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National Finance

Volume 129: debated on Thursday 10 March 1988

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Forestry

1.

To ask the Chancellor of the Exchequer what estimate he has made of the revenue impact for the Exchequer of the removal of all special taxation provisions for forestry development.

The income tax forgone is currently estimated at some £10 million. No information on which to base an estimate of the cost of capital tax reliefs is available.

I am grateful to the Minister for his half helpful reply. Does he realise that most current commercial afforestation is carried out despite the objections of those who care for our landscape and wildlife and not especially for timber production but to provide tax dodges for the very rich? I do not expect the Minister to give away any Budget secrets, but will he at least confirm that there can be no social or economic justification for allowing the present tax regimes to continue?

I note what the hon. Gentleman says, although some people would point out that forestry is important for employment in some rural areas and for the pulp and paper industries. The hon. Gentleman will be aware that we have introduced the broadleaved woodlands scheme so that there can be a better environmental balance in some of the forests that are being developed.

When my right hon. Friend is considering matters affecting the taxation of forestry, will he bear in mind that the many thousands of acres of forest in Scotland and many hundreds of acres in my constituency are an essential part of the balance of the economy in many parts of Scotland, including my constituency, and will he not be taken in by all the noise of those who have never been near the forests?

I note what my hon. Friend says. I said that forestry was important for employment, especially in remote rural areas. It is true that the industry operates on an extremely long time scale.

Is the Minister aware that inefficient use of public money on forestry does not stop with tax exemptions? Is he aware that, under the provisions of Wildlife and Countryside Act 1981, landlords are compensated not for planting trees but for not planting them? Is the right hon. Gentleman aware that one Highland landlord raked in almost £500,000 for not planting trees in a Caithness bog? When will the right hon. Gentleman put an end to this scam?

I note what the hon. Gentleman says and shall draw it to the attention of my right hon. Friend the Secretary of State for the Environment.

Does my right hon. Friend recognise that in the October gales more than 1 million trees were lost and that they will not be replaced without suitable tax provisions for those engaged in planting forests?

Is it not true to say that, not only in forestry, but in business expansion schemes, enterprise zones, bed and breakfasting and executive share options, tax avoidance is mushrooming? Will the right hon. Gentleman agree that the money which is squandered for no real economic benefit on the tax havens of a few would be better invested in a better National Health Service for us all?

I note that the hon. Gentleman takes advantage of a question on forestry to repeat his speech of the other day about tax breaks. I note also that the hon. Gentleman is not in favour of tax incentives that help small companies to raise capital or enable rundown areas of cities to be regenerated.

Self-Employment

To ask the Chancellor of the Exchequer what has been the increase in self-employment in the British economy since 1979.

Self-employment fell between 1974–79, but has since risen in every year. The total increase since 1979 is nearly 1 million.

Does my right hon. Friend agree that the striking increase of more than 50 per cent. shows that substantially more people — [HON. MEMBERS: "Reading".]

Order. I think that the hon. and learned Gentleman is referring to his notes.

Does my right hon. Friend agree that the striking increase of more than 50 per cent. in the number of people in self-employment shows the substantial interest of many people in the freedom and independence provided by self-employment? Will he agree to ensure in the monitoring work being carried out by his Department that no pressure is exerted on self-employed people to become employed and that no one is deterred from self-employment by pressure from his Department?

On the first point, I entirely agree with my hon. and learned Friend. On the substantial point about the Inland Revenue, I note my hon. and learned Friend's concern, but whether an individual is self-employed is a question of fact and general law. Essentially, the test is whether someone is in business on his own account. If he is, the Revenue will treat him as self-employed.

The enterprise allowance scheme has allowed a number of people to become self-employed. However, my research shows that a number of them could have survived in business had an allowance been available to them in the second and even in the third years. Some are failing unnecessarily at the end of the first year. Will the Minister consider examining the enterprise allowance scheme with a view to funding people for a second year?

I note the hon. Gentleman's point. I think he will agree that the enterprise allowance scheme has been very successful. The number of entrants has increased by about 70 per cent. since 1985. Of those who remained on the scheme for more than a year, more than 60 per cent. were still trading two years later and in most cases had employed further staff by then. It has been an exceedingly successful scheme.

Does my right hon. Friend agree that it is a sign of the health of our economy that more and more people are self-employed, whereas under the last Labour Government the self-employed represented a declining proportion of the total?

My hon. Friend is quite correct. Self-employment has grown in every region in the country in recent years, whereas, as my hon. Friend said, it fell between 1974 and 1979. It now stands at its highest level since 1950.

Value Added Tax

3.

To ask the Chancellor of the Exchequer whether he has any plans to discuss with his European Economic Community counterparts the question of zero rates on value added tax.

The Economic and Financial Affairs Council will discuss the Commission's proposal for tax approximation in the light of the report by its economic policy committee, which is expected in the spring.

Does the Minister think that the Prime Minister's assurances during the last election campaign that there was no question of imposing VAT on food or children's clothes should be treated with more, or less, confidence than her assurance on 23 April 1979, before the 1979 election, that there was no question of massive increases in value added tax?

My right hon. Friend made it clear to the Ecofin Council in November that we would not allow to come into force any proposals that would in any way impinge on our election promises to retain zerorating of VAT on those products, and that stands.

Does my right hon. Friend agree that many Eurofanatics are more concerned with harmonisation than with common sense? They should be told to mind their own business in matters that do not affect Europe but concern this country alone, and be told that we still run our own affairs, thank God.

My hon. Friend has put an opinion that clearly has widespread support in this country. The Government have made it clear that they have difficulties with many of the proposals that have been put forward by Lord Cockfield. Those difficulties are shared in different ways by several other countries. Indeed, we find some of the proposals quite unacceptable.

Will the Minister heed the report of the Treasury Select Committee, published this morning, which suggests that VAT harmonisation is in no way essential to the achievement of the internal market, which, contrary to the views of some hon. Members who have been calling out, is in the interests of this country?

The hon. Gentleman is correct. The Treasury Select Committee echoed a point that I and the Government have made. We welcome the moves towards an internal market, but do not believe that it is essential to harmonise all excise duties or necessarily to approximate all VAT rates.

As Lord Cockfield seems unable to understand the messages that have gone from the House previously, and for the avoidance of doubt, will my hon. Friend write to him and explain in explicit terms that his proposals for the approximisation of VAT, and especially for the abolition of zerorating, are totally unacceptable to Her Majesty's Government and to the House of Commons?

The noble Lord is perfectly well aware of our views. Over the years he has shown an ability to learn from experience and argument. After all, he was once the chairman of the Price Commission, and subsequently realised that there were less bureaucratic and more effective ways of reducing inflation. A similar relevation may occur in this matter.

Inquiring with interest whether the Chancellor of the Exchequer will be consulting the Almighty as well as other Finance Ministers in Europe before he imposes VAT on the Bible, may I ask whether, in pressing for allowing different rates of indirect tax, the Minister will draw to the attention of those other Finance Ministers the fact that the United States has a large internal market without integrating or harmonising state or local taxes? Will he further press on them that if they want industrial competitiveness they need to move beyond harmonisation of taxation to a joint or common industrial strategy in the European Community?

The hon. Gentleman is correct. The United States has achieved what is by any standards a free and open internal market and has done so without requiring its states to give up some freedom to operate different rates of taxation. Clearly, the United Kingdom Parliament should retain greater freedom than an individual state of the United States of America.

Vehicle Excise Duty (Coaches)

4.

To ask the Chancellor of the Exchequer what representations he has received seeking changes to vehicle excise duty for coaches.

My right hon. Friend has received a forceful representation from my hon. Friend.

To avoid framing any questions that would enable my hon. Friend to make a bland comment about not revealing Budget secrets, may I ask whether he is aware that vehicle excise duty is £100 for a small private car but £84 for a 50-seat coach? In view of the pollution, congestion and road damage done by those coaches, is that not a grotesque distortion of the tax system? So that we may know whether to blame the Treasury or the Department of Transport, can my hon. Friend make it clear whether he has received any specific proposals on that matter from the Department of Transport?

The Government have only one policy on every issue, and that is the collective responsibility of the whole Government. However, I note my hon. Friend's point. I advise him that this country is unique in operating a policy whereby categories of vehicle are required to cover, both by VED and their fuel taxes, the track costs that they generate. Coaches cover their track costs.

Instead of increasing vehicle excise duty for coaches, will the Minister consult his right hon. and hon. Friends at the Department of Transport and suggest that the Treasury charges British Rail £84 for every passenger vehicle while, at the same time, meeting its track, signalling and infrastructure costs, which is what happens with the coach business at present? That would at least lead to lower rail fares and go some way towards the principle of fair competition about which the Conservative party is always talking.

I note the lion. Gentleman's point. Of course, in assessing whether fair competition applies between rail and road, one has to take into account not only vehicle excise duties but the fuel costs borne by the different industries.

I welcome my hon. Friend's statement that road taxation should cover vehicle track costs. Will he consider carefully whether that policy is being implemented in relation to coaches?

Before I came to the Dispatch Box today I checked to confirm that coaches cover their track costs through a mixture of VED and fuel duties.

Does the Minister accept that any additional VED on coaches would make them less competitive? Does he understand that that has implications for my constituency, where most of the United Kingdom's coaches are built? We would not want additional VED on coaches and the Minister should not go down that route.

I shall certainly ask my right hon. Friend the Secretary of State for Transport to take note of that point as well as all the other points that have been made in this exchange.

Vat (Confectionery)

5.

To ask the Chancellor of the Exchequer what value added tax revenue is expected from United Kingdom confectionery sales in the current financial year; and if he will make a statement.

VAT on confectionery, including chocolate biscuits and similar products, is expected to yield some £450 million.

I thank my hon. Friend for that reply. On behalf of the House may I extend warm birthday congratulations for tomorrow to my right hon. Friend the Chancellor of the Exchequer and hope that he may still enjoy confectionery despite the penal rates of taxation imposed upon it. Does my hon. Friend agree that there would be considerably more employment in the manufacture of confectionery if, along with other EEC countries, we re-regulated VAT on confectionery in line with food?

Obviously I join my hon. Friend in wishing my right hon. Friend a happy birthday. I understand that I must extend the same congratulations to my hon. Friend, because he shares a birthday with my right hon. Friend. I am sure that confectionery will be in order.

I have noted the points that my hon. Friend has persistently and assiduously made in the House on behalf of an industry which is of great importance to his constituency and the country. He will appreciate that I cannot be more specific during this pre-Budget period.

Does the Minister accept that it is ridiculous that children at birthday parties tomorrow who eat cookies with chocolate on the outside will have to pay VAT on that chocolate, but that those who eat cookies with the chocolate on the inside will not pay VAT?

I pay tribute to the hon. Gentleman, who has also pursued the interests of the confectionery industry in Adjournment debates and otherwise. He has displayed a great knowledge of the details and complexities of the industry. The hon. Gentleman should take up his argument with his right hon. Friend the Member for Leeds, East (Mr. Healey), who imposed VAT on confectionery in the first place.

Is VAT constant on all confectionery at a relative level? If so, why is some confectionery so much more expensive than others, although the same items are involved? Why are humbugs and fudge up the road so much more expensive than they are in the House of Commons?

Humbug is in more plentiful supply in some places than in others and, doubtless, that determines the price. Taxation does not determine the price. The rules of taxation, as they apply to biscuits, are somewhat strange and include as confectionery only buscuits that are entirely covered with chocolate. Those that are partially covered with chocolate are, for some reason, exempt.

Personal Taxation

6.

To ask the Chancellor of the Exchequer what proportion of earnings of a married male on average earnings with a non-working wife and two children were taxed by (a) income tax, (b) national insurance contributions, (c) value added tax, (d) other indirect taxes and (e) domestic rates, in 1979 and 1987.

I refer the hon. Gentleman to the answer I gave to my hon. Friend the Member for Hornchurch (Mr. Squire) on 18 December 1987.

I thank the right hon. Gentleman for that answer. Does he agree that tax incentives are now overdue after the promises given in two general elections? Will we soon see those tax incentives? Does he also agree that the vast majority of people would rather see some incentives put into the National Health Service and into small businesses?

I note what the hon. Gentleman says and that he is singing a very different tune from the one that his party sang last year. He will understand that I cannot anticipate my right hon. Friend's Budget.

Does the question imply that taxation should be lowered? Does my right hon. Friend expect the Liberal party to support any forthcoming tax cuts, or does the hon. Member for Southport (Mr. Fearn) represent a separate Southport branch of the Liberal party?

That seemed to be the clear implication of the hon. Gentleman's question and, as I said, there seemed to be a very different approach last year.

It might be more useful to examine the Government's position rather than the Liberal party's position. In a very helpful written answer, the Financial Secretary told the House on 28 January that in the last year of the Labour Government total tax and national insurance contributions were 33·8 per cent. of the gross domestic product, yet between 1981 and now the same figure has averaged well over 38 per cent. In those circumstances, how can the Government claim that the Conservative party will give people more say over their spending decisions?

I note the hon. Gentleman's very interesting intervention which, again, clearly seems to be a plea for reduced taxes, which I note.

Pay Increases

7.

To ask the Chancellor of the Exchequer what level of pay rise would be required by the average employee paying tax in order to compensate for price increases over the past year.

Given the tax cuts in the last Budget and the low rate of inflation, the pay rise needed to compensate fully the average tax-paying employee for the rise in prices over the past year is about 1½ per cent.

Does my right hon. Friend therefore agree that claims for pay increases of 8, 9 and 10 per cent. can only be damaging to the economy and possibly lead to increased inflation and the loss of jobs?

My hon. Friend is correct in much of what he says. Unlike the previous Labour Government, we do not believe in a prices and incomes policy, but there is no doubt whatever, and the country should be aware of this, that excessive of pay increases, which are certainly not warranted by the figure that I quoted, are liable to lead to a loss of competitiveness and a loss of jobs.

Does the Chancellor agree that other aspects of Government policy, particularly the large increase in electricity prices and the way in which rates are being forced up in the shire counties into double figure increases through the Government's reduction of rate support grant, have put added burdens on people in employment? Should not those facts be taken into consideration in determining the average increases that those people need to maintain their living standards?

The figure that I quoted at the beginning took all those factors fully into account. The plain fact is that under the last Labour Government the real take-home pay of a married man with two children who was on average male earnings rose by less than 1 per cent., but under the present Government the take-home pay of a married man on average earnings with two children has gone up in real terms by 23 per cent.

I think it right that the House should be more concerned about the number of jobs, which, although rising fast, would rise even faster if there were greater moderation in pay claims.

Does my right hon. Friend agree that the average employee has benefited from reduced rates of taxes and that there is some evidence that his own receipts have gone up since the reduction of rates of tax and duty? Why does he suppose that he is opposed in these matters by the Opposition Benches? Could it be that the Opposition's taxation policies owe more to spite than to reason?

My hon. Friend is right that, although, under Labour Governments, taxes go up, the tax revenues have not risen nearly as much as they have under the Conservative Government, who have been able to reduce rates of income tax. There will be one occasion on which the Labour party can show more clearly its attitude towards reductions in taxation, and that will be next week.

Asset Sales

8.

To ask the Chancellor of the Exchequer what is the expected level of asset sale receipts for 1987–88; and if he will make a statement.

I am sure that the Prime Minister's guide to household economics says that capital asset receipts should be reinvested in capital projects and not used to fund current expenditure. In the light of that, can we expect the sum that the Financial Secretary mentioned and any sums that may accrue in the next financial year to be used to fund infrastructure projects in the community and to invest in the health and education of our people?

As the hon. Gentleman will be aware, capital spending is broadly, in real terms, around the same level as it was in 1979. There has been a very considerable increase in expenditure on roads, railways and other items of infrastructure, but I am sure that the hon. Gentleman's plea for more expenditure on infrastructure has been noted by my right hon. Friend the Chief Secretary.

Does the Financial Secretary agree that, while we welcome the progress that has been made in electricity and other big asset sales, now is also the time to look at some of the lesser assets that are languishing in the public sector, such as the PSA and Ordnance Survey, and to bring them forward to be included in this excellent programme?

I note what my hon. Friend says. I am sure that he will welcome yesterday's announcement about the Professional and Executive Register, which is one of the smaller agencies of precisely the sort to which he rightly says we should give attention.

Fortunately, there is a long way to go. As the hon. Gentleman well knows, we are expecting the implementation of water and electricity privatisations to occupy us for a little time yet.

Will my right hon. Friend accept my congratulations on this excellent figure, which is a reflection of how successful the Government have been in transferring ownership of these assets from the state to individual shareholders? Does he not think that it is time he speeded up the process by privatising British Coal and British Rail?

I note what my hon. Friend says. We have said that we have no present plans to privatise those industries. As I said to the hon. Member for Sunderland, South (Mr. Mullin), privatising the electricity and water industries is a considerable task in itself at present.

Interest Rates

9.

To ask the Chancellor of the Exchequer if he will make a statement on the present level of interest rates.

In view of the present balances on trade and external payments, and the serious extent to which both will be aggravated by this week's predictable surge of sterling, how does the Chancellor explain last month's hike in interest rates—or was he overruled?

I am not sure what the hon. Gentleman means by the predictable rise in sterling; I was not aware that he had predicted it. We remain committed to maintaining a policy of exchange rate stability. That was agreed by the Group of Seven Finance Ministers and central bank governors in the communiqué of 23 December last year. While stability certainly does not mean immobility, any further significant rise in the exchange rate, certainly against the deutschmark, would in my opinion be unlikely to be sustainable.

Does my right hon. Friend agree that amid all the speculation about the likely next movement of interest rates and the sterling exchange rate, what really matters is keeping a continuous downward pressure on inflation? That is likely to be far more valuable to British industry than any minor damage done by a 3 per cent. rise in the exchange rate.

My hon. Friend is right. The battle against inflation is at the core of the Government's policy. That is why it is necessary, as I have said time and time again in the House, to maintain interest rates at whatever level is necessary to keep downward pressure on inflation.

Will the Chancellor bear in mind the words of the president of the CBI, who said yesterday that allowing the exchange rate to develop in this way would produce a serious threat to British industry? Is he aware that most of us thought we understood his policy, which was stability? It does not seem to be stability now. Can he explain it?

I was certainly aware of what the president of the CBI said, and I fully understand why he said it. It is also right to remind the right hon. Gentleman that he said something else, too. He said that it was very much the responsibility of business and industry to contain their costs.

In view of Britain's trade balance and the lower level of oil prices, does my right hon. Friend consider that the present strength of sterling is due to our very high interest rates, or mainly to overseas confidence in the Government's ability to manage the economy?

It is clear that confidence throughout the world in the British Government's management of the economy is a major factor in the strength of the pound.

Do not the combination of the high pound, high interest rates, and high and worsening trade deficits emphasise the economic and social case for a Budget that puts investment before tax cuts? Does the right hon. Gentleman recall the statement that he made on the question of exchange rate stability, and the statement he made to the Financial Times on 10 November to the effect that the pound should not rise above Dm3? Has he changed his mind, or has the Prime Minister changed it for him?

I never quoted any particular figure, and if the Financial Times quoted one attributed to me it was wholly wrong. The hon. Gentleman should recognise that the policies that we have been pursuing have made this country's economy stronger than it has ever been before, with living standards at record levels, low inflation, output at record levels, exports at record levels—a far better performance than most of our major competitors.

If the Opposition Front Bench are correct in saying that high interest rates discourage investment, how is it that we have seen a more prolonged period of sustained investment in this country despite moderately high interest rates? Will my right hon. Friend confirm that he will persevere with his monetary policy until we achieve our declared manifesto aim of stable prices?

I can certainly confirm what my hon. Friend has asked me to confirm. I can certainly give that assurance. He is right to point out that the policies that we have been pursuing for nearly nine years, and which have brought unprecedented success, were condemned and criticised every inch of the way by the Opposition.

Public Services (Finance)

10.

To ask the Chancellor of the Exchequer what assessment he has made of the relative effects on the level of resources available for financing public services of (a) reducing taxes on higher income earners with the aim of stimulating economic activity and generating higher revenue in the longer term and (b) devoting the same amount of money as would be preempted by such tax cuts directly to expenditure on those services; and if he will make a statement.

The success of the Government's economic strategy, of which reductions in income tax are an important part, has created increased resources both for the provision of priority public services and for higher living standards in general.

I thank the Minister for that answer. Is it not true that a Government-commissioned report by Stirling university could find no basis for assuming that cuts to higher tax earners would lead to any incentives? Further, is it not true that a reduction of 40 per cent. on higher income earners would cost the Exchequer £1·7 billion, a sum that would go far towards supplying the underspend of the National Health Service and would more than fund the package of proposals made by the Association of London Authorities to meet the crisis in this capital city? Is it not time that the very rich were asked to forgo their luxuries in order to meet the needs of the majority of the population?

The truly substantive point is the extent of revenue raised by the Exchequer in order to finance precisely those public services that the hon. Lady cares about. The proportion of total income tax paid by the top 5 per cent. as risen from 24 per cent. in 1978–79 to 29 per cent., despite the substantive cuts in the top rates of income tax in earlier Budgets.

Will my right hon. Friend explode the myth peddled by the Opposition that cutting taxes and increasing public expenditure in certain targeted areas are alternatives? In a thriving economy such as ours they are not alternatives, particularly when we have lower taxes which create more wealth and result in more revenue to the Treasury.

My hon. Friend is correct. I share his view that worthwhile public expenditure is important. That is why this year we have been able to increase public expenditure on programmes by £4½ billion. The revenue to finance that depends on a successful economy, and it is our judgment that past reductions in income tax have helped to make the economy successful, and that has financed that public expenditure.

What research has the Chief Secretary undertaken to show whether a top rate of income tax of 60 per cent. is a disincentive to the quantity and quality of work undertaken, as opposed to remuneration for it?

On the general point, the hon. Gentleman will recall that during the period when we had excessively high rates of income tax a clamour arose when many skilled people such as surgeons, doctors and others left the country. That was a clear illustration of what happens with unduly punitive tax rates.

Economic Growth

11.

To ask the Chancellor of the Exchequer what is the current rate of economic growth.

The Autumn Statement forecast growth in 1987 of 4 per cent. I shall be presenting my latest estimate in my Budget next week.

Is it not good news that the 1980s have seen the fastest sustained period of economic growth since the second world war, with considerably faster growth than our European competitors? Does the Chancellor feel that the country has yet fully come to terms with our rise up the international league table from the relegation zone to championship status?

My hon. Friend makes a very good point. Certainly it is the case that during the 1960s and 1970s we had the lowest rate of economic growth of all major European countries, and that during the 1980s we have had the highest. I think that the country has an inkling of this, and that may have accounted, among other things, for the general election result last year. But Opposition Members seem to find it particularly difficult to hoist this on board.

If the Chancellor is right in saying that things are going so very well, why will he not give the National Health Service a better deal?

In the Autumn Statement in November I announced the biggest increase in spending on the National Health Service that had ever been announced for any one year.

Will my right hon. Friend concede that the present growth rate is not sustainable, and, since it is now claimed that he does not have the political support of the Prime Minister for maintaining the pound in the European exchange rate mechanism, will he reintroduce monetary controls?

I do not know what my hon. Friend means by monetary controls. It sounds like some kind of socialistic intervention, which I would certainly not endorse.

If the Chancellor is so confident about the prospects for economic growth in the coming year, would he care to reflect on the continuing low level of investment, the worsening balance of trade, the worsening balance of payments and now, it would appear, the pound going into free float against the deutschmark? The Chancellor said very clearly on 10 November that his objective was to keep the rate below Dm 3. He used to be proud of having devised what he called managed floating. Is it not now rather less management and rather more floating?

I stand entirely by what I said at the September meeting of the International Monetary Fund, and there was nothing about Dm 3 there. The Financial Times must have been mistaken on that point. More fundamentally, the hon. Gentleman is wholly mistaken, because what is being shown at the present time is the confidence of the world in the British Government and the economic policy and the economy of this country.

While congratulating my right hon. Friend and the Government on what they have achieved for the economy of our country, and while industry can certainly cope with relatively high interest rates, may I ask whether he is not now a little concerned about the exchange rate, because this may well undermine the competitive position of British industry in the world?

I entirely understand what my hon. Friend is saying. Clearly, we do not want an excessively high exchange rate, but, by the same token, nor are we prepared to see attempted salvation through devaluation, which is espoused by the Opposition, but is the route to higher inflation.

Vat (Funeral Charges)

13.

To ask the Chancellor of the Exchequer if he has received any representations seeking zero-rated value added tax on funeral charges.

Is the Minister aware that, on average, about 10,000 people die each week and that the National Association of Funeral Directors has estimated that the present VAT arrangements result in the Treasury receiving between £14 million and £18 million a year, which is, in effect, a tax on death? Will he look at the possibility of giving tax relief on simple insurance schemes, which would give reassurance to many elderly people that their funerals have been paid for, and result in reducing their savings below the £6,000 a year capital limit which prevents them from getting benefit?

I understand the point that the hon. Gentleman makes. The Government recognise the inevitable sadness at the time of bereavement by exempting essential funeral charges from VAT. We do not have the power, however, under our treaty obligations and successive directives on VAT to change that from exemption to zero rating, but I will draw to the attention of my right hon. Friend the point that the hon. Gentleman has made about insurance policies for funerals and the costs of bereavement.

Industrial And Commercial Profitability

14.

To ask the Chancellor of the Exchequer what are the latest figures for the level of industrial and commercial profitability.

The net rate of return of non-North Sea industrial and commercial companies was 8·9 per cent. in 1986—higher than in any year since 1973. 1987 is likely to see a further rise.

Does my hon. Friend agree that the continued confidence of industry and commerce about future prospects contrasts with the forecasts of gloom and doom due in the autumn that we heard from Opposition spokesmen last May and June? Is not the major achievement of the Government the very changed attitude that now exists to company profitability?

My hon. Friend is right, and what he says is borne out by the CBI survey, which shows strong growth in manufacturing investment and manufacturing production. Opposition Members say those words because they know of no others, even if they have no correspondence with reality whatsoever.