To ask the Chancellor of the Exchequer if he will make a statement on the effect on tax revenues of changes in the level of unemployment in the United Kingdom over the last year.

There are no reliable estimates of these effects. Estimates would require assumptions about, for example, the reasons for the change in unemployment and its wider economic effects—in particular, its effects on incomes and spending. So many uncertainties are involved that the final estimate would be neither accurate nor informative.

Is it not the case that reliable estimates can be made? It is estimated that the cost this year will be £11·5 billion, which is £2·4 billion more than last year. Is not that an enormous price to pay for the Chancellor's mistakes? Would it not be better if the Government spent that kind of money on stimulating manufacturing investment, instead of perpetuating misery on the unemployed?

No. I cannot, for the reasons that I gave, accept that there are such reliable estimates. The variation that would be achieved would critically depend on the reason unemployment was falling. If it was because average earnings were lower or had been held in check or because exports were higher, each would produce different results. As to manufacturing industry, the hon. Gentleman should note that manufacturing productivity is currently at an all-time high and that unit wage costs have been falling in this country while they have been rising in others. Manufacturing exports have never been higher than they are today, and the hon. Gentleman should welcome that.

Does my right hon. Friend agree that the best way to defeat unemployment is to keep inflation down, to give clear-cut encouragement to firms to get on and create wealth—not to encumber employers with red tape and extra nonsense from Brussels, such as the social chapter?

Yes. I believe that there could be no recovery if we had not succeeded bravely and consistently in bringing down inflation. That was the prerequisite. My hon. Friend is absolutely right to draw attention to the role of deregulation. It must be our continuing policy that the rest of Europe can have the social chapter and we shall have the jobs.

Is not the best response to falling tax revenues from high unemployment measures substantially to cut unemployment, not to raise value added tax? In a Market Access survey published today, 75 per cent. of Conservative Members say that they now favour even more increases in VAT—60 per cent. favour VAT increases on newspapers and 27 per cent. favour VAT increases on rail and bus fares. Will the Chief Secretary give a categorical assurance that he and his Government will not increase VAT on food, transport, newspapers arid children's clothes—yes or no?

The hon. Gentleman continues to be extremely confused and to believe that one can in some way bring down unemployment to bring about recovery. The opposite is true. One brings about recovery, and that will lead to lower unemployment. That is why we have consistently followed policies that have enabled the recovery to take place.

To ask the Chancellor of the Exchequer if he will make a statement on the latest figures on the ratio of savings to gross domestic product.

The latest figures show that the personal sector saving ratio was 11·4 per cent. in the fourth quarter of 1992. Last year, personal saving was at its second highest level in the post-war period.

In 1988, when I last asked that question, personal sector savings were in the region of £17 billion. Since then, they have risen three times in 1992 to more than £50 billion. It appears that while it has been raining in the recession, it has been raining pennies into people's savings accounts. Will my hon. Friend say what that means for the future of the recovery, given that people have been saving so strongly in the past few years?

My hon. Friend is right to point to the importance of the high level of savings. We expect savings to remain high as economic recovery picks up. This is mainly because the full effects of cuts in mortgage interest rates, worth £160 per month on the average mortgage, are feeding through in the form of a significant rise in real disposable income.

Does the Minister agree that the hon. Member for Dorset, South (Mr. Bruce) ought to have asked about the indebtedness of the nation—[Interruption.] The hon. Gentleman has had his turn. He ought to have asked about the indebtedness of the nation rather than about savings ratios. It is the indebtedness of the nation that is stopping the recovery that the Chancellor wants. If the Minister agrees with that, what proposals does he have to reduce indebtedness in the United Kingdom?

It is true that the private sector is saving, but the public sector is borrowing heavily. As a result, total saving as a percentage of gross domestic product is low by historical standards. However, Government borrowing is currently high because of the recession. My right hon. Friend the Chancellor spelt out in the Budget a determined programme to tackle the deficit without hindering the recovery, and that is the right approach.

Does my hon. Friend agree that it is very encouraging—notwithstanding the high level of savings—that retail spending is recovering and that the retail sector generally is doing better? Does not that show that the improvement in the economy is advancing on all fronts?

It does, indeed. We are seeing not only a pick-up in retail sales of record levels but a continued high propensity to save. Both are being delivered through higher disposable incomes arising from the much lower interest rates that people are paying. This is brought out clearly in the fact that last month some 1·2 million households with annual review mortgages saw their interest payments cut by more than £60 a month. This has very important and beneficial implications for the level of spending and for savings.

What would further increases in indirect taxation do for private sector savings? Will the Minister give an assurance that the Government will not increase the rate or broaden the scope of value added tax?

I refer the hon. Gentleman to what my right hon. Friend the Chief Secretary has just said on that subject. As far as the Budget proposals are concerned—

The Minister is being evasive.

There has been no evasion; the position has been made absolutely clear. As to the future, the Budget proposals set out increases in the rate of VAT, which apply not this year but next year. The reason for that is to ensure that we tackle the deficit about which the hon. Member for Wrexham (Dr. Marek) asked.

To ask the Chancellor of the Exchequer if he will list the economic indicators published since the Budget for car registrations, industrial production and retail sales; and if he will make a statement.

Figures published since the Budget have shown further increases in car registrations, industrial production and retail sales. These, and a number of other indicators, are clear signs of a resumption of growth.

Does my right hon. Friend agree that it is extremely encouraging that the upturn in economic activity is so broadly based? Is it not evident that this improvement has been under way for some time now in the face of unremitting gloom from the Opposition Front Bench?

My hon. Friend is absolutely right. It is astonishing that that fact gets no recognition from the Opposition. Retail sales have been on a rising trend for about a year; car registrations have risen each month for the past six months and in the first quarter of this year were up 11 per cent. on last year; and manufacturing production in the first three months of this year was 1·5 per cent. up on a year ago.

"How should Labour … react to the news that unemployment has fallen for two successive months?"

"It is much easier to be negative when the economy is in trouble, but what does one say when the economy starts bouncing back?"

"I would remove zero rating for VAT on all items.

Given that the Labour party is opposed to the extension of VAT to food, children's clothes and transport, will the Chancellor give exactly the same assurance? Can he tell us that there will be no extension of VAT to children's clothes, fuel, food and transport? Will he give an answer—yes or no?

The whole country and the House will have observed that the Labour party seems to have one policy in the House of Commons and another policy in the House of Lords.

Does my right hon. Friend agree that the recent economic indicators are very good news for the economy and that we must not throw this opportunity away, either by letting inflation rip or by having an uncompetitive exchange rate?

My hon. Friend is right to say that it is important that we should see that the recovery is sustainable and is sustained. The policies that we are following will ensure exactly that. The prospects for sustained recovery are good. First, inflation is at the lowest level for 25 years. Secondly, the rate of increase in earnings is at the lowest level for 25 years. At the same time, productivity in manufacturing industry is increasing sharply. Those are all the reasons why the recovery ought to be sustainable.

Before the Chancellor of the Exchequer gets too carried away by these encouraging and welcome figures, will he reflect on the fact, which is confirmed in the Red Book, that even if we achieve growth of more than 2·5 per cent. and sustain it, we shall still in three years' time have a public sector borrowing requirement of £35 billion? Will he also bear in mind that if he wants to claim any credit for the improvement in figures that he has announced, he will have to accept full responsibility for the desperate depths to which the recession went?

The right hon. Gentleman is right to highlight the public sector borrowing requirement as something to which we must devote attention. Firm control of public spending is necessary. That is not something, alas, for which we get support from the Labour party. Although I notice that the right hon. Gentleman and his hon. Friends have been very happy to make political capital out of the extension of VAT to fuel and power, that is precisely what they proposed in their own policy document.

To ask the Chancellor of the Exchequer how many countries in the EC have lower base rates than the United Kingdom.

None. The United Kingdom has the lowest short-term market interest rates in the European Community.

Will my right hon. Friend confirm that as a result of the substantial interest rate reductions in Britain since 1990, annual corporate cash flow has increased by £11 billion? Does that not provide British industry with an immense opportunity to attack markets, both at home and abroad, with renewed confidence and from a stronger financial base?

My hon. Friend is absolutely right. He would of course, highlight the fact that half the interest rate cuts, which amount to some £11 billion, occurred before September. That is having a major impact on recovery now. I entirely agree with what my hon. Friend says. In addition to the relaxation in monetary policy, there have been a number of other specific measures: what we did in the Budget last year, in halving the car tax, and then in the autumn statement last year, by removing the car tax altogether. That undoubtedly, in the opinion of the those involved in the motor industry, has been a major stimulus and encouragement to this industry, which is at the heart of British manufacturing. In addition, the measures that we have taken to encourage the housing market—in the last Budget, by raising the threshold on stamp duty, and in the autumn statement, by putting in a very large sum of public money to take empties off the housing market—have contributed to the recovery that we now see.

Yes, but when the right hon. Gentleman talks about the improvement in retail sales, is he not aware that that in itself will not lead to any recovery? We have a £17·5 billion balance of payments deficit to come. The only recovery will come from exports and investment and it is to those that he should turn.

I entirely agree with the right hon. Gentleman that our eyes ought to be on the long term and that the House ought to be dealing with making Britain more competitive and ensuring that our public finances are in sound order. I would stress what the right hon. Gentleman did not—the need to bring down the public sector borrowing requirement, which is a high priority for us. Manufacturing investment, to which I think that the right hon. Gentleman referred, increased in the last three quarters of last year. There has been a large increase in our exports to non-European Community countries, which are up 12 per cent. on one year ago. There is every indication that British industry is highly competitive and that, given the right framework, sustained recovery and the right policies, it can compete and will beat the competition.

Does my right hon. Friend agree that in view of our large budget deficit, there will inevitably be upward pressure on interest rates unless that deficit is reduced, as the Government will have to sell more and more Government stock to finance it? Does he therefore agree that it is vital that public expenditure is reduced in the November Budget so that interest rates can be kept low and the recovery continued?

I very much agree with my hon. Friend that there is a connection between the total borrowing requirement and interest rates, both at the short and the long end. It is important for us to have public expenditure under control and for the PSBR to be on a declining path. I notice that the Labour party seems to agree with that sentiment and seems to wish to get on the attack over it, but we have not heard one suggestion from the shadow Chancellor to rectify that aspect of policy.

Does the Chancellor accept that now interest rates are down to a tolerable level, perhaps the most important thing for manufacturing industry and the jobs dependent on it is to maintain the stability of interest rates, so that there can be a foreseeable interest rate level for the investment cycle? When considering future interest rates, will the right hon. Gentleman also bear in mind pensioners who have a relatively small amount of money saved and are dependent on interest for the money on which to live?

The hon. Gentleman refers to interest rates being at a tolerable or acceptable level; they are at the lowest level for 15 years and are the lowest in the European Community and mortgage rates are at their lowest for 20 years. He also referred to savers and I entirely agree. During the last Question Time in which I answered questions about interest rates, I said that I thought that the postbag on interest rates was running 50:50 in favour of higher rates. In all honesty, it is now running at 8:1 in favour of higher rates.

To ask the Chancellor of the Exchequer what is his assessment of recent indicators concerning the level of house prices.

On the Halifax measure, house prices have risen for two months in succession. House builders and estate agents are notably more optimistic and have consistently been reporting increased activity. Those signs are very encouraging and clearly point to the level of activity rising further during the year.

Does my hon. Friend agree that the increasing activity in the housing market is further evidence of a rise in general economic confidence? Is not it clear that changes to stamp duty in the Budget and the buying-up of empty properties announced in the autumn statement last year have had a beneficial effect?

My hon. Friend is right to say that there have been increasing signs of confidence in the housing market and in the economy generally. The buying-up of about 23,000 empty properties and doubling stamp duty to £60,000 have helped sentiment, but the biggest boost to confidence in the housing market has come from the significant reduction in interest rates, which has brought mortgage rates to at or below 8 per cent. As my right hon. Friend the Chancellor of the Exchequer said, that is the lowest level for 25 years.

Are we to assume from the Government's Budget changes that they are continuing to phase out mortgage income tax relief? If so, may I ask them not to do what the President of the Board of Trade advised a few years ago, which was to abolish it entirely except for first-time buyers, and instead to consider some of the more sensible proposals such as giving a subsidy to low-income home owners without artificially inflating the housing market, which would also allow renting to become an economic activity again, for landlords and tenants?

The Government have taken measures to assist and promote the rented sector, such as the deregulation of rents, the renting a room schemes and others. However, as for mortgage interest relief generally, my right hon. Friend the Chancellor made the position for next year clear in his Budget statement. Every year in the Budget statement, the rate of mortgage relief is set for the following year. This is not the right time to make a Budget statement for the next financial year.

To ask the Chancellor of the Exchequer when he last met the CBI to discuss company profitability; and if he will make a statement.

My right hon. Friend the Chancellor of the Exchequer has frequent contacts with. the CBI.

Does my right hon. Friend agree that one of the biggest problems facing companies in my constituency and throughout the United Kingdom in their return to sustained profitability is the difficulty in getting working capital from banks? When my right hon. Friend the Chancellor next meets the CBI, will he be able to say that the Treasury plans an issue of two to three-year gilts especially designed for banks to buy, as foreshadowed in the Budget? Does my right hon. Friend agree that that would be the best way to ease liquidity in the banking system, thereby helping companies to get the working capital that they so desperately need?

I do not want to disappoint my hon. Friend, but I have nothing to add to what my right hon. Friend the Chancellor said about funding in the Budget statement. Indeed, I would have anxieties about the pressure that such short-term gilts might have on inflation. The key to liquidity, about which my hon. Friend is worried, is the maintenance of low inflation and the restoration of profitability, which depend on the recovery. I think that she will be encouraged by the forecasts for company profitability.

Given that company profitability was regenerated only when Britain was forced out of the exchange rate mechanism, why are the Government now indulging in nonsense about interest rates not coming down further and trying to talk up the pound again? Do they not realise that the only answer to the problems of a country that is in horrendous deficit and whose manufacturing base has shrunk below the levels of viability is competitiveness, competitiveness, competitiveness—competitiveness and competitiveness, now and for ever? Why not put Group 4 in charge of the pound?

The hon. Gentleman was in some danger of repeating himself during that question. I agree that competitiveness is very important, which is why the fact that unit wage costs have fallen in Britain while they have continued to rise in Japan and Germany is extremely encouraging. The hon. Gentleman should note that the encouraging performance of exports and retail sales began during the first half of last year. He should not put his faith in devaluation, which has never been the way out of problems for this country. He should consider the improvements in our competitiveness, which have been achieved in the last year by company managers getting control of productivity and quality and ensuring that they keep down wage and other costs.

Given the importance of levels of investment on profitability, the fact that the Red Book forecast that business investment is to fall by half a per cent. this year and the fact that CBI industrial trends show that manufacturing firms are cutting investment, is the right hon. Gentleman satisfied with the present level of investment? If not, what is he going to do about it?

The hon. Lady often repeats statistics, and I have had the privilege of hearing her make that point many times. However, she has not read the figures carefully. If she excludes investment in the North sea—investment which, because it is lumpy, rises and falls—she will find that investment has been rising. Even at the very lowest level predicted for the first half of 1994, business investment will be 14 per cent. of gross domestic product. That is historically a very high figure and is higher than that achieved for any year between 1970 and 1986. The hon. Lady will recall that her party was in power for some time during that period.

To ask the Chancellor of the Exchequer what has been the change in the level of industrial production in the last 12 months; and what was the equivalent change in Italy, France, Germany and Japan.

To ask the Chancellor of the Exchequer what has been the change in the level of industrial production in the last 12 months; and what was the equivalent change in Italy, France, Germany and Japan.

Comparing the latest three months with the same period a year ago, industrial production has risen by 1¼ per cent. in the United Kingdom but fallen by 8¼ per cent. in Germany, 5 per cent. in Japan, 4½ per cent. in Italy and 3¾ per cent. in France.

Does my right hon. Friend agree that those figures show that we, and our manufacturing industry in particular, are doing much better than our competitors in Europe? Is my right hon. Friend aware that the Ford Transit plant in Southampton, which employs many of my constituents, has shown a sharp increase in production and in quality, and a 20 per cent. increase in productivity, over the past two years? The plant is now producing vans significantly more cheaply than the equivalent plant in Belgium. Does not that suggest that the prospects for manufacturing industry in this country are better than they have been for many years?

I entirely agree with my hon. Friend. He gives a powerful example, about which I shall want to read more. My hon. Friend is right about the statistics. My reply to his question did not cite all the figures for the United Kingdom. From peak to trough of the recession, industrial production fell by 7½ per cent. in the United Kingdom. The recession in Germany continues, and so far industrial production there has fallen by 12·3 per cent. In Japan it has fallen by 11½ per cent. so far and in Sweden, where recession also continues, it has fallen by 18½ per cent. so far.

Does not the Chancellor understand that if there is recession across the world, that is dangerous for Britain and he should not glory in it? Europe is in difficulty, Japan is turning down and there is every sign that the American economy might be beginning to clip again. The Chancellor is pushing up the value of the pound, but it was the devaluation of the pound alone that brought up the British economy. We might lose our recovery, so the right hon. Gentleman should not crow about conditions in other parts of the world but should seek to achieve international co-operation to improve employment in the world economy.

I am in no way crowing. I simply mention facts that I have never heard mentioned by any Opposition Member. The hon. Lady talked about international co-operation, and I entirely agree with her. We strive for international co-operation in the European Community and in G7. The hon. Lady mentioned the exchange rate, but the pound is floating; we have no exchange rate target. But I observe with some amusement that when the pound goes down that is thought to be a good thing, and is described as "floating", but when the pound goes up, that is thought to happen under the influence of the Government.

To ask the Chancellor of the Exchequer if he will make a statement about the results of business surveys taken since the Budget.

The unanimous message of recent business surveys is that confidence has strengthened and industry is moving out of recession.

I am sure that my right hon. Friend will agree that that is more good news for the Martyn Lewis school of broadcasters. I hope that note is taken of that. Has my right hon. Friend had a chance to read the latest quarterly economic survey by the Norfolk and Waveney chamber of commerce, which shows a dramatic improvement in confidence, in orders and in deliveries on the home front and, perhaps even more important, an improvement in export performance?

Yes, it is good news for everybody, although I realise that some Opposition Members have difficulty in recognising it. I have not yet had an opportunity to see the survey about Norfolk to which my hon. Friend referred. Nevertheless, it sounds as though the report sends out the same message as that sent out by all the other surveys that I have seen recently.

Given the fact that it was the accidental almost 20 per cent. devaluation of the pound that triggered the recovery that we are seeing at the moment, what are the implications, in the Minister's opinion, of the gradual rise of the pound over the past few weeks?

The hon. Lady is quite wrong in the first part of her assertion. If she looks at the figures, she will find that the improvement started before the events to which she drew attention. It is there for all to see and many of the figures have already been referred to this afternoon.

Does my right hon. Friend agree that business surveys show that small and medium-sized manufacturing companies are concerned about the shortage of risk capital for those unquoted companies? Does he further agree that there would be a dramatic effect in our competitive position vis-a-vis our fellow Europeans if this country were to consider the radical measure of abolishing capital taxation, thus making our country a haven for the inward location of capital, which is very scarce around the world, and perhaps learn from the lessons of Lee Kuan Yew in Singapore? That would give us a serious and important competitive edge.

I certainly agree with my hon. Friend about the importance of small and medium-sized firms. The small firms part of the CBI survey, to which attention was drawn recently, shows that they are expecting to employ more people in the next few months. That is confirmed very strongly by surveys carried out by the Institute of Directors and by 3i. Chamber of commerce and Dun and Bradstreet surveys are also positive. All that emphasises the importance of small firms.

Have those business surveys included the subject of boardroom pay? Some boardroom members appear to have been to the Martyn Lewis school of salaries. Will the Government take the opportunity to condemn some executives who have been taking exorbitant pay levels, such as the reputed £10 million paid to a Royal Bank of Scotland executive, when those executives and Ministers have been calling on the less-well-off to take small or no pay increases? What are the Government proposing to do to ensure that everyone is treated in the same way and that the people who already have a great deal do not continue to line their pockets at the expense of others?

I am not going to comment on individual salaries or amounts of remuneration. However, the hon. Gentleman and the House know that the Government and Ministers set an example in that respect this year which I would like to see followed much more fully by leaders in industry and commerce—as indeed it has been by Members of this House.

To ask the Chancellor of the Exchequer what is his assessment of the current trend in retail sales and their impact upon the economy.

Retail sales in the latest three months were 3·25 per cent. higher than a year ago, and have now been on an upward trend for a year.

Does my right hon. Friend agree that, while that is extremely good news for the British economy and very bad news for the Labour party, it is important that British industry now takes the opportunity to expand its export trade, backed by a stable pound?

I entirely agree about the importance of exports. Clearly retail sales figures show the opportunities at home, but a good home market is the foundation for exports and that also should be pursued.

Given that the Government are now claiming that the recession is over, when will they apologise to all the victims of it? What specific help can they give my constituents, particularly engineers who lost their jobs in their late 50s and still see no prospect of ever getting another job, people who have had their homes repossessed and see no chance of ever being able to buy another home, and young couples who are stuck in high-rise flats with small children and with little or no prospect of getting a home away from those flats?

My right hon. Friend has already made it clear this afternoon, as well as on previous occasions, that the depth of the recession here has not been nearly as bad as in other countries. I am not quite sure whether the hon. Gentleman expects me or any other Conservative Member to apologise for the performance in other countries as well as in Britain. Of course, a recession is very difficult for a lot of people and that is why it is important that we are now moving out of it. All the figures that we have been discussing this afternoon are positive and encouraging for all of us.

To ask the Chancellor of the Exchequer what recent representations he has received from the Manufacturing and Construction Industry Alliance, the Building Employers Confederation and the Housebuilders Federation about stamp duty.

We have received representations only from the Housebuilders Federation. It welcomed the doubling of the stamp duty threshold.

Does my hon. Friend agree that stamp duty is an archaic tax which suffocates the housing market? Will he respond positively to the representations from the Construction Industry Employers Council and the Manufacturing and Construction Industry Alliance by restricting the tax payable to a percentage of the amount by which a property's value exceeds £60,000; or, better still, will he announce that the tax will be abolished altogether?

I should like to be able to announce that. I know that stamp duty is not a much loved tax, but it will bring in this year on land and buildings £570 million, and on shares it will bring in more than £1 billion next year, so it is a very significant source of income. As for making a tax-exempt band as opposed to a threshold, the cost of doing that would be very significant; it would amount to £270 million. We have already gone a long way. In the Budget, my right hon. Friend the Chancellor made a significant, welcome and important increase in the stamp duty threshold.

Could the Economic Secretary tell me the percentage drop in the number of transactions involving stamp duty as a result of the Budget changes? Is he using that as an argument to close the Leeds stamp duty office? Is he aware that there is great concern in the Leeds financial community about the closure of that office? Does the hon. Gentleman realise that, in closing the office, he is going against the trend of other financial institutions, all of which regard Leeds as a growing and strengthening centre for financial services?

As for the number of transactions, that has been picking up recently. I acknowledge immediately the hon. Gentleman's concern. I know that he has represented the interests of that office in his constituency on this matter. He will know that I have written to him. Some regional stamp duty offices have been changed largely because of advances in technology as well as the need to save costs. Although a relatively small number of people are involved, I acknowledge the importance of that local service to many businesses.

To ask the Chancellor of the Exchequer what was the latest available number of live profit-related pay schemes; and what the numbers were a year ago.

There were 4,615 active profit-related pay schemes at the end of March 1993—getting on for double the number a year ago. The number of active schemes has more than trebled since my right hon. Friend the Chancellor of the Exchequer increased the tax relief in his 1991 Budget.

The figures that were given by my right hon. Friend are extremely good news for workers in those companies. Also, given the extension of employee shareholding organised by the Government, does that not show that we can extend co-operation and consultation with workers and enable them to share in the benefits of their companies much more effectively on the basis of participation in profits than the collectivist-imposed solutions favoured by the Labour party and by the social protocol? Does it not prove that we put up and that they should shut up?

My hon. Friend is absolutely right. There are now 1·2 million employees participating in profit-related pay schemes. There are 2·9 million employees participating in all-employee share schemes. Both those schemes are highly commendable. They have attracted the approval and support of the Trades Union Congress. My hon. Friend is absolutely right to say that such schemes is the way to get employees involved. It means that all employees have a vested interest in the success and profitability of companies. That must be the right way to handle it.

Can the Minister explain why the Government are spending British taxpayers' money on advertisements placed in the German press to tell Europe that Britain now has the lowest wages in the whole of Europe? Is that something of which the Government want to be proud?

We are enormously proud that the United Kingdom has become a haven for inward investment. We are the envy of Europe. We are attracting 40 per cent. of Japanese investment into the European Community and about the same proportion of investment from the United States. Is the hon. Gentleman so xenophobic that he wishes to turn away that investment?

To ask the Prime Minister if he will list his official engagements for Thursday 6 May.

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.

Does my right hon. Friend agree that the quantity of advertising spend is a sensitive barometer of the state of the economy? Is he aware that the amount of advertising for retail sales is up 4 per cent. on the first quarter this year and the amount of advertising on television is up 7 per cent. on the first quarter of this year? Does he think that that is an excellent advertisement for not only the Conservative party but its economic policy?

My hon. Friend is correct about advertising being an indicator of activity in the economy. It has been increasing. I was not precisely aware of the figures that my hon. Friend has set out but I have no doubt—[Interruption.] I must have missed them in the welter of other encouraging economic news that I have seen.

Yesterday the Prime Minister boasted to the Newspaper Society about the number of manifesto pledges he claimed to have carried out during the year. Why was there no reference whatever to taxation in that speech?

The right hon. and learned Gentleman is in no position to talk to anyone about taxation. I recall that it was his talking about taxation that played a significant part in the fact that we are sitting here and he is sitting there.

The House will have noticed that the Prime Minister studiously avoided answering the question. Is not the real reason why he forgot to mention taxation that he wants the voters in the elections today to forget that his Government's VAT and national insurance increases will cost the typical family in the United Kingdom another £8·50 every week?

How interesting that the right hon. and learned Gentleman should say that because I have in front of me a quote that I shall read:

"I favour the higher band income tax and the removal of the ceiling on national insurance contributions that Labour's 1992 Shadow budget proposed. Failing that, I would remove zero rating for VAT on all items."

The Prime Minister knows well—because Lord Desai has written to him—that the noble Lord was on the Back Benches when he said what he said—[Interruption.] He also knows——

Order. The House must come to order.

Is it not the case that—let the Prime Minister understand that he cannot run away from this—in the general election he made clear and specific promises not to increase VAT and national insurance contributions? Surely the last thing that he wants people to remember today is that his promises and Tory promises are worthless.

Clearly the right hon. and learned Gentleman has lost touch with his own party. The quote that I used, far from being elderly, is in Tribune today.

Will my right hon. Friend find time to examine the growth of bureaucracy which is seriously impeding the work of the police and the criminal justice system? Is my right hon. Friend aware that even the simplest case these days requires a trail of paperwork and that the more serious cases are such that the expensive time of detectives is now more likely to be spent on paperwork than on the investigation and detection of crime?

I agree with my right hon. Friend about that. My right hon. and learned Friend the Home Secretary, like me, wants to see police officers solving crime, not pushing paper. That is why he is setting out proposals to see how much paperwork can be cut. The more we can free our police from that work, the better they can do the work that I and every other hon. Member of this House would like to see them carrying out.

To ask the Prime Minister if he will list his official engagements for Thursday 6 May.

I refer the hon. Member to the answer I gave some moments ago.

In view of Asil Nadir's breach of bail, should not the Prime Minister come clean about Nadir's contribution of £1·5 million to Tory party funds?

Order. May I make it clear to the House that, while that matter may be of some interest, there is no Government responsibility—[HON. MEMBERS: "Yes, there is."] Order. There can be no Government responsibility for finance given to a political party.

Well, Madam Speaker, you are of course entirely right about that. I notice that the hon. Lady does not mention the remarkable sums that the Labour party received from the late Robert Maxwell. I cannot, of course, comment on the details of Mr. Nadir's case, which is currently before the courts.

Because the Bosnian Serbs possibly doubt the resolve of the United Nations to act forcefully against the atrocities that we have seen in recent weeks and months perpetrated by the Bosnian Serbs against the relatively defenceless Bosnian Muslims, will my right hon. Friend make it clear to the House that we and our allies will not abnegate our responsibilities to take any action that may be deemed necessary to bring those atrocities to an end?

Our highest priorities have to be to secure implementation of the settlement plan, to deter further Serbian offences and to sustain humanitarian relief. In one important aspect, things have changed in recent days. President Milosevic of Serbia has committed himself to the Athens agreement. Whatever views may emerge from the self-appointed Bosnian Serb assembly, the international community expects President Milosevic to make good that commitment. He should do so, in our judgment, by closing Serbia's borders with Bosnia, cutting the supply of weapons and other goods and exerting all other possible pressure on the Bosnian Serbs. The Serbian people must realise that they will come under mounting pressure from throughout the international community until there is a peaceful settlement. That is the essence of the common approach that we have agreed with our allies.

To ask the Prime Minister if he will list his official engagements for Thursday 6 May.

I refer the hon. Member to the answer I gave some moments ago.

Could the Prime Minister devote some time to the appalling situation in Sudan, from which the hon. Member for Harrogate (Mr. Banks) and I have recently returned? There is mass starvation, the interruption of food supplies, the harassment of the Christian churches and the prevention of the international aid agencies from doing their work. Will the Prime Minister take up the matter with the Security Council to bring an end to the appalling 10-year civil war and allow uninterrupted work by the Christian churches and the international aid agencies, which are doing valuable work there?

The hon. Gentleman raises a serious matter. I fully share his concern and that of my hon. Friend the Member for Harrogate (Mr. Banks) about the distressing situation in Sudan. As the hon. Gentleman will know, we took a lead in the United Nations General Assembly last December when it adopted a resolution condemning the Sudanese Government's human rights record. Also, of course, the United Nations Commission on Human Rights has decided to appoint a special rapporteur. We are looking at the moment to the negotiations under Nigerian auspices. We hope that they will succeed in ending the civil war. I certainly would not rule out a future role for the Security Council. It would be helpful if the hon. Gentleman and my hon. Friend could perhaps let me have a more detailed report of what they saw in Sudan. I would welcome that as I should like to discuss it with my right hon. Friend the Foreign Secretary.

Is my right hon. Friend receiving letters, as I am, from pensioners and others receiving benefit who are concerned in case that benefit should be paid exclusively into banks and building societies? Will he confirm that benefit will continue to be available from post offices and sub-post offices, thus giving the customers a choice, in line with Conservative policy?

This is a matter on which concern is raised from time to time. We have made no proposals to make those changes. If we had any firm proposals to make those changes we would bring them before the House.

To ask the Prime Minister if he will list his official engagements for Thursday 6 May.

I refer the hon. Member to the answer I gave some moments ago.

Will the Prime Minister find time during a busy and probably worrying day for him to reflect that when he and I were leaving school student grants were adequate and most discretionary awards were paid for higher degrees? Does he not think that the present situation, where higher degrees are not awarded grants by local authorities, is a deterrent to less-well-off students and the nation will lose their skills? Is it just that he is unconcerned because he got where he is with three O-levels?

The hon. Gentleman is inaccurate in most of the things he says. His essential mistake about the future is that he entirely overlooks the vast increase in the numbers of young people going into higher education. Virtually one in three young people now goes on to further education. Those arc wholly different circumstances from when the hon. Gentleman and I left school.

Is it not good news that British Telecom is to reduce the cost of connection charges by £40? Does this not show the benefits of privatisation combined with a tough regulatory regime?

It certainly does and it certainly would not have been so efficient without privatisation. Privatisation has brought better service and lower charges for gas, electricity and telecommunications and that is why we continue to support it, unlike the Opposition who have supported no new idea of any sort for years.

To ask the Prime Minister if he will list his official engagements for Thursday 6 May.

I refer the hon. Member to the answer I gave some moments ago.

The Prime Minister will be aware of the meeting last night in the Grand Committee Room where Mr. Nelson Mandela met Members of all parties and both Houses. The meeting was well attended and Mr. Mandela got a standing ovation on both entering and leaving the room. What help can the Government give to South African in the forthcoming general election, particularly in investment from Britain?

My right hon. Friends the Foreign Secretary and the Minister of State, Foreign and Commonwealth Office and I separately met Mr. Mandela during his visit to the United Kingdom. We had the opportunity of discussing a whole range of issues: the difficulties with violence, the progress with the talks and the prospects for transition to a peaceful, multiracial democracy in South Africa. We discussed the range of ways in which we could help, both personally and publicly.

Will my right hon. Friend hesitate a little before deciding to abolish the May day bank holiday? Ideological considerations apart, is it not a fact that more people enjoy having an early summer day's break than would enjoy a break at the beginning of winter? Is it not further the case that the May day bank holiday gives a welcome and much-needed kick-start to the leisure industry which a holiday at the end of October could never begin to do?

I am grateful for my hon. Friend's advice on that important matter. When we have an announcement to make, we will bring it to the House.

The Prime Minister will recall that yesterday the European Communities (Amendment) Bill was debated and that in the course of the debate an amendment was passed, as a result of which the House has unanimously agreed to strike out the protocol that the Government had previously negotiated for an opt-out from the social chapter.

The right hon. Gentleman knows as well as any hon. Member the implications of being a parliamentary democracy. We are a parliamentary democracy, and I am not in favour of referendums. The sole effect of the amendment to which the right hon. Gentleman referred is to remove the social protocol from being incorporated into United Kingdom law, but the opt-out remains part of the treaty. So let me repeat very clearly that we will ratify the treaty which I signed at Maastricht: no change, no social chapter, no back-door socialism.