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Oral Answers To Questions

Volume 178: debated on Friday 12 October 1990

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National Finance

Manufacturing Output


To ask the Chancellor of the Exchequer if he will make a statement on the prospects for manufacturing output in 1990.

I shall be publishing a forecast of manufacturing output in 1990 with the autumn statement.

Will the Chancellor confirm that, according to his officials, the manufacturing side of the British economy is now in recession? Will the right hon. Gentleman also give up his previous habit of trying to alter the definitions of expressions such as "recession", renaming it "technical recession", which we understand is the current ministerial sales line, just as he has done with "inflation", renaming that "headline inflation", with "convergence of inflation" in the Madrid conditions becoming "divergence of disinflation"? Does he accept that what industry now wants from the Government is some leadership out of recession so that just entering the exchange rate mechanism is not seen as the answer, because on its own that can be no more than putting on a gas mask full of carbon monoxide?

I have rarely heard such a short point put at such length. I can certainly confirm that output is slowing and has been slowing over the past two or three months, as I have repeatedly said. Whether it is within the normal definition of "recession"—which is, of course, why my officials and subsequently I use that term—is a matter that we shall soon see. It is not entirely clear yet. It is conceivable that it is, but we must wait and see.

Will my right hon. Friend remind the macho champions of manufacturing interests on the Opposition Benches—[HON. MEMBERS: "Oh."]—that in the past decade, manufacturing output in Britain rose faster than in any other EEC country, according to OECD figures, and that during the period of the previous Labour Government, manufacturing output fell?

I can certainly confirm those OECD figures. I can also confirm that manufacturing investment has grown on an annual basis over the past decade, whereas that also fell during the period of the previous Labour Government.

Has the Chancellor noted the bleak report produced by the British chambers of commerce earlier this week? Recognising that the task of manufacturing industry will not be any easier in the early days of the ERM, will the right hon. Gentleman help it by seeing that we get more investment in skills and skill training and in transport for access to markets so that it can have some hope of increasing competitiveness?

I read that survey with some interest. It has, of course, been only a recent survey and has not yet passed through a complete economic cycle. There are signs that some of the observations in that survey were a little overdone, but we must wait and see what happens in the next few months. It is certainly consistent with the slowing down in the economy that we are seeing. That is a necessary part of the cycle. It has been predicted, it is expected and it is here, and the sooner we have it, the sooner we shall be through it and back to low inflation and growth again.

Does my right hon. Friend agree that wage restraint is needed from the very top of industry, but that it is failing to give the right lead? If industry is to become profitable, it is no good having 6 per cent. wage increases in the German car industry while Rover and other workers are getting 13 per cent. That is the way to ruin and to losing jobs, not the way to prosperity.

I agree with my hon. Friend. He will recall that it was about a year ago, possibly in answer to one of his questions, that I first made the observation about pay affecting people at the top of industry as well as on the shop floor. That was true when we had that exchange a year ago, and it remains true today.

Mortgage Repayments


To ask the Chancellor of the Exchequer what is the present number of people six to 12 months in arrears on their mortgage repayments.

Figures published by the Council of Mortgage Lenders show that at end June 1990 there were 76,280 mortgage loans six to 12 months in arrears.

Is the Minister aware that in the past six months more than 400,000 people were two to three months in arrears and well over 14,000 had their homes repossessed? Does he think that his 1 per cent. cut in interest rates will make much of a dent in those figures?

I am sure that any cut in interest rates will help people who, for that reason, are in trouble with their mortgages. While all of us feel a great deal of sympathy for people in difficulty with their mortgage payments, the problem should be kept in perspective. The level of repossessions in the year to 30 June was less than one third of 1 per cent. of all mortgages, and we should keep the problem in perspective.

Does my hon. Friend agree that one of the great tributes to the Government's economic performance has been that mortgages have been readily available to people at prices that they can afford, which has encouraged the responsibility of home ownership? Will he do what he can to use his good offices to encourage the building societies to help fund the excellent debt advice services currently run by the Advice Services Alliance?

I shall take up my hon. Friend's second point first. As he probably knows, the Government already give a grant of £11 million to citizens advice bureaux. On his first point, it is worth recalling, when considering the figures, that during the past 11 years there have been 3·5 million additional home owners—more than ever before, and 3 million of whom have mortgages—and 900,000 additional mortgages have been taken out in the past two and a half years.

Is the Minister aware of the number of people who, because they could not find rented accommodation, decided to buy a house, and were actively encouraged to do so by the Government and building societies, but who now find themselves—certainly in the west midlands and my district—in tremendous difficulties? A number of my constituents face the repossession of their homes, with the local authorities not always being able to help. Is the Minister further aware that those and millions of other people who are just able to cope with paying their mortgages do not have the benefit of the tax havens mentioned inThe Sunday Times last Sunday? When will that loophole be closed? Why is it that time and again the rich are rewarded with the advantages of loopholes that other people cannot use?

If the hon. Gentleman is so worried about the unavailability of rented accommodation, perhaps he should not have had such a doctrinaire opposition to the various rent Acts and supported us when we tried to free that sector of the housing market. As for people having difficulties with their mortgages, as I said, that is certainly true and all hon. Members have a great deal of sympathy with such people. However, most arrears are sorted out and few short-term arrears turn into long-term arrears. The figures for repossession show that the total number of repossessions in the past 12 months has been 21,780, and in 1987 it was more, at 22,930. During the intervening period there have been nearly 1 million more mortgages. Perhaps the figures do not bear out what the hon. Gentleman said.

Will my hon. Friend consider what the position would have been if interest rates had not gone up last year, when house prices were going up at a rate of 20 or 30 per cent., particularly in the south-east and south-west, and the first-time buyer was being completely taken out of the market? Has he noticed that during the past year, house prices, particularly for the first-time buyer, have gone down by 10 per cent. in those districts?

My hon. Friend makes an extremely good point. There was no way that house prices could continue to rise at the 20 per cent. a year at which they were rising, which was damaging for potential home owners. Some adjustment was long overdue.

Child Poverty


To ask the Chancellor of the Exchequer when he last met representatives of the Child Poverty Action Group to discuss the effects of the Government's policies on child poverty.


To ask the Chancellor of the Exchequer when he last met representatives of the Child Poverty Action Group to discuss the effects of the Government's policies on child poverty.

I have not myself recently met representatives of the CPAG, although I am aware of their representations to my right hon. Friend the Chief Secretary.

Will the Chancellor consider that between 1979 and 1987, 1·5 million more children were living in families on half the average income; and that from 1987 child benefit was frozen, so its value in real terms this year had fallen by £1·35? Has he got his priorities right, taking into account the fact that people earning £70,000 a year have had tax cuts 200 times greater than families living on £5,000 a year?

There are two points in the hon. Gentleman's remarks to which I want to refer. It is relevant that the total amount of money now available for child benefit has risen from something under £2 billion 10 years ago to something over £4½ billion this year—a substantial amount.

Of course, the missing element in the hon. Gentleman's equation about average income is important: the extent to which average incomes generally have risen dramatically and to which the impact of direct taxation has fallen correspondingly. On the greater level—this is what lies behind the hon. Gentleman's question about family benefits in total—expenditure has risen from well under £2 billion when we took office to well over £5 billion today.

Is my right hon. Friend aware that it is no longer acceptable to take tax from people who earn less than a third of the national average wage to give child benefit to the richest people in the country? How much money would be saved if only those earning under £20,000 a year received child benefit?

I cannot immediately give my hon. Friend an answer. It would certainly be a substantial amount, but child benefit is recognised as a universal benefit paid to the mother, and we have no intention of changing that arrangement.

Will the Chancellor explain how it is that a Government who purport to put the family at the heart of their policies have presided over an increase by more than a half of families living on or below the poverty line, who now number 6·2 million? How does that square with the party of the family? How does he explain a situation in which targeting the first-born is seen as some sort of a substitute for coherent family policy? There may be an historical precedent for that, but it did not do Pharaoh any good and it will not do the Prime Minister any either.

We return to the definitional point with which we commenced Question Time. What the hon. Gentleman refers to as the poverty line is the level at which social security benefits start. Because we have extended them much more dramatically than the previous Government, more people automatically fall within the statistics.

Does my right hon. Friend agree that under the Conservatives payments to the family have risen by more than a quarter while under the previous Labour Government they fell by 8 per cent?

I certainly agree with my hon. Friend, except that the figures are, I think, a little more favourable to the present Government than she said.



To ask the Chancellor of the Exchequer what proportion of gross earnings a married couple with one earner on average earnings, with two children, paid in tax, treating child benefit as negative income tax, in 1978–79 and in 1989–90.

A one-earner couple, with two children, on average male earnings saw the proportion of gross earnings paid in income tax fall from 14·4 per cent. in 1978–79 to 12·3 per cent. in 1989–90.

I thank the Minister for that answer, but it would be good if he answered the question on the Order Paper. Does he agree that the information given by the Library shows clearly that in 1979 the tax referred to in the question that the Minister has not answered was 35·2 per cent. and is now 36·6 per cent. and that that represents for the average family an increase in taxation of £300 a year? Does not that underline what many are saying—that the Government are the Government of high taxation?

I answered the hon. Gentleman's question. He may have asked the wrong question but I gave the right answer. The level of taxation for average households has fallen considerably. A further fact, of which he may not be aware but which is worth sharing with him, is that real net income for the average household has risen by 34 per cent.

Does my hon. Friend agree that, despite massive reductions in income tax rates, we have seen over the past decade a massive increase in income tax yields? The top 10 per cent. of taxpayers now contribute nearly 30 per cent. of the yield as opposed to 24 per cent. when we came to power. That demonstrates that tax reductions help the country to find the money to spend on social services.

My hon. Friend makes the point well. Very high tax rates provide no benefit at all for the country. They do not result in extra tax yields but drive successful people who are on high incomes overseas to be taxed elsewhere. That is of no benefit to anyone. The only other thing that they do is to appease socialist spite and envy.

The Minister must know that one person's tax dodge is another's tax burden. Is not it time that tax dodges by a wealthy minority, such as those publicised inThe Sunday Times last Sunday, were brought to an end? That question was put to the Economic Secretary and, significantly, was not answered. Why do the Government permit the easy avoidance of tax by a wealthy few using offshore trusts while ordinary families have to pay every single penny that is imposed on them?

The short point is that, above all, what creates tax avoidance and made the tax avoidance industry in the 1970s one of the most successful industries in the country is a high level of taxation and complicated tax laws. Of course, there may be a problem here and we are looking closely at it. If the right hon. and learned Gentleman thinks that the right way to deal with such complicated international matters is to leap to instant conclusions, I am afraid that we part company with him.

Is it the case that four out of five families with children of school age are direct tax payers? If that is so, will my hon. Friend tell the House how their family lot could possibly be improved by the high taxation policies of the Labour party?

When a party proposes reckless increases in spending, as the Labour party has, the only ways in which that can he paid for is either by increasing taxation, which would hit precisely the families to which my hon. Friend refers, or by borrowing. We all know the disastrous effects that that had in the 1970s.


To ask the Chancellor of the Exchequer what proportion of non-oil gross domestic product he forecasts taxes and national insurance contributions will represent in 1990–91.

My right hon. Friend will publish a forecast of tax receipts in the autumn statement.

In view of the fact that last year, in 1989–90, the proportion of non-oil GDP taken in taxes and national insurance contributions was 36·75 per cent., which compares with 34 per cent. in 1978–79, whatever the Government say by huffing and puffing at the polls, will the Minister now admit that the Conservative party is the party of high taxation?

That is an odd contention in view of the much lower levels of taxation that now prevail. The Government fund their spending honestly by taxation and not by borrowing. When the previous Labour Government left office they had a PSBR of no less than 5 per cent. of gross domestic product. We have chosen to reverse that and to raise honestly the money that the Government spend, by taxation. If Labour's tax regime had remained in force in the way that it was in 1979, the tax burden would now have increased by £12 billion a year.

Does my hon. Friend agree that the Opposition's promises on benefits and public spending mean that the proportion of taxation taken by any Labour Government would be vastly increased, to the detriment of ordinary taxpayers as well as the rich?

That would be the inevitable consequence. Such reckless promises—of which the Labour Front Bench cannot even keep count—would have to be funded either by higher levels of taxation on everybody or by borrowing, which would be disastrous.

The Financial Secretary is wrong if he believes that Labour is the party of low taxation—[Laughter.] Will he confirm that the percentage of GDP taken in taxation has been much higher during this Conservative Government's years in office compared with the halcyon days when Labour was in office—[Laughter.] Oh yes, the figures are there to prove that, and the Financial Secretary does the House no good by trying to deny them. When will he tighten up the offshore tax concessions that have proliferated during the past 10 years? When will he bring down taxation for the British people to what it was in the 1970s?

It is good fun to be lectured by a member of the Labour Front Bench for being a party of high taxation, compared with the Labour party's wonderful history of low taxation—although under Labour taxation levels rose to 83 per cent. and 98 per cent. in the pound. If that is low taxation, thank heavens Labour never went in for high taxation.

Government Expenditure


To ask the Chancellor of the Exchequer what is his latest forecast for the share of gross domestic product to be taken by central Government expenditure.

The forecast for the unadjusted ratio of general Government expenditure, excluding privatisation proceeds, to gross domestic product published in the "Financial Statement and Budget Report" is 39¾ per cent. The central Government component of that was 29¼ per cent. of gross domestic product.

Will my right hon. Friend confirm that a substantial proportion of the gross domestic product taken by central Government is spent by local authorities, and that that spending has recently risen dramatically? Will he further confirm that it is an outrageous and unacceptable burden on ordinary people, which must not be allowed to continue?

My hon. Friend is right. Local authorities in England this year increased their current spending by 13¼ per cent. That is quite unjustified. My right hon. Friend the Secretary of State for the Environment has made it clear that the Government intend to make vigorous use of their community charge capping powers if that continues.

My hon. Friend will be aware that we have introduced a new local authority capital finance regime, which we believe will help to deal with the problem of overspending on capital. My hon. Friend was right to say that it is a serious problem.

To meet that expenditure, what percentage of revenue does the Minister expect to come from oil revenues? As there has been a dramatic rise in the price per barrel—it is touching $40—can we expect an increase in revenue that might, perhaps, touch £5 billion?

The hon. Gentleman takes a special interest in energy matters, so he will be aware that the revenue from North sea oil is a small proportion of total tax revenue. I speak from memory, but I think that it is about 2 or 3 per cent. The level of oil revenue would be affected if there were to be a sharp rise in the oil price, but it would not have a significant effect on total tax revenue.



To ask the Chancellor of the Exchequer if he will make a statement on the current level of inflation.

As there is a clear need for pay restraint, does my right hon. Friend agree that those chairmen and chief executives of major companies who received highly publicised and spectacular pay rises last year—which, by and large, were supported because they were linked to increased profits—must equally accept reductions in their salaries this year, which should be equally spectacular if their profits are suitably reduced?

As I said earlier, if there is a need for wage restraint throughout industry to ensure greater competitiveness, it must apply at the top as well as at the bottom. I am happy to reiterate that.

Does the Chancellor realise that we are now two years into the counter-inflationary strategy of relying on high interest rates? Does he realise that, by increasing the retail prices index—which is what high interest rates have done, through mortgage interest rates, quite apart from the other factors—the Government are now relying on exhortation, and that exhortation will not be enough as the RPI rises?

The right hon. Gentleman makes a better case against the way in which we measure prices than against the policy that will bring inflation down.

Does my right hon. Friend agree that the most sensitive guides to the direction that inflation is taking is not the latest RPI figure but the movement of monetary aggregates? Will he confirm that there has been a steady decline in monetary aggregates over the past six months—particularly in MO but also in M4? Does he agree that that is a good sign that he has got inflation under control and that the Government's policies are working at last?

I strongly agree with my hon. Friend's view. The reduction in MO has occurred over the past six months or so and the reduction in broad money has continued throughout this year in each and every month since January.

Like his predecessor, the Chancellor is constantly explaining to us that he is trying to bring down the rate of inflation. Why does he talk as though it was an act of God that caused inflation? Why does not he admit that the Government did it? Why is it that, with the bonus of North sea oil, which no other country in Europe has enjoyed, our inflation rate is higher than those of our European counterparts—in some cases twice as high?

At no stage have I placed the blame where the hon. Gentleman suggests I have. The problem that created inflation was excessive demand, as I have repeatedly stated. That is accepted by commentators and it is broadly accepted by hon. Members on both sides of the House. As a result of monetary policy, demand is falling away, and inflation will come down as well.



To ask the Chancellor of the Exchequer when he last met the Governor of the Bank of England to discuss levels of investment.

My right hon. Friend meets the Governor regularly and discusses a range of issues.

Will my right hon. Friend confirm not only that investment in this country has risen by 40 per cent. in the past three years but that in the past 10, investment in the United Kingdom has risen faster than in any other industrialised country except for Japan? Will he also confirm that, on current trends, investment in the United Kingdom economy in 1990 will be no less than 40 per cent. greater. in real terms, than it was in the so-called halcyon days of the previous Labour Government?

My hon. Friend is right. Business investment in the past three years has risen by 44 per cent., and in the 1980s, it rose faster than in any other G7 country except Japan.

When the Minister meets the Governor of the Bank of England, will he be reinforcing the view of the Secretary of State for Trade and Industry that there is a deal-making culture in the City that hurts industry and investment?

That is a matter for my right hon. Friend the Secretary of State for Trade and Industry.

When my hon. Friend meets the Governor of the Bank of England, will he discuss with him the fact that the greater proportion of foreign investment coming into the EEC comes to Britain, as opposed to the continental countries?

My hon. Friend is right. Under this Government and over the past 10 years, Britain has proved an extremely attractive place for foreign investment.



To ask the Chancellor of the Exchequer what is his assessment of the effect of high interest rates on the level of unemployment.


To ask the Chancellor of the Exchequer what is his assessment of the effect of low output growth in 1990 on the level of unemployment.

A period of high interest rates and slow output growth is necessary to defeat inflation. The precise effect of this on unemployment depends crucially on whether wages growth slows as well.

Is the Minister aware that the principal reason for the present large number of bankruptcies is high interest rates? What words of comfort can he give to firms teetering on the brink of collapse?

As my right hon. Friend has repeatedly made clear, a slowdown is necessary so that we can get on top of inflation, and continuing high inflation would do immense damage to all companies, and it is essential for their prospects that we get inflation down.

Mr. Harry Cohen. Is he here? [HON. MEMBERS: "Yes."] The hon. Gentleman may not have heard the whole answer, but he may ask his supplementary question.

Does the Minister believe that the rise in unemployment—by 36,000, in the south-east alone—is a sign of a successful economic policy? Will not unemployment increase enormously in the next two years as a result of the Government's policy of slowing down growth and output because they had overheated the economy in the first place?[Interruption.]

I was going to congratulate the hon. Gentleman on his quick thinking, but he has merely repeated what he has said many times before. It is noticeable that this is the first time for many months that Opposition Members have mentioned unemployment. They never mentioned it when we had 36 months of a continuing fall in unemployment. They never acknowledge that we still have unemployment which is below the European Community average, that we have a good rate of growth in jobs and that our record compares well with those of other countries and with that of the Labour party.

Is not it as true now as it was under the previous Labour Administration that one man's pay increase is another man's price increase, that unearned pay increases are a major contributing factor to inflation, and that that is the real cause of unemployment?

It is certainly true that excessive wage claims have a considerable bearing on unemployment. They can cause unemployment, and the unions must judge that. I think that they have to stand by the results of their decisions. They are not my words, but those of the right hon. and learned Member for Monklands, East (Mr. Smith).

Does my right hon. Friend agree that our successful trade figures for several months now give the lie to the fact that we have poor upward growth and demonstrate that successful British companies are doing well? Is not that reinforced by the fact that Norton is taking over a West German company, and does not it show that British industry should not be written off, as it is by the Opposition?

In recent months exports have been growing faster than imports, and last month's trade figures were the best for three years. The slowdown in the economy is having a beneficial effect on the current pound, as well as being designed to bring about a reduction in the rate of inflation.



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

Does the Minister accept that the so-called Madrid conditions are a sham, especially in view of the Government's failure to get the rate of inflation down before entry into the exchange rate mechanism, and that the Madrid conditions were all abandoned in time for the Tory party conference? Is not it true that Britain has one of the highest rates of inflation in Europe because the Government are totally inept at running the economy? Without sound policies on investment and training, entry into the ERM alone will not undo the damage caused by the Government.

My right hon. Friend the Chancellor and my right hon. Friend the Prime Minister have made it perfectly clear that the Madrid conditions have been fulfilled—[Laughter.]

I am going to Madrid the weekend after next, but I am happy to say that unless the Madrid conditions have been framed and put in the Prado I shall not be paying them any attention on that visit.

Does my hon. Friend agree that high interest rates are highly inflationary, that they are particularly damaging to investment and that they are very damaging to manufacturing industry, which in my view is the sole non-inflationary creation of a sound economy? What does my hon. Friend intend to do to help manufacturing industry, which is so important?

We have a battle on our hands against inflation. Raising interest rates is an essential ingredient of that battle. The way that this country calculates the retail prices index considerably distorts the figure. The underlying rate of inflation in the United Kingdom is 8·3 per cent. which has to be compared with the European average of 5·4 per cent. If we look at the average over the past seven years, we find that inflation in the EEC was 5·1 per cent. and that in the United Kingdom it was 5·9 per cent. The difference, therefore, is not all that great.

Does the Minister recall that recently the Chancellor of the Exchequer told Brian Walden that he wished the Government to be judged on their record? Since the Government's record shows that they invented the tax and price index and then abandoned it, returned to the retail prices index and abandoned that, too, and adopted the underlying rate of inflation and then redefined it, is there any significance in the Government ceasing to refer to the underlying rate of inflation, or is there no significance in anything that they say?

Whatever problems we may have with inflation, there is nothing that we can learn from the Labour party—[Interruption.] The Opposition do not like this bit. When they were in office the average rate of inflation was 15·4 per cent. and the lowest was 7·9 per cent. The average rate of inflation under this Government has been 7·9 per cent. Our average, therefore, is the same as their lowest. Over the past six years, the underlying rate of inflation in Britain was 4·9 per cent. The lowest rate of inflation under Labour was 7·9 per cent., so there is nothing that we can learn from the Opposition.

What would be the effect on inflation of the 182 promises made by the Labour party in "Meet the Challenge: Make the Change"?

My hon. Friend makes a good point. The answer is that inflation would increase dramatically. During the past few years the Opposition have constantly told us to cut interest rates when that was inappropriate and to raise public expenditure. In the not-so-recent past they urged us to run a substantial public sector borrowing requirement. Had we taken any of those measures, inflation would be far worse than it is today.

Interest Rates


To ask the Chancellor of the Exchequer when he next expects to meet representatives from the Building Societies Association to discuss the current level of interest rates.

My hon. Friend the Economic Secretary met the Building Societies Association yesterday to discuss a number of issues.

Will the Minister confirm that he will have to reduce the mortgage interest rate by another 1 per cent. if the large number of people whose mortgages are assessed annually are to have any serious relief? Will he also confirm that unless there is expenditure on research, development and the infrastructure, any benefits that might be created by a reduction in interest rates will he lost? Does the Minister acknowledge that it is the result of his Government's ineptitude that home owners have to bear these massive mortgage increases?

On the first point, it is for the lenders to decide when and how to reduce mortgage interest rates for borrowers. As for any further reductions in interest rates—[Interruption.]

I am not used to this degree of acclamation, but I think that I could get used to it. As for future cuts in interest rates, as my right hon. Friend the Chancellor of the Exchequer said, there will be no further cuts until it is safe to do so.

Does my hon. Friend agree that it is noticeable that most of today's questions, such as this one, from the Opposition relate either to inflation or to interest rates but never to both? Will my hon. Friend confirm that whether one is inside or outside the exchange rate mechanism there is no soft option for curbing inflation and that it is dishonest of the Opposition to try to pretend that there is?

My hon. Friend is entirely right. If we want to cure inflation, there is no alternative to keeping interest rates as high as are needed, getting demand down and keeping a downward pressure on demand. In that way we will secure the reduction in inflation that is essential if we are to return to the periods of sustained growth that we saw during the 1980s. We are confident that the Government's tough policy of maintaining interest rates uncomfortably high is working and will show its reward next year in a substantial fall in inflation.



To ask the Chancellor of the Exchequer what are the latest OECD forecasts for investment growth in the United Kingdom and Germany in 1990.


To ask the Chancellor of the Exchequer what are the latest OECD forecasts for investment growth in the United Kingdom and Germany in 1990.

Over the past five years, total United Kingdom investment has increased by 40 per cent. double the rate seen in Germany. The OECD's latest forecast for fixed investment in 1990 was for a fall of 0·5 per cent. in the United Kingdom and a rise of 6·8 per cent. in Germany.

Does the Minister agree that it is a disgrace that we are bottom of the league in terms of manufacturing investment and that we are seeing a fall of 1 per cent. while other European countries, such as socialist France, are seeing an increase of 6·5 per cent. in manufacturing investment? What does he intend to do about that?

The hon. Gentleman obviously did not listen to my reply, which showed that our investment record compares well with those of other countries in Europe. Britain has enjoyed an investment boom. Our investment record compares extremely well with that of Germany. That is the point that the hon. Gentleman raised in his question. but he failed to take in the answer.

The Minister knows that our investment in manufacturing fell by 6 per cent. between the first and second quarters. Is he going to ensure that manufacturing investment and investment on the supply side are a central part of the strategy of ensuring that our economy and inflation improve over the next few years? Areas such as mine need more manufacturing investment. What is he going to do to support them?

Any slowdown in investment that is likely to happen as a result of the general slowdown in the economy happens from a high base. As I have explained to the House, we have enjoyed strong growth in investment—far stronger than many of our European competitors.

Prime Minister



To ask the Prime Minister if she will list her official engagements for Thursday 25 October.

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

While welcoming the release of a number of hostages from Iraq earlier this week, may I ask my right hon. Friend to make it clear that the Government's and the world's determination to remove Saddam Hussein from Kuwait remains undiminished?

I gladly respond to my hon. Friend. Of course, we are glad to see more hostages home. We are glad for them and their families. Their return brings to 900 the total number of British nationals who have come back from Iraq and Kuwait so far. We are particularly concerned about those who are left—some 1,400—who have been taken totally contrary to international law. They and their families are suffering and for that we should totally and utterly condemn Saddam Hussein. We stand unequivocally by the United Nations decision that the whole of the territory should be restored to Kuwait, Saddam Hussein must withdraw, the legitimate Government must be restored, the hostages should be released and compensation should be paid to the people of Kuwait for the terrible damage done to their territory.

Will the Prime Minister join me in offering unreserved praise for the humanitarian efforts of the right hon. Member for Old Bexley and Sidcup (Mr. Heath), especially when there are common objectives on both sides of the House and the right hon. Gentleman has undertaken his successful efforts without giving any comfort to Saddam Hussein but giving unending comfort to sick people and their loved ones?

I thought that the right hon. Gentleman had already heard me do that. We welcome the return of the hostages whose release was secured by my right hon. Friend the Member for Old Bexley and Sidcup (Mr. Heath): their release brings the total number of those who have returned from Baghdad and Kuwait to some 900. We very much regret that more than 1,400 people are still there, as I am sure my right hon. Friend does, too.

Popular attitudes and aspirations change. Wise political leaders like my right hon. Friend the Prime Minister respond to those changes. In the 1970s, she encapsulated them; in the 1980s, she gave effect to them. What is her assessment, her perception, of the aspirations and attitudes of the British people for the 1990s? [Interruption.]

Order. It may take a little time, but let us hear the Prime Minister's reply.

To continue to rise to the responsibilities of defending freedom staunchly, as we have always done in the past; to carry on with the pound sterling, and maintain the current Parliament's powers with regard to the economy and monetary policy; and to continue with policies that have resulted in the creation of more jobs, more wealth and a higher standard than ever before—policies that enabled us yesterday to announce the distribution of a further £5 billion to families with young children and old people.


To ask the Prime Minister if she will list her official engagements for Thursday 25 October.

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

What action does the Prime Minister propose to halt the destruction of our countryside—especially in areas of outstanding beauty such as the Vale of Glamorgan, where developers propose to build no fewer than six golf courses, four large hotels, three new town settlements and a racing track? This madness must stop.

As the hon. Gentleman is aware, that is a matter for the local planning authorities. As he is also aware, we must try to find a balance between the beauties of the countryside and the importance of providing jobs for the people.

Does my right hon. Friend agree that it is right to give every encouragement to the strengthening of the rural economy, so that we can maintain the social stability and the fabric of the countryside as we all know it? In that context, does she also agree that farmers—as the managers of the countryside—have a specific responsibility, and that they will be unable to undertake that responsibility if real reductions in their income result? I am thinking particularly of hill farmers, and those in the beef and sheep sectors.

I agree with my hon. Friend that the preservation of both the rural countryside and the rural economy is vital. Much of the landscape that we seek to conserve, however, was created by farmers in the first place. There is nothing contradictory about wanting both to conserve the environment and to look after farmers.

I agree with my hon. Friend that it is particularly important to look after the fortunes of hill farmers, and we have tried to do that. We pay hill livestock compensatory allowances of more than £125 million a year, and our total support for the sheep and beef sectors is running at about £750 million to £800 million this year, compared with about £450 million last year. We are trying to make up for the very difficult time that many farmers have had this year.


To ask the Prime Minister if she will list her official engagements for Thursday 25 October.

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

Is the Prime Minister aware that the £5 per week increase in income support payments to care home residents announced yesterday will do nothing to stem the tide of closures and evictions that are affecting vast numbers of elderly and handicapped people? Is the right hon. Lady further aware that the safety net once provided by local council homes is no longer available to many of those people because they, too, have been closed as a consequence of Government policy? Has not the Government's exercise in free market community care been a disaster for vast numbers of elderly and disabled people, who are among the most disadvantaged and vulnerable groups in society?

Yesterday's announcement represents a £5 billion increase in all, which is a fantastic amount—made possible by the Government's successful economic policies. As to residential care, the Government are spending, through the taxpayer, £100 for every £1 spent under Labour.


To ask the Prime Minister if she will list her official engagements for Thursday 25 October.

In acknowledging, rightly, that only three out of 10 absent fathers pay maintenance, does my right hon. Friend think it disgraceful that seven out of 10 absent parents, usually fathers, make no contribution to their children's welfare, and in so doing impose an intolerable financial burden on the state and cause untold misery for their neglected families? Although I welcome the forthcoming White Paper designed to overcome that problem, will my right hon. Friend ensure that the pressure groups that ask for legislation do not cause those proposals to be watered down?

I agree with my hon. Friend. Fathers may sometimes walk out on their families, but they must not be allowed to walk out on their financial responsibilities. If they do, conscientious families have to meet not only the cost of looking after their own children but of caring for the children of those who have walked out on their responsibilities. We shall not water down the White Paper. The people in question must make some proper payment towards the cost of caring for the children whom they left behind.

Does the Prime Minister intend to meet today the farmers from all over the United Kingdom who have come to London to lobby? That demonstration began in Llanrwst in my constituency. The right hon. Lady has already answered a question on agricultural policy, but does she understand that as long as the Minister of Agriculture, Fisheries and Food and Government policy support a 30 per cent. reduction in farm support in the GATT talks, that will undermine any Government proposals for saving agriculture in the hills?

I have already indicated some of the help given to hill farmers. We acknowledge that it is vital that they should stay farming in the hills. In addition to the support that I earlier described, we recently announced a higher rate of suckler cow premium for hill producers. Next year, we shall pay a special supplement to hill sheep farmers. The 30 per cent. reduction in subsidy in the Uruguay round is effective from 1986, so it takes into account much that has already been done. I believe that the hon. Gentleman would agree that where heavy subsidies are given to small. inefficient farms on the continent, that undermines the opportunities for our larger family farmers to be efficient and to secure a larger market. It is important that they should have a better chance of being very efficient, so that they may enjoy a bigger share of the food market.


To ask the Prime Minister if she will list her official engagements for Thursday 25 October.

Will my right hon. Friend find time today to study the Audit Commission report on day surgeries? She will note that it clearly demonstrates disparities in efficiency between authorities. Does my right hon. Friend agree that organisations spending billions of pounds of public money have a duty not only to determine best practice but to implement it?

Yes, Sir. The Audit Commission has done an extremely good job on the education and health services. The report that came out today is particularly interesting. It shows that different district health authorities vary very much in the efficiency with which they use their resources, particularly with regard to day surgery. It points out that if all health authorities brought their day surgery up to the level of the best 25 per cent., 186,000 more patients could be treated at no extra cost. That would help enormously to reduce waiting lists. It would not require any more money, just better use of the money that they already have. Indeed, we have already given a great deal more money to the health service. In the past three years, it has gone up from £24 billion to £26 billion to £29 billion—far better than the Labour party achieved during its time in government.


To ask the Prime Minister if she will list her official engagements for Thursday 25 October.

As the Prime Minister has said that there are incontestable signs that the economy is working in the way in which the Government intended it to, does she gain any satisfaction from the comprehensive report published this week by the Association of British Chambers of Commerce which shows that industries everywhere, including the west midlands, are already in severe recession?

Where we had inflation in the economy—where the extra money supply was going not into extra growth but into extra prices—it was vital that we squeezed it out. The report from the Association of British Chambers of Commerce shows that we were entirely justified in reducing the interest rate from 15 per cent. to 14 per cent. at the precise time when we did, and I should have thought that Opposition Members would have had the integrity to admit it.

Will my right hon. Friend turn her attention to the plight of British agriculture and agree that, basically, it is the fault of the monstrous common agricultural policy, which was devised and is administered by the Commission in Brussels? Is not it time to point out to Mr. Delors that his proposal earlier this week that the unelected Commission will take over all tax, environmental and employment law will be totally rejected by her Government?

My hon. Friend knows that my right hon. Friend the Minister of Agriculture, Fisheries and Food battles nobly for British farmers. We object to discrimination in favour of small farmers on the continent, for many of whom farming is not their livelihood, and against British farmers, who have family farms much bigger than those on the continent and a high standard of efficiency. Those with a high standard of efficiency should have a bigger share of the market for food, and therefore should get bigger and better incomes.