asked the Chancellor of the Exchequer what assessment he has made of the impact of value added tax on building alterations to village halls and community centres since its imposition in 1984.

Information is not held in a form which would allow such an assessment to be made.

Does that mean that the Chief Secretary does not realise that the village halls which are maintained by voluntary local effort, rather than those which are provided by local councils and are VAT exempt, are bearing this burden? As many were built before the war or soon after it and will need building alterations, would it not have been a better Budget if the Chancellor of the Exchequer had announced that he would stop raiding jumble sale proceeds and let village halls use their money to maintain their buildings by voluntary effort?

Not only do some village halls benefit from the community programme, but direct grants from central Government to charities — I assume that the hon. Gentleman regards them, properly, as being charities—have increased to £180 million in 1983–84. Counter-Inflation Policy 3. Mr. Robert B. Jones asked the Chancellor of the Exchequer if he will make a statement about counter-inflation policy. The Chancellor of the Exchequer (Mr. Nigel Lawson): Since 1980 inflation has fallen from 20 per cent. to 5 per cent.—the lowest level since the 1960s. In my Budget statement I reaffirmed the Government's commitment to continue the drive against inflation through sound monetary policies.

I congratulate my right hon. Friend on restating his commitment not only to maintain his drive against inflation but to reduce and eliminate it entirely. Does he agree that a counter-inflation policy is a counter-unemployment policy, and that there is ample evidence at home and abroad of the destructive effects on jobs of inflation?

My hon. Friend is right. It is a significant fact that successive Governments since the war have presided over higher levels of inflation and higher levels of unemployment at the same time. This Government have succeeded for the first time in getting the level of inflation down. That is a sound basis, coupled with the other measures that we have taken on the supply side, for dealing with the serious problem of unemployment. Dr. Marek: Does the Chancellor of the Exchequer agree that the measure of monetary growth is not the only factor which determines inflation? Does he accept that he should be able to devise a policy to reduce unemployment through a certain amount of capital spending which, incidentally, would have the beneficial effect of ensuring that our infrastructure does not rot to pieces?

I entirely reject the suggestion that our infrastructure is rotting to pieces. We are substantially increasing expenditure on roads, and on the sewers and water industry generally. If reducing unemployment were simply a matter of increasing Government spending, there would be no unemployment anywhere in the world today because there is nothing easier than for a Government to spend other people's money. Mr. Andrew MacKay: Would my right hon. Friend care to speculate on how much inflation would be fuelled if this afternoon the building societies foolishly and shortsightedly increased rates for mortgages?

An increase in mortgage rates—that is obviously entirely a matter for building societies and has nothing to do with the Government—would in the short run cause an increase in the retail prices index. Over the medium term it would not have any effect on inflation.

Will the Chancellor expand on that answer a little? Will he tell us, because he must know, how much the retail prices index has already been increased by building society increases announced this year? How much will be added to it by the increase which we fear will happen today or tomorrow? Having given those figures, will he confirm that the increase in mortgage repayments endured by most householders this year will more than take up the amount which they might have received in tax reductions through his Budget?

It is an impertinence for the right hon. Gentleman to address the Government about the problem of inflation. While he was in office—he was Secretary of State for Prices and Consumer Protection—inflation never came anywhere near as low as it is at present. It will stay low and get lower.

Does my right hon. Friend agree that even after the Government's success in reducing the rate of inflation, the fact remains that at present levels of inflation a person who starts his career today and invests £1 would, on his retirement, receive a capital refund of less than 12½p? Does he therefore agree that bringing down the rate of inflation even further remains a primary aim of the Government?

I agree with my hon. Friend. Ensuring stable prices, or as near stable as we can possibly get, is the greatest social service that any Government can provide.

asked the Chancellor of the Exchequer when he expects to reply to the fifth report of the Treasury and Civil Service Committee on exchange rate policy.

I refer the hon. Gentleman to what my right hon. Friend the Chancellor said about the exchange rate in his Budget statement.

Why should the Government have intervened when the pound fell below $1·10?

Intervention in exchange markets was discussed in the G5 meeting, when it was decided that coordinated intervention by several Governments might be useful as and when conditions made that necessary.

Does my hon. Friend agree that a period of sustained dollar weakness might cause just as many problems as the recent dollar strength? Might it not now be in our interest to participate fully in the exchange rate mechanism of the EMS?

I am not too sure about the relationship between the two parts of my hon. Friend's question. I do not believe that under present conditions it would be right for us to join the exchange rate mechanism of the EMS. With regard to the weakness of the dollar to which he has referred, it might be a little early to pass judgment on that phenomenon.

asked the Chancellor of the Exchequer how much higher the total tax bill will be in real terms comparing 1985–86 to 1978–79.

It is expected to be £27·6 billion higher at 1984–85 prices.

Would the Government not have done better to use that money to get people back into real jobs and to deal with the infrastructure problem rather than have to face the ever-increasing burden of unemployment that results from Government policies?

As my right hon. Friend said a few seconds ago, capital expenditure in this country is running at the record level of over £55 billion.

In a written answer before the Budget the Minister said that a single person had to be earning £23,000 a year before he was paying less tax than in 1979. What is the figure for the same single person since the Budget?

I should plainly need notice to give a detailed answer. If the hon. Gentleman had been with us during our debate last evening he would have heard me give illustrations of people on half, average, one and a half and twice average earnings, and how they are all substantially better off than they were five years ago.

It it not misleading and useless to talk about increased tax burdens without considering the relationship of a person in work and his standard of living compared with the rate of inflation? Is it not about time for Opposition Members to stop bleating about a tax burden while calling for increased public expenditure?

My hon. Friend is not only precisely right in all that he said, but he brings clearly to the House the recognition that inflation is a far greater scourge for those who have saved and those on limited incomes. The impact of inflation on their pockets has been greater than taxation.

How does the Financial Secretary square the claim by the Foreign Secretary when he was electioneering in Oxford in April 1979 that every Labour Government put taxes up and every Conservative Government get taxes down, with the fact that the tax burden has increased by £26 billion between 1978–79 and 1985–86, and that only half of that is due to oil revenues? The present Budget will increase the tax burden by £3·5 billion. Is this not another example of broken promises by the Tories?

As I am sure those hon. Members who were present last night will remember, I pointed out that the taxes which have gone down — those on the employer—which are critical to the creation of jobs have to be taken into account, together with the ways in which the Government have radically reduced inflation by ensuring that honest taxation is preferable to the excessive borrowing levels of the last Labour Government.

asked the Chancellor of the Exchequer what he estimates to be the prevailing savings ratio for the current year; and whether he expects a higher ratio in 1985–86

Figures so far available for 1984–5 show a personal saving ratio of around 10½ per cent.

Will the Economic Secretary be good enough to answer the second part of my question: does he expect a higher ratio in 1985–86? If he does not, why is the Treasury so supine in the light of a declining savings ratio? Is he not aware that in the United States the public tend to save more when inflation is low? Will he reflect on the successful French experience of the last seven years of tax incentives for the public to invest in industrial shares?

I shall certainly answer the second part of the hon. Gentleman's question. I left it out in the interest of brevity. As is explained in paragraph 342 of part III of the Financial Statement and Budget Report, there will possibly be a small increase in the savings ratio during the coming year but it is unlikely to have any very substantial effect. As for the relationship between the savings ratio in this country and that in the United States, whatever the hon. Gentleman may say, the ratio of savings in the United States is very much lower than it is in this country. In fact, in this country the savings ratio has been above these levels only when inflation has been very high. I am glad to say that inflation has now come down.

Does the lack of any change on the taxation of pensions in the Budget mean that my right hon. and hon. Friends are happy about the very high proportion of savings that are channelled through institutional means?

We believe that savings should be channelled through both institutional means and direct investment. Many of the measures that we have taken should encourage direct investment by private individuals.

asked the Chancellor of the Exchequer what representations he has received regarding his Budget statement.

Several.

Is not unemployment likely to be higher this time next year than it is now? If so, does it not show how irrelevant is the Budget to the the situation that faces the country? Bearing in mind the increases that are due to take place in gas, electricity, mortgages, rates and prescription charges, why does the Minister not admit that after the Budget most people will be worse off rather than better off?

The House might be more interested in the remarks of the director-general of the Confederation of British Industry, who suggested, when commenting on the Budget, that the Chancellor has got it right, that interest rates should fall because the Chancellor is getting a grip on inflation and on borrowing, and that this Budget ought to be good for growth and for jobs, which is the essence of the point that the hon. Gentleman is seeking to make. It is some kind of cheek for the Opposition to refer to gas and electricity prices, when during their last period in office gas and electricity prices increased by 2 per cent. every six weeks.

While accepting all that my hon. Friend said, has it yet been represented to him that the Chancellor's proposals regarding employers' national insurance contributions on higher income earners could have a penal effect on those very enterprising firms which pay out their profits in the form of salaries to owner-directors? Will my hon. Friend turn his attention to this point to see whether he and the Chancellor can avoid hitting some of those very firms which they are seeking to encourage?

Some people have drawn our attention to that point, although not in quite those terms. However, there are far more, including the CBI, who have so far recognised the benefits and potential for those at the bottom end of the earnings scale, who may be given considerable opportunities by the recommended reconstruction of national insurance contributions.

In reply to my hon. Friend the Member for Walsall, North (Mr. Winnick) the Minister said that he had received several representations. That does not really tell us what the volume of representations has been. Is not the truth of the matter that they are coming in daily, and that although he has not yet reckoned them up they are obviously considerable?

I thought, two days after the Budget, that it would be most convenient for the House if I simply indicated that several representations had been received. Of course, many more will be coming in. I could cite other comments that have been equally supportive of the Budget, such as the comment by the Institute of Directors [Interruption.] Those who have some recognition of the problem of trying to offer people work, which I thought was of some interest to Opposition Members, said that my right hon. Friend

"has skilfully squeezed a wide range of employment and enterprise measures from a limited range of resources."

Is my hon. Friend aware that he should not listen too closely to everything that the hon. Member for Walsall, North (Mr. Winnick) says? Is he further aware that yesterday I spent a day in the west midlands visiting a very large factory and did not receive a single complaint about the Budget?

I always listen with considerable care to my hon. Friend. I know that he will be reassured when I remind him that the hon. Member for Walsall, North (Mr. Winnick) was my losing opponent in the October 1974 election.

The Financial Secretary seems to expect a big reduction in unemployment as a result of the changes in national insurance contributions, but will he take into account the fact that they will cost only £450 million in a full year, whereas the reduction in the national insurance surcharge cost £900 million last year, and even more the year before? That did not do very much good for unemployment.

The right hon. Gentleman should not underestimate the size of the reconstruction. It is a question not simply of the Government's overall contribution to the restructuring of national insurance contributions but of the redistributive effect of the £800 million odd that comes from the upper income limit. Some people are already criticising, but that makes a total of about £1·2 billion.

Have any representations been received from the building societies? If so, has my hon. Friend suggested that they might follow the example of the banks and lower their rates rather than increase them?

As far as I know, my right hon. Friend the Chancellor of the Exchequer has not received any representations, but I shall certainly draw his attention to that point.

If we accept the Financial Secretary's protestations that this is, indeed, a Budget for jobs, are we agreed that,, if by the time of the next Budget there has not been a significant reduction in unemployment this Budget will be accepted as a failure?

I was not asked for my protestations. I was asked about what representations I had received. I referred to the representations of two of the major employers' organisations in the country. I could refer to others, such as the Associaton of British Chambers of Commerce, which said that the Budget was a fair and competent package.

asked the Chancellor of the Exchequer if he will make a statement on the level of the public sector borrowing requirement for the coming year.

As my right hon. Friend the Chancellor of the Exchequer indicated in his Budget statement, we have set the PSBR at £7 billion, equivalent to 2 per cent. of GDP.

Is my right hon. and learned Friend aware that that news has been greeted with some acclaim in the City, and that it is good news for industry in this country in general, and in particular for manufacturing industry? After all, it holds out the prospect of lower interest rates and a stabilising of the currency.

I am grateful for those comments. The figures certainly signalled to the world outside that the Government are still on course and pursuing a sound financial policy that will be of considerable benefit to the economy.

In that case, might it not have been more accurate to describe the Budget as a Budget for the City rather than for jobs? If the PSBR target and the other figures in the Budget strategy represent a Budget for jobs, how is it that the impact of the Budget on the economy will not be deflationary?

If the hon. Gentleman considers the growth record of the past four or five years and the prediction of growth for the coming year, he will realise that his strictures are wide of the mark.

Will the Chief Secretary say how much of the forecast public expenditure for next year will be due to capital receipts from the sale of council houses, and does he now know what the Labour party policy is on that matter?

Without notice, I am afraid that I cannot give the projected receipts.

"End enforced council house sales, empower public landlords to repurchase homes sold under the Tories".

asked the Chancellor of the Exchequer what has been the real percentage increase in total public expenditure in each year from 1979; and what is the anticipated real level of public expenditure for the forthcoming five years.

In real terms the year-on-year percentage increases in the public expenditure planning total since 1979–80 have been 1·5, 2·7, 1·6, 1·6 and 3·2. This last figure, which relates to the year now ending, reflects coal strike costs, without which it would have been 1·2 per cent.

Is my right hon. and learned Friend aware that there is widespread concern that the planning totals have consistently been exceeded, that those totals were too high to begin with, and that it is essential to have some reduction in real terms if we are to have real tax cuts in future?

I understand my hon. Friend's concern. Provided that we contain public expenditure within the planning totals, and on the basis that there will be growth in the economy, I hope that my right hon. Friend will have increased scope for making the tax cuts that my hon. Friends all want.

In view of the very small increases in public expenditure to which the Chief Secretary has referred, is he aware that in Scotland this year rates will rise by about 20 per cent. because of a drop in rate support grant authorised by his Department and also because of revaluation? If he is approached by the Secretary of State for Scotland for more money to ease the problems of domestic and commercial ratepayers, will he make more money available for that purpose?

My right hon. Friend the Secretary of State for Scotland has made his position clear on that point. The hon. Gentleman is right to emphasise the fact that the increases are at least partly due to the domestic revaluation.

In his concern to restrict the future growth of public expenditure, will my right hon. and learned Friend remember that important services such as health and education are, for the vast majority of the electors, provided exclusively out of the public sector, and that therefore it would be quite wrong artificially to hold down the level of those services because they happen to fall in the public, rather than the private, sector?

I do not entirely accept my hon. Friend's analysis. He and the whole House will realise that there have been real increases in both programmes since we came to office.

asked the Chancellor of the Exchequer if he will transfer the responsibility for value added tax from Her Majesty's Customs and Excise to the Inland Revenue.

No, Sir. When VAT was introduced in 1972 Customs and Excise was responsible for managing purchase tax, one of the taxes replaced by VAT, and the decision to introduce VAT in the United Kingdom on a transaction basis, rather than an accounts basis, was finally decisive in favour of laying the administration of VAT to Customs and Excise rather than to the Inland Revenue.

Will the hon. Gentleman acknowledge that, in relation to tax, businesses have to concern themselves with two very different types of Government Department, and that Customs and Excise is acknowledged to have far less knowledge of the workings of business and to be far less flexible in dealing with the real problems currently faced by businesses?

I do not accept the hon. Gentleman's reservations. The taxes are very different in kind. The needs are different and so are the methods of collection. I am confident that Customs and Excise exercises its authority in this matter in a proper way.

Does my hon. Friend agree that the suggestion implicit in the question would be a retrograde step, if only because the record of Customs and Excise on making its rules and regulations available to the public has recently been rather better than that of the Inland Revenue?

I do not accept my hon. Friend's latter point, but I agree that the suggestion would be a retrograde step for the taxpayer, the country and the administration of the Revenue and Customs and Excise.

asked the Chancellor of the Exchequer if, in the light of recent experience, he will change the assumptions upon which the Treasury model computer programme is based in regard to lower wages and job creativity.

No, Sir.

Does the Treasury understand that those who advise the Chancellor assume that the lowest paid in manufacturing industry produce the lowest unit labour costs, and that if wages in the public sector go down 10 per cent. in aggregate that will increase employment prospects by 10 per cent.? Will the Chief Secretary review those assumptions and come to some better understanding, if policy is to make sense?

I assure the hon. Gentleman that we review the Treasury model's operations fairly regularly. If he is doubtful about the assumptions that are fed in, he is quite at liberty to feed in his own assumptions and have a go on the model himself.

As full industrial employment in the old-fashioned sense is unlikely to return under Governments of whatever colour, if only because of technological change, and as it is better for people to have a part-time job than no job at all, should not the Government take pride in the fact that this is a Budget for part-time jobs?

Whether part-time or full-time, we take pride in the fact that this is a Budget for jobs. A range of measures, many of which my right hon. and hon. Friends have drawn attention to, such as the restructuring of national insurance contributions, the raising of thresholds and improvements and additions to the youth training scheme and the community programme, all demonstrate that it is a Budget for full-time and part-time jobs.

Is the Chief Secretary aware that unemployment has gone up ever since the Treasury model was installed? Would it not be a good idea to get rid of this computer? Was it developed by Tycom—like the one which the Conservatives used but found they had to get rid of?

I regret to say that I cannot tell the hon. Gentleman whether it is a Tycom model. However, the basic thrust of our policies depends on sound common sense and a grasp of basic economic principles. We do not need the refinements of the Treasury model to assist us there.

Does the Treasury model show that a high proportion of people who are paid large wages are employed by big firms? Will my right hon. and learned Friend confirm that big firms have recently enjoyed a considerable increase in liquidity and profitability—as is shown by the high level of shares on the Stock Exchange—and that the change in the employers' contribution is unlikely to cause any increase in unemployment among rich people?

My hon. Friend has perceptively summed up the matter, as is so often the case.

asked the Chancellor of the Exchequer if he will make a statement on the recent rise in interest rates and their effect on industry.

Without the rise in interest rates there would have been a risk of a return to inflationary conditions, threatening the prospects for industry and for continued growth.

Is the Economic Secretary aware that the minimum lending rate of 13·5 per cent. is a major constraint on British industry and commerce and stands four square in the way of any substantial industrial expansion? Does he agree that, with an inflation rate of 5 per cent. and a minimum lending rate of 13·5 per cent., real rates of interest in Britain are about the highest that they have ever been in the past 50 years? What are the prospects for interest rates coming down so that British industry might have a less crippling rate for the price of money?

I am glad to be able to say that interest rates are now lower than when the hon. Gentleman tabled his question. British industry has been doing very satisfactorily.

"Interest rates should fall because he is keeping a grip on inflation and on borrowing."

Does my hon. Friend agree that the best way to keep interest rates low is to reduce the competition for scarce funds from the public sector and allow the private sector to create jobs by spending more money?

I have no doubt that my hon. Friend is correct to point out that the higher budget deficit which is involved in higher public expenditure places a strain on interest rates and therefore causes damage to the private sector.

Does the Minister not realise that the people sitting on the Treasury Bench are absolutely useless, except for the Lord Privy Seal and the Whip? Is he aware that his Government are hitting industries in my constituency in two ways, because a number of them are dependent upon contracts in the public sector, and at the same time he is banging up interest rates? They are still going to be laying people off, and yet they say that they are a Government who create jobs for people so that they can work. What is he going to say about that?

I am going to tell the hon. Gentleman that inflation destroys jobs and that the policy of this Government is to maintain monetary conditions which continue to bring down inflation.

Does my hon. Friend agree that the Budget at least gives great encouragement to the banks to lower their interest rates because of financial rectitude? Was he not disappointed by the timid approach of the banks in cutting interest rates by only 0·5 per cent.? Is it not time that the banks stopped making their money out of home industry and losing it overseas, and instead reduced their interest rates at home?

I was glad to see that the banks reduced their base rates, and that, of course, has now been validated in the markets. If and when conditions are such that monetary constraint can be maintained at lower levels of interest rates, that will be very welcome.

Is the Minister convinced that if interest rates were to be reduced by 1 per cent. that would have a detrimental effect on the dollar-sterling exchange rate?

The dollar-sterling exchange rate is influenced by many factors other than the level of sterling interest rates because it is measured against many other currencies as well. I believe that we should maintain short-term interest rates in this country at the level required to deliver the monetary conditions and the pressure against inflation, which is Government policy.

Does my hon. Friend share my sense of mystery as to how Opposition Members can praise the United States approach to budget deficits as an explanation for growth but be unable to recognise that the United States economy can still flourish with the differential between money and the real interest rates of the United States economy?

There are many contradictions in the Opposition's interpretation of financial affairs in the United States. We must all recognise that the large deficits in the United States have caused problems for many other countries and may well cause problems for the United States as well.

In view of the public uncertainty and concern about the Government's policies on interest rates, will the Economic Secretary elucidate the bald but very pregnant sentence in his right hon. Friend's Budget speech in which he said, without explanation, that he was increasing the provision in public expenditure figures for future years for debt interest?

I thought that that was very clearly expressed by my right hon. Friend. It was a realistic assessment in the light of current projections for interest rates. If interest rates turn out to be lower than we have projected, we shall all be very glad about the public expenditure consequences of that. But, since it is the prime purpose of our monetary policy to maintain monetary conditions to bring down inflation, we have to accept that that has a cost in interest rates as well.

asked the Chancellor of the Exchequer how many taxpayers are no longer liable for income tax as a result of his recent Budget.

Some 800,000 people on low incomes, 100,000 of them widows, who would have paid tax if I had not raised personal allowances will pay no tax at all in 1985–86.

That is an encouraging figure. The raising of tax thresholds by twice the rate of inflation, combined with the reductions in national insurance contributions, will be of real help to those on low pay. Will my right hon. Friend now address himself with urgency to the further measures that are required to eliminate the poverty and unemployment traps?

Yes, indeed. It has been a constant objective of the Government, both under my predecessor as Chancellor and myself, to reduce the effect of these traps, and particularly the employment trap. Thresholds have now risen by more than 20 per cent. in real terms over what they were under Labour. My hon. Friend is right to direct attention to the restructuring of the national insurance contributions system, the first time that such restructuring has ever been done, and I believe that it will have a very helpful effect indeed where unemployment is at its most severe.

Is the Chancellor aware that tax thresholds have risen by 10 times more than child benefit has risen over the period? Is he aware that a rise in child benefit is the only way to help the 500,000 working families with children, whom tax thresholds do not help at all?

Tax thresholds help families with children, just as they help the single and those without children, whereas an increase in child benefit helps only those with children. It is a matter of judgment as to where the Government put their limited resources. I am confident that a reduction in taxation is the best way to help the economy grow and prosper.

Has my right hon. Friend noticed that 260,000 of those who will no longer be paying tax as a result of the Budget are over working age? Does he agree that, apart from a few well-paid pensioners, such as certain Opposition Members, the Chancellor and the Treasury should, on the whole, keep their sticky fingers off the pensions that people have worked so hard to provide for themselves?

I am not sure whether my hon. Friend is praising the extent to which tax reliefs have gone to the elderly or whether she regards what has been done as excessive. The elderly benefit from the changes in the Budget. It is extraordinary for the Opposition to maintain that the proposals in the Budget concerning national insurance were derived from the Labour party manifesto. Following what the Leader of the Opposition said about that, I looked into the matter and found that all that they said in their manifesto was that the upper earnings limit for employees should be abolished. That was the one thing that I conspicuously refrained from doing.

Will the Chancellor now answer the question which he refused to answer half an hour ago? Will he confirm that if the mortgage rate is increased in the coming 24 hours, for most house owners the increase in mortgage repayments this year will more than exceed any reduction in their income tax?

That is a typically confused calculation—[HON. MEMBERS: "Answer."]—because the benefits in income tax terms will last for the entire year whereas the extra burden in mortgage interest will last for only so long as the mortgage interest rate is higher—which will be considerably less than a year.

Does my right hon. Friend agree that while it is advantageous for many thousands of people no longer to be liable for tax, even more welcome is the fact that many people who were earning too small a sum to be liable for tax will benefit from the reduction in employees' national insurance contributions?

My hon. Friend is absolutely right. It also makes an important difference to the relationship between earnings in work and income out of work. That was an important aspect that we had to change for the better, and that is what the Budget has done.

asked the Chancellor of the Exchequer what estimate he has made of the effect of his Budget proposals on the level of unemployment.

The Budget proposals will substantially improve the prospects for jobs without taking any risks with inflation.

Will the Chancellor predict the extent to which unemployment will fall before he presents his next Budget to the House?

It is most unwise to make predictions about the precise level of unemployment — [Interruption.]—because it depends on the behaviour of people — of trade unions, workers, employers and managers — throughout the economy. As the hon. Gentleman will know, the community programme enlargement alone will produce 100,000 more jobs.

Is my right hon. Friend aware that in one youth training scheme in Leicester for clerical trainees the success rate is 77 per cent. and that in another scheme for catering trainees it is 80 per cent.? Does he agree that more youth training places mean more employment?

My hon. Friend is right. The youth training scheme has been a conspicuous success. That is why we are proposing an extension of it, provided that employers are prepared to pay an adequate share of the bill, as I am sure they will be. Of course, nowhere has the youth training scheme been a greater success than in Leicester.

asked the Prime Minister if she will list her official engagements for Thursday 21 March.

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

Will my right hon. Friend take the opportunity today to make a speech about wages councils? Will she explain that it is unlikely that many people will take jobs at rates below the level that would be given to them by supplementary benefit? Will she further give the House and the country the leadership that we have come to expect from her? Will she explain that she is not in favour of a fudge and that she shares the preference of the Chancellor of the Exchequer for complete abolition?

My hon. Friend has made the point very effectively himself. The consultative document on wages councils will be out later today. I believe with my hon. Friend that, especially for young people, lower wages would mean more jobs. Those who are interested in solving unemployment will, I believe, follow that course of action.

Is the Prime Minister aware that the 1 per cent. rise in mortgage rates announced this afternoon will cause very grave hardship to millions of home-buying families? Because of that, will the right hon. Lady support those building society chiefs who favour a system for setting mortgage rates which is more rational and more stable than the present system, which follows short-term market fluctuations?

Yes of course I regret the 1 per cent. rise in mortgage rates, but I think that the building societies must be the best judge of the rates necessary to get in sufficient money to enable them to continue to meet the demand for mortgages.

Does not even the Prime Minister, who heads this high mortgage Government— [Interruption.] That is absolutely true. The mortgage rate has never been in single figures since this Government came into power. Does not even the Prime Minister understand the immense anxieties of families with a mortgage of £20,000, whose rates of repayment have gone up by over £30 a month since last summer alone? Does she think it is right that families paying mortgages should be the victims of short-term speculation by big money speculators? If she does not, will she take steps to introduce a system that will mean that mortgage payers can enjoy greater stability and greater security in the price that they pay for their houses?

Building societies can only lend money that has been lent to them. There are some 14 million or 15 million people who put their savings in building societies. They can choose where their savings go. The building societies have to pay a rate of interest that will attract the savings of 14 million-15 million people into building societies rather than elsewhere, otherwise there would not be money for mortgages. I am glad that the right hon. Gentleman is so concerned. I hope that he will also consider the need to keep down rates to counteract the increase in mortgages.

The rise in mortgage repayments that has taken place under the right hon. Lady in just the last year is bigger than almost any rate that ordinary people who are buying their houses have to pay. If the right hon. Lady is so concerned, why does she not use the powers of the Government to help the building societies, because public money would then be literally as safe as houses and people could have a stable rate of payment for their mortgages?

I repeat that the building societies have to attract the savings of the people. The people have the choice where to put their savings. It is important that the building societies have enough money to lend out on mortgage. If the right hon. Gentleman had his way, there would be far fewer owner-occupiers in any event.

Will my right hon. Friend reassure pensioners that she is looking to local authorities to continue concessionary bus passes and to improve the efficiency of their local bus services?

We have made provision for that in London, but outside London it will be up to local authorities to decide.

Is it not extraordinary that the Chief of Defence Procurement cannot be shown the documents affecting a £200 million contract? Is it not extraordinary that he was a political adviser who was then illegally appointed to be a permanent civil servant? Is it not time that the Prime Minister withdrew that appointment and did not continue to compromise the integrity of the Civil Service in the way that she has done?

The integrity of the Civil Service has not been compromised. I should have thought that the right hon. Gentleman would agree with many people who think that it is right that there should be more interchange between business and the Civil Service. It is often thought that that is one of the ways of increasing the knowledge of the Civil Service of business and how it works. As the right hon. Gentleman knows, permission has been given by the commissioners of the Civil Service for the appointment, which has now taken effect.

Did my right hon. Friend hear the extraordinary comments of the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley), who sought to equate the cost of what he called fighting the miners with the amount of money available for tax reductions? Is it not clear that the right hon. Gentleman and the Labour party could not recognise a principle if they saw one? Presumably, on the right hon. Gentleman's thesis, in 1939 it would have been cheaper if we had merely sat on our hands instead of fighting Fascism.

I do not know what view—[Interruption.] This Government could never have given in to violence and intimidation, even if the Opposition wanted us to do so.

On a point of order, Mr. Speaker.

Order. I shall take points of order later.

asked the Prime Minister if she will list her official engagements for Thursday 21 March.

I refer the hon. Gentleman to the reply that I gave some moments ago.

Can the Prime Minister clarify the position of YTS and the entitlement to supplementary benefit in the light of the Budget? The Chancellor said that the cost of his YTS plans would be £125 million in 1986–87 and would in part be offset by savings in social security payments. How will those savings be made? Will the right hon. Lady make it clear that there is no intention during the lifetime of her Government or this Parliament to make YTS compulsory and so make savings in that way?

There is no change in the arrangements for YTS. Clearly, those who are drawing amounts for YTS will not be drawing supplementary benefit. When the full YTS scheme is in place, I believe that it would be right to say to young people, "You have the choice of a job, education or training." Unemployment should not be an option. That can only be considered when that scheme is in place. I believe that the overwhelming majority of parents and people would agree with me. The hon. Gentleman may prefer unemployment for young people—we do not.

asked the Prime Minister if she will list her official engagements for Thursday 21 March.

I refer my hon. Friend to the reply that I gave some moments ago.

Now that the fears of all those in company pension schemes have been allayed by the Chancellor, will my right hon. Friend point out to those people that the only threat they face is from a Labour party committed to directing pension fund investments according to the whims of a Labour Government and not with a view to maximising the profits of the members of such funds?

Yes, the fact that the threat has been made makes it more unlikely that the Opposition will ever be in a position to carry it out.

What effect will the Budget have on unemployment in the northern region, where unemployment has increased every month since the right hon. Lady's Government came into power, and where the unemployment rate is still the highest in the country outside Northern Ireland? What possible hope can there be for the north in this "do nothing" Budget? Will the right hon. Lady set up an inquiry into the special problems of the northern region?

I hope that the north and the north-west will gain from changes in both the YTS and the community programme, which should provide more jobs, particularly for those who have been unemployed for a long time. Although unemployment is very high in the north, indeed it is the highest of all, the wages in that region are also comparatively high. They are the third highest in the country. The two might be related.

asked the Prime Minister if she will list her official engagements for Thursday 21 March.

I refer my hon. Friend to the reply that I gave some moments ago.

Does my right hon. Friend agree that the country is faced with a tragic paradox: with, on the one hand, massive unemployment, and, on the other, a tremendous skill shortage? Therefore, will she use all her powers to urge the Manpower Services Commission to set up long-term training for young people, lasting for two years or more, to provide the skills that industry vitally needs?

My hon. Friend is correct. In spite of unemployment and massive amounts spent on training, universities and polytechnics, there is a skill shortage. We hope that the measures announced this week, both the switch in the universities to more engineering and technology courses and the extra money for YTS, will result in training young people for some of the jobs that need higher skills. This is the biggest investment in the training of young people that has ever been made.

The Prime Minister has again reiterated that lower wages means more job creation. How many jobs does she estimate that the chairman of ICI, in taking a 65 per cent. wage increase, will have cost the work force at ICI?

ICI has had, as the hon. Gentleman knows, a record year. I hope that he is pleased that it is one of the outstanding companies in Britain. With regard to the link between wages and jobs, between 1974–1984, in the United States earnings were down by 10 per cent. and jobs were up by 21 per cent. In the United Kingdom over the same 10 years, earnings were up by 19 per cent. and jobs were down by 4 per cent. That would seem to show an effectively close link.

asked the Prime Minister if she will list her official engagements for Thursday 21 March.

I refer my hon. Friend to the reply that I gave some moments ago.

Will my right hon. Friend take time today to study the situation in Hackney? Does she agree that if this Labour-controlled council fails to set a rate it will not be able to pay its 7,000 employees, and any claim that it is defending jobs will be seen to be sheer hypocrisy?

I agree with my hon. Friend. If the council does not set a legal rate the consequences will fall on its staff and the electorate—both of whom the council will be punishing—and possibly on its future as well.

asked the Prime Minister on how many occasions since 1979 the United Kingdom has availed itself of the provisions of the North Atlantic Treaty Organisation's agreements with the United States of America for the supply or use of equipment outside the North Atlantic Treaty Organisation area.

None, Sir. I know of no NATO arrangements of the kind suggested by the hon. Member.

Why then, under this agreement, should Mrs. Jeane Kirkpatrick write in The Times on 4 March that precisely such an arrangement made it possible for us to get all the American intelligence that we wanted during the Falklands campaign? When did the right hon. Lady learn from American intelligence of the recall signals on 1 and 2 May from Argentina to the Belgrano? When did she know from American intelligence?

The North Atlantic Treaty provides only for mutual defence in the North Atlantic area. Members of the Alliance consult on a wide range of issues inside and outside the treaty area that affect their common interests. Any arrangements made are on a bilateral basis—nothing to do with NATO.

On a point of order, Mr. Speaker. During Question Time the hon. Member for Christchurch (Mr. Adley)—incidentally, that is where I happened to be, with lots of other people, with the Royal Air Force during the war—suggested that Opposition Members would actually accept a policy of appeasement towards dictators and Facism. May I draw to his attention and the attention of the House—

Order. That is not a point for me. The hon. Gentleman must find other methods of drawing the matter to the attention of the House—

rose—

Order. We have a particularly heavy day, with two statements, business questions and a long list of speakers who wish to take part in the Budget debate. If it is a point of order that I can answer, I shall do so, but the hon. Member for Liverpool, Walton (Mr. Heffer) must not try to reply to the hon. Member for Christchurch (Mr. Adley) through a point of order.

Is not the hon. Member for Christchurch misleading the House when he fails to tell hon. Members that it was the Anglo-German Friendship Society, supported by the Conservative party—

Order. This is an abuse. I must ask the hon. Gentleman to desist. Business questions.

Further to that point of order. Mr. Speaker.

Order. I gave the hon. Gentleman an opportunity to put a point of order to me, and he is now seeking to extend Question Time because he disagrees with what the hon. Member for Christchurch said.

No.

Order. That is what he is doing.

No.

Put a point of order to me, and I shall deal with it.

I am putting a point of order to you, Mr. Speaker, on the basis that it is your duty to protect the interests of Members of the House. I say that Opposition Members have been deliberately misrepresented because of the statement made by the hon. Member for Christchurch. I believe, in the interests of the House and of honesty, that he should withdraw that statement and learn a bit of history.

Order. Every day we hear things in the House that hon. Members disagree with.

It is a fact.

The hon. Gentleman must find other methods of raising the matter.

On a point of order, Mr. Speaker.

Well, Mr. Ryman.

Despite your disdain, Mr. Speaker, I have a genuine point of order, and it is this. Is it or is it not in order during Prime Minister's Question Time for sycophantic Tory Back Benchers to ask a supplementary question that is not within the Prime Minister's responsibility, but is simply for the purpose of making a cheap, partisan point?

I do not think that that is a matter for me, either.