To ask the Chancellor of the Exchequer if he will make a statement on the role of a minimum wage in his welfare-to-work strategy. [6177]

As my Budget made clear, there are three elements of our welfare-to-work strategy and our reform of the welfare state: first, encouraging the long-term unemployed into work; secondly, providing opportunities for men and women to gain skills; and, thirdly, making work pay. Set at a sensible level, a minimum wage is an essential element of making work pay. It ensures that family credit paid by the taxpayer goes to low-paid employees who need it, not to low-paying employers who do not.

Is my right hon. Friend aware that, in former mining areas such as mine, the void left by thousands of lost jobs has often been filled by the arrival of firms paying poverty wages? Does he share my view that the fact that nearly 4,000 people in my area are paid less than £3 an hour is an indictment of the party of exploitation—the Conservative party? Does he agree that, in a fair society, the setting of a decent national minimum wage must be the cornerstone of any welfare-to-work strategy?

My hon. Friend is absolutely right about the need for a decent minimum wage. Under the last Government, hundreds of thousands of working men and women were earning less than £2.50 an hour. Many were earning less than £2 an hour, and some less than £1.50 an hour. It is precisely to sort out some of those problems that the Low Pay Commission has been set up, and will report in due course.

It is interesting that, increasingly, large numbers of employers are coming to support the minimum wage. The only group in society that appears to be completely against it is the Conservative party.

Is the Chancellor aware that, however sceptical we may be about his welfare-to-work proposals, we hope that they will be at least as successful in getting people back to work as our measures, which have reduced youth unemployment by 100,000 over the past four years?

If, however, the Chancellor believes that reducing the cost of employment through job subsidies will persuade employers to increase the number of people they employ, does he also accept that the cost of employing people through a statutory minimum wage or the importation of European social costs will reduce the number of people employed? As the latter measures apply to millions of people and are permanent—unlike the Chancellor's windfall tax, which is temporary and applies to only 100,000 people—does the right hon. Gentleman accept that the net effect of his measures is work to welfare?

It is interesting that, in the shadow Chancellor's first question—I welcome him to his post, and to Treasury questions—he should mention Europe, and reveal that the position of Conservative Treasury spokesmen in regard to Europe has changed fundamentally since his appointment. Let me, however, answer directly his question about welfare to work. We have had to introduce our proposals not because the last Government succeeded but because they failed. At present, 20 per cent. of households have no wage earner. It is precisely to deal with such problems that we are introducing the welfare-to-work strategy.

As for the minimum wage, I should have thought that the Conservative party's period of reflection— which may be long indeed—would allow its members to look at what is happening around the world. America has a minimum wage; our European competitors have a minimum wage; Japan has a minimum wage. Every country that is ahead of us in the world prosperity league has a minimum wage. When will the Conservatives realise that, when Winston Churchill and Harold Macmillan supported a minimum wage, they were in the mainstream of society? The present Conservative party is on the fringes.

When my right hon. Friend considers his welfare-to-work proposals, which were tremendously popular at the general election where we achieved a real mandate to deliver them, will he consider the construction industry, not only in terms of the impact of the minimum wage, which can be nothing but healthy, but in respect of the way in which the previous Government allowed that industry to get away with bogus self-employment which cost the Exchequer millions of pounds that could have been used for welfare to work to provide decent training and get young people back into work?

I am grateful to my hon. Friend. First, we shall deal harshly with tax avoidance in any sector of the economy. That is why we have set up a review within the Treasury to examine the very issues that he has raised. [HON. MEMBERS: "Oh."] It is interesting that the Conservative party now does not want to deal even with tax avoidance. I should have thought that the Conservatives would support us at least in those efforts.

We have already had a number of offers from construction employers who want to be part of the welfare-to-work strategy and are offering training places on the programme. That shows, once again, that British employers are willing to support our new welfare-to-work programme. I believe that it will enjoy a higher status as a result.

To ask the Chancellor of the Exchequer what assessment he has made of the impact of his Budget on investment by the water utilities. [6178]

After consulting the regulators, it is my judgment that the windfall tax can be paid without any impact on investment.

Can the right hon. Gentleman tell the House how he expects the privatised utilities to pay the £5 billion he is asking of them without increasing their charges, which means higher water bills; reducing their investment, which means more leakages; cutting employment; or reducing dividends, most of which go to pension funds?

I can say what I can because the water industry regulator has just said publicly that he would not expect any of the water companies to reduce their commitments. He has taken what I consider to he an objective view: that water companies have made excess profits that were recognised by Conservative Members when they reported from the Public Accounts Committee before the election and are perfectly capable of paying the windfall levy. It is interesting to note that the water companies are ready to pay, but, once again the Conservative party remains isolated as the one group in society which believes that they should not pay.

Is it not a fact that when the water companies were privatised, they received massive cash handouts from the then Tory Government and they faced no competition, as we could get our water from only one company and have our sewage dealt with by only one company? Is it not the case that, to date, North West Water has failed to deliver an improved service and deal with leaks, and the directors have made massive profits out of the privatisation?

What people will remember about the water companies over the past few years is that, under the Conservative Government, they made massive profits, there was an 80 per cent. increase in prices, substantial dividends were paid out, but very little corporation tax was paid. Indeed, in some cases, the water companies paid no mainstream corporation tax at all. All that was defended by the Conservative Government. The Public Accounts Committee estimated the replacement value of the water and sewerage companies' assets to be £138 billion and the profit that the Government received from the sale was £3 billion.

Will the Chancellor continue to insist that investment by the utilities will be unaffected as a result of the imposition of the windfall tax, even if the utilities themselves insist and demonstrate otherwise?

I am grateful to the hon. Gentleman for pointing out that the water companies have substantial obligations to the public. I believe that they are perfectly capable of making those investments. Over the past few years, there have been share buy-backs, handouts to shareholders and special dividends as well as the excesses in the boardroom. Water companies should be enhancing their investment programme and we are determined that that will happen.

To ask the Chancellor of the Exchequer what plans he has to end the cycle of boom and bust. [6179]

The Budget set out a framework for monetary and fiscal stability to achieve our objective of high and stable levels of employment and growth. Today, the Bank of England has agreed with me that, if we are to prevent the cycle of boom and bust, inflationary pressures in the economy, which the previous Government negligently failed to tackle, must be brought under control. By taking tough action now to bring both the deficit and inflation down, the Government and the Bank of England are determined to ensure that this country does not return to the instability and negative equity of the Conservative years.

I am grateful for that answer. Does my right hon. Friend agree that it is absolutely essential for home owners and businesses—[HON. MEMBERS: "Reading."]—that there is no return to the boom and bust economy of the 1980s—[HON. MEMBERS: "Reading."]—as we experienced under the Tory Government? Does he also agree that—[HON. MEMBERS: "Reading."]—it is regrettable that the Tories abdicated all responsibility for tackling inflation? Does he agree that they failed to tackle it?

I am grateful to my hon. Friend. I welcome him back to the House after his distinguished election victory. The Conservatives would be better advised to behave themselves in this Parliament in a way that they did not in the last.

We are determined that this country does not return to the conditions that we saw in the late 1980s and early 1990s, when a Conservative Government allowed inflation to get out of control and damage businesses and the ability of thousands—indeed, hundreds of thousands—of people to own their own homes. I remind my hon. Friend that, every month from December—December, January, February, March and April—the Governor of the Bank of England advised the then Chancellor that, if he did not raise interest rates, inflation would be in danger of getting out of control. We took the decision to raise interest rates and to give the Bank of England operational independence. It is now up to the Conservative party to tell us whether it would raise interest rates, faced with such inflationary pressures.

Does the Chancellor recognise that today's decision to raise interest rates by the Bank of England represents a thumbs down to two people? As he rightly said, the former Chancellor pursued an irresponsible monetary policy in advance of the general election and did not take the Bank of England's advice when he should have done to take the heat out of the economy. The decision is also a thumbs down for the present Chancellor for not delivering a Budget that lived up to his own billing that it would rebalance the economy and help to keep interest rates down. Does the Chancellor accept that his Budget failed to live up to that billing?

The hon. Gentleman says that the Bank of England has criticised me today—it is quite the opposite. The Bank has acknowledged the effects of my Budget in slowing down the economy. We have to take a long-term view of the balance between monetary and fiscal policy. I believe that people will judge that my deficit reduction plan over five years brings the necessary stability in fiscal policy. We will not have the Liberal Democrats' policies, which are quite irresponsible.

The hon. Gentleman, who criticised us last week for not spending enough on the health service and education, should look at the press release that he issued before. He said that £500 million should be spent on the backlog of repairs and maintenance.

This year.

May I just read the press release? It refers to a school building programme

"with a 5 year investment programme of £500m".

We put in £1.3 billion.

On the health service, the hon. Gentleman referred to an

"immediate injection of £300m into the NHS"

plus

"A £600m increase in next year's NHS Budget".

That is £900 million in total. We put in £1.2 billion. Instead of criticising us, the Liberal Democrats should he congratulating us.

To ensure that we do not go back to the years of boom and bust, does my right hon. Friend agree that people who work for a living should be treated properly? Does he really think that he can stand aside, like Pontius Pilate, with the rest of the people on the Front Bench, ignoring the people down at Heathrow, those stewardesses out on strike who are hounded and intimidated by this evil man Ayling just because they are fighting not only to keep their trade union intact but for proper wages and conditions? Surely it is time that our people on the Front Bench understood that those people at Heathrow, many of whom voted Labour at the election, ought to be treated properly and that anybody in the management of British Airways should be told by the Government that it is time that they started treating their people properly?

I repeat to my hon. Friend what my right hon. Friend the Prime Minister said yesterday. It is a matter for management and trade unions to sort out, and the sooner it is sorted out the better.

Given that the Chancellor justified his breathtaking 17 tax rises on the need to curb the consumer boom, will he explain why £5 billion of his £6 billion tax rises were taken from the corporate sector?

The hon. Gentleman should do some research on the Budget. He would find that I cut mortgage interest tax relief and raised stamp duty and excise duties on cigarettes and petrol. A considerable sum of money will be taken out of the consumer sector of the economy.

What I will not do is pursue the irresponsible policy pursued by the previous Government, who knew that there were inflationary pressures in the economy and refused to take action. We have still to have an answer from the shadow Chancellor who, on the television at lunchtime, refused to answer the question whether he supported the rise in interest rates. Does he support me and the Bank of England, or is he not prepared to do so? Does he support the former Chancellor or the present Chancellor? It is time that we had some coherency from the Opposition.

Does my right hon. Friend agree that we must not return to the experience of the late 1980s, when millions of households suffered from negative equity, which damaged the social fabric and the economic well-being of our society? Does he agree that the best way to ensure that we do not return to that situation is to control inflation?

I am grateful to my hon. Friend for making that point. In every constituency, men and women still suffer the effects of the stop-go economics practised by the Conservative Government. Home owners still have negative equity because of the failed policies of the Conservative Government. I assure the House that I will not make the mistakes that the previous Government made of allowing inflation to get out of control and causing instability, volatility and negative equity. The measures that I have taken and those taken by the Bank of England are necessary to restore balance to an economy that was in danger of becoming seriously out of balance because of the mistakes of the previous Government, who failed to take the necessary action.

To ask the Chancellor of the Exchequer what representations he has received on the level of VAT on tourism. [6180]

I have received a number of representations to the effect that the UK tourism industry suffers a competitive disadvantage as a result of VAT. Given the regular increases in recent years in the number of visitors to the UK and the amount of money they spend, there is nothing to suggest that the UK tourism industry is suffering, but I am keeping this matter under close review.

The Financial Secretary has acknowledged that this country's tourism industry, including our hotels, is at a competitive disadvantage compared with the tourism industries of other member states in the European Union. For example, the VAT level in France is 5.5 per cent.; in Belgium and Holland, 6 per cent.; in Greece, 8 per cent.; and, in Italy, 9 per cent. What initiatives does she propose to take to ensure a fair and level playing field for VAT on tourism throughout the European Union?

The tourism industry in the UK is not at a competitive disadvantage because of VAT. I draw the hon. Gentleman's attention to reports today in the Financial Times which said that the UK hotel industry has achieved record profits, higher even than in the late 1980s, and that those profits are expected to increase in the next year, in London and in the regions.

Does my hon. Friend agree that VAT receipts from tourism would be greatly improved if we put to greater use our under-used large houses, including Chevening and Dorneywood? Does she realise that seven extremely large homes, one with 600 rooms, are occupied by a single family? Would it not be the greatest boost to tourism if we could persuade the royal family to live in just two palaces?

I am grateful for my hon. Friend's advice, and I am glad to hear that he, like the Government, is committed to encouraging tourism. I am sure that my right hon. Friend the Chancellor heard his comments and, as my hon. Friend probably knows, he has declared his intention to ensure that there is use by the public of government buildings.

To ask the Chancellor of the Exchequer if he will commission the National Audit Office to examine the assumptions contained within the departmental spending plans published in the "Financial Statement and Budget Report 1997–98"; and if he will make a statement. [6181]

My right hon. Friend the Chancellor asked the National Audit Office to examine the key assumptions underlying the fiscal projections in the Budget which he announced on 2 July. This was the first time that any Government had done that; the Chancellor has indicated that he sees a continuing role for the NAO in future Budgets, but the arrangements for that have not yet been made.

When the previous Chancellor announced his last set of spending plans, they were widely seen as unrealistic. The present Chancellor has said that there will be high inflation for the next few years, and his cash spending plans are widely seen as totally unreachable. Will the Chief Secretary commission the National Audit Office to review the current Chancellor's spending plans, or tell us which services or programmes he will cut to meet the "eye-wateringly tight" planning totals?

The hon. Gentleman is returning to a now-familiar theme of the Liberal Democrats. Let me make the position clear: we fought and won the election on the basis that we would put the public finances on a sound and proper footing. We will do that, although that means that tough decisions have to be made. I repeat the point that my right hon. Friend the Chancellor made to the hon. Member for Gordon (Mr. Bruce) a few moments ago. In terms of health and education, we have provided a real-terms increase in spending.

I have no wish to fall out with the Liberal Democrats, but they are being a little opportunistic—not for the first time, perhaps. In terms of capital expenditure, they asked us to spend £500 million, and we are spending £1.3 billion on schools. They asked us to spend £900 million on the health service, and we are spending £1.2 billion. When we announced those totals, their immediate response was, "That is not enough". I caution the hon. Gentleman and ask him to bear in mind the fact that some of us have responsibility for the economy and cannot call for opportunistic spending at every opportunity.

Since the Comptroller and Auditor General is an Officer of the House, is it not splendid that my right hon. Friend the Chancellor is getting his views and, I hope, aiming to expand that role in the future?

My right hon. Friend has substantial experience of these matters. We want to use the National Audit Office more. It is independent of Government, although the Auditor is an Officer of the House. The public would respect Governments all the more if they planned their Budget forecasts on realistic assumptions, and that is what we did. The unrealistic assumptions of the previous Government have led to some of the problems that we now have to clear up.

Will the Chief Secretary come clean about the real cut in public expenditure announced in the Budget? Does he agree that the higher inflation that the Government are now predicting for the years ahead means higher costs for all public services, yet no more cash is allocated for those years? Does he agree with independent calculations that this means a £3 billion cut in real public expenditure this year and a £5.25 billion cut next year? Will he confirm these figures, which flow directly from the Red Book published by his Government?

Welcome to the new friends of public spending. The Conservatives are now telling us, in effect, that the figures that they left us do not add up. The right hon. Gentleman must accept that we have inherited a difficult financial position, largely because of the actions of the Government of which he was a member until he resigned 12 months before the election. Frankly, we will take no lectures from the Conservative Opposition on the conduct of the public finances. We are prepared to take hard decisions to ensure that public spending is on a proper footing for the rest of this Parliament.

To ask the Chancellor of the Exchequer what new measures he is proposing to increase public-private partnership. [6183]

The Government have reinvigorated the private finance initiative and accepted the 29 recommendations of the Bates report. We will see to their timely implementation between September and December. We have asked Departments to prioritise their schemes and I am pleased to be able to say that schools and hospitals—two early priorities—are proceeding well. Within the next few days, I also hope to announce the chairman of the new task force which we are setting up.

I thank the Minister for his reply. Is he aware that in my constituency of Lincoln we have a first-rate example of public-private partnership in the presence of the new university of Lincolnshire and Humberside, which is the first purpose-built university in this country for many decades? Will he and his ministerial colleagues study such models of good practice, where councils, businesses, local organisations and individuals have joined to ensure the co-operation necessary for the provision of educational excellence?

I am grateful to my hon. Friend for drawing to my attention the excellent example of Lincolnshire and Humberside. I commend it to the House as an example of the public and private sectors working well together. In particular, I compliment my hon. Friend on her contribution to that partnership. In marked contradistinction, we note that the private finance initiative got nowhere under the incompetence of the previous Conservative Government. We are determined to make a success of it.

Whereas any extension of public-private partnerships is to be welcomed, does the hon. Gentleman appreciate that in many areas—rural areas, in particular—where the schemes are small and scattered and we are dealing with single classrooms or schemes of that type, the PFI will never he the appropriate solution? Does he appreciate that, however much it is extended, it will be no substitute for a proper capital investment programme in local authorities?

The hon. Gentleman will be aware that, in the next five years, we will be spending three times what the Liberals intended to spend. He must also be aware that, of that £1.3 billion programme for schools refurbishment, two thirds is intended to be non-PH and so, in that sense, directly for schools. As I am sure he will agree, where the PFI can work for the other third, we will get incremental spending in so far as it is successful in those areas, and I am sure that it will be.

Although I am sure that the Paymaster General will be pleased to hear that we agree with public-private partnerships where they offer good value for money to the taxpayer, does he agree that the biggest case of that is probably the existence of the pension funds, which have built up some £650 billion of assets? Does he feel that it is wise or conducive to future good will and the success of such collaboration to introduce a tax, through the changes in advance corporation tax, to the tune of £5 billion a year, with all the consequent effects either in driving people back into the public sector or in requiring rebates to be adjusted—therefore at greater public expenditure cost?

The question is totally irrelevant to the PFI, as the hon. Gentleman well knows. The fact is that the Conservative Government made a total flop of the PFI and this Government are going to make a success of it.

To ask the Chancellor of the Exchequer if he will make a statement on his plans to reduce value added tax on domestic fuel. [6184]

My right hon. Friend announced in the Budget last week that VAT on domestic fuel is to he cut to 5 per cent.

I am grateful to my hon. Friend for that reply. Can she confirm that millions of pensioners and people on low and fixed incomes will benefit directly as a result of the reduction in VAT on gas and electricity, which, together with the other changes in the Budget last week, will lead to significant reductions in fuel bills later this year? Has that not served to emphasise one of the main differences between the Government and the Opposition? The latter broke their promises on VAT. We keep ours.

I can confirm that the average household will be more than £18 a year better off and that the poorest households, including pensioners, will benefit the most, because it will be a greater proportion of their income. The implementation date will be 1 September, to ensure that they get the benefit in this winter's bills.

In view of the Government's propensity to claim that they, keep their promises, why, when an official Front-Bench Labour spokesman before the general election promised that, alongside the Budget Red Book, a green hook would be published, setting out the Budget's environmental consequences, no such book has appeared?

We have every intention of keeping that promise from the first full Budget.

Does my hon. Friend agree that many decent people will welcome the alleviation of fuel poverty and that reducing cold-related illnesses will save the national health service a great deal of money?

I agree that it is important to ensure that people can keep warm and that the scandal of hypothermia is tackled, with the consequent reduction in costs for the national health service. We also intend to introduce an insulation and energy efficiency programme to ensure that people can not only heat their homes and stay warm but can do so as efficiently and cheaply as possible.

In implementing the welcome cut in value added tax on domestic fuel in early September, will the Financial Secretary consider ensuring that customers who have credit balances in their gas and electricity accounts suffer no prejudice because of their prepayments or increased contributions to their accounts, and that they do not receive bills that they need a maths degree to understand?

I can confirm that the provisions in place for the energy companies ensure that they will be able to apportion bills to ensure that people get the full 5 per cent. reduction; there should be no problems with that.

To ask the Chancellor of the Exchequer what representations he has received on the exchange rate; and if he will make a statement. [6185]

My right hon. Friend has received a number of representations concerning the exchange rate. The Government want a stable and competitive pound over the medium term, consistent with the objective of price stability. The focus of policy will be on achieving the low inflation and sound public finances that are the necessary conditions for sustained exchange rate stability.

Has my hon. Friend had a chance to study the attempts in the House in the past year to get the previous Government to take action on the ever-increasing value of the pound, which has done so much damage to steel and other exporting industries? Is she aware that the inheritance of the Tory high pound might benefit Conservative Members such as the shadow Chancellor, who can now renovate his chateau in Normandy much more cheaply, but does immense damage to our exporting industries? Does she share my concern that the pound is too high? It should be stable, but at a lower rate.

I share my hon. Friend's concern about the impact of the high pound on manufacturing and other industry. He makes the most apposite point in drawing attention to the previous Government's failure to tighten monetary policy effectively. We are living with the consequences of a Government who were more concerned with their own Back Benches than with governing the country.

Have the Government received representations about the exchange rate from companies with substantial foreign earnings, particularly from those who would have been affected by the abolition of the foreign income dividend? Is it true that the Government are about to announce the most humiliating U-turn and scrap the Budget measure that would have abolished FIDs?

I regret the fact that the hon. Gentleman did not find it possible to be in the House on Friday when my hon. Friend the Paymaster General referred to those matters. The Government have no intention of making any U-turns. We pursue the policies that we were elected on in the general election; I realise that that is something Conservative Members find very difficult to accept.

As early as February this year, it was predicted that there was only a one in four chance of our meeting the inflation target, yet the previous Government did nothing about it. Will my hon. Friend comment on the implications of that in the current economic situation?

My hon. Friend makes a valuable point. Six times in a row, the previous Government were warned about the inflation target and, six times in a row, they chose to go for narrow political considerations. That is why my right hon. Friend the Chancellor of the Exchequer is determined to put the setting of the inflation rate on a firm long-term footing. That is a key way of ensuring stability in the economy and an exchange rate that is acceptable in the medium and long term.

To ask the Chancellor of the Exchequer if he will publish the representations he has received from business organisations about the windfall tax. [6186]

No.

I thank the hon. Gentleman for his answer. Is he aware of the track record of Anglian Water in improving services for people in East Anglia? Is he further aware that Anglian Water has made it plain that, to pay the windfall tax, it will have to borrow the full amount, thereby adding to its costs and to the difficulties of its investment programme for improving water services all over East Anglia?

As the hon. Gentleman knows, Anglian Water, like other water companies, has paid hardly any mainline corporation tax. Perhaps Anglian should take a leaf from Hyder's book. Its chairman, Graham Hawker, today released a press statement in which he said:

"Hyder does not intend in challenge the legality of the windfall tax and it will be paid from borrowings.

Hyder is confident that it can deliver satisfactory dividend growth.

The group remains committed to its current programme of customer rebates and discretionary capital expenditure. Customers are not bearing the burden of the windfall tax."

That company probably bears a relatively heavier burden than Anglian.

Does my hon. Friend understand that those of us who support the windfall tax are somewhat disappointed about its coverage? What about the people who were able to buy British ports, including my port of Tilbury, at a snip? Time and again, they became millionaires overnight. That is unfair. Some of those massive profits should be returned to the dock communities that created them. The House gave a private monopoly of London's principal airports to BAA, which raked in large sums of money that should be returned to the British people and to the workers whose enterprise created that wealth.

I understand my hon. Friend's feelings on those matters, but he will agree that those organisations did not fall within the tightly drawn criteria that we had to use for the definition of the windfall tax. I am sure that he also agrees that lone mothers, school children and the unemployed, old and young, will greatly benefit from the uses to which we intend to put the tax.

Does the Minister accept that the windfall tax on British Telecom at least tells its directors not to try to do cosy deals with the Labour party? Has he considered what message he is giving to the telecommunications industry? Is he saying that the Office of Telecommunications failed in its job? Can he explain why prices have fallen by 40 per cent. for consumers since 1984 when BT was privatised? What impact on competition does he expect the more than 150 competitors now in telecommunications to have?

I welcome, with the hon. Gentleman, the good progress of BT. The failure—and it was a big one—was the serial commercial incompetence of the Tory Government in selling off public assets far too cheaply and delivering a had deal for taxpayers, which we are going to put right.

To ask the Chancellor of the Exchequer if he will meet representatives of pensioners to discuss the impact of his fiscal policy. [6188]

We are always keen to know the views of representative bodies and are happy to meet those that wish to make representations to us on an appropriate basis.

Is my right hon. Friend aware that the provision in the Labour Government's first Budget to cut the Tories' hated VAT on fuel was widely welcomed by pensioners in York? Does he agree that that shows that Labour's tax promises can be trusted? Will he confirm that the poorest households, including pensioners, will gain the most in proportion to their incomes, from this Labour tax cut?

My hon. Friend is right. I am sure that he owes a large part of his very large majority at the general election to the fact that the Conservatives wanted to raise VAT on fuel to the full 17.5 per cent. We kept our promise to reduce VAT on domestic fuel to 5 per cent., just as we have kept every other manifesto promise.

Does the right hon. Gentleman have any plans to meet representatives of the secretaries to Members of Parliament to discuss the impact on their pensions of the changes to ACT? Has he any plans to increase non-contributory payments so that they can enjoy the same pensions to which they looked forward just before the infamous Budget?

I am not aware of any representations. I caution the hon. Gentleman and many of those who sit on the Benches alongside him: they do no one any good by creating false scares that have no justification.

Yesterday, the Chief Secretary to the Treasury conspicuously failed to defend the Financial Secretary's claim that the £5 billion extra tax on pension funds was

"good for pensions and pensioners, not had for them … People should understand that our reforms will benefit pension funds."—[Official Report, 3 July 1997: Vol. 297. c. 507]

Will he, today, defend that remark? If this damaging measure is good for pension funds, why is it necessary to protect charities and other funds from its impact?

As the right hon. Gentleman knows, I spoke for some 45 minutes yesterday—perhaps too long—during which I defended the Government's policy to the hilt because the position is correct. We have removed a distortion in the tax system. It should be for managers and businesses to decide what to do with their profits. The tax system should not decide whether they are reinvested or distributed. The decision will be good for pension funds because it will enable companies to grow. The stock market has risen not only since the election but since the Budget announcement because people realise that the decisions that we have made will add to the wealth of companies and, therefore, to the wealth of pension funds.

The right hon. Gentleman should think twice about attacking us because in 1993 the Government of which he was a member embarked on a bare-faced raid on pension funds because, as the right hon. Member for Charnwood (Mr. Dorrell) admitted at the time, they saw it as a soft touch for raising money. We have reduced corporation taxes. That will benefit companies and, therefore, pensions.

To ask the Chancellor of the Exchequer what discussions he has had with businesses about the implementation of his welfare-to-work proposals. [6190]

The chair of the advisory task force, Sir Peter Davis, has been involved in discussions with me and with other Ministers on aspects of the design and implementation of our new deal for the unemployed. On 25 June, I hosted a breakfast seminar for senior business figures on this very matter. I am pleased to say that our proposals have received support from many of Britain's leading companies.

The welfare-to-work proposals are certainly important to my constituency, which covers six of the poorest wards in the west midlands. Does my right hon. Friend agree that the policy will realise the wasted talents of our young people and of the long-term unemployed? Does he agree that that can only be of benefit to industry and the country in general?

I believe that there has been a substantial welcome throughout the country, including the business community, for our proposals to tackle the problems of youth and long-term unemployment. Something should have been done many years ago. People understand that the Government made a promise at the election that they would take action on the issue. We have raised a windfall levy from the utilities to pay for the action that we are taking. We are a Government who keep our promises to the young people of Britain.

Will the right hon. Gentleman acknowledge that, since his party first announced its proposals in opposition, the number of people who need the benefit of welfare to work has reduced and that his actual target is numerically impossible to meet? At the beginning of Question Time, when the minimum wage was mentioned, it was put to the right hon. Gentleman by the hon. Member for North-West Leicestershire (Mr. Taylor) that a significant number of adults earn less than £3 an hour. Is it possible that, in line with welfare to work, the minimum wage will be introduced at £3 an hour?

The hon. Gentleman should know that the Low Pay Commission is examining exactly that matter. The minimum wage will be decided after consultation involving the Low Pay Commission, which includes representatives from business, the trade unions and other sections of the public, including guaranteed representation for small businesses. There are more than 500,000 young people out of work. In Britain today, 20 per cent. of households include no one earning a wage. That is a sad and tragic commentary on 18 years of failed Conservative government.

To ask the Chancellor of the Exchequer if he will make a statement on the current strength of the pound. [6191]

The Chancellor keeps a close watch on the strength of the pound and is conscious of its impact on companies that are heavily involved in exports.

Does my hon. Friend know of the British steel industry's difficulties with the export of its products? In particular, is she aware of the anxieties of Shotton steelworkers in my constituency which are felt because of difficulties in exporting their products as a result of the high value of the pound? Does she agree that the Conservative party has to face up to a large measure of guilt for that?

I congratulate my hon. Friend on the concern that he has consistently expressed for the steel industry in his constituency. I am aware that, because of an efficiency drive by the company that runs Shotton, there have been 69 redundancies. We are acutely conscious of the impact of the previous Government's failure to act on the strength of the pound and we are conscious of its impact on exports. Indeed, my hon. Friend the Paymaster General is to chair a special forum devoted to exports. I am sure that he will concentrate on those aspects of the export industry that directly relate to the steel industry.

If the hon. Lady and her colleagues on the Treasury Bench are so proud of the fact that the Bank of England, on their behalf, is tightening monetary policy, how does she intend to face up to the real dilemma that every time interest rates go up not only will the pound sterling strengthen still further but mortgage rates will also go up, with the result that the cost of living index will go up? Surely that real problem will require fiscal approaches.

The hon. Gentleman rehearses the very argument that got us into difficulties in the 1980s and the Government he supported knew all about that. Before I came into the Chamber today I learnt that the pound has fallen by 2 pfennigs.

I take the hon. Gentleman's point about monetary policy. In that respect, it is important that we have a coherent long-term policy on interest rates. That is why the Chancellor has taken the sensible decision to ensure that the Monetary Policy Committee should take decisions on interest rates independent of the political grandstanding that took place under the previous Government. That affects mortgage rates, which affects the well-being of families throughout the country.

Is not today's failure by the shadow Chancellor to say whether he agrees with the announced interest rate increase a clear signal that the Conservatives can never be trusted again not to lead us into a boom-bust cycle?

My hon. Friend is perfectly correct. The shadow Chancellor is frightened to say yea or nay because he is frightened about which part of the Conservative parry he might have to play to for his further preferment.

To ask the Chancellor of the Exchequer when he last met the director general of the Confederation of British Industry to discuss the impact of the Budget on business costs. [6192]

My right hon. Friend the Chancellor met the CBI on 18 June and I am due to meet its representatives shortly.

At that meeting, did the Chancellor raise his plans to abolish foreign income dividends? Does the Chief Secretary now regret that decision? Will he confirm whether he will proceed with that ill-thought-out and highly damaging measure? The earlier answer from the Economic Secretary will simply add further confusion to an already confused and highly unsatisfactory situation.

The situation is not confused at all. My hon. Friend the Paymaster General made the Government's position absolutely clear on Friday at the conclusion of that day's debate on the Budget. If the hon. Gentleman wants to see what my hon. Friend said, he need do no more than read Hansard. The situation is widely understood, particularly by those affected.

Would not business costs be less if some of the top bosses paid themselves less in increases? Is my right hon. Friend aware of the 20 per cent. increase given to the director general of the BBC? He will now receive a salary of £354,000 a year. That is in addition to a number of perks, including petrol for private use, two cars and the rest of it. At the same time, redundancies have been announced at the BBC and, in general, employees receive an average increase of less than 2 per cent. Is it not time that the director general of the BBC was told that the organisation is in the public sector and that those who lead public service organisations should behave somewhat differently? Frankly, is it not time that the director general left that organisation?

I am bound to confess that I am not familiar with every detail of the director general's pay package. I shall repeat what I have said before, which is that those who lead companies should set an example to all their employees and all those concerned with the firm. Whether they do that is largely a matter for the companies and organisations involved and those to whom the director is responsible.

To ask the Chancellor of the Exchequer if he will make a statement on his proposals for fiscal incentives for investment in business research and development. [6193]

The 2 per cent. cut in corporation tax announced in the Budget, combined with the abolition of tax credits for pension funds, provides a better environment for long-term investment, including investment in research and development.

Does the Economic Secretary accept that perhaps even more of companies' Funds should be invested in research and development? Does she also agree that further incentives, by way of providing allowances against additional corporation tax, might be a better use of tax receipts?

The hon. Gentleman asks a sensible and interesting question, but I shall refer him to the statement that my right hon. Friend the Chancellor made on the Budget. The purpose of reducing corporation tax and abolishing tax credits for pension funds was specifically to ensure that companies could take their own decisions on research and development by retaining more of their profits.

If the hon. Gentleman cares to check the most recent figures for research and development—those of 1995—he will find that there was a 2 per cent. drop in research and development in the United Kingdom. I believe—and the Government believe—that companies that are able to invest more of their own retained profits have a much greater opportunity to invest them in research and development.

I warmly welcome the Government's Budget decision to improve capital allowances—something for which I have been campaigning for a great many years. But does not the hon. Lady accept that the increase in interest rates—they will have gone up three times in seven weeks under the new Government—will be counterproductive, particularly to manufacturing industry, which will not he able to invest and may well start making people redundant when it faces increased competition because of the value of the pound?

I am surprised that the hon. Gentleman should make that point as it allows me to return to the Dispatch Box and say that if the previous Chancellor of the Exchequer had been prepared to accept the advice of the Governor of the Bank of England, action would have been taken on interest rates at an appropriate time. It was the complete failure of the previous Chancellor to have the courage to accept the advice of the governor that has created a number of interest rate rises in recent months.

While I welcome the Government's response, does the Economic Secretary agree that good firms will seek to invest in research and development—some have been following the foresight plan—but that the Treasury does not seem to be fulfilling its side of the bargain? Is it not important that the Treasury should do so? Is this not a problem of old-fashioned interpretation—with more money being invested in pure research, but not enough in applied research?

I am interested in the hon. Gentleman's point; indeed, I shall return to the point that I made earlier. One reason why the Government cut corporation tax was that the Treasury believes that more money should be invested by companies in accordance with their own priorities. The Treasury does not believe that companies should be forced into having to make dividend payments that might not be in line with their best interests in future. I acknowledge the importance of research and development—particularly in Northern Ireland and in my country, Scotland, especially for high-tech, small companies. It is important that we create a climate in which companies feel free to make those investments without extraneous pressures on them.

To ask the Chancellor of the Exchequer when he expects the register of government assets to be completed; and when he will publish the results. [6194]

The Government are planning to complete the register of Government assets and will publish it by November, as we promised in our manifesto.

May I take this opportunity to welcome the fact that the Government are producing their register in November? Their willingness to publish the results show that they are committed to openness and transparency in their economic policy. I also welcome the fact that, for the first time since the Domesday hook, the Government have a complete list of what they own. Does my right hon. Friend agree that the Government can make more informed use of their assets by knowing exactly what they own?

Many people would find it astonishing that the Government have not, until now, known what they own. As my hon. Friend said, for the first time, this November we will be able to show what the Government own. We intend to publish that register because it will enable the Government to make decisions about how best to use public assets in a way that people find acceptable and put them to their optimal use.