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Oral Answers To Questions

Volume 983: debated on Thursday 24 April 1980

The text on this page has been created from Hansard archive content, it may contain typographical errors.

National Finance

Gross Domestic Product (Growth Rate)


asked the Chancellor of the Exchequer what are the main factors on which he bases his assumption of average growth rate for the years 1981 to 1984.

The Chancellor of the Exchequer has asked me to apologise to you, Mr. Speaker, and to the House for his inability to be present in the House this afternoon as he is attending an International Monetary Fund interim committee meeting in Hamburg.

As explained in the medium-term financial strategy, the 1 per cent. average growth rate of GDP was simply an illustrative assumption for the years after 1980. It is similar to the average growth achieved between 1973 and 1979.

As to the figure stated in the financial strategy being simply an illustrative assumption, does the Chief Secretary realise that it is a crucial assumption in relation to the public sector borrowing requirement target? What will he do if that assumption is unfulfilled? The right hon. Gentleman made a comparison between 1973 and 1979. Is he aware that, taking into account his planned reductions in public services, that rate of growth will require twice the rate of business output that was achieved during those years? How will he achieve that?

It is true that there is a real significance in the assumptive implications of this figure, in respect of both taxation and public spending. The realism is underlined by the fact that it is no more than the average rate of growth that was achieved between 1973 and 1979. As in all matters, the House and the Government should be cautioned to take these matters as they arise, year by year.

The House is well aware of the right hon. Gentleman's contempt for the medium-term financial plan. Will he answer some questions? First, the plan is revealed by the evidence given to the Select Committee by Treasury officials to be grossly over-optimistic and not overcautious as was stated earlier. The Government are expecting a continuing fall in the output of manufacturing industry and in public expenditure, so any increase can come only from private services. Which private services will increase to that level? Will they be bingo parlours and luncheon vouchers?

I am unashamed in my agnosticism about economic forecasting, and it is an attitude that I commend to all parts of the House. There are no grounds whatsoever for the right hon. Gentleman to use the word " contempt ". It is that kind of language that devalues him and debate in the House. I do not believe that it is generally assumed that the financial plan is grossly over-optimistic. Indeed, a number of commentators have suggested that in respect to North Sea oil it is under-optimistic.

I apologise to the right hon. Gentleman. I shall replace the word " contempt " with " distaste and mistrust ". The right hon. Gentleman said that he had chosen the figure for the rate of growth because that was the rate of growth in the last five years. Is it not the case that in the next four years the Government are proposing to follow a fiscal and monetary policy that is far more restrictive than that followed in the last five years? Indeed, the right hon. Gentleman has boasted of that in every debate that we have had in the last 12 months.

I am pleased to accept an apology from the right hon. Gentleman, if only because it is such a rare occasion.

With regard to the movement of the economy in the second part of this Parliament in an assumptive fashion, there is no doubt that the conditions of world trade and a reversal of stock building can have a real impact upon these figures, and I have no doubt that those factors have been taken into account.

Does my right hon. Friend agree that one of the most important points about such assumptions is that there they are aggregate assumptions, and that within those totals, through policies which result in greater efficiency in certain sectors of the economy, one might see substantial growth offsetting other sectors, which would inevitably be in decline?

That is right in that there is much more to economics than macro-equations. There is also the whole impact upon personal motivation by Government policy.

Interest Rates


asked the Chancellor of the Exchequer to what extent his policy to reduce interest rates will be affected by changes in United States prime rates of interest.

The Government's policy remains to allow interest rates to fall, as and when this is consistent with the requirements of domestic monetary control. Since my right hon. and learned Friend's measures last November, there has been a marked slowing down in the rate of growth of sterling M3.

I congratulate my hon. Friend and my right hon. and learned Friend on that achievement, but does my hon. Friend agree that the rate of interest that currently prevails in Britain depends to a considerable extent on the high level of prime rates of interest in the United States? Will he therefore concede that it is vital for the Government to continue to pursue their strategy of controlling public expenditure and sterling M3 in order to achieve the reduction in the rates of interest which we all recognise is desirable?

Since the Chief Secretary, at least, is an agnostic in terms of monetary religion, and since he does not believe, and does not in fact know whether the Government's monetarist policies will lead to a reduction of inflation, what is the purpose of these monetary policies and high interest rates, which are merely destroying large sections of British industry?

The purpose of these policies is to bring down inflation. They will bring down inflation, and my right hon. Friend, far from not believing that, was among the first right hon. and hon. Members, on either side of the House, to emphasise the importance of monetary policy on the course of inflation.

I support the courageous strategy and policies of the Government—I congratulate all my right hon. and hon. Friends on the Treasury Bench—but does my hon. Friend agree that high interest rates are damaging to commerce and industry, particularly to new smaller businesses? Will he consider implementing a form of differential interest rate for commerce and industry, which I understand is practised by many countries with which we trade and which are our major competitors?

In a sophisticated financial economy such as ours, there is no practical means of insulating one sector of the economy—because there would inevitably be arbitrage—even if it were desirable to do so. We must concentrate on monetary measures which enable us to reduce interest rates generally. That is one of the main purposes behind the medium-term financial strategy. With regard to interest rates in Britain particularly, my hon. Friend knows that interest rates throughout the world have risen by as much as they have risen in this country over the past 12 months.

The Chief Secretary has wisely and publicly repudiated the crude theory on which Government policy was previously based. What changes will be made in that policy?

My right hon. Friend has a philosophic disposition, and his speeches reflect that, but that is no excuse for an observer as percipient as the right hon. Gentleman wilfully to misrepresent them.

Tax And Price Index


asked the Chancellor of the Exchequer what is the latest published increase in the tax and price index.

The tax and price index rose by 176 per cent. in the 12 months up to March 1980.

Will the Minister tell the House whether he agrees with the comment by his Department, in a press release dated 18 April 1980 concerning the tax and price index, that it is accurate only once a year, namely, from Budget to Budget? If that is so, how can it possibly be used by either employers or trade unions in collective bargaining arrangements that take place throughout the pay round, which lasts from November to July? In those circumstances, is it surprising that no one makes use of this so-called tax and price index?

I do not have before me the document to which the hon. Gentleman refers, and I hope he will excuse me from giving a specific answer on that point. With regard to his more general point on the tax and price index, I believe that this index is valuable alongside the retail price index, just as it has been valuable to have data published by the Institute of Fiscal Studies, all of which are designed to try to provide some clearer public education in the movement of prices.

On the 1 o'clock ITV news programme, Mr. Sidney Weighell said that his members were expecting to get a 20 per cent. pay increase because they want to keep their standard of living at the same level as a year ago, and that the retail price index had gone up by 20 per cent. Will my right hon. Friend send a telegram to Mr. Weighell and all the other people on his executive to tell them that if they need to keep their standard of living at the same level as last year they require only 17·6 per cent.?

Perhaps a few remarks from this Bench will obviate the public expenditure necessity of sending a telegram. I think that negotiations between Mr. Weighell and British Rail are best left to the appropriate people, namely, the management of British Rail, but it is undoubtedly true that productivity must be a major factor in whatever wage settlements are concluded.

Is it not clear from what has been said today that the tax and price index has lacked credibility from the word " go "? It would have been better if the Government had concentrated on the retail price index, to which wage bargainers in industry pay attention and which would have some effect on inflation if it were kept down.

That is a somewhat narrow reaction. The major embarrassment of the tax and price index is that it was an innovation, and because it was an innovation it was deeply repugnant to many on the Labour Benches. It is true that the retail price index, by virtue of its long existence, is much greater in the whole nature of public debate on these matters than any other index.

Black Economy (Tax Frauds)


asked the Chancellor of the Exchequer if he will make a statement on his discussions with the Inland Revenue Staff Association on tax fraud relating to between £5,000 million and £11,000 million of untaxed funds from the black economy.

My right hon. and learned Friend has not yet had any such discussions, but we have seen the recent statements made by the Civil Service unions on the black economy.

The figures are slightly speculative, as I am sure the Civil Service unions would be the first to acknowledge. I refer the hon. Gentleman and the House to some of the later work that has been undertaken by the Central Statistical Office, which suggests that the black economy may be running at 3½ per cent. or less of gross domestic product. Of course, we are not complacent about that figure either.

I accept that the real antidote to the black economy is a substantial reduction in direct taxation, but will my hon. and learned Friend nevertheless take on board the fact that this is a serious problem? At the very least, does he expect any information to be fed back by the additional social security inspectors who are to be appointed, so that action can be taken against both employers and employees?

No. We expect to have better information from the revenue departments, which are naturally alert to this problem. I am sure that we shall take positive action in the light of anything that we discover through them.

Is it not time that the Government had a better informed view of this problem, especially as indicators are now being given by people who have expertise in the matter and since the Government have made such a fuss over the question of social security fraud, which is piddling in comparison with the huge amounts involved?

I remind the hon. Gentleman and the House that the first figure was given during the Administration of which he was a distinguished ornament by the then chairman of the board of Inland Revenue to the Expenditure Committee. At that time the number of staff at the Inland Revenue had reached an all-time high, so there is no precise correlation between the black economy and the number of people employed in the revenue departments.

Interest Rates


asked the Chancellor of the Exchequer what representations he has received from small businesses regarding high interest rates.

We continue to receive a number of representations from small business men on the current level of interest rates.

Does the hon. Gentleman agree that there is no apparent mechanistic link between money supply and inflation, or between the public sector borrowing requirement and inflation? Is it not the deliberate and disastrous policies of the Government, who pay lip service to small businesses, that are producing the abnormally high rates of interest that are smashing small business after small business? What are the Government going to do about it?

As I said in answer to an earlier question, the rate of interest has risen throughout the world by roughly the same amount. The whole world is facing the same inflationary problems. It is interesting to note that when the Government first took office the rate of inflation, as measured by the six months' annualised increase in the RPI, but excluding seasonal foods—which is generally regarded as the best measurement of the underlying rate of inflation—was 12·2 per cent. It is now 16·4 per cent. That is almost exactly in line with the increase in inflation rates worldwide over the same period. Similarly, countries worldwide have sought to contain the increase in inflation rates by monetary policies that involve, for the time being, a high rate of interest. Our intention is to bring interest rates down for the sake of small businesses, and others, as soon as it is safe to do so.

In general, are interest rates positive or negative in real terms?

That is an interesting philosophical question. Whether interest rates are positive or negative depends upon the expectation of inflation, and expectations differ. If we measure the current short-term interest rate against the current rate of inflation, interest rates are negative at present.

Apart from high interest rates, it is clear that small businesses will be seriously affected by the 6 per cent. decline in manufacturing output next year, which has become apparent from the cross-examination of officials before the Treasury Select Committee. Will the hon. Gentleman explain how the massive loss of jobs from medium and large companies is to be made up by small businesses?

I do not know what massive loss of jobs the hon. Gentleman is referring to, but he seems to have a certainty about the future which some of us lack. However, small businesses would be much more adversely affected by a resurgence of inflation, which is what would happen if the policies advocated by Labour Members were followed.

As lower differential interest rates for business are clearly impossible, would it not be a good idea to introduce a lower domestic rate of interest as soon as possible?

May I direct the hon. Gentleman's attention to the figures that were published on Tuesday showing the massive loss of jobs in the past seven months since the Government have been in power? Is he aware that his officials gave the view to the Treasury Select Committee that there will be a massive increase in unemployment over the next 12 months, and that no outside forecaster believes that unemployment will fail to reach 2 million within a year from now? Why is he so complacent about the consequences of his policies?

The real question is "Why is the right hon. Gentleman so impertinent? " Even if unemployment were to rise to 2 million, that would be a smaller increase than the increase in unemployment during his stewardship of the Exchequer.



asked the Chancellor of the Exchequer when he now expects the inflation rate to fall substantially.

The Financial Statement and Budget Report forecast published at the time of the Budget envisaged that the 12-monthly increase in the retail price index would peak at slightly over 20 per cent. in the second quarter of this year before falling to 16½ per cent. in the fourth quarter. I cannot helpfully expand on those forecasts.

Now that the inflation rate has almost certainly exceeded 20 per cent., does not that show that the right hon. Gentleman's speech in January in which he said that Britain was in for three years of unparalleled austerity is proving only too correct? In view of his latest speech on the movements in money supply and inflation, does he agree that, although it was an honest and courageous speech, it exposed the mumbo-jumbo of the Government's economic thinking?

If I wanted commendation for my speeches, I hope that the hon. Gentleman will not think me discourteous if I say that I should not look to him for it. If I had to comment on the nature of my speeches, I should say that they are trite and commonplace rather than courageous.

Is my right hon. Friend worried at the current level of the increase in the cost of public sector pay, which, with the help of Professor Clegg—about whom I shall not say any more—is touching 25 per cent.? Will he undertake that the Government will get a grip on the problem and ensure that this disastrous situation does not repeat itself in the coming year?

It is important to get the issue of Professor Clegg into perspective. Many of my hon. Friends were fairly happy to fight on an election manifesto that had no commitment to disavow the Clegg recommendations. The real test is the extent to which settlements for the current pay round are manageable within the current cash limits. On that analysis, I think that there is some ground for modest hope.

Is the Chief Secretary aware that the innovation of the Government that is repugnant to Labour Members is their abandonment of their direct responsibility for promoting sensible policies on wages and prices? Will the right hon. Gentleman, who has been the architect of that, disavow the Government's policy before it is too late?

If one can translate that into everyday current political experience, it is an invitation for the Government to endorse a quasi-statutory control of incomes which collapsed, with all the consequences that are now being dealt with by Professor Clegg. Although we may not learn all that much in politics, I think that we have learnt that much.

Will my right hon. Friend continue to remind the House and the country that when the Labour Party was in Government it achieved a reduction in the inflation rate only when the Labour Government were forced to introduce the so-called monetarist measures that they now criticise us for pursuing?

I think that the right hon. Member for Leeds, East (Mr. Healey) was an imperfect monetarist. When I look at the Labour Party, I take sustenance from Lord Butler by accepting that he is the best monetarist that we have.

May I thank the right hon. Gentleman for what I think he intended to be a compliment? I remind his hon. Friend the Member for Hornchurch (Mr. Squire) that the rate of inflation was halved in the year before the Labour Government went to the IMF. Let him put that in his pipe and smoke it. Given the right hon. Gentleman's distaste, contempt or distrust of Treasury forecasts, why has he skulked behind the Red Book forecast for inflation at the end of the year? As an honest and imperfect monetarist, does he believe that the rate of inflation in the fourth quarter of this year will be as low as 16½ per cent.? Let him come out from behind the shelter of the Red Book and tell us what he really thinks.

I am complimented that the right hon. Gentleman should regard my remarks as a compliment. I know that he travels in stony territory and that it is hard to get compliments these days. I quote 16½ per cent. from the Red Book because it is published with the authority of the Government and because it is intended to contribute to public discussion and understanding. The House and politicians will get themselves into trouble only when they crucify themselves on these figures.

Construction Programmes (Expenditure)


asked the Chancellor of the Exchequer when he expects to be able to give further details of future public expenditure on construction programmes beyond 1980–81.

I cannot give my hon. Friend any undertaking about when I shall be able to provide such information, because detailed decisions on the composition of expenditure programmes beyond 1980–81 have not yet been taken.

I understand that. However, with regard to table 5.2 of the public expenditure White Paper—which stops at the end of 1980–81—does my right hon. Friend accept, in principle, that medium-term targets are as important for construction planning as they are for monetary control?

I understand that point, and I know that the industry has expressed anxiety on this matter. Those considerations will be taken into account when we contemplate the next White Paper.

Although I accept that the Minister is, not unnaturally, reluctant to publish the figures for construction, are not the housing figures available in the Estimates? Do not they show a cut of £2·5 billion a year by 1983, most of it in bricks and mortar? Is not that a suicidal policy when 235,000 building workers are unemployed?

I readily confess that I cannot answer the hon. Gentleman's specific question, but I shall ensure that an answer is sent to him. There is no point in deceiving ourselves about the construction industry. If there is to be a cut in the rate of inflation, and if an interim price is to be paid for reduced activity, the construction industry, no less than other parts of the economy, will have to pay it.

In view of the forecast decline in investment in the construction industry, why are the Government deliberately understating North Sea oil revenues by £3 billion or £4 billion in current prices, and probably £7 billion or £8 billion a year in foreseeable terms? Is it not more important that those revenues are used to strengthen industry and investment in this country and do not go abroad in capital outflow and destroy our industry through a high-value pound?

Although that is a controversial question, it is none the less interesting and perceptive, I suggest that it goes a good deal wider than the public expenditure construction programme. The conclusion that I draw from the hon. Gentleman's observation is that it is unfair to characterise the medium-term forecast as some facile piece of optimism.

Clearing Bank Profits (Taxation)


asked the Chancellor of the Exchequer when his consideration of the imposition of a special tax on the windfall profits of the leading clearing banks will be completed.


asked the Chancellor of the Exchequer when he expects to complete his consideration of a special tax on the windfall profits of the clearing banks.

I have nothing to add to what my right hon. and learned Friend said in his Budget Statement.

The recent massive profits announced by the four leading banks and those of British Petroleum, which exceed £3 billion, exceed the total savings from public expenditure cuts. Is this the unacceptable face of capitalism? Will the Chancellor of the Exchequer urgently consider the TUC's call for a windfall tax on such obscene and exorbitant profits?

As a general proposition, one issue that divides the Chamber is that Conservative Members would like to see higher profits, in the interests of a healthy economy, whereas Opposition Members would like to see profits disappear down the plug hole. When such bank profits occur, partly as a side effect of Government policy, the question of special taxation measures relating to the windfall element will arise. It would be foolish to rush into hasty decisions which might have undesirable side effects.

Does not the Financial Secretary, with his well-known capacity for witch-hunting those on social security, realise that those profits are so exorbitant and unexpected that people will want to see whether this enthusiasm for taxation applies to the big boys as well as to the tiny ones? Will he consider taxing profits of £4,000 million when ordinary people are being grossly overtaxed?

I have already answered that question. The banks are taxed. In his Budget Statement the Chancellor made it clear that he would consider whether it would be appropriate to introduce a windfall tax on the windfall element of the banks' profits. It is absurd to talk about witch hunts. We are trying to ensure that the economy becomes healthier and that the balance between taxation and expenditure is right. We seek to diminish the public sector borrowing requirement, and that will be one of the main uses of revenue from North Sea oil. We also wish to bring down inflation. To talk in the emotive language that the hon. Gentleman has used is to demean the Chamber.

In view of the recent wage agreements negotiated by the clearing banks, does not my hon. Friend agree that there is a little bit of evidence to show that the clearing banks are a tiny bit monopolistic? Does he not think that it would be a good idea to look at that problem?

My right hon. and learned Friend the Chancellor of the Exchequer is looking at that problem. The pay increases that are being negotiated by the banks are a matter for them. However, they are fully aware of the consequences of unnecessarily high pay increases.

In this context, a " windfall " is something that accrues to one section of the business community, not as a result of its efforts but as a result of the side effects of specific Government policies. That is why we have a petroleum revenue tax.

Will my hon. Friend confirm that many of those windfall profits go back into industry and are of benefit to it? May I press my hon. Friend further about the differential rates which I earlier proposed? They may well be used by and be made available to industry. Is it not correct that many of the countries with which we compete—including some of our European colleagues—are adopting differential interest rates for the benefit of their industries?


Although I am not an expert on the subject, I understand that some countries have two-tier interest rates, with greater and lesser amounts of success. However, to shelter one sector of the economy at the expense of another would undermine the effectiveness of the Government's overall monetary policy. It would be subject to leakages, and it is highly unlikely that it would be effective.

Is not the Financial Secretary aware that the Government's failure to act demonstrates their fear of the City and of offending the Bank of England? Does he agree that there is no problem about taxing excess profits and that one could have an excess profits tax? If the hon. Gentleman were to introduce such a clause into the Finance Bill, we would support it.

There are considerable practical difficulties. If the right hon. Gentleman takes a little more time to reflect on the subject, he will, with his experience, appreciate that.

How does the Financial Secretary think that the public will react—in a climate of social security cuts, £l prescription charges and so on—when they see those bank profits? Does he accept that they arose as a direct result of Government policy and were not the result of demands for increased production? Does he further accept that even the Daily Mail found them unacceptable?

The right hon. Gentleman must be aware that bank profits tend to rise when profits in the rest of the economy are not doing well and when interest rates are rising. The reverse is also true. Bank profits tend to fall when the rest of the economy is doing well. One should look at the behaviour of bank profits and other profits over the cycle as a whole.

Premium Bonds


asked the Chancellor of the Exchequer what circumstances would persuade him to narrow the gap between minimum lending rate and the 7 per cent. interest currently paid into the premium bonds prize fund.

New, more attractive terms of the prize fund have only just been announced.

Will the Minister at least spend a comparable sum on advertising index-linked retirement certificates— which currently yield 20 per cent.—to that which he spends on advertising premium bonds, which yield 7 per cent.?

We shall certainly take account of the hon. Gentleman's remarks and see whether we can boost the sales of other forms of saving certificates.

Money Supply


asked the Chancellor of the Exchequer if he is satisfied with the development of the money supply in the first quarter of 1980.


asked the Chancellor of the Exchequer if he is satisfied with the progress of the achievement of his monetary targets.

Recent figures suggest that the underlying rate of growth of sterling M3 is now well within the 7 to 11 per cent. target range.

Now that these figures appear to be much more optimistic, when will they have an effect on the rate of inflation?

As my right hon. Friend the Prime Minister has pointed out on a number of occasions, there is a well-established link between falls in the rate of growth of the money supply and falls in the rate of inflation. That is not mechanistic. There are variable time lags, but on the whole these lags tend to be about two years.

Obviously these figures are highly encouraging. Does my hon. Friend agree that the early implications suggest that the Government's strategy has laid the foundations from which we can look forward to perhaps the most urgent requirement of industry and the most useful thing that we can do for it, namely, a gradual reduction in the cost of borrowing money?

Is the hon. Gentleman aware that the Chancellor of the Exchequer told the Select Committee the other day that 2 per cent. must be added to the published figures of money supply to account for the distortions of the corset since the Government took office? Is he aware that in that case the Government have not met their monetary targets at any time in the last 12 months? That being so, why should anyone take the slighest notice of the fantasies in the medium-term plan?

As I have pointed out, there has been a sharp deceleration in the rate of growth of the money supply since my right hon. and learned Friend's measures last autumn. In the past five months, even taking into account the acceptance leak to which the right hon. Gentleman refers, the rate of growth of the money supply has been running at 9¾ per cent. a year.

Is the Minister aware that the Government's economic policy will mean many more days of action among workers who must defend their living standards against Government policies?

I can think of nothing more futile, and nothing more contrary to the interests of the working people of this country, than so-called days of action to which the hon. Member refers.

Enterprise Zones


asked the Chancellor of the Exchequer if he will make a statement on the progress of discussions he has had for the creation of his proposed enterprise zones.

My right hon. Friends the Secretaries of State for the Environment and for Scotland, Wales and Northern Ireland are currently consulting the local authorities named in the Government's policy document. The Government will make a final announcement about sites in the summer.

Is it not a measure of the interest in this proposal that local authorities up and down the country are clamouring to be designated as enterprise zones? In view of the substantial and exciting opportunities that these enterprise zones offer, will my right hon. Friend ensure that as soon as the sites have been selected every means of communication to business and industry is used to bring the opportunities home to those who make investment decisions?

Is the Minister aware that unemployment in the Northern region is approaching 140,000 and that, in effect, that was once the national figure? If the Tyne-Wear area succeeds in getting one of these enterprise zones, would it not be more appropriate to rename it a resuscitation zone?

I had hoped that the hon. Member would be rather more charitable in welcoming this innovation.

Bank Of England


asked the Chancellor of the Exchequer when he will meet the Governor of the Bank of England.

When the Chancellor meets the Governor, will he discuss with him the Bank of England's own evidence from its financial model that the public sector borrowing requirement has only a small effect on the level of interest rates? Indeed, a change of £1,500 million affects interest rates by only 0.2 per cent. What will the Chancellor say to the Governor about that evidence?

In his evidence to the Treasury Select Committee a few days ago, the Govenor of the Bank of England stressed the importance of getting the public sector borrowing requirement down.

Retail Price Index


asked the Chancellor of the Exchequer what are the fiscal implications of the existing make-up of the retail price index.

The retail price index measures the rate of change of the prices of the goods and services that households buy; this necessarily includes price changes which are due to changes in indirect taxation.

The retail price index is sometimes referred to as the cost-of-living index. Does it make sense that drink and cigarettes, which some people claim contribute to dying rather than living, should be included in the cost-of-living index?

The composition of the retail price index is not directly under Government control, but the point is made.

Prime Minister (Engagements)


asked the Prime Minister if she will list her official engagements for 24 April.

This morning I presided at a meeting of the Cabinet and later met Mrs. Louisa Kennedy, the wife of one of the American hostages in Tehran. In addition to my duties in this House, I shall be having further meetings with ministerial colleagues and others, including one with a delegation from the city of Hull.

While the Prime Minister pursues her busy schedule, will she bear in mind that an extra 5p tax on a packet of cigarettes would have enabled the Government to increase child benefit by £1 instead of 75p? Will she accept that any loss of revenue caused by a diminution in smoking would easily have been compensated for by savings in the National Health Service?

Extra indirect tax works through straight away to the retail price index. Because so many social security benefits are linked to that index, that would put up public expenditure next year by a multiplier factor. That is one of the aspects that we must take into account when deciding the balance of the Budget.

Will my right hon. Friend comment on the deplorable example of bath-plug economics, to which our attention was drawn in the press articles on the Isle of Grain power station closure yesterday and today? Can any industrial society survive a system in which 27 men can force the squandering of nearly £400 million of hard-earned public capital in this way? Does not this he at the heart of the discontent which some of us feel, in that the initiative that she is showing in this area has not been sufficiently robustly supported on the Benches next to her?

I agree that industrial relations on the Isle of Grain site for the new power station have been a disgrace, when some 27 laggers can virtually bring the whole place to a dead slow and then a stop and are being paid £4·60 bonus an hour. I agree that we need to look into industrial relations on this site and other sites of the same kind. We must also look into the economics of the construction of future power stations which can be so delayed and overrun like this one.

The Prime Minister referred to her discussions with Mrs. Kennedy, to whom we all give our sympathetic understanding. Is she aware that Mrs. Kennedy spoke on radio before she met the Prime Minister and made a statement to the effect that in no circumstances would those poor hostages support any military undertaking? In her discussions with Mrs. Kennedy, did the Prime Minister give her a similar impression, and will the right hon. Lady and her Government bear it in mind?

I saw Mrs. Kennedy this morning, and I think that she is a wonderful and remarkable person. It is clear that both she and her husband, who is being held hostage, have considerable inner resources of strength that are seeing them through. I made it clear that we are anxious to support our friends, the United States, in what we are now being asked to do—to take further political action, and later economic action. We shall continue to support them in those endeavours.

If, in the course of today, my right hon. Friend considers the tactics that she will employ this weekend in Luxembourg, will she bear in mind that the essence of any genuine community must be the willingness of those who are strong and well off to help those who are less well off? Does she agree that at present we should be net beneficiaries and not net contributors? If my right hon. Friend cannot reach any such agreement, there is no Euro-fanatic in this country who will be able to persuade the British people that we belong to a genuine community.

The essence of partnership in any community is that all partners are entitled to an equitable deal. We are not getting an equitable deal at the moment. Because of that, we are requiring back large sums of the net contribution that we make. I still do not underestimate the difficulties of the task, but we must stick to our objective absolutely clearly.

While we wish the Prime Minister success in her endeavours at Luxembourg to recover this large sum of money—and we have given her steady support in this matter—will she, in view of the statement by President Giscard d'Estaing yesterday that this issue could not be settled in the absence of an agreement to increase farm prices, give an assurance that the position of the Minister of Agriculture, Fisheries and Food will be fully supported and that no increase will be conceded by the British on prices for goods and commodities in surplus?

When that statement was made by the President of France and communicated to the meeting of Agriculture Ministers, my right hon. Friend made a pretty robust response—as only he can. He said that the agriculture price agreement would be dealt with, as it always has been, on merit. I have made it abundantly clear that we are certainly prepared to look at the other matters which have to be settled within the same time scale but that each of them must, nevertheless, continue to be considered on merit, and I shall stick to that viewpoint.

I take it that the Prime Minister wants the House to understand that there is no question of bargaining an increase in the farm price settlement on commodities that are in surplus against the budget.

I entirely agree. We are not bartering a settlement in one sphere against settlement in another. We are prepared to look at them all—certainly agricultural prices and sheepmeat—within the same time scale. I think that many of my right hon. and hon. Friends would say that if we expect Community members to help us to sort out our problems, we must equally expect to be ready to help them to sort out theirs. That is what a community is.

I do not know whether the right hon. Lady was trying to obfuscate the issue, but what she said at the end was not clear. We would like a clear answer from her on this matter. Is it the case that when she goes to Luxembourg—she will, of course, be discussing all these issues separately—she does not intend to yield on what is the common sense of the agricultural situation, namely, that commodities in surplus will not enjoy price increases this year?

I had hoped that we were at one on this and that after my last reply we were at one. May I repeat——

that we are not going to barter prices on the agricultural settlement against the budget. The agricultural settlement will be dealt with by the Agriculture Ministers in the ordinary way.

With all respect to the right hon. Lady, we have not had an answer to the question. The question is a simple one. Are we intending to stand firm on our position that commodities in surplus will not enjoy a price increase during the coming year?

The right hon. Gentleman is asking me to achieve something that he never achieved. What I will not do is to barter prices in the Agriculture Council against the budget. With all due respect, I do not think that the right hon. Gentleman can ask for more than that.

The House and the whole country will draw their own conclusions from that attempt to wriggle. However, the right hon. Lady is wrong, because we did achieve a freeze on surplus commodities. They did not enjoy any price increase. Will the right hon. Lady please withdraw her remarks on that?

It was a freeze on surplus commodities last year, negotiated by my right hon. Friend. In almost all years—I do not say in every one—the right hon. Gentleman negotiated increases in prices above those recommended by the Commission. I think——

The country will be well aware that it was the right hon. Gentleman's Administration that left us with a net contribution of £1 billion.

During the course of the day, will my right hon. Friend consider what additional measures her Government, or this House, might take to give British trade unionists the opportunity to have a better level of leadership, the need for which has been exemplified by the performance during recent days of a certain Mr. Mostyn Evans, who signed a national agreement with British Leyland and then advised his membership that he would support action against that agreement, only to find his recommendation rejected in turn?

Over and above what we have provided for in the Employment Bill and the new Green Paper which will be coming out, I think that we must look to the trade unions to sort out their own internal problems. What we are trying to do is to give ordinary trade union members a greater say in union matters.

International Arms Sales (Brandt Commission Report)


asked the Prime Minister what is the policy of Her Majesty's Government regarding the views expressed by the Brandt Commission regarding taxation of international arms sales for the benefit of developing countries.

We are studying the detailed proposals of the Brandt Commission and will give our considered views soon.

On the principle of such a tax, does the Prime Minister agree or disagree with her right hon. Friend the Member for Sidcup (Mr. Heath) and his distinguished co-signatories?

I looked at what the Brandt Commission said on this matter of a tax on armament exports and imports. With respect to the hon. Gentleman, it is a pretty cursory reference. It is a long way from a firm recommendation that there should be a tax on armaments. The reference is in the context of a tax on all exports and on all international trade. I could not suddenly out very much more study, and I do not come out with a decision on that with believe that those who sat on the Brand Commission would expect it.

Will my right hon. Friend bear in mind that what ma; appear to be a developing country in one context is, in some manufacturing contexts, highly developed and may be competing, quite unfairly, with our own producers?

I accept what my hon. Friend says. There are great differences among developing countries One of our problems is that of competing with some of the trades of the newly developed countries, such as South Korea.

Prime Minister (Engagements)


asked the Prime Minister whether she will list her official engagements for 24 April.

Will my right hon. Friend find time during the day to look at the information available on the increasing persecution in the Soviet Union of the so-called dissidents, who are, of course, people seeking to exercise fundamental freedoms, such as freedom of religion and speech and the right to emigrate? Will the Prime Minister consider how this information can best be made more widely available so that those who are considering going to the Soviet Union, for whatever reason, might be more aware of the extent of the denial of human rights there?

The latest information that I have was given during the course of a debate in this House. It was information compiled by a distinguished academic. It said that between August 1978 and March this year there were some 97 political trials in the Soviet Union, leading to over 200 severe sentences of imprisonment for political matters. As my hon. Friend knows, in addition to those matters, Sakharov has been sent to the town of Gorky, where he cannot communicate with anyone. There is widespread persecution of minority groups in the Soviet Union, and that is endemic to the system.