asked the Chancellor of the Exchequer if he will give total taxes as a percentage of original income plus cash benefits for a two adult/two child family with earnings of £1,500 a year, £2,000 a year and £4,500 a year.

The most recent family expenditure survey shows that total taxes paid by such a family in 1971 amounted to around 32–33 per cent. of original income plus cash benefits at each of the three levels of earnings. The value of the cash benefits however falls—both absolutely and relatively—as the level of earnings increases.

Does not that show how unprogressive our present system of taxation is? In the light of the Government's appeal for fairness, does not the Chief Secretary think that the onus is on the Government to do something radical about it very soon?

The answer shows that in this medium range of incomes the total weight of taxation, both direct and indirect and including all cash benefits, is roughly of the same level. But, of course, it is based on the 1971 family expenditure survey figures and there have been considerable changes since then. Also, the figures encompass a very considerable range of incomes around each average and therefore the figures should be treated with a good deal of caution.

asked the Chancellor of the Exchequer what progress has been made towards an annual growth rate of 5 per cent.

asked the Chancellor of the Exchequer if he is satisfied that his target of 5 per cent. economic growth in the economy is being achieved; and if he will make a statement.

asked the Chancellor of the Exchequer what estimate he has made of the effect of the Government's anti-inflation policy on the 5 per cent. per annum growth target.

The latest indicators of demand and output and the falling trend in unemployment suggest that the economy is now growing at a rate broadly consistent with the Budget forecast. Success in reducing the rate of inflation will make it easier to sustain a rapid growth rate.

Is not the Chancellor aware that some experts take a contrary view and that some of them are very pessimistic about the present position? Will he give a forecast about the balance of payments deficit for the year arising out of the consumer-led boom which we are now experiencing? Will he explain the reluctance of private investors to invest?

There are other Questions on the Paper concerned with the balance of payments. The Questions now before us deal with growth. There is plenty of evidence to show that the economy is now growing at around the rate which I forecast in the Budget. Industrial production, for example, which is a very important indicator, was nearly 6 per cent. higher in the three months to November than a year earlier. Retail sales are 6 per cent. higher than a year ago and new car registrations are more than 15 per cent. higher. Unemployment on a seasonally-adjusted basis has fallen by 173,000 since March.

in the event of an apparent conflict between the objective of a 5 per cent. growth and the objective of the abatement of inflation, which would have the greater priority?

I do not believe that the policies we are pursuing are producing any inconsistency whatever.

Is it not the case that the welcome increase in growth in recent months has been largely because Government policies last year increased consumption about three times as fast as national wealth, and was not this one reason for the very heavy deterioration in our balance of payments? Is it not also the case that under the Government's proposals for the coming year consumption will increase at only about one-third of the rate at which they hope to increase national growth? What does the Chancellor propose to do to ensure that the welcome growth we can see at the moment is maintained for the next two years, as the Prime Minister promised the other day?

One of the main reasons for introducing the measures announced by my right hon. Friend last Wednesday, which I hope will have the support of the Opposition in the national interest, was to be able to maintain a more rapid growth rate. I am, however, a little surprised that anyone who supported the Labour Government's policies of restriction and economic stagnation should criticise the present Government on anything to do with the growth rate. The previous Government deliberately held back the growth of the economy to an average rate of less than 2 per cent. a year. It was a disastrous policy and, what is more, the Opposition know it.

asked the Chancellor of the Exchequer what was the increase in the money supply (M3), expressed as an annual rate, during the latest period of three months for which figures are available; and if he will now revert to the former practice of publishing targets for the expansion of domestic credit over the period of the financial year in course.

In the three months to mid-December M3 increased at an annual rate of about 24 per cent. The latest figures emphasise how right we were to take the measures we have taken recently to moderate the growth of money and credit to rates consistent with our objectives for the economy. In present circumstances I do not think it would be desirable to give hard and fast numerical targets for the expansion of monetary aggregates.

Is my hon. Friend alarmed by this latest reversal of the slight reduction which we previously experienced in the rate of acceleration in the money supply? To what extent does he think it is related to the Government's public spending programmes coming home to roost, and what relationship is there between this and the phase 2 legislation which we are to discuss later in the week?

I can only emphasise what I have already told my hon. Friend: that I think that the December figures, which were to the middle of December, indicated that it was right to have taken the earlier action which was taken and the action which was announced before the figures were made public. I would have thought it would be wrong to place too much emphasis on a single month's figures. Although the trend is higher than it was earlier in the autumn it is substantially below what it was in the summer, and it remains the Government's intention to bring the growth of money supply more nearly into line with the money growth of the economy.

When the Chief Secretary is talking about not placing too much reliance on one month's figures, he might remind the Chancellor of some of the things his right hon. Friend said on the basis of one month's figures. On the whole question of money supply and public expenditure, as the Government have forecast that public expenditure is to grow next year at the rate of 5·3 per cent., will the Chief Secretary tell us what growth rate he is planning for private consumption?

The hon. Gentleman will know that it has been the custom of successive Chancellors to give forecasts of that nature only at the time of the Budget and I will not anticipate my right hon. Friend's Budget Statement. As for the question of the growth of money supply, the hon. Member's point never arose under the previous Administration because they never published monthly figures.

If the Government are hoping for a rate of growth of 5 per cent. per annum, what is the point of having a rate of growth of money supply which is in excess of that?

We have always made it clear that it is Government policy that our stance on money supply should be consistent with the rate of growth my right hon. Friend announced in his Budget Statement. As he told the House last year the rate of growth of money supply was higher than was necessary to achieve that, and we have been running it down. Measures taken recently will reinforce that intention.

asked the Chancellor of the Exchequer what is the latest value of the £ sterling compared with June 1970.

asked the Chancellor of the Exchequer what, on the basis of the General Index of Retail Prices, is the purchasing power of the £ sterling, taking it as 100p on 18th June 1970.

asked the Chancellor of the Exchequer what is the value of the sterling compared with 1st July 1970.

asked the Chancellor of the Exchequer what, on the basis of the General Index of Retail Prices, is the purchasing power of the sterling now, taking it as 100p on 18th June 1970.

Taking the internal purchasing power of the £ sterling as 100p in June 1970, its value in December 1972, the latest date available, is estimated at 82p. This estimate is based on the movement in the General Index of Retail Prices.

Is the hon. Gentleman aware that on the last three occasions he has answered this recurring Question the value of the £ has always gone down by 1p per month? When is the freeze supposed to start working?

I should emphasise that in the December price index period the retail price index rose by about ½ per cent. and that per cent. of that increase was due to higher food prices, partly due to seasonal factors and partly due to the world beef shortage. There was very little increase in non-food prices. It was less than one-quarter of 1 per cent.

Can the hon. Gentleman tell the House why, in the first month after the freeze, prices were higher than in the preceding month? I am astounded that, when the Minister comes to the Box on numerous occasions to answer this Question, he trots out such phrases as "Things are looking up", "We are turning the corner" and "If we take the appropriate measures things will change." Can he give us a guarantee that as a result of phase 1, phase 2, and the prospect of phase 3 the £ will not fall another 5p under the present Administration?

I am never astonished that the hon. Member is astounded because he has immediately asked a question which I answered a moment or two ago. He must listen to the answers which are given. I must confess that I do not recognise the remarks which he has attributed to me. The essential thing here is that the Government should introduce the proposals which we have made and which we believe will make a significant contribution—as, from the figures I have quoted, it is apparent the standstill has done.

My hon. Friend has twice mentioned food prices. Has he any proposal to hold food prices in check or is the whole of the freeze exempted from food prices, and the other way round? Are food prices to be taken out of the freeze?

My hon. Friend will appreciate that if food prices rise on a world basis we as a country have to pay more. Since he has asked a specific question about food I am sure that he and hon. Members opposite will welcome the fact that with the abolition of SET on 1st April there will be a reduction in the tax on food distribution and in other taxes which hon. Members opposite introduced. We are thus reducing the tax on food, in contrast to the previous Government's action.

Is the hon. Gentleman aware that in the first month of this fraudulent freeze the pay of a worker on average rates of pay was cut by 15½p a week and the pension of a married pensioner was cut by 5½p a week? Is he proud of that as an achievement? When will the Chancellor abandon his stubborn arrogance and do something about food prices?

I do not believe that my right hon. Friend is either stubborn or arrogant. The point is that in the 12 months to December 1972 retail prices rose by 7¾ per cent. whereas average earnings increased at least twice as fast. In real terms pensions in December were 11 per cent. higher than in mid-1970 and there was also the extra £10 paid to pensioners. I believe that this answers the hon. Gentleman clearly.

If the Labour Party is really concerned about the fall in the value of the £, why has it consistently opposed a voluntary agreement on incomes in the national interest?

I hope that hon. Members opposite will adopt a more responsible attitude towards these matters in the future than they have in the past.

Is the hon. Gentleman aware that he has just admitted that food prices went up 1½ per cent. in the first month of the freeze which means an annual rate of increase in the retail price index of 6 per cent.? How can he expect any ordinary working person to co-operate voluntarily in total control of incomes when the Government absolutely refuse to do anything about the appalling rise in food prices?

I have already given the figures and I rest on them. I am not quite sure whether the right hon. Gentleman heard them correctly. As for the overall position I should make it clear that if world prices rise, as a nation we necessarily have to pay more. Dealing with the proposals for wages and incomes I have already given the position for the 12 months to December. Whereas retail prices rose by 7¾ per cent. average earnings rose at least twice as fast. The important thing is that we should support the measures which the Government are introducing, which will help to cure inflation, will have a significant impact and will benefit the entire country.

asked the Chancellor of the Exchequer what is the purchasing power of the £ sterling, based upon the General Index of Retail Prices, assuming it to have been 100p on 6th November 1972; and what it was on 6th December 1972 and 6th January 1973.

Taking the internal purchasing power of the £ sterling as 100p in November 1972, its value in December 1972, the latest date available, is estimated at 99½p. This estimate is based on the movement in the General Index of Retail Prices.

I am grateful for that reply. If one makes the assumption that in the last two months there has been an effective fall in the value of the £ of probably 1 per cent., can my hon. Friend tell the House what was the effective fall in the value of the £ in the two months prior to 6th November?

I am sorry. If my hon. Friend will table a specific Question in those terms I will give a specific answer. The precise position in answer to his question is that the value of the £ on the basis I have described is 99½p.

What I am interested in, and I am sure that the whole House, especially my side, is interested in it, is an answer to a question that has puzzled me for a long time. At the last General Election the Conservative Party promised that the return of my party to power would lead to the "ten bob" £—

Order. Is this a question?

Yes, Mr. Speaker. Has the Treasury done any calculations about when the "ten bob" £ will become a reality?

The important point which needs to be emphasised is that we should take measures which will prevent the decline in the value of the £. We are determined to do that.

asked the Chancellor of the Exchequer if he will propose the reintroduction of Schedule A tax.

No, Sir.

Is the hon. Gentleman aware that because there is no Schedule A tax and no capital gains tax on excessive rises in house prices, the average executive earning over £5,000 a year has gained about £14,000 in untaxed housing capital gains under the present Government while during exactly the same period the average tenant has been forced to pay an average of 30p a week more in rents? Is this not a grotesque inequality, as offensive to the Chancellor as the land speculation of which he purports to disapprove? When will he stop this and land speculation?

I cannot see how it would conceivably help the tenant to hit at the position of the owner-occupier. To re-impose the old Schedule A—there is a new Schedule A on rents—would hit at the expansion of owner-occupation, something which has been supported on both sides of the House, would impose new burdens on existing owner-occupiers, would impose a much greater burden on those who have paid off their mortgages, many of whom will be elderly retired people, and would require a large number of extra Revenue officials. It would be interesting to know whether that is the policy of the Labour Party.

If the hon. Gentleman will not do as my hon. Friend asks, will he at least set a ceiling for tax relief on mortgage interest since this is becoming a scandal and is one of the main causes of the present high price of houses?

The position of tax relief on mortgage interest is exactly as it was left by our predecessors in June 1960.

If the Minister will not agree to either of these proposals will he try to bring some fairness into the system as between owner-occupiers and rent-payers, who do not draw a subsidy from any source, by allowing rent-payers to set a proportion of their rent against tax?

That is a wholly different question.

asked the Chancellor of the Exchequer if he will make a statement on his discussions with the retailing organisations on the value added tax.

We have had a number of discussions with retailers about the abolition of purchase tax and SET and the introduction of VAT. The retailing organisations have been most co-operative and helpful, and I am grateful to them. I look forward to these discussions continuing.

As it is now seven months since a row on both sides of the House led the Government to set up the Munro Committee to deal with the tax on children's shoes, why has no decision yet been arrived at? Surely this is not the most complicated subject in the world.

It may not be a complicated subject but I can assure the hon. Gentleman that Mrs. Munro's excellent report is a full and comprehensive one. In these circumstances it is necessary that it should be most carefully considered by my right hon. Friends and myself. We are doing that.

Will the right hon. Gentleman reverse his outrageous decision to penalise in particular small retailers who have not registered for VAT by 31st March, through no fault of their own but because of the extreme complications of the tax, and thus allow them credit for purchase tax on stocks?

I am surprised that the hon. Gentleman, in view of his professional qualifications, should say that mere registration is a difficult or complex matter. This is not so. The fact is, and it is as well that those concerned appreciate this, that it is in the interests of people to register as soon as possible because of this rebate of purchase tax.

Will my rigor hon. Friend accept that what the public want is the right answer on VAT and children's shoes, and not necessarily a speedy one as the Opposition seem to want?

It was as a result of the responsible attitude adopted by some of my hon. Friends who felt strongly about this matter that the Munro Committee was set up.

asked the Chancellor of the Exchequer what progress he has made with explanations to, and registrations of, retailing organisations for value added tax.

Retailers registered for VAT are being visited and advised by Customs and Excise officers, who have already addressed over 7,200 meetings representing all sectors of trade, including retailers. Explanatory notices have been issued. A special leaflet for small retailers has been issued and another will be issued this month.

Is the Minister aware that everything points to the vital registration process falling seriously behind schedule because, as he has just reminded the House, only half a million businesses have so far registered whereas it was intended to register 1½ million by the end of next month? How, therefore, will he avoid serious administrative problems?

I do not accept what the hon. Gentleman says. At the same time I would not wish to be complacent. It is important to remember that there are not only the number which have actually been registered—the figure I quoted a moment ago—but also those applications which are now being processed at the VAT headquarters in Southend and a substantial number of applications in local VAT offices. None the less I emphasise, as my right hon. Friend said a moment ago, that unregistered traders will still be liable for the output tax when it comes into operation and will not be able to claim back input tax or the purchase tax rebate. Therefore, it is in the traders' own interest to register as rapidly as possible.

Does my hon. Friend agree that shoe retailers will not know how they are placed until they know about the application of VAT to children's shoes? Will he confirm or deny that the Munro Report has now been with the Treasury for many weeks?

My right hon. Friend has dealt with that and, as he has said, he will deal with the question in his I3udget Statement.

asked the Chancellor of the Exchequer whether the payment of fees by retailers to organisations advising them on the complexities of value added tax are allowed as a tax deductible expense.

Expenditure on advice on the operation of VAT would normally be allowed as a deduction in computing profits for income tax or corporation tax purposes.

Is the Minister aware that, since it has become known how complex VAT is, large numbers of individuals and organisations have set themselves up as VAT consultants? Does he agree that this is probably the only growth industry we have seen under the present Government?

No, I would not agree with that for one moment. I suggest that individual retailers or others with particular problems should consult their local VAT office, which will be pleased to help them.

asked the Chancellor of the Exchequer if he will now say that he will zero-rate value added tax on children's clothes and footwear.

I cannot anticipate my right hon. Friend's Budget Statement.

Does not the Minister realise that the imposition of VAT on essentials such as children's clothing and footwear will bear most heavily on poorer families? How does this line up with the Prime Minister's recent statement on the pay and prices legislation that he wants to protect the lower paid? Come off it! Let us have zero-rating on children's footwear and clothing.

This matter was debated at considerable length in the Finance Bill debates last year. Again, as I am sure the hon. Gentleman will appreciate, I cannot anticipate my right hon. Friend's Budget Statement.

Since the exemption of child-size clothes as opposed to children's clothes would give an unfair bonus to small-size adults whereas it would in no way help the parents of large-size children, will my hon. Friend consider instead assisting parents by means of tax or other allowances?

I have taken note of what my hon. Friend says, as no doubt has my right hon. Friend.

For how many weeks has the Munro Report been with the Treasury?

I am afraid I do not have that information.

asked the Chancellor of the Exchequer what would be the estimated value added tax loss to the Treasury in a full year on the basis that the items listed in the Finance Act 1972, Schedule 5, Group 1 (Exemption from VAT for certain interests in land) were zero-rated instead of exempted.

Probably over £50 million.

Will my hon. Friend consider how much easier administration would be if the items on this list were zero-rated?

Be that as it may, the figure I have just quoted is one which we need to consider very carefully.

asked the Chancellor of the Exchequer if he will reconsider his decision not to postpone the introduction of value added tax, in view of the number of traders who have failed to register.

No, Sir.

Will the hon. Gentleman reconsider that answer in view of the fact that so far, only 336,000 traders have registered out of a total of 1,500,000, and bearing in mind the points which have been made about the state of the Civil Service, particularly the Customs and Excise officials, and the certainty—which must flow from those figures and other information available to the Treasury—that traders are not ready to cope with this enormously complicated task? Does not the hon. Gentleman appreciate that many people believe that the Chancellor of the Exchequer has taken leave of his senses in introducing a tax of this kind at a time when he is putting forward totalitarian measures of a kind which have never before been used in this country? Does he not agree that it is outrageous to introduce such a tax at the same time as he seeks to introduce wage controls?

I do not for a moment accept the hon. Gentleman's remarks. As for the conjuncture of the introduction of value added tax and the Government's prices and incomes policy, he will be aware that in the Government's White Paper we propose specific measures for the introduction of VAT. I am a little surprised that the hon. Gentleman has again raised the general question. When we debated the subject very fully before Christmas on a Supply Day, the Opposition had so little enthusiasm for their own motion that they could not muster enough Members to keep the debate going.

Does my hon. Friend agree that to postpone the introduction of VAT for the simple reason that traders have not bothered to register would give traders a weapon for all time in that they could put off a tax by the simple process of refusing to register? If the rule of law means anything, will my hon. Friend firmly tell the House that he has no intention of postponing the introduction of VAT?

I have made absolutely clear, as has my right hon. Friend the Chancellor of the Exchequer, that we have no intention of delaying the introduction of VAT or of delaying the abolition of SET and purchase tax. I do not accept the remarks of the hon. Member for Heywood and Royton (Mr. Joel Barnett) about registration, but at the same time we are not complacent about the situation. We believe that it is in everybody's interest that traders should register as soon as possible, given the fact that unregistered traders cannot deduct input tax. They will still be liable for output tax and they will not be able to take advantage of the purchase tax scheme if entitled to it.

asked the Chancellor of the Exchequer whether, in every instance in which value added tax is levied, it will be possible for the person providing a product or service to pass on the tax to the consumer; if not, what estimate his Department has made of the proportion of the tax that will be levied in this way; which industries are likely to be so affected; and if he will make a statement.

Such information is not available.

Will my hon. Friend undertake to reconsider the position of traders and those who supply a coin-operated service who are unable to pass on the tax to the consumer? Since this tax is expected to be paid by the consumer, will my hon. Friend give an undertaking that this matter will be reconsidered?

I am afraid I cannot give an undertaking of that kind. I fully appreciate my hon. Friend's concern on this topic which he has raised on a number of occasions. The difficulty in regard to coin-operated machines arises on the question of discontinuity in terms of the large size of coin unit in which the amount is paid. None the less the introduction of VAT and the abolition of SET and purchase tax is a change in costs, and the industry has coped with similar changes in costs where precisely the same problems have arisen. I believe that it will succeed in coping in this instance.

Has the Treasury now provided an answer to the coin slot problem better than the one we had in Committee concerning launderettes—namely, that people should buy a season ticket?

That was one of the points raised in Committee and I am well aware of the hon. Gentleman's continuing interest in this subject. Whenever there are changes in costs, there are always problems for the operators of coin-operated vending machines and other coin-operated machines. I do not regard this as a unique problem connected with the introduction of VAT and the abolition of SET and purchase tax, and I do not believe that this will necessarily create any more problems than any other changes in costs, which have been experienced by the industry.

In view of the unsatisfactory nature of the reply, I give notice that I shall seek to raise the matter on the Adjournment at the earliest possible moment.

asked the Chancellor of the Exchequer what is the present total of medium and short-term official overseas debt; and how this compares with October 1964 and June 1970.

The total of short- and medium-term official external debt, converted at parity rates, was as follows: at end-September 1964, £71 million; end-June 1970, £1,461 million; and at the present time, nil.

Does my right hon. Friend agree that those are extremely interesting figures? Will he arrange to let the House have similar figures a little more frequently as they show exactly what inimical results the trade union movement is achieving when it tries to sabotage national industry?

One thing which we determined to do when we took office in June 1970 was to rid ourselves of this debt which had been contracted by the previous Government.

In view of the galloping deterioration in the balance of payments position over the last few months and the predictions of the London and Cambridge model, which is very close to the model used by the Treasury, will the Chancellor say whether he intends during the next few months to deal with the situation by imposing more exchange control, by borrowing abroad or by facing a haemorrhage of reserves and letting the rate sink even further, with serious results to the cost of living and the payments to be made to the European Community?

In the Budget Statement on 6th March I shall be dealing with the balance of payments. Not only have we repaid all the official debt but, in addition, our reserves are now twice as large as they were when the hon. Gentleman's party left office.

Will the Chancellor of the Exchequer, who no doubt carries all these figures in his head, tell us what was the balance of payments deficit in October 1964, June 1970 and January 1973?

I have a faint suspicion that the right hon. Gentleman knows the answer to that question.

asked the Chancellor of the Exchequer what estimate he has made of the cost of removing the tax on the pensions of war widows.

The information on which to base an estimate is not available.

Will my hon. Friend remember that Germany and Italy—and this will apply eventually to all our partners in the European Community—do not impose any tax on the pensions of war widows? Will he also remember that in the forthcoming Budget he has the opportunity not only to help these widows but also to strike a blow for European tax harmonisation?

It is with great hesitation that I correct my hon. Friend, but Denmark is among several countries, which include the Netherlands and Italy, which impose tax on war widows' pensions. We have always taken the view—because it would give nothing to those below the tax threshold and be of maximum benefit to those with substantial other income—that to exempt these pensions from tax is not the right way to help war widows. Instead we aim to increase the level of war widows' pensions whenever that is possible.

Is the Minister aware that, while it is difficult to disentangle the problems of war widows from those of widows generally and the problems of widows generally from those of other single-parent families, the Government appear to be incredibly indifferent to the plight of these disadvantaged families? When will some initiative be taken on behalf of these people on the same lines as that which has been taken for surtax payers?

I must contradict the hon. Gentleman. I just do not believe that his accusation bears any relation to reality. On the contrary the Government have done more to give specific help to those families which face specific problems than did their predecessors. We can stand proudly on our record on this.

asked the Chancellor of the Exchequer what plans he has for the special 10 per cent. car tax announced in his last Budget; and if he will make a statement.

A general guide to car tax procedure was issued in September by the Customs and Excise to car manufacturers and commercial importers and arrangements for the introduction of the tax on 1st April are going steadily ahead.

When the announcement of this tax was made last April the Chancellor of the Exchequer promised chat he would keep it under constant review. As the costs of materials for the motor industry have risen since April, and as the highest level of demand for cars is essential to full employment in the motor industry, does my hon. Friend feel that 10 per cent. is too high?

I have noted my hon. Friend's suggestion.

Why not abolish altogether the car tax and simplify the procedure by increasing the price of petrol?

I have noted the hon. Gentleman's suggestion with some interest, but the car tax was debated at considerable length in the Finance Bill debates and is now incorporated in the Finance Act.

asked the Chancellor of the Exchequer if he will co-ordinate the activities of Ministers responsible for nationalised industries with a view to bringing the industries back to profitability.

I would refer my hon. Friend to Paragraphs 17 and 18 of the White Paper on Controlling Inflation (Cmnd. 5205). Existing arrangements for co-ordination between Ministers are satisfactory and are working well.

Does not my hon. Friend agree that spending over £500 million a year on subsidising the nationalised industries and those industries not having to pay interest on their capital contributes to the increased money supply which is causing inflation? To curb inflation, would it not therefore be right to begin to get back to the level of profitable charges in this sector of the economy?

My right hon. Friend and, indeed, the Government have never concealed from the House or the country that there are significant disadvantages in pursuing a policy of price restraint in the nationalised industries. But in our view these are outweighed by the advantage of achieving greater price stability at a time when we are trying to bring the general level of price increases more under control. My hon. Friend will have taken note of the provisions in the White Paper that in stage 2 the nationalised industries will be subject to the same criteria for increasing prices as is private industry.

Will the Chief Secretary tell the House what will be the criteria for profitability for the nationalised industries? At present it looks as though they will receive an open-ended subsidy. If so, there will he no criteria of profitability to replace those which we have known for some years.

There is no question of an open-ended subsidy for the nationalised industries. The extent to which they will be allowed to increase their prices and charges will be rigorously controlled and, apart from profitability, is on the same basis as that which applies to private industry.

asked the Chancellor of the Exchequer if he will make a statement about his meeting during the recess with the Customs and Excise Departmental Whitley Council to discuss departmental morale, problems arising from the introduction of value added tax, the effect of the pay freeze and other matters.

I saw representatives of the Staff Side of Customs and Excise Departmental Whitley Council on 10th January and I took note of their views.

Will the Chancellor acknowledge that, contrary to the impression he gave not long ago, morale in the Department of Customs and Excise is very unsatisfactory and that there is gross overworking, mainly because of EEC entry, the implications of VAT and the grossly unfair treatment of the Civil Service in the current freeze? Is he not setting the worst possible example as an employer?

I do not think so. I appreciate the concern of those who came to see me about the pay standstill but I hope that they, like the public at large, will recognise the justification for what the Government are doing. We had a very useful discussion covering a variety of matters.

Does the right hon. Gentleman realise that the House is not impressed with the so-called fairness with which he claims to have treated the Civil Service? Is he aware that the pensions of civil servants on the eve of retirement will suffer as a consequence of the freeze? Does he think that that is fair?

The problem is an obvious one. When one imposes a standstill one does one's best to make it as fair as possible between one group of employees and another, and this we have done.

I support my right hon. Friend's policy, but I ask him to look closely into this matter because some of the lower-paid civil servants who work alongside people who are making much more money are having to work overtime, and there is justification for the hard feelings that some of them have.

I note what my hon. Friend says, but I cannot support any proposal which would result in different treatment—other than what we have laid down—for those individuals about whom he is speaking during the standstill.

asked the Chancellor of the Exchequer whether his proposed policy for £ sterling is a fixed exchange rate or a fixed but adjustable rate; and when this will be put into force.

We intend to return as soon as conditions permit to the maintenance of a fixed parity within agreed margins, against the background of an international monetary system based on a regime of fixed but adjustable parities.

Will the hon. Gentleman make rather clearer than he has done in his answer whether what the Government propose to adopt is a regime of fixed parities or of fixed but adjustable parities?

I am well aware that the right hon. Gentleman seeks to find some inconsistency between the use of the phrases "fixed rate" and "fixed but adjustable rate". There is none. What we shall return to is a fixed rate. If the right hon. Gentleman wants to find an implication that membership of the Communities means that parities must be immutably fixed now, he will not be able to do so. In the first stage, and probably in the second stage, of the move to European economic and monetary union—although that is still a good way ahead—changes of parity during those phases will be possible.

asked the Prime Minister if he remains satisfied with the co-ordination between the Scottish Office and the Department of Trade and Industry and the Department of the Environment with regard to the formulation of policy for the development of North Sea oil and gas pending the publication of a White Paper; and if he will make a statement.

Yes, Sir. I am satisfied that there is close co-ordination between Departments on this matter. I do not think a White Paper would be appropriate: a report to Parliament was presented on 16th January and Government measures are announced as the opportunities develop.

Does not the Prime Minister accept that the response to the IMEG report by the Government has been puerile and timorous in setting up a branch office of the Petroleum Industry Supply Board in Glasgow? How many civil servants or others will that branch office employ? Will not the Prime Minister update the figures of reserves in the North Sea so that we can see the full potential of the finds there?

No, Sir. The Government's response to the report has been to put in Scotland as large a share as possible of the organisations concerned in this important development. It is right that it should be allied to the organisation which exists here in White- hall; I am sure that is the best way to produce results. Any estimate of reserves must depend on progress made in drilling in the North Sea. From time to time we give estimates and try to keep them up to date as far as possible.

Will my right lion. Friend say whether the new development committee, which incorporates civil servants from both Departments mentioned in the Question, has any locus in planning matters as well as in development questions?

I think that the planning questions will remain with the normal authorities, but the Scottish Petroleum Office will be part of the Scottish Industrial Development Office in Glasgow. There will also be a branch of the DTI Petroleum Division in Glasgow. This, combined with the North Sea Oil Development Committee as part of the Scottish Economic Planning Board, should cover the ground.

The Prime Minister should be aware of the fact that there is a good deal of dissatisfaction in Scotland at the lack of power in the Scottish Office to take any initiative on likely oil revenues and environmental control of associated developments. Will he reconsider the establishment of some sort of development corporation, as has been suggested by the Scottish TUC and the Scottish Council, which could have a much more direct control over oil policy in Scotland?

I am fully prepared to consider proposals of this kind but I emphasise that we gave much consideration to this organisation as a result of the report we received. I do not agree that the Scottish Office is inhibited in taking the initiative. Indeed, many people have paid tribute to the speed with which matters have advanced in Scotland. The Scottish Office has stepped in to prevent any undesirable environmental effects.

asked the Prime Minister whether he will place in the Library a copy of his public speech to the Gimcrack Club on 8th December on taxation matters.

asked the Prime Minister if he will place in the Library a copy of his public speech at York on 8th December concerning taxation.

I did so on 11th December, Sir.

Is the Prime Minister aware that in that speech he said that he may have been a source of gain to the people who backed him at the last election? Was he talking about people on the same salary as himself who are £6·16 a week better off because of the income tax cuts, or was he referring to the price of horse meat which has risen as high as the price of beef?

In that speech I was talking about those who backed me against the public opinion polls. They did rather better at the last election than those who backed the Leader of the Opposition.

Since the Prime Minister referred in that speech to the fairness of his Government's taxation reforms, especially VAT, why is VAT being introduced to push up prices during a prices freeze at exactly the same time as the abolition of the surcharge on unearned income will give the lion's share of £300 million a year almost wholly to the rich?

The hon. Gentleman has no justification for the first part of his remarks about the impact of VAT. As we explained in the White Paper action is being taken to ensure that in terms of the reflection in prices this is carried out. In any event, we shall be debating this tomorrow.

While my right hon. Friend is considering putting copies of various speeches in the Library, will he also consider placing there a copy of the full text of his recent presidential— I mean Prime Ministerial—Press conference so that we can examine it and discover whether representatives of the Press are as good at putting questions to him as we are?

If it is not already in the Library, it can be easily put there.