.

In this area, as so often in politics and government, Governments have to take account of a number of realities, and so do peoples. As the Conservative Party has occasionally had the courage to admit, if the average level of settlements this year is significantly above 5 per cent., it will not be possible to keep down the rate of inflation. That is a fact and there is no political argument that can get rid of it.

I have already explained that although we have had some excessive settlements they have so far been in areas where we had excessive settlements last year and their size has been significantly lower than last year's increases, except in the one case of the Ford Motor Company. It is the duty of myself and my right hon. Friends and, indeed, all my hon. Friends, as well as hon. Members opposite, to put these facts in front of the people continually until they finally recognise them.

The only alternative—and my hon. Friend the Member for Liverpool, Walton (Mr. Heffer) was beginning to recognise it in the latter part of his supplementary question—is to allow wages to rip and to be compelled to take the sort of action that the Government had to take in 1975–76 in rigid control of further wage increases, cuts in public expenditure and rises in taxation. I do not think that that is a prospect which my hon. Friend would relish in practice, however much he may contemplate it in theory.

Will the Chancellor recognise that it is high time that he stopped lecturing the Opposition on pay responsibility? Is he not aware that he should count himself profoundly lucky—and I mean this seriously—that in virtually every statement that I and my right hon. and hon. Friends make on this issue we impress upon those concerned with pay bargaining the need to achieve moderate settlements in line with moderate targets of monetary growth if we are to achieve a sensible solution without rising unemployment?

Will the right hon. Gentleman recognise that the threat to achieving sensible outcomes from responsible collective bargaining arises from the intolerable sanctions that are being imposed on employers who are trying to achieve sensible results by the increasingly disorganised bands of labour which represent the unacceptable face of what used to be called the trade union movement?

I never complain about having the right hon. and learned Gentleman as the Shadow Chancellor of the Exchequer. That is something which I welcome and I hope that it will continue for many years. On the substance of what the right hon. and learned Gentleman said, the speeches of Conservative Members would be more convincing if they had supported the Government's attempt to achieve settlements in line with what the Opposition say is necessary, had not tied our hands behind our back by robbing us of the sanctions weapon in the private sector, had not pressed consistently for policies that would increase prices, particularly in agriculture, and had not gone out of their way on every occa- sion—and this applies particularly to the right hon. and learned Gentleman—to insult the trade unionists whose support and responsibility they are canvassing.

asked the Chancellor of the Exchequer what is the current size of the Contingency Reserve Fund; and what proposals he has in relation to it for the rest of the financial year.

I take it that my hon. Friend is referring to the contingency reserve for the current financial year included in the public expenditure planning total. The amount now remaining in the reserve is just over £40 million. I cannot say what contingencies will arise in the next three months.

Is the Chief Secretary aware that some severely disabled housewives have been denied the new allowance, partly because of the semantics of the regulations which are now being considered by an advisory committee, but partly because there is no public expenditure provision? I do not wish to tie anyone's hands behind his back, but can my right hon. Friend undertake to ensure that public expenditure provision is made available for this small, but hard-pressed, group of severely disabled women?

That is a matter for my right hon. Friend the Secretary of State for Social Services, but I know that my hon. Friend recognises, and I hope that all my hon. Friends recognise, how much the Government have done for the long-term sick and disabled. In 1973–74, we were spending, at 1978 survey prices, £1,190 million. In 1979–80, that figure will have risen to £1,840 million and we are planning to increase it, in real terms, to £2,070 million at the end of the current public expenditure round. I hope that my hon. Friends are aware of just how much we have been able to do for the long-term sick and disabled, despite all the difficulties.

Can my right hon. Friend confirm that the increase in earnings in the 12 months up to November justifies an increase in retirement pensions and can he tell us when pensioners are to be paid what they are owed?

I am not sure how that supplementary question relates to the original Question, but my hon. Friend will be aware that there was a substantial increase in pensions this year which was entirely in line with the legislation under which we were working. I hope that he will recognise, in fairness, that we have given substantial real increases to pensioners since we came to office in 1974.

asked the Chancellor of the Exchequer when he expects to give further details of his proposals for phasing out vehicle excise duty.

We must await the outcome of consultations with the motor industry and other interested bodies. These are to begin shortly.

If the Minister of State decides to go ahead with this policy, can he at least give us a definite undertaking that funds will be made available to compensate the disabled who receive the mobility allowance and who are exempt from vehicle excise duty from the loss that they will sustain?

It is not for me to give that sort of undertaking, but I assure the hon. Gentleman that the points that he and others have made will be taken into account when we consider this very difficult problem.

Will my right hon. Friend accept that the phasing out of the duty and the corresponding increase in petrol prices will be an enormous problem not only to people in rural areas but to urban groupings, such as Cannock Chase, which are on the borders of major conurbations and where large proportions of the population travel considerable distances to work?

I accept that some groups will be worse off as a result of the change. But other groups will be better off. We are conscious of the problems of the disabled and we are examining them.

Does the Minister agree that we are worried not only about the abolition of the vehicle tax but about the alternative measures to ensure that cars are properly licensed and insured? Will the Minister undertake that before such measures are introduced full particulars will be published of the proposals to replace the present vehicle licence?

It will still be necessary to have a proper system for vehicle registration, for the purposes of enforcing the law and road safety. There is no question about that. We are concerned here about the taxation aspect of the matter.

asked the Chancellor of the Exchequer if he will meet a delegation from the National Association of Widows to discuss the taxation of widows.

My right hon. Friend the Financial Secretary would be glad to meet a delegation from the National Association of Widows, as he has in previous years.

When the Minister meets representatives of the National Association of Widows will he bear in mind their feelings of grave injustice about being taxed on their widows' pensions? Will he consider bringing them into line in the next Budget with the war widows who have been given a 50 per cent. discount?

I do not accept that there is a grave injustice. However, I accept that widows, like other groups of people, are anxious about the amount of tax that they pay. The House decided to give the 50 per cent. exemption to war widows. I do not accept that that is the right way to deal with the problem. Income from whatever source should be taxed in the same way, subject to the rules.

When my right hon. Friend meets the widows, will he tell them how he justifies singling out widows' allowance as the only short-term social security benefit which is taxed?

Both sides of the House recognise that in theory there is no reason why other short-term allowances should not be taxed. But there is an administrative problem caused by the fluctuating nature of most of the short-term allowances. The widows' allowance does not fluctuate. It is a flat-rate allowance paid for a short period and there are no administrative problems.

asked the Chancellor of the Exchequer if he will now take steps to extend to other young workers the income tax allowance of £20 a year for tools and industrial clothing just granted to engineering apprentices after agreement with union representatives.

If any trade union makes an application for apprentices to be given a flat-rate allowance, the Inland Revenue is prepared to negotiate one, provided that the allowance broadly reflects the amounts individually deductible in respect of the cost of upkeep of tools and special clothing. In the absence of any such flat-rate allowance, individual apprentices are entitled to claim the amounts actually expended for the purpose.

I welcome that Answer, but there are young workers in certain other industries who do not receive these allowances. Does my hon. Friend accept that, even when the allowances are available, they are often unclaimed because people do not know about them? Will the Minister publish the list?

I shall consider publishing the list, but I make no commitment. The object of the flat-rate allowance is to ensure that people know to what allowances they are entitled. The Inland Revenue has no objection to negotiating such arrangements with the trade unions.

asked the Chancellor of the Exchequer in what range of fluctuation against the basket of Europeon currencies he now wishes to maintain the £ sterling.

There has been no change in our exchange rate policy. Our aim is to maintain a stable exchange rate as measured against the currencies of all our main trading partners.

In view of the fact that the current public sector borrowing requirement is regarded widely as excessive and is forecast in yesterday's White Paper as remaining excessive, does the Chancellor agree that his exchange rate target will be achieved in the end only by either higher domestic interest rates or higher taxes?

If the hon. Member's view were shared by those who help to determine the value of sterling on the foreign exchange markets, sterling would not have been as stable as it has been in the last 12 months. But it is not shared by those who watch our affairs from outside. The hon. Member and his hon. Friends would be wise to look at the value which foreign countries put upon our currency before seeking to denigrate our achievements.

Has my right hon. Friend read his own expenditure paper? Has he noticed that our net budget contribution to the EEC in 1980 is to rise to £795 million? Is this not an intolerable burden on our Budget and balance of payments?

The Government have made it clear on many occasions that they regard the budgetary burden which falls on the United Kingdom as a result of the current monetary arrangements inside the Community as seriously excessive. They are seeking to renegotiate them both in terms of the budget itself and the common agricultural policy, which is the main culprit.

if the Chancellor's reply to my hon. Friend the Member for Mid-Sussex (Mr. Renton) has any validity, how does he account for the fact that other countries have reduced the proportion of their reserves which they maintain in sterling to under 2 per cent.?

We have asked them to do so because we regard the reserve role of sterling as damaging to the interests of the country. I am glad to say that we were successful.

asked the Prime Minister if he will list his official engagements for 18th January.

This morning I presided at a meeting of the Cabinet. In addition to my duties in this House I shall be holding further meetings with ministerial colleagues and others.

Is my right hon. Friend aware that neither in her television broadcast last evening nor in her speech to the House of Commons on Tuesday did the Leader of the Opposition make any reference to how the Tories would tackle the problems of inflation? [HON. MEMBERS: "Reading."] Short-term, ill-considered proposals on trade union legislation would not help the country in the present situation. [HON. MEMBERS: "Reading."] Will my right hon. Friend continue to impress upon the trade union movement that inflationary wage increases have no relevance to social justice and are not in the best interests of working people—[HON. MEMBERS: "Reading."]

Order. The hon. Member made copious use of notes, that is all.

That might be so, but I did not hear all the question. If I caught my hon. Friend's first few words correctly, as I think I did, he stressed the need in all our current problems to emphasise the importance of overcoming inflation. That, of course, is right. Inflationary wage settlements, so far as they enter into the final costs of production, give rise to rising prices and rising unemployment. Nothing that I know can destory that basic fact. It should be hammered home on all occasions.

Does the Prime Minister appreciate that in the East Riding of Yorkshire we have the biggest concentration of pigs in the country? [HON. MEMBERS: "That is right."] Labour Members will laugh less when I tell them that, owing to the concentration of the Transport and General Workers' Union on the feed mills of Hull, a large number of those animals are definitely and genuinely in danger of going short of food. Hon. Members may laugh if they wish.

Will the Prime Minister today phone up the strike committee in Hull and use his influence to persuade its members to withdraw the pickets and to show in practice the sympathy which they profess for animal welfare?

The hon. Member will now understand how I sometimes feel when I have to give a quick reply at the Dispatch Box and I say not quite what I mean to say. The hon. Gentleman made a serious point, however I understand that there have been particular problems, especially in the port of Hull and in East Yorkshire, with picketing and secondary picketing. I know that contacts have been made through the emergency unit. I believe that some changes have been made. Clearly I cannot give a definite answer to the hon. Member. I shall have something more to say about the general position in my statement later.

Will my right hon. Friend, in the course of his engagements today, seek to ascertain from the right hon. Lady the Leader of the Opposition whether she sees any relationship between wage settlements and inflation and, if so, why she fails signally to refer to that relationship in any of her public statements?

I am sure that the right hon. Lady is as aware as anyone else of the consequences of inflation. This is a problem to which more attention might be paid by the Opposition on occasions, instead of referring to what are in certain circumstances peripheral matters affecting powers. I do not believe that taking statutory powers is necessarily, as experience has shown, the right way to conquer inflation.

asked the Prime Minister if he will list his official engagements for Thursday 18th January.

I refer the hon. Member to the reply which I have just given to my hon. Friend the Member for Kingswood (Mr. Walker).

I understand that it is the intention of the Prime Minister to seek a voluntaryagreement with the trade unions, not simply with a view to settling the present dispute but on wider and longer-term issues. How will such an agreement differ from the solemn and binding agreement made between the trade unions and the Labour Government in the 1960s which, as the Chancellor of the Exchequer reminded us not long ago, melted away like butter in the sun?

That is not on the list of my engagements for today, I am bound to say, and we had better wait to see what emerges from discussions with the TUC, which I shall certainly hope to have as soon as possible. I imagine that present circumstances have shown clearly how important it is for any Government to secure the full co-operation of the organised workers in this country if we are to succeed.

As my right hon. Friend reflects today—if he reflects at all—on the right hon. Lady's broadcast last night, will he recognise that it was an exercise in sheer damned hypocrisy, for two reasons? First, on the one hand, she is citicising the lorry drivers for following the policies advocated by herself and her right hon. Friend the Member for Leeds, North-East (Sir K. Joseph)—

On a point of order, Mr. Speaker. In the light of circumstances today—

Order. Usually we take points of order at the end of Question Time.

Secondly, will not my right hon. Friend agree that the right hon. Lady was hypocritical in promising—

Order. It is out of order, as the House knows, and quite wrong, for an hon. Member to call any other hon. Member a hypocrite.

Thank you for your guidance, Mr. Speaker, but I did not call the right hon. Lady a hypocrite. I merely said that the political broadcast was an exercise in hypocrisy, and I think it was. [HON. MEMBERS: "Withdraw."] Will my right hon. Friend say whether he does not think that promising public service workers substantial increases in pay, and at the same time threatening huge cuts in public expenditure, is a hypocritical exercise?

I am afraid that I am unable to join in this, as I did not have the privilege of seeing the television broadcast. I am not, therefore, able to pass any comments on it. What is quite clear is that if we have free collective bargaining, as a result of which public sector workers are to have large increases in pay, it is certainly not consistent with that to promise large cuts in taxation. I am sure that must be known to the Conservative Front Bench.

If Mr. Moss Evans can produce within a matter of hours a draft code on picketing, why is it not possible for the Government within a matter of days to produce their own proposals on picketing and to publish them this weekend, so that we can debate them in the House next week?

The Transport and General Workers' Union, as I shall report a little later, is issuing a code of practice about the current dispute and the current dispute alone. That is somewhat easier than drawing up a general code that would apply to all disputes at all times. I should have thought that the Opposition, having seen some of the results of their own ill-considered legislation, would not wish to rush back into this too soon.

Is my right hon. Friend aware that he has often said in this House that prevention is better than cure? Does he not consider that the crisis facing this country today would have been prevented had his Cabinet given a flat-rate increase right across the board during the early stages of negotiations? I am sure, having done my sums on this—[Interruption.] Listen to that lot, Mr. Speaker. If they were in India they would be sacred. Will my right hon. Friend agree that, had such a flat-rate increase been allowed, so that the man on £40 a week would have had the same increase as the man on £20,000 a year, three-quarters of the trouble which faces the Prime Minister and the Government today would have been prevented?

One of the problems that we face at present is that while there is one view in favour of increasing the pay at the bottom end of the scale by a substantial flat rate or percentage rate, at the other end of the scale—and, indeed, in the middle of the scale—the cry by those who are organised is for an improvement and an increase in the differentials. This is one of the dilemmas facing anyone who tries to devise policy in this field.

Will the Prime Minister some time today give some thought to the fact that today, in the Trafford district of Greater Manchester, four hospitals have closed down, partly due to the transport workers' strike and to picketing and partly due to the proposed threat of action on Monday by the National Union of Public Employees? Does he not think it is quite serious that sick people are being penalised in this way by industrial action? What view do his Government take about, and what do they propose to do to remedy, this serious position?

The hon. Gentleman knows full well that we clearly take a serious view of a matter of that sort, if it is as the hon. Gentleman has described. But, as he will also know, it is easier to say how serious a position is than to put it right. It would be possible to put it right by giving substantial increases in pay to all those who are coming to lobby us on Monday. If that is the Opposition's policy, they should say so clearly. If not, they should not just bellow "What are you going to do about it?".

On a point of order, Mr. Speaker. I am sorry to press this matter. However, over the years, there have grown up in the House certain rules of procedure and rules concerning the manner in which hon. Members are addressed. Not only do those rules preserve the dignity of this House here; they are consistent with the dignity of this House in the eyes of the country. I think that you will agree, Mr. Speaker, with the view that the terms in which the hon. Member for Swindon (Mr. Stoddart) referred to statements made by my right hon. Friend the Leader of the Opposition were against the best traditions of this House. I hope, Mr. Speaker, that you will make that perfectly clear.

Further to that point of order, Mr. Speaker. I explained to you and to the House that I referred to the broadcast and the direction of that broadcast, and not to a person. I think that it does no good to this House of Commons if Members of Parliament are mealy-mouthed and do not state what they mean. I stated exactly what I meant, and I believe that it was the truth.

Order. There is not one right hon. or hon. Member who would like to be called hypocritical—not one of us.

I do not know about that.

Order. Every man according to his taste apparently—but it is not mine.

I agree with the hon. Member for Gillingham (Mr. Burden) that it behoves us all to try to maintain the proper standards in the Mother of Parliaments. Hansard is read widely throughout the Commonwealth—and not always to advantage, I may add.

Further to that point of order, Mr. Speaker. The hon. Member for Swindon (Mr. Stoddart) used the word "hypocrisy" as an accusation against my right hon. Friend the Leader of the Opposition. It is well known that to use that word as an allegation against an hon. Member is an unparliamentary proceeding. Should not the hon. Member, therefore, be called upon by you to withdraw that allegation?

When the hon. Member for Swindon (Mr. Stoddart) rose later, I understood him to indicate that he was not making a personal charge. Therefore, although I have the same impression as the right hon. and learned Member for Huntingdonshire (Sir D. Renton), as the hon. Member for Swindon has told us that he made no personal charge, I think that the House would be better served by accepting that.

On a point of order, Mr. Speaker. Having checked carefully with the Official Report, I now realise that I did make a personal allusion to the right hon. Lady the Leader of the Opposition which implied that she was a hypocrite. I am very happy to withdraw that remark.

asked the Prime Minister when he plans next to take the chair of the National Economic Development Council.

I next plan to take the chair at a meeting of the National Economic Development Council on 7th February.

Will my right hon. Friend agree that, in spite of our present problems, the usual relationship between trade unionists and management is that reflected in the useful co-operation seen in the NEDC sector working parties? Will he accept that, if we are to get the long-term benefits of the industrial strategy, even more Government involvement will be necessary to ensure the rapid implementation of the working party recommendations?

Yes, it is the case, as is commonly vouched for, that relations in the overwhelming part of British industry are satisfactory, if not good. Indeed, they are improving. I believe that the increased communication that is taking place as a result of the sector working parties has contributed to that. Certainly they will have the full backing of the Government.

Is not the National Economic Development Council one of the appropriate places in which to consider some of the suggestions put forward by the Leader of the Opposition. since the scale of repeated industrial anarchy is gravely damaging to the economy?

Will the Prime Minister not reject the suggestions of the Leader of the Opposition simply because she has come rather late in the day to the principle of inter-party co-operation? Will he recognise that there really is growing public concern about the impotence of Parliament in these situations? Will he therefore give the right hon. Lady a positive response in trying to seek a united approach on these issues?

The right hon. Gentleman may be certain that all proposals—from wherever they may come—for dealing with the present situation or, indeed, any other discomforts in our industrial situation, will be objectively considered by the Government.

I must say that I was impressed this morning by the article that appeared—if I may give an advertisement to such an organ—on the editorial page of The Daily Telegraph. It is well worth reading, because it shows how misconceived are some of the proposals that are put forward in—again I repeat the word "peripheral"—circles regarding the capacity of the law to deal with this situation. I do not say that in any polemical spirit, but it seems to me that we must get the analysis right if we are ever to find a solution. The writer was someone who did not sign his article, but he described what he was doing from his practical experience. I hope that every member of the Conservative Party will read that article very seriously.

On a point of order, Mr. Speaker. It may not have escaped your attention that the hon. Members for Newcastle upon Tyne, East (Mr. Thomas) and Swindon (Mr. Stoddart) both asked questions of my right hon. Friend the Leader of the Opposition. I can quite see that it is more interesting to ask questions of the next Prime Minister than of the past Prime Minister. Would not it be more sensible if we asked my right hon. Friend to take, say one of the sessions, on the Tuesday or the Thursday, to answer her questions?