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Oral Answers To Questions

Volume 175: debated on Thursday 5 July 1990

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National Finance

Bank Loans


To ask the Chancellor of the Exchequer what reaction he has obtained to his appeal to the banks for greater care in offering loans to their customers.

My remarks on the marketing of credit were addressed to all the lending institutions. There are encouraging signs that they are taking the matter very seriously.

While welcoming the recent attention paid to that important matter by my right hon. Friend, may I ask whether he is as concerned as I am by the recently issued figures showing that credit is still far from being under control? Does he accept that the financial institutions still engage in practices that pressurise people into effecting credit and that are far from the traditional practices in some corners of the City of London?

Has my right hon. Friend given any consideration, even at this late stage, to the possibility that the banks and building societies should be required, on a temporary basis, to make special deposits with the Treasury, thereby limiting their opportunities to encourage people to engage in irresponsible credit-taking?

I congratulate my hon. Friend on his well-deserved honour in the recent birthday honours list which will give considerable pleasure to his many friends.

On my hon. Friend's specific points, I confirm that I share his view that the volume of credit being advanced is still higher than I would wish. That means that we will retain a level of interest rates higher than it would be otherwise. On his advocacy of special deposits, I feel that, alas, their disadvantage is that their practical effect might be to raise rather than to reduce interest rates which would be difficult territory. The prime difficulty with the activities of lenders lies not with the banks or building societies, but elsewhere. Sir Gordon Borrie, the Director General of Fair Trading, has expressed his view on that matter.

Is not it clear that the policy of relying on a single instrument for the control of credit is not working? Should not the right hon. Gentleman pay more attention to the hon. Member for Brentwood and Ongar (Sir R. McCrindle) and think more seriously about proper credit controls, rather than rely on a weak form of exhortation?

My recent speeches were related not to credit controls, but to the marketing of credit. Credit controls are a separate matter. Although I understand the right hon. Gentleman's advocacy of them, I do not believe that a deregulated economy without exchange controls would be even remotely effective.

Does my right hon. Friend accept that when he appeared before the Treasury Select Committee, some hon. Members pointed out that organisations like the Halifax building society were making offers such as, "Take a second mortgage and have the trip of a lifetime round the world"? Many of us are pleased that, at long last, the Treasury is taking the view that long-term investment is good for the country, but that people mortgaging their homes for holidays is the way to financial and economic disaster.

I entirely share my hon. Friend's view. He will be aware that following the Jack report, a code of practice to cover the banks" and building societies" relationships with customers, including credit marketing and the use of confidential information, is being drawn up under the chairmanship of Sir George Blunden. I welcome that and look forward to the code in due course.

When perfectly sensible suggestions such as those made by hon. Member for Brentwood and Ongar (Sir R. McCrindle) were being put forward by the Opposition, they were derided by Treasury Ministers. Why does the Chancellor believe that the same ideas are now gaining currency among Conservative Members?

I have yet to hear any sensible ideas emanating from Opposition Front-Bench spokesmen.

Will my right hon. Friend resist any suggestion that we should return to the stupidity of special deposits? Does he agree that they will work only if we reintroduce exchange controls which is quite against our economic philosophy and that of the European Community?

My right hon. Friend touches on an important point, but I reiterate what I said a few moments ago. There is a very real danger that special deposits would have the practical market effect of driving short-term interest rates up, not down.

Balance Of Payments


To ask the Chancellor of the Exchequer when the monthly balance of payments deficit was last under £1 billion.


To ask the Chancellor of the Exchequer when the monthly balance of payments deficit was last under £1 billion.

Does not such a high balance of payments deficit need to be financed across the exchange rates? Does not it cause high interest rates? If the Government could control the deficit, would not that contribute to reducing interest rates?

The hon. Gentleman's question referred to the current account, not to the balance of payments which, by definition, cannot be in deficit. I do not believe that the current account deficit is a force for high interest rates. Interest rates are determined largely by domestic factors. The main reason why we need the present level of interest rates is to get on top of inflation.

Is the Minister aware that since the last election the balance of payments deficit figures have been utterly appalling? After 10 years of having a Conservative Government in control of our economic affairs, why do we have such huge balance of payments deficits, and the highest interest rates and inflation of any comparable western European country?

We also get the same questions week after week from the hon. Gentleman. It is a pity that he cannot comment on the highest rate of growth of any EC country other than Spain and that he cannot concentrate on the fact that Britain has had such dramatic investment growth and that our rate of inflation is very much lower than it was when the Labour party was in Government.

Is not one of the reasons that we have a balance of trade deficit the fact that whereas most people would obviously far prefer to buy British goods, which are of far higher quality and much more reliable, many people do not know what is British? For example, did my right hon. Friend know that Sierra and Granada cars are not assembled in Britain? Will he point out to people that if they want to buy a British car, they should take great care to buy British and not foreign-assembled goods?

I am sure that hon. Members will pay attention to what my hon. Friend has said, but the main reason why we have a current account deficit is simply excess demand because of changes in monetary policy in 1987 and not a lack of competitiveness. If it was a lack of competitiveness, we would not be experiencing such a spectacular growth in exports. Exports in the three months to May are up some 11 per cent. compared with the same period a year ago, whereas imports have gone up by only about 4 per cent. So the fundamental and underlying trend is strong and good and our rate of growth in exports now compares very well with any period in our history.

Will my right hon. Friend explain to me and the House why the Government do not give manufacturing industry far more encouragement, bearing in mind the fact that manufacturing industry is the only non-inflationary source of economic growth and that in most European Community countries where there is a balance of trade surplus, they have low interest rates and a healthier economy?

I do not know why my hon. Friend—I hope that he is my hon. Friend—does not think that the lowest rate of corporation tax in the western world is of considerable help to manufacturing industry and that the restoration of profits to the highest level for 20 years is not the biggest possible help that can be given to every sector of the economy.

Is not the hon. Member for Macclesfield (Mr. Winterton) perfectly right: the most worrying aspect of the trade deficit is the continuing high level of imports, particularly of manufactured goods? Since the trade deficit in manufactured goods first appeared under this Government—last year it amounted to £16 billion—is not it time that the Government reconsidered their refusal to take any serious steps to support manufacturing?

I totally reject what the hon. Lady says. As she says, manufacturing is extremely important from the point of view of the external trade balance, but the greatest help that we can give to manufacturing is to have low inflation and good growth. During the past decade we have had a far better combination of those two factors than the Labour party did when it was in government.

If we joined the exchange rate mechanism at broadly the current rates of exchange, would not West Germany be particularly pleased, as that would lock us permanently into a £9 billion deficit?

I certainly do not intend to comment on any particular exchange rate parity and policy on the exchange rate mechanism. My right hon. Friend the Chancellor of the Exchequer has made our position clear.

Inflation (Europe)


To ask the Chancellor of the Exchequer how many European countries currently have a higher inflation rate than the United Kingdom.

The Chancellor of the Exchequer and the Prime Minister constantly make claims about the health of Britain's economy, but Britain has the worst inflation rate of the seven most industrially advanced countries. Is not that a disgrace?

The hon. Gentleman is correct. The rate of inflation is a good deal higher than I would wish it to be, or than it will be in due course. As the hon. Gentleman clearly shares my view, I am surprised that he supports Opposition policies that would raise inflation and keep it high for a very long time.

Is my right hon. Friend aware that we may be giving the impression that our currency is declining in value faster than that of other countries because of the appallingly poor quality of the paper used for the new £5 note? Will he ensure that paper of the proper quality is used and that he does not harmonise in that respect with the other European countries, whose currency notes have always been of far poorer quality than ours?

My right hon. Friend makes an important point that will be echoed in many quarters.

Does the Chancellor reflect that it is a poor comment on 11 years of Conservative Government that we have the worst rate of inflation of all the G7 countries, and that nine of the European Community countries have a better inflation record than ours? After 11 years in government, is not that a pitiful record?

The right hon. and learned Gentleman is being typically selective. He has overlooked the greatest growth in investment and productivity and the greatest underlying improvement in the economy over that 10-year period compared with any other nation in Europe.

Now that the Chancellor has had an opportunity to discuss with the president of the Bundesbank the working of the anti-inflationary policy, why does he still believe that an autonomous central bank, with responsibility to maintain price stability, has no place in Britain and can be no part of European monetary union?

With the approach of 1992 and the greater harmonisation of many activities in Britain and the other member states of the European Community, will my right hon. Friend give serious and urgent consideration to introducing a more reasonable and equivalent measure of inflation than the retail prices index, which is quite unlike the measure used in other European countries? The inclusion of mortgage interest rates greatly exaggerates the supposed rate of inflation, although interest rates are raised to reduce inflation. Does my right hon. Friend accept that the sooner that change is made the better, particularly so that comparisons with other Community countries can be more realistically understood outside the House?

My right hon. Friend is entirely correct that, on a more comparable basis that takes account of the differing factors in the relative inflation measures, the more correct rate of inflation in the United Kingdom is about 7 per cent., compared with a European Community average of about 5 per cent. He made an important point.

Value Added Tax

To ask the Chancellor of the Exchequer what a family with two children on average earnings paid in a year in value added tax in 1978–79 and in 1989–90.

Approximately 2.7 per cent. of gross earnings and 5 per cent. respectively.

Is the Minister aware that, for an average family with two children, that represents an increase of £364 a year over the figure that applied in 1979, when this wicked Government came in? Why does not he tell the truth, the whole truth and nothing but the truth about total taxation? Why does not he tell the British people that total taxes have increased from 34 to 37 per cent. under this Government? Instead of ripping off pensioners with value added tax, why does not he claw back the £26.2 billion that the wealthiest 1 per cent. in Britain have had from the Government in the past 10 years?

The hon. Gentleman's remarks were based on a working man with two children.

The truth is that the take-home pay of a working man with two children has risen by 34 per cent. in real terms since the Government took office. Under the Labour Government, it rose by a measly 1 per cent.

When my hon. Friend is telling the nation about the effects of VAT and the tax burden will he remind our people that the Labour party has a habit of inventing new indirect taxes, such as selective employment tax, which add considerably to the burdens of our taxpayers?

My hon. Friend is right, and we look forward to receiving the full details of the new taxes that the Labour party would impose if it ever took office.

Will the Economic Secretary confirm that the Government are good at inventing new taxes and increasing indirect taxes—for example, almost doubling VAT, increasing national insurance contributions and inventing the poll tax? Will he confirm that the burden of taxation has increased under his Administration, and will he admit that the Conservatives are the high-tax party and that Labour is the low-tax party? Will he further admit, without squirming, that the rich have benefited from cuts in income tax in the past 10 years which have not compensated for the increases in indirect taxation, whereas those who have no jobs or low-paid jobs have borne the brunt of the Government's disastrous tax policies?

The hon. Gentleman asked several questions. The Labour party has four new taxes planned for Scotland alone. The contribution to the Revenue of the top 5 per cent. of income tax payers has risen by more than a quarter since 1979. The hon. Gentleman made several other claims about taxation. The truth is that if the Labour party ever took office it would need to raise taxes enormously to pay for the pledges made by the hon. Gentleman and his hon. Friends.

Does my hon. Friend agree that the figures merely show that there has been a shift from direct taxation, which is a tax on work, to indirect taxation, which is a tax on spending? Was not that policy precisely the one on which the Government were overwhelmingly elected to office in 1979?

I agree entirely with my hon. Friend. The policy is based on the extension of the freedom to choose. That was the reason why we made that change in 1979.


To ask the Chancellor of the Exchequer what is the underlying rate of inflation.

There are a number of ways of estimating the underlying rate of inflation. As measured by the RPI, excluding mortgage interest payments and the community charge, it was 7 per cent. in May.

Will the Minister confirm that the measure of the RPI which excludes mortgage interest payments is now at its highest level since July 1982? Why do some Conservatives now try also to exclude the poll tax from the calculation? Is not this very unfair on people with special needs, not least the many severely disabled people who are now paying over £700 more in poll tax than they paid in rates, due to the repeal of Labour's Rating (Disabled Persons) Act 1978?

I had a hunch that the right hon. Gentleman would raise the question of the disabled, so before I came here, I looked up the figures. In 1989–90 the Government will spend £8.3 billion on the disabled, an increase of £4 billion in real terms since 1979 when the right hon. Gentleman was responsible for disabled people.

Will my hon. Friend give the House some idea what the level of inflation would be if it were calculated on the same basis as for our European Community partners?

The only other country in the European Community that counts mortgage interest payments in its RPI is Ireland. Our figures would be far lower if mortgage interest rates did not count towards the RPI.

Monetary Integration

To ask the Chancellor of the Exchequer when, and in what year, he placed his proposals for further monetary integration within the European Community before its Council of Ministers.

I thank the Chancellor of the Exchequer for that reply, especially as the question should have been "in what form", not "in what year". Does the Chancellor agree that in an authority that was charged with the responsibility of supervising a common currency, there would be some responsibility for the economy of the area over which that currency was dominant? If that supervising authority is to be accountable, should it be answering questions only to a person or body who must lump it or like it, or should it be accountable to a body that can do something about it? Will the right hon. Gentleman's paper address the distinction between the two types of accountability and which form do the Government prefer?

I certainly concur with the hon. Gentleman's view that the question of precisely what accountability means and to whom will be critical in future debates in the intergovernmental conference and elsewhere on economic and monetary union—whatever sort may emerge in the European Community. As the hon. Gentleman knows, the Government do not believe that the Delors prescription for stage 3, with its single central bank, its single monetary policy and its present lack of accountability, is a concept acceptable to the House of Commons. I will carry that view to all my fellow Finance Ministers.

Does my right hon. Friend agree that his proposal that the hard ecu should be accompanied by a European monetary fund which could require central banks to repurchase their own currencies with the ecu or equivalent hard currencies would be a powerful sanction against lax monetary policy and, as such, could be the beginning of an embryonic European federal bank?

I agree that the hard ecu would be the most effective counter-inflation currency yet devised and, for that reason, may commend itself to people in future years. The essence of my scheme for a hard ecu is that it is optional, evolutionary and gradualist. That is an immense improvement on what is presently on offer in the Delors report.

In relation to monetary integration, does the Chancellor of the Exchequer recall the remark of Sir Alan Walters that by joining the exchange rate mechanism, currency speculators could force a realignment of the pound—and thus a devaluation—and take us back to the stop-go policies of the 1960s? In anticipation of our joining the exchange rate mechanism, has not the pound increased in value? How does the Chancellor reconcile the views of Sir Alan Walters with the pound's stability now?

I see no particular reason why I should. My view about the exchange rate mechanism is entirely clear —I believe it to be in the interests of the country to join, and in due course, when the conditions that we have set out are met, we will most certainly join.

As the independent central bank has been so spectacularly successful in Germany, and as a similar mechaism is now proposed for the European Community, why are the Government, who are anxious to counter inflation, so timid about the suggestion?

I certainly do not accept that we are timid about countering inflation or that there is a necessary parallel between the activities of the Bundesbank and the German national legislature, and the position of the Bank of England and our legislature. It is my clear view—I regret that my hon. Friend does not share it—that the man or woman responsible for monetary policy should be available to the House of Commons to answer for his or her policies.

Scientific Research

To ask the Chancellor of the Exchequer if he will introduce fiscal measures to benefit scientific research.

There is already a generous tax relief for capital expenditure on scientific research related to a company's trade, which is fully relieved by a special 100 per cent. capital allowance.

On public company gifts for scientific research, would a Treasury Minister be prepared to meet David Baldwin, chairman of Hewlett-Packard in Britain, who says that if the arrangements were more generous —as they are in the Federal Republic of Germany and the United States—his company would be prepared to give significantly more to universities such as Edinburgh, Strathclyde, Bristol and Cambridge? Would such a meeting be possible?

It might indeed—if we received any such request. When I was responsible for these matters, as Economic Secretary, I was in correspondence with the gentleman to whom the hon. Gentleman has referred and I believe that I asked him for any evidence that there was more favourable treatment in the federal republic. I do not know whether my successor ever received it, but I certainly did not.

Does my hon. Friend accept the important and significant conclusion of the Select Committee on Science and Technology in the other place that as a nation we are spending too little on civil research and development and that the situation is getting worse?

I would certainly not agree that the situation is getting worse. Over the past five years, spending by British industry on research and development has risen by 46 per cent. and companies now spend some £5 billion per year on research and development. We all welcome that trend.

Is not it true that our enormous and growing balance of trade deficit—currently more than £20,000 million—has risen at least in part because of the lack of scientific-based research and development, which has helped to diminish our manufacturing base? Is not it true that we are not catching up with Japan and West Germany and that under this Government we are becoming a nation of assemblers, without proper or adequate manufacturing research and development?

There were so many mis-statements in the hon. Gentleman's question that I cannot put him right on all of them. It is simply not true that things are getting worse—they are getting decidely better. During the 1980s manufacturing industry's productivity increased—not least because of research and development—faster than in any other G7 country. That is good news for the future.

Does my hon. Friend accept that, in spite of his answers to previous questions, the majority of the money to which he referred is in fact spent on development rather than research? Will he consider how the Government can help to encourage more research, particularly among manufacturing companies?

As I said in response to the main question, there is already more generous tax treatment for research than for any other kind of investment. We also have the lowest level of corporation tax on profits earned of almost any country in western Europe. That is beneficial to industry and leaves more money in industry's hands for investment in such activities, and I welcome the fact that that is increasingly happening.

Excise Duty (Petrol)

To ask the Chansellor of the Exchequer how much revenue was raised in excise duty on (a) unleaded and (b) leaded petrol (i) in the three months prior to 20 March and (ii) subsequently.

In the three months to mid-March, £417 million worth of duty was collected on unleaded petrol and £1,128 million on leaded petrol. In the two months to mid-May—the latest period for which figures are available —the figures were £347 million for unleaded and £847 million for leaded.

I expect that the Minister is aware that the Society of Motor Manufacturers and Traders estimates that sales of unleaded petrol represent about 34 per cent. of the whole. Does the Department have a target figure for sales of unleaded petrol, and what steps is it taking to achieve it?

Last year we set ourselves a target of 30 per cent., and we have reached that. This year we set ourselves a target of 40 per cent., which we hope to achieve by next March's Budget. We have reached 33 per cent. already, so I have high hopes that we can reach this year's target.

New cars fitted with three-way catalytic converters have to run on unleaded fuel. Will my hon. Friend therefore consider removing the 10 per cent. car tax on such new cars? How much longer must cars have two taxes imposed on them—VAT and the 10 per cent. car tax?

As my hon. Friend knows, catalytic converters will have to be fitted to all new cars by 1 January 1993. For that reason, my hon. Friend's points are not relevant in the context of our European obligations.

Does the Treasury have a mechanism for assessing the impact of fiscal policy on the environment? If so, when will the Minister report to the House the impact of the Budget in that respect? If he will not do that, will he explain why?

I have already described the impact of the Budget in increasing the use of unleaded petrol. With regard to wider environmental considerations, the hon. Gentleman, like the rest of us, will have to wait for the publication of the White Paper from my right hon. Friend the Secretary of State for the Environment which is due in the early autumn.

Do not those figures show that our Government are prepared to make fiscal changes for environmental purposes when there is proper scientific evidence and when the fiscal studies show that that would be constructive? Does not my hon. Friend therefore believe that other fiscal changes might help the environmental cause? Does he believe that a differential road tax might also help and lead to savings for the environment?

Road tax has remained the same for five years. That is designed to encourage people who travel less to pay less. The differential was the subject of an amendment tabled by the Labour party during the Committee stage of the Finance Bill. We turned that down on the basis that if we had that kind of differential there is no reason to believe that people's decisions about the sort of car that they may purchase would depend on a differential which any Government might introduce.


To ask the Chancellor of the Exchequer what is the tax and price index rate of inflation.

Is not it remarkable that no matter how the Government seek to change the method of calculation, our rate of inflation is still among the worst of all manufacturing countries? Would the Chancellor of the Exchequer like to tell us when his miracle is going to start so that our inflation will drop and our manufacturing deficit be eliminated?

Will the Minister tell us which measurement of inflation the Treasury intend to use in estimating when we enter the exchange rate mechanism? Will he guarantee to tell us that now, so that we can judge exactly when the Government are likely to meet that average rate of inflation which will bring us into the exchange rate mechanism?

What would be the effect on the underlying rate of inflation of a massive increase in public expenditure in addition to an immediate cut in interest rates, both of which are Opposition policies? How could any Government implementing such policies and committed to immediate entry to the exchange rate mechanism, however vague the conditions, hope to maintain the pound's parity within the ERM system?

That is a question for the hon. Member for Derby, South (Mrs. Beckett), the shadow Chief Secretary. If the Labour party were ever returned to office, she would be the Minister responsible for ensuring that all the gravy trains arrived on time.

The Minister told his hon. Friend the Member for Eastbourne (Mr. Gow) that the cause of inflation was excessive demand. Will he say who caused that excessive demand?

It was caused by over-confidence among consumers, especially in the wake of the Wall street crash of 1987. I notice that the Leader of the Opposition is whispering advice to his right hon. and learned Friend. Perhaps they are correcting each other. The shadow Chancellor did not advise the then Chancellor, my right hon. Friend the Member for Blaby (Mr. Lawson), to deflate after the Wall street crash of 1987.

Charities (Tax Relief)


To ask the Chancellor of the Exchequer what representations he has received from charitable organisations on the decision to introduce new tax reliefs for single gifts to charity; and when he proposes to issue detailed guidance for donors and charities on the arrangements for claiming relief.

Charitable organisations are enthusiastic about gift aid, the new tax relief for single gifts to charity. Detailed guidance will be made available in good time for the start of the scheme.

Does my right hon. Friend agree that the Charities Aid Foundation and other organisations have welcomed the Budget as the best news ever for charities? That is also shown by the fact that in the past few years the income of the 200 major charities has more than doubled. The Government have shown that we wish to restore the generosity of spirit of our people, who give to charities in which they feel most involved. Does my right hon. Friend agree that the negative, carping attitude of Opposition Members, who think that the work of voluntary organisations should be taken on by the Government, shows the lack of generosity of spirit on the Opposition Benches?

My hon. Friend puts his point extremely well. The Charities Aid Foundation was gracious about the budgetary elements that I announced earlier in the year. I hope that a large number of people will take the opportunity of the new tax relief to give generously.

Does the Chancellor really believe that The Adam Smith Institute should be treated in charity law in the same way as Barnardos, the Save the Children Fund and Oxfam, when all that The Adam Smith Institute does is to pump out irrelevant, right-wing nonsense and rubbish?

Perhaps The Adam Smith Institute should be treated in precisely the same way as the Fabian Society, as indeed it is.

Income Tax


To ask the Chancellor of the Exchequer if he has any plans for further reforms of the income tax system.

My right hon. Friend the Chancellor of the Exchequer intends to continue to reform, simplify and prune the tax system, and to reduce the basic rate of income tax to 20p in the pound when it is prudent to do so.

Does my hon. Friend accept that the actions of the Chancellor's two immediate predecessors to reduce the rate of income tax led to an increase in the incentive to work and an increase in the income tax take? Does he agree that it must be beneficial to go on reducing the rates of income tax as soon as it is prudent to do so?

I entirely agree with my hon. Friend. There is no doubt that lower marginal rates of tax improve incentive and the supply side performance of the economy. Sadly, that is a lesson the Opposition have not learnt— hence their plans to increase marginal tax rates, especially for the more successful members of society.

Are not the Government perpetrating a monstrous fraud on the British people by reducing the level of direct income tax but heaping up indirect taxation levels, so that people are more heavily taxed under the present Government than under any previous Government? Does the Minister not accept that most people, given the choice of improvements to provide decent services in this country, would vote for an increase in income tax?

There is a small element of consistency in the hon. Gentleman's position. Like the rest of the Opposition, he has voted against every cut in income tax that we have introduced, but at least he has been honest enough to admit that he favours a higher rate of income tax, which the policies of the Opposition would clearly require if they were honest enough to cost them.

Central Unit On Purchasing


To ask the Chancellor of the Exchequer when he expects the new head of the Treasury's central unit on purchasing to take up his post.

The new head of the Treasury's central unit on purchasing is expected to be in post on 1 October 1990.

I am obliged to my hon. Friend for that reply. Does he accept that, assuming that public money must be spent as carefully as we would spend our own, all the spending Ministries should take full advantage of the activities of the central unit on purchasing?

My hon. Friend is absolutely right. The unit has played a very valuable part. Since it was established, cumulative savings have amounted to about £1 billion, and that is very welcome. We expect an even higher rate of savings in the coming year, amounting to something like 6 per cent. of the expenditures covered.

Will the Minister ensure that the central unit on purchasing and every member of the Treasury Bench receives a free copy of Sir Alan Walter's new book—or will they be given complimentary copies because, as I understand it, some of them are friends of the family?

European Currency


To ask the Chancellor of the Exchequer if he will make a statement on his proposals for a European currency unit.

I refer my hon. Friend to the answer that my right hon. Friend the Chancellor gave my hon. Friend the Member for Richmond and Barnes (Mr. Hanley) on 21 June.

By proposing the hard ecu, is not my right hon. Friend the Chancellor offering the best of both worlds in that we should retain control over our national currency and monetary policy while at the same time adopting a common European currency for use when appropriate? As we actively prepare for 1992, the removal of trade barriers to our European partners, and easier travel throughout Europe, is not that the most logical and flexible approach that we can take at this stage?

My hon. Friend puts the advantages clearly and well. A common currency would be valuable to people travelling, working and trading in Europe. The whole of Europe can unite around our proposals. They are not divisive or exclusive, as are some other projects before the Community.

Prime Minister


To ask the Prime Minister if she will list her official engagements for Thursday 5 July.

The Lord President of the Council and Leader of the House of Commons
(Sir Geoffrey Howe)

I have been asked to reply—[HON. MEMBERS: "Why?"] My right hon. Friend the Prime Minister is hosting the NATO summit meeting. This evening, she will be attending a dinner for NATO given by Her Majesty the Queen.

Order. The Leader of the House has every right to answer questions for the Prime Minister.

Speaking as one Welshman to another, does my right hon. and learned Friend share with me—and, I hope, the whole House—a feeling of pride at the way in which the English football team conducted itself over the past three weeks? Does he agree that it deserves the warmest congratulations and good wishes of the whole House for its next game on Saturday?

I am sure that right hon. and hon. Members in all parts of the House share the sense of pride expressed by my hon. Friend. The English team has got further in this contest than ever before on foreign soil. Even more important is that the team's quality of play and behaviour has been a great credit to the nation. We are proud of that as well. We certainly wish the team well in the match on Saturday.

I at least agree with the right hon. and learned Gentleman in saying that the lads done magnificent.

Will yesterday's decision by the Cabinet mean that people will pay lower poll taxes next year?

There has been no consideration by the Cabinet of the matter raised by the right hon. Gentleman. The review of the operation of the community charge is well advanced. As the Prime Minister has made clear, the outcome of the review will be announced at the end of the month. It is a great deal further advanced than any review undertaken by the Labour party of its proposals. The Opposition have gone through every gamut in the book—one tax, two taxes, local income taxes and capital valuation taxes—and have finally arrived back where they started, with rating system of the type that they used to condemn as discredited, as we condemn it now. We look forward to hearing the Opposition's proposals in a year's time. Our own proposals will be brought forward at the proper time and in the proper way.

I rather believe that the right hon. and learned Gentleman is being kept in the dark on this subject, as he is on others. Perhaps he can answer a question from his fellow Conservatives. Is he aware that senior Conservative councillors have said, through their associations and very publicly, that next year in order to be

"realistic and reflect the true costs of providing local services",
the Government's grant should be at least £2.9 billion higher simply to meet inflation? Can he tell them how £2.5 billion will do the job? Which set of Tories have got it wrong—the Tories in local government who have to deal with the realities, or the Tories in the Cabinet who have to deal with the Prime Minister?

A huge range of speculative figures are being published in the press. The figures on which the Government decide will be vouchsafed to the House in due course in the ordinary way when the grant proposals are announced in the ordinary way. The country continues to wait for an answer from the Labour party as to what it proposes to put in place of the rating system.

Perhaps the deputy Prime Minister at least knows this much—that the poll tax is of itself regressive, unfair, very expensive and incapable of reform. Can he tell us whether anything decided by the Cabinet yesterday changes anything in that?

The review, which is still taking place, is of the operation and not the structure of the tax. What the country is still waiting to know is what the Opposition propose in relation to the rating system. If the Opposition still agree, as they originally did, that domestic rates are unfair and discredited, why do they propose to return to them?

To ask the Prime Minister if she will list her official engagements for Thursday 5 July.

I have been asked to reply.

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

Does my right hon. and learned Friend share my view that the commendable performance of Mr. Bobby Robson and his team in showing that we are at least the third or fourth most successful footballing nation in the world has been severely tarnished by the behaviour of many so-called supporters in Brighton and elsewhere yesterday? Does he agree that they should be severely punished, with prison sentences?

Once again, the whole House is bound to agree with my hon. Friend that the disappointment of yesterday's result cannot afford any justification for the kind of wanton violence and hooliganism that took place in Brighton and elsewhere last night. Especially regrettable was the willingness to damage cars because they had been made in Germany. We welcome the prompt police action in relation to such misconduct. It should certainly be dealt with effectively.


To ask the Prime Minister if she will list her official engagements for Thursday 5 July.

I have been asked to reply.

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

Will the Leader of the House take this opportunity to emphasise his support for the commitment of all the parties in Northern Ireland represented in the House to dialogue and partnership in the moves toward genuine power-sharing in Northern Ireland? Will he tell the House what new road blocks have been erected today, who is responsible for erecting them and what he is doing to remove those obstacles so as to ensure that that partnership can continue?

The hon. Gentleman will appreciate that that topic is to be debated within a few minutes of the conclusion of business questions. The whole House wishes to see progress along the lines that he described at the beginning of his question. My right hon. Friend the Secretary of State for Northern Ireland will be addressing himself to the matter later in the afternoon.

Does my right hon. and learned Friend agree that it is entirely fitting that the Prime Minister should be hosting today's NATO summit, as it was her resolution which ensured that, when the Soviet Union increased its armaments in Europe, they were matched armament for armament? Does he further agree that the only people who do not understand that that is why the Soviet Union came to the negotiating table are the Campaign for Nuclear Disarmament and the parliamentary Labour party?

I entirely agree with my hon. Friend. I am astonished that even one member of the Labour party expressed astonishment or dismay at the fact that my right hon. Friend the Prime Minister was hosting the meeting. It is an entirely appropriate place for the Prime Minister of this nation at a time of such importance.


To ask the Prime Minister if she will list her official engagements for Thursday 5 July.

I have been asked to reply.

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

If there is a ballot on whether a hospital should acquire self-governing status, and if the majority say no, is there any chance that the people who voted will get their way and be able to exercise that choice?

Hospitals which are to achieve self-governing status will achieve that status in line with arrangements approved by the House and designed to improve standards of performance in those hospitals for the sake of those who work there and the patients who go there.


To ask the Prime Minister if she will list her official engagements for Thursday 5 July.

I have been asked to reply.

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

Does my right hon. and learned Friend agree that leasehold reform in this country is long overdue —especially reform that would allow individual flats to carry their own freehold rather than be tied to a leasehold? Does my right hon. and learned Friend accept that such a reform would complete the home ownership revolution which has occurred under this Government by permitting people in inner cities to own their own homes?

I entirely agree with my hon. Friend about the merit in extending opportunities for home ownership. He will know that the leasehold system has been the subject of many proposals over many years. We are about to undertake a detailed evaluation of the working of the Landlord and Tenant Act 1987. It would be premature to contemplate any particular changes until that study is completed.

Irrespective of any welcome devolution to an assembly in Ulster, this House will still have some legislative powers with respect to Ulster. Will the deputy Prime Minister therefore ensure that all such legislation is made properly by a Bill, thus ending the temporary, contingent and offhand manner in which the House has handled Northern Ireland affairs? It would also end the grotesque mistake that I discovered this morning, whereby a person moving from London to Belfast was refused income support because

"England pays under Act of Parliament whereas Northern Ireland pays under Order in Council."

As the hon. Gentleman knows, the system for legislation in respect of Northern Ireland has been in its present form for some time. The question that he raised has been asked on a number of previous occasions. The hon. Gentleman will have an opportunity to address it during this afternoon's debate.

To ask the Prime Minister if she will list her official engagements for Thursday 5 July.

I have been asked to reply.

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

Will my right hon. and learned Friend make it crystal clear to the Romanian Government that there can be no economic aid from this country or from anywhere else until there is a sign of genuine democracy in that country? Does he agree that the arrest of Mr. Leon Nico and two others about three weeks ago contrasts very strangely with the marauding club-wielding miners who were praised but not prosecuted, that that constitutes evidence that there is no rule of law and no justice in Romania, and that, until there is, there can be no proper democracy in that country?

Again, I think that the whole House will share my hon. Friend's concern about the fact that there is still, as I understand it, no news about the three student leaders to whom he referred. He is certainly right in commending the proposition that we should continue to withhold aid except on humanitarian grounds until there is real progress towards democracy and economic freedom, in particular including respect for human rights and the rule of law.

To ask the Prime Minister if she will list her official engagements for Thursday 5 July.

I have been asked to reply.

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

Is the Leader of the House aware that last night, following a cash crisis, at a meeting held in secret without proper consultation, it was decided to close one in 10 of the beds at King's College hospital in south London? When the Prime Minister said that the national health service was safe in her hands, did she mean 90 per cent. rounded to the nearest 100?

I think that the hon. Gentleman will find that the arrangements that were made last night were designed to prevent the kind of short-term shortfall in revenue that has occurred in the past, and to provide for a sensible and sustainable pattern of health provision within the health authority's area.

To ask the Prime Minister if she will list her official engagements for Thursday 5 July.

I have been asked to reply.

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

Will my right hon. and learned Friend confirm that under this Government 15 out of 15 taxpayers have enjoyed lower rates of tax, that a man on average earnings now pays £1,000 per year less tax than in 1979, and that 15 out of 15 taxpayers can look forward to lower tax rates under this Government?

I am glad to confirm what my hon. Friend has said. Under this Government, there has been progress not only in the direction of steadily reducing taxes on income, but towards the abolition of borrowing, with a movement towards the repayment of Government debt and a substantial expansion of real spending programmes as a result of the real growth that we have been able to achieve.

I have a conundrum about the poll tax with which the deputy Prime Minister may be able to help me. How can it be fair that the good folk of Wolverhampton have to put £47 each into the safety net while the citizens of Wandsworth take £116 out?

The arrangements for the distribution of the safety net in relation to the community charge are in line with those approved by Parliament. I have a conundrum for the hon. Gentleman. When is the country likely to know what kind of arrangements the Labour party would put in place?