asked the Chancellor of the Exchequer if he is satisfied with the working of the policy of competition in credit.

Yes, Sir. The changes have resulted in a welcome increase in competition and innovation in the banking sector.

I accept that the principles in the Green Paper have had a good effect on the economy in waking up the banking sector, but does my hon. Friend not agree that there is some anxiety that even the present high level of interest rates will not be sufficient to enable the Government to reach the declared objective of moderating the rate of increase in money supply? If further increased rates are necessary to achieve this and to sell more Government securities to the non-banking public, will the Government allow this to happen, or will they consider resorting to other types of control over particular types of lending?

I cannot make any forecasts or comments about the future course of interest rates, but the weapons available under the new monetary arrangements are adequate. A return to ceilings on bank lending in the private sector would stifle competition and in any event would have severe limitations as a monetary tool.

Will my hon. Friend accept that it is undesirable to revert to a system of credit control by sector, and that to do so could only have the effect of increasing interest rates? If there is one sector that needs to be controlled, it is that of Government expenditure.

We debated Government expenditure a week or two ago. I agree with my hon. Friend that the main effect of selective controls would be to alter the channels through which finance flows, and in less efficient directions. Ceilings—which existed under the Labour Government—do not represent a viable alternative to the use of interest rate to control money supply, particularly in the present conditions of very strong demand for credit.

asked the Chancellor of the Exchequer what change there has been in the proposals for an EEC monetary union.

At the meeting on 14th February, the Council of EEC Finance Ministers decided to advance to 30th June the dates for reports on short-term monetary support and conditions for the progressive pooling of reserves.

As an interesting comment and as a curtain-raiser to this afternoon's debate, would my right hon. Friend not agree that it is now time to exorcise the illusion that it is in the interests of British people to fix irrevocably the parity of the pound? Surely, with mountains of international money slopping around the world markets, the only rate is the rate that the market will pay.

I have already made clear the Government's approach to this problem.

The Chancellor of the Exchequer will be well aware that by deciding to maintain the float—a decision of which most of us in the House strongly approve—he has completely broken his undertaking to maintain the "snake-in-the-tunnel" agreement. Does he maintain, after the events of the last nine months, that it is realistic to aim—as the Prime Ministers originally committed themselves—not only at single exchange rates immutably fixed within seven years from now but almost identical tax systems and a supranational agreement to fix all the major parameters of the national budgets of all the nine member countries?

I know that the right hon. Member for Leeds, East (Mr. Healey) stands by the views expressed by his right hon. Friend the Leader of the Opposition when he was Prime Minister——

Come off it.

There seems to be a difference of opinion on the Opposition Front Bench. All the Governments of the EEC agree with the need to press on with the work of integrating the economies of the Community, which will make a monetary union possible.

asked the Chancellor of the Exchequer when he now expects to be able to fix a parity rate for sterling.

When conditions permit.

I appreciate that the floating of the pound has been a great advantage to sterling, particularly in the last few weeks, when an immense amount of hot money has been flowing into Germany, with great embarrassment to the Germany economy, but does not the Chancellor of the Exchequer have a clear commitment to fix a parity within the EEC? When does he intend to make clear that he will fulfil that commitment?

We have considered this matter on a number of occasions and I have made it absolutely clear where Her Majesty's Government stand.

Is the Chancellor aware that I am quite happy to hear him reaffirm his adherence to fixed rates in principle, so long as he allows sterling to float in practice?

If my right hon. Friend is happy with one aspect of the Government's policy, I am very happy for him.

Does a fixed but adjustable rate, which the Government apparently now favour, mean a rate of exchange which can be altered whenever we wish?

I do not understand what the right hon. Gentleman is saying when he uses the expression "which the Gov- ernment now favour". It is the policy that this Government throughout have favoured.

Will the right hon. Gentleman confirm that he intends not to fix the exchange rate until inflation is under control?

I have said before that in considering this matter the totality of conditions affecting any exchange rate will obviously be taken into account.

asked the Chancellor of the Exchequer what loss of revenue is entailed in reducing the inaugural rate of value added tax to five percentum only; what consideration of income standstill policy he will consider in that connection, having regard to the inflationary effect of value added tax at any higher rate than five percentum; and whether he will make a statement.

On the basis of the estimate published in last year's financial statement, introduction of VAT at a rate of 5 per cent. would reduce the full year yield by over £700 million. In deciding upon the initial rate of VAT in the context of his Budget my right hon. Friend will have regard to all relevant considerations.

Without expecting my hon. Friend to be anticipatory in present circumstances, may I remind him of the extreme attractiveness of a rate of 5 per cent. now that the freeze has been widely accepted in this country and that all quarters of opinion generally support it—since a 5 per cent. rate would be generally within the freeze conditions?

I agree with my hon. Friend that the Government's counter-inflation policy enjoys a great measure of support in the country. My hon. Friend also knows that my right hon. Friend the Chancellor of the Exchequer receives a variety of cogent and attractive advice which is not always mutually consistent. But we pay the closest attention to it all.

Is the hon. Gentleman aware that any rate will be inflationary, because it will be abused? Is he aware, further, that I have here a pair of children's slippers, bought at the Lincoln branch of Mothercare a few days ago, carrying a price tag of 70p but having underneath that price tag another tag, ready for the introduction of VAT which reads "Including VAT, 85p", an increase of more than 20 per cent. before the rate of VAT has even been announced? Is not it obvious that mothers will be exploited by this intolerable tax unless the Government remove it altogether from children's clothes?

I am not sure what sort of happy event the right hon. Lady expects at Lincoln. She will appreciate that I cannot anticipate the judgment of my right hon. Friend the Chancellor of the Exchequer about the coverage of VAT.

In view of the fact that even the right hon. Member for Leeds, East (Mr. Healey) has admitted that a 10 per cent. VAT will do little to the cost of living when it replaces purchase tax and selective employment tax, will my hon. Friend resist blandishments to lower the rate, bearing in mind that because of the relief on the necessities of life a reduction will be of greater relative advantage to better-off families than to poorer families?

I take note of what my hon. Friend says.

Will the hon. Gentleman recognise, first, that he deliberately misled the House the other day when he said in reply to me that there were 950,000 registrations? That was not the truth, and perhaps the hon. Gentleman will apologise. Will he recognise, secondly, that if he were to accept the advice of the hon. Member for Worcestersire, South (Sir G. Nabarro) it would make an even greater nonsense of VAT than it is at present? He would be raising about half the amount that is raised by the two taxes which it replaces. Would not it make more sense, in the present inflationary situation, to take notice of what was said by my right hon. Friend the Member for Blackburn (Mrs. Castle) and postpone the introduction of VAT altogether?

I apologise if I misled the House. I will look into what the hon. Gentleman says. I gave the latest figures of registrations and applications in the course of the Committee stage of the Counter-Inflation Bill.

asked the Chancellor of the Exchequer how many letters he has received asking that safety equipment be free of VAT.

Eleven.

Is it not nonsense to spend considerable sums of money encouraging safety consciousness and for the first time to introduce VAT on safety equipment which has not previously been subject to purchase tax—for example, fire blankets, fire extinguishers, goggles, safety footwear, respirators, gas masks, helmets, safety harness and machine guards which are designed for protection? Surely there must be a clash of policy somewhere in the Government's thinking.

We debated this subject at considerable length on the Finance Bill last year. Safety equipment, as a class, was not relieved in last year's legislation because of the impracticability of finding a satisfactory definition. The hon. Gentleman may recall that we debated at length the question of buckets of sand. I understand what he is saying, but I cannot agree with him, because VAT on safety equipment purchased by registered traders for business use will be recoverable, and many other circumstances apply.

Is the hon. Gentleman aware that my trade union, which is the construction section of the AUEW, is deeply concerned about the introduction of VAT on safety equipment? Does he realise that the construction industry, which has the highest accident rate in the whole country, makes extensive use of the articles mentioned by my hon. Friend the Member for Oldham, East (Mr. James Lamond)? On that basis, bearing in mind the number of firms which have gone out of existence because of lack of capital, will the hon. Gentleman reconsider the situation?

I do not think that I need comment further at the moment, in view of my right hon. Friend's Budget, which is to be announced in 12 days.

asked the Chancellor of the Exchequer if he will exclude all income derived by a person from teaching in educational establishments from liability to value added tax.

Teaching by employees of educational establishments will be exempt from VAT.

Is my hon. Friend aware that a part-time lecturer will have that portion of his income which comes from teaching VAT-ed under the present proposals? Since he receives fees under contract and the contract cannot be changed, he will have to accept 10 per cent. less in fees. Will my hon. Friend consider that matter and give a favourable reply?

I appreciate that my hon. Friend is referring to a self-employed lecturer. Lecture fees would be taxable only if they were in excess of £5,000 a year. I appreciate the particular circumstance which my hon. Friend has brought to my attention. I think that the educational establishment in question may be behaving in a rather harsh manner. I appreciate the case that my hon. Friend has made to my hon. Friend the Financial Secretary and, obviously, we will look into it.

asked the Chancellor of the Exchequer what further representations he has received from charities about the effect on them of value added tax; and what replies he has sent.

During recent months, many charities have had useful discussions with Customs and Excise. Representatives of some of the larger charities saw my hon. Friend the Chief Secretary in December, and, together with the Financial Secretary, I myself saw representatives of the National Council of Social Service last Monday. I have noted their views.

But is the right hon. Gentleman aware that the report commissioned by the National Council of Social Service showed that 45 out of 52 charities would be worse off, even allowing for benefits that they received from other taxation changes? Surely the Chancellor can agree that at least goods donated for sale in charity gift shops could be zero rated? This is very important to charities such as War on Want.

The representatives of the national council who came to see me fully understood why I could not comment at this time. Therefore, I can only say that I have noted the hon. Gentleman's views.

Will my right hon. Friend confirm that the individual shops run by such organisations as Oxfam will be treated separately, as he undertook to do in the recent debates on this subject? If that is the case, will he confirm that they will then be able to compete more effectively than now with commercial businesses?

All I should say at this stage is that this aspect of charity shops was fully debated last year. I agree that it is very important, and I will certainly bear in mind all that is said.

Is the right hon. Gentleman aware that this is not a party matter in any way? Many hon. Members on both sides are deeply concerned at the fact that many charities will gain no benefit from the tax changes which the Chancellor announced last year but will suffer heavily from the effect of value added tax on their operations. As I understood it, in the debates that we had on this matter earlier, when the Chancellor refused to give any undertaking, he said he would see how the tax affected these charities, but is he aware that many of these charities may cease to exist after a year of value added tax, if it is applied in the way now proposed? Will he assure us that he will have an announcement to make on this matter in his next Budget, before the tax comes into effect?

It was as a result of what I said last year that there have been these very useful discussions between a number of charities and the Customs and Excise. However, with the Budget less than a fortnight away, I certainly could not respond to the right hon. Gentleman.

asked the Chancellor of the Exchequer whether he will seek powers to establish a fund, financed from football pools betting duty, to assist soccer clubs in Divisions 2, 3 and 4 of the Football League.

No, Sir.

Is the hon. Gentleman aware that the Government are likely to take at least £500 million out of football in the next 10 years from one source or another? Why does not the hon. Gentleman seriously consider the possibility of setting up a fund from the pools duty to help clubs, some of which face bankruptcy, to develop their grounds into community centres and thereby allow them to live off the income? Is the hon. Gentleman aware that if the Government put back a tenth of what they take out of the game many of football's problems could be resolved?

I am not aware of the figures that the hon. Gentleman has mentioned. His Question related to betting duty. This is a source of general revenue, and the hypothecation of revenue for specialised purposes has been contrary to the policy of all Governments. I remind the hon. Gentleman that the pool promoters already pay the Football League £1 million for its copyright fixture lists.

Is the hon. Gentleman aware that with the introduction of VAT a number of Fourth Division clubs—Mansfield Town, Darlington, and others—will be looking for recompense, and that this is one way in which the Government could recompense them against the effects of VAT?

I am sure that the hon. Gentleman appreciates that the zero rating for food and other essential commodities was designed to afford relief to the lower-income family. There could not be a similar justification for zero rating on admission charges to football matches and other sports and entertainments.

asked the Chancellor of the Exchequer what was the annual income to the Exchequer arising from the taxation of safety prizes for the latest convenient year.

This information is not available, but the amount must be very small.

I am obliged to the hon. Gentleman for confirming that it must be small. Is not it deplorable that this should be Government policy, especially when the Government ought to be trying to encourage reasonable efforts by people to be conscious of the need for safety at work? We are talking about a measure which could even save lives by giving encouragement to firms to induce safety consciousness amongst their workers.

The Government support any measures for the encouragement of safety, especially in the mines, but I doubt whether it would be practicable to start making special tax rules for safety prizes.

Is the hon. Gentleman aware that there is great resentment about the tax throughout industry—not just the mining industry—which sees this policy as a mean and despicable way of taxing safety at work?

A prize is taxable if it reaches the taxpayer as a reward for the exercise of his employment or profession. There have been many claims for the exemption of particular incomes by life-boatment and firemen, and overtime earnings, because of the special circumstances of the income. However, the only way to operate a tax system which has to apply to 25 million people is to make broad and comprehensive definitions and stick to them.

asked the Chancellor of the Exchequer whether he has given further consideration to the inflationary implications of the unsolicited distribution of credit cards; and if he will make a statement.

I am not convinced that the unsolicited distribution of credit cards has had inflationary implications. However, restrictions on this method of distribution are being considered as part of proposed consumer legislation.

Some hon. Members would disagree with the first part of that reply. There would seem to be a good case for the introduction of stamp duty on credit cards, which would have the effect of making unsolicited cards invalid and also provide a useful source of added revenue. Will my hon. Friend consider that suggestion?

I have noted my hon. Friend's suggestion, but the need for banks to observe the 12½ per cent. minimum reserve ratio and to respond to calls for special deposits means that credit card facilities must be largely at the expense of other forms of credit. The amount of credit involved with credit cards is very small in relation to total bank lending, in any event.

I am glad to have the hon. Gentleman's acknowledgement that credit card credit will be at the expense of other credit. In the Government's plans to fight inflation, will they give due publicity to the fact that credit under instalment schemes of these credit cards is much more expensive than ordinary bank credit?

The hon. Gentleman is referring to the rate of interest on an annual basis as opposed to the rate of Interest being expressed in another way. His point is well recognised. I am sure that this kind of matter should be given wide publicity.

Has the Chancellor any figures at his disposal about the amount spent on National Westminster Bank Access cards, where the sums expended were not backed by amounts deposited with the bank? How many cases of fraudulent use of these cards have there been, since they are to be used only by the authorised signatories, yet they were sent out without any signatures upon them? What has been the additional cost to other users of that bank by reason of those cards being sent out unsolicited and being used?

This is a matter between the bank and its customers. It is not for me.

asked the Chancellor of the Exchequer whether, in view of the fact that value added tax is to be levied on catered meals, even if paid by luncheon vouchers, he will arrange in his forthcoming Budget for an increase in the amount by which a luncheon voucher may be issued free of tax.

I have noted my hon. Friend's suggestion.

I had expected my hon. Friend to say that he could not anticipate the Budget Statement. Will he tell the House when the level was last raised for the re-issue of luncheon vouchers? Despite VAT, is it not due for a review in any case?

As my hon. Friend recognises, I cannot say anything much in advance of the Budget. The amount of 15p was fixed in 1959. It was never intended to cover the full cost of a meal outside. It was intended to be a contribution towards it approximately equivalent to the subsidy received by an employee who has the benefit of a stall or works canteen.

Is it not clear that this will not hit ordinary working people? Is it not ridiculous that, for example, potato crisps and ice cream will be taxed but caviar is zero rated and will not be taxed? Is not this an absurdity about the tax on foodstuffs?

The hon. Gentleman has asked his supplementary question on the wrong Question. This Question is about luncheon vouchers being free of tax.

Will the hon. Gentleman clarify the position of luncheon vouchers under phase 2 of the counter-inflationary policy? Is it possible for companies to give luncheon vouchers or free canteen meals in addition to the £1 plus 4 per cent.?

Luncheon vouchers are a form of remuneration, and increases in the value of those issued to employees should be set against any other increase allowed under phase 2.

asked the Chancellor of the Exchequer whether he will consider legislation whereby supplementary benefits paid to strikers should be taxed.

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

Is my hon. Friend aware that that reply will cause dismay in Cornwall among working people who do not go on strike, not least among many of the traditional supporters of right hon. and hon. Gentlemen opposite?

I take note of what my hon. Friend said. As he knows, there have always been formidable administrative difficulties about taxing supplementary benefits, whether paid to strikers or not. The Government are engaged in a thoroughgoing and extensive review. I cannot say more.

Would it not at least be an act of decency on the part of the hon. Gentleman if he made it clear that he abhors the idea of the wives and children of strikers being penalised on account of strikes?

I take note of what the hon. Gentleman has said.

Does my hon. Friend agree that if there were need no tax would be payable? Is it not intolerable that safety devices are subject to tax, whereas subsidies to well-off strikers are not?

I think that my hon. Friend will recognise that the earlier Question related to the application of VAT as a comprehensive tax on consumer goods. The taxation of strikers' benefits raises different issues, not least administratively.

Will the hon. Gentleman reject entirely the suggestion made by his hon. Friend the Member for Truro (Mr. Dixon)? Why does his hon. Friend want to attack the wives and children of strikers? Why do not the Government educate industrialists and management better to understand workers, so that we can prevent strikes taking place?

It would be foolish of me to reject my hon. Friend's suggestion when the Government have the matter under review.

asked the Chancellor of the Exchequer if he will publish a report on the number of married couples applying for separate taxation of wife's earnings in accordance with Section 23 of the Finance Act 1971 during the first year of its operation and of any difficulties which have arisen.

Approximately 3,500 elections have been made. I am not aware of any difficulties in administering these provisions.

Is the hon. Gentleman aware that this much vaunted women's liberation measure has proved very disappointing in operation, because it continues the patriarchal practice of requiring husbands to make returns on behalf of their wives? Will he reconsider this aspect of the matter with a view to seeking power to end this humiliating discrimination against married women?

For the great majority of working couples, in tax terms aggregation is more favourable than disaggregation, since the couple get both the married allowance and the wife's earned income allowance. I appreciate the point that the hon. Lady is making, but either a husband or wife may elect to be separately assessed if he or she wishes. There are opportunities for submitting separate tax returns in the way the hon. Lady desires.

asked the Chancellor of the Exchequer whether he will consider exempting the capital as well as the interest component of house mortgage repayments from the burden of income tax.

No, Sir.

Does my hon. Friend not recognise that, owing to the inflated price of housing, any young married couple earning between £40 and £50 a week may be paying up to 50 per cent. of their gross income in mortgage repayments and tax, before they are allowed to live at all? Does he not believe that the concession which I have proposed would stimulate house ownership and thereby stimulate house building?

Income tax is a tax on income, and relief can be given only for income expenditure. Under my hon. Friend's proposal, I am afraid that the wealthy could create tax relief and make virtually unlimited profit at the expense of the Inland Revenue. My hon. Friend should look to Cmnd. 5205, which emphasises that the Government intend to bring forward proposals which will increase the availability of building land and reduce the extent to which it is possible for people to make disproportionately high profits from transactions in land. This is the way to stabilise house prices and make more houses available.

Does the Minister accept that at the moment it is possible for the wealthy to make considerable profits out of loopholes in the taxation system? Since the payment of rent is logically exactly equivalent to the payment of interest, why should there not be permission to offset rent against taxable income, in the same way as interest payments?

I am sorry, but I see no similarity between the payment of interest and the payment of rent. They are two entirely different things.

Will the Minister not point out that not only is his hon. Friend's suggestion absurd but the Chancellor's taxation policies are equally absurd, if he is to have the slightest chance of making a voluntary policy work, which is essential now that his statutory policy has so utterly failed?

We are discussing mortgage relief, which was available under the hon. Gentleman's Government. We have not changed the rules in this area at all.

asked the Chancellor of the Exchequer if he will make a further statement about the progress of his discussions with the managements of the nationalised industries regarding Exchequer compensation for their participation in price restraint; and what is now his estimate of the cost of such compensation in the current financial year.

I have nothing to add to the information in the Answers given on 13th December to my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley)—[Vol. 848, c. 174–5]—and on 29th January to my hon. Friend the Member for Bedford (Mr. Skeet).—[Vol. 849, c. 316.]

Will my hon. Friend confirm that not one nationalised industry is now running at a surplus on current operations, let alone approaching its required financial returns? What will be the impact of this on next year's borrowing requirement? Will it be over £4,000 million, over £4,500 million, or what?

My hon. Friend will not expect me to answer the last part of his question at this time. We have always made it clear that there are dangers in subsidising the nationalised industries, but the dangers of inflation are even greater. It is for that reason that we have sought to ask them to restrain their prices, and they have done so—and it has been greatly in the national interest that they have done so.

Does the Minister not agree that the artificial holding down of prices in publicly-owned industries amounts to a subsidy to private business? If these publicly-owned undertakings are to be able to finance the developments that they must have in the next few years is not a realistic pricing policy called for?

The right hon. Member is right to say that a pricing structure which allows nationalised industries to earn a reasonable return on their assets, assists them to find the finance for investment. In the interests of counter-inflationary action, however, we have asked them—and they have agreed—to restrain their prices. But their investment programmes are not held back, because they have access to lending from the National Loans Fund.

asked the Chancellor of the Exchequer what action he is taking to reduce the inflationary effect of speculative capital expenditure.

Speculative gains are as much a consequence of inflation as a cause. They are but one aspect of the manifest unfairness which inflation produces.

Is the hon. Gentleman not aware that in spite of the freeze there has been a steady escalation of housing costs, as a result of the activities of property speculators? Is it not now completely indefensible that these speculators should be actively subsidised by being allowed to set off interest on the capital borrowed against their incomes for taxation purposes? Also, is there not now a strong case for imposing penal taxation on the profits of property speculation?

On the first part of the hon. Gentleman's question, I can only repeat what my hon. Friend the Minister of State said a moment ago, that the relief for interest in the case of loans to buy property is on exactly the same basis. with no change at all, as applied when his own party was in office. On the other part of the hon. Gentleman's question, I am sure that he will recognise that I cannot say anything at this stage.

Does my hon. Friend not agree that this is another example of the word "inflation" being improperly used, in that rising prices are not necessarily the same thing as inflation?

I recognise that one could get very deeply involved in academic arguments on this interesting subject, but I shall resist the temptation today.

asked the Chancellor of the Exchequer what would be the cost of raising the surcharge starting point from £2,000 to £3,000, exclusively for married age-retired people whose income is wholly from investments, apart from that received from pensions.

Approximately £5 million for a full year.

Does my hon. Friend not agree that savers are essential for the good economic health of the nation? Why discriminate against this small group of people by taxing them with an additional 15 per cent.? In the name of fairness, would my hon. Friend consider cancelling that surcharge—particularly as it costs so little—for what are not very high incomes today?

I remember very well our debates on this subject last year. I am afraid that I cannot comment further at this point on my hon. Friend's suggestions, but of course I agree that many people are living in retirement on low incomes from savings. It was for this reason that in last year's Budget my right hon. Friend decided that he should set a limit of £2,000.

asked the Chancellor of the Exchequer what is the estimated expenditure on information from the EEC Budget in 1973.

About £5 million.

As British taxpayers' money is involved, will the hon. Gentleman say how much of this is used for the payment of secret retaining fees to individuals throughout Western Europe for undisclosed services?

If I heard the right hon. Gentleman correctly, he was asking a very particular question, of which I must ask him to let me have notice.

Now that we are members of the Common Market, can we not be told what part of this sum is spent in Britain?

The European Communities maintain an information office in London, as the hon. Gentleman is aware, and information of all sorts is available to people in this country. It is absolutely right that it should be so.

asked the Chancellor of the Exchequer what exchange control restrictions now limit the free movement of capital from the United Kingdom into EEC countries.

The normal rules apply, with two significant differences. First, United Kingdom companies may transfer up to £1 million per project per year through the official exchange market to finance direct investment in EEC countries. Secondly, people moving to work in the EEC may transfer sufficient funds in official exchange to ensure their freedom to take up their employment.

Are not certain Community countries now operating even tougher restrictions on investment movement? Is it not also the case that we are committed, by the end of next year, to removing all remaining restrictions on the financing of direct investment? Can my hon. Friend say whether, if this programme in the transitional arrangements is to be adhered to, it will be done only on a reciprocal basis?

I am not aware of the particular examples that my hon. Friend is giving, but concerning the full liberalisation of direct investment, under the timetable this is something which we have to meet by 1st January 1975.

In the event of a balance of payments crisis, would action to reimpose controls on capital movement in the Common Market be compatible with our Common Market obligations?

There is very little purpose in my answering a hypothetical question of that nature.

Is it not a fact that the official limit of £1 million per project per year is widely known in the City to be virtually a dead letter now? Will the hon. Gentleman confirm that the net flow of capital, on both the direct account and portfolio account, is overwhelmingly from this country into the EEC, and not the other way around?

In the latter part of his question I think that the hon. Gentleman was suggesting that the flow was mainly coming into this country rather than vice versa.

No.

At present all the indications are that there is a substantial flow of money going into direct investment in the EEC. We should certainly welcome that.

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.

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.

asked the Chancellor of the Exchequer what has been the monthly average fall in the value of the £ sterling based on the General Index of Retail Prices since June 1970.

81½p, or a fall of 0·6p per month. This compares with a rise in personal disposable income in the third quarter of 1972 of 1·0p per month, which gives a rise in the standard of living of the British people at almost double the rate of the period 1964–1970.

Is the Minister aware that the counter-inflation measures, according to these figures and others, have proved that we have a continually sinking pound, that prices are now rising faster during the freeze than before it, and that the standard of living of ordinary working people is deteriorating as a result? The last official figures show that total earnings were well below those of a month before. The Minister does not seem to be able to give any guarantee about the floating of the pound abroad, but why does he not show a little independence and fix the pound at home?

As I said in my original answer, the fact of the matter is that in the 12 months to January retail prices rose by about 7¾ per cent., whereas average earnings increased twice as fast as that. On the January figures, the retail price index for all items except food was practically stationary.

Is the hon. Gentleman aware that his answer provides further proof of the scandalous failure and fraud of what is foisted upon this country as an alleged prices freeze, before rate increases and before VAT? How can the hon. Gentleman expect gas workers, hospital ancillary workers and civil servants to accept wage curbs when prices are soaring?

There is little purpose in my commenting on the hospital workers. This is not a subject for me, and I do not see that it will help by discussing it across the Floor of the House.

As I said in answer to the previous question, all the evidence is that the retail price index for all items except food was practically stationary in January. The standstill is having a very good effect.

Order. It is now 3.15 p.m. Further supplementary questions should be very brief.

Is it not obvious from the answer that wage claims at present not only have to be retrospective but also have to cater for the continuing decline in the value of the pound? On that basis is not the gas workers' claim fully justified?

I have already told the House that over the recent period the standard of living of the British people has been rising at double the rate, in real terms, that it was rising during the period of office of the hon. Gentleman's party. I do not see why he should complain about that.

asked the Prime Minister what discussions he has now had with civic leaders from Manchester, Leeds, Sheffield, Liverpool, Birmingham and Bristol about anticipated increases in municipal rates; and if he will make a statement.

asked the Prime Minister whether he will make a statement on the meeting which he had with civic representatives of Manchester, Leeds, Sheffield, Liverpool and Birmingham on 9th February last, to discuss their municipal budget problems.

I met representatives of the six cities on 9th February and we discussed the problems which they face in fixing their budgets. We agreed that control of inflation was essential in dealing with those problems and they recognised what the Government have already done to help the cities through the rate support grant and the adjustment in the domestic element. I undertook to give careful and urgent consideration to the points which they put to me.

Why is the Prime Minister dithering? Does he recall promising the five cities an early reply about two weeks ago? He now appears to be showing no sense of urgency whatever. If he is unable to offer immediate and substantial help to cities such as Manchester, is he aware that his policies for countering inflation will be increasingly regarded by ratepayers as a carefully organised hypocrisy?

If the hon. Gentleman wants to be able to help the city of Manchester that is the worst possible way of going about it. It is exactly the reverse of the attitude adopted by the cities. I told the House, on Tuesday I think, that the cities have sent us three separate lots of memoranda putting forward their statistics, that these are being carefully examined, and that we shall announce the result of that at the earliest possible moment. We are well aware of the urgency of this matter, because of their obligation to fix rate poundages.

Does my right hon. Friend agree that it is not only the big cities which face rate increases? Is he aware that the county of Essex faces big increases on the rate charge, likely to be 24 per cent. apart from revaluation? May I press my right hon. Friend to do something urgently to bring in some reform of local government finance?

I mentioned only the cities in this answer, because the Question was about the cities. But on the following Tuesday I saw the representatives of all other local authorities in the country, including the County Councils Association. As far as the general reform of local government finance is concerned, we have only discussed this briefly and not in detail, but it is recognised that a long-term solution to many of the problems of both the cities and local authorities can be reached only in the context of the reform of local government finance.

May I assure the Prime Minister that by taking these two Questions together he is not contributing by any means to a family conspiracy?

Will the right hon. Gentleman indicate what percentage increase in the domestic rate he would consider to be excessive? Would it be an increase beyond 5 per cent? Regarding the envisaged Government monitoring procedure of municipal rates, is it the Government's intention to recommend to local authorities that they economise on education, social services and social welfare? Will the Prime Minister give the House and the nation his thoughts on this matter?

The cities did not ask for any particular figure to be taken into account from the point of view of what would be excessive. They were trying to analyse the different reasons for the burden on the cities and they acknowledged, of course, that in some cases their own expenditure, apart from Government expenditure, had a considerable effect on it. We know that last year Manchester's rate rose 29·4 per cent., or nearly three times the national average, following the change of control on the council.

Come off it.

We also know that the GLC, on the other hand, for two consecutive, years has managed to keep its demand the same.

My right hon. Friend is quite right to say that the cities should bear the expenditure resulting from their own decisions. Will he please look in particular at the situation in Birmingham, where the differential between industrial rating and domestic rating has got out of step because of revaluation?

Yes. There are certain problems which the cities have in common and others which are peculiar to individual cities. That was also confirmed at the meeting. The question raised by my hon. Friend the Member for Birmingham, Perry Barr (Mr. Kinsey) applies particularly to Birmingham but not, as far as I know, to any of the others present at the meeting.

Will the Prime Minister, for greater accuracy, remind the House of what he said in the 1970 election about the rate burden, in his exact words as he used them, and will he now tell us how much the rate burden has risen under his administration?

What I can tell the right hon. Gentleman is that this—[HON. MEMBERS: "Answer the question."] I am answering the question in detail. This Government have given a higher grant—60 per cent. of expenditure—[Interruption.]—more than £3,000 million, higher than ever before, and we have also given the highest increase in the domestic element. That is the contribution that this Government have made to taking the burden off the rates. [Interruption.]

Will the right hon. Gentleman, in a total breach of precedent, answer the question I put to him?

The answer is that what local authorities spend is to a considerable extent in their judgment. If the right hon. Gentleman wants to have—[HON. MEMBERS: "Answer the question."] If he wants to have a figure [Interruption.]—a figure for the previous year, I will get it worked out for him. What I am saying, and the right hon. Gentleman knows it well, is that the Government are making a greater contribution than ever before.

Answer my question.

I wish the right hon. Gentleman would stop losing his temper.

What the country is entitled to in answer to the question is not what the Prime Minister has told the House now but what he told the country in 1970. Will he answer that?

If the right hon. Gentleman wants to know he can look it up. [Interruption.]

If we can get away from the cant put forward by the Leader of the Opposition, is it not a fact which we must face that price increases account for only a part of the rate increase, and that the only way to get rates to a proper level is to reduce expenditure? To give an extra Exchequer grant, if that means extra taxes, is not the answer, because the ratepayers are invariably the taxpayers. That fact must be faced.

I agree with my hon. Friend, and the cities were at great pains to point out the different factors which were entering into their problems. They emphasised the impact of inflation on their rate expenditure and their support for the Government's policies in dealing with inflation. At the same time, they pointed out some of the other factors I have mentioned, such as the change in population, the balance between industrial and domestic rates, and so on. These are aspects which must be dealt with separately. As for cutting back expenditure, the city of Sheffield representative said they had cut back by £3½ million and that they were therefore keeping their demands the same.

Is not the whole point that the large cities have no wish to cut back on the welfare services but at the same time have the great problem of depopulation—of people moving to the areas outside the city boundaries—and that that is the basis of the crisis facing the cities? Will the Prime Minister give us a clear assurance that the answer will be forthcoming in the near future, in order that the cities can get down to working out their forthcoming budgets, at the same time ensuring that the welfare services, and so forth, are maintained at their present level, if not increased, as they should be?

I can give the hon. Member an assurance that our conclusions will be announced at the earliest possible opportunity. On the question of declining population, of course there is an allowance for that in the rate support formula. What we discussed with the cities was whether in the circumstances in which Liverpool, for example, finds itself, that formula is satisfactory. The cities agree that this formula cannot be dealt with before the next rate poundage is announced. It can be tackled in the reform of local government finance.

On a point of order. In view of the unsatisfactory nature of those replies I give notice that I shall raise the matter on the Adjournment as soon as possible.

asked the Prime Minister if he will define the responsibilities of the Secretary of State for Employment.

President Bhutto is always welcome in London, but there are no current plans for him to come here.

Order.

The responsibilities of Ministers and their Departments are defined in a number of standard works of reference including "Britain, 1973", an official handbook published by Her Majesty's Stationery Office, copies of which are available in the Library of the House.

Is it not obvious that conciliation in industrial affairs has been deleted from these responsibilities? Is it not for that reason that we have the worst strike figures for 40 years and a policy of confrontation throughout industry? Will the Prime Minister say when conciliation in industry will be restored and sanity returned to industrial affairs?

Conciliation is used a very great deal by industry through the Department of Employment at the present time. It is one of the major responsibilities of the Secretary of State for Employment, his Department and his conciliation officers, and the whole of industry knows that it is being very widely used.

Rubbish.

Among the Secretary of State for Employment's other duties, one is to maintain employment and to arrange for retraining. Has not unemployment fallen, and has my right hon. Friend not arranged for 100,000 people to be retrained? Is it not also the case that the Leader of the Opposition last Tuesday seemed to support my right hon. Friend's suggestion that the gasmen should put their case before the Pay Board now, but that nothing should be acted upon until phase 3?

The whole House will welcome the great increase in training and retraining which is now going on. It is a steady increase. The House will also welcome the substantial further reduction in unemployment shown by the figures published today, with a fall of more than 200,000 over the last year.

In the Prime Minister's reply to the supplementary question to my hon. Friend the Member for Birmingham, Northfield (Mr. Carter) he said that the conciliation rôle was still an important one. Will he therefore tell the House whether the Secretary of State for Employment is being inhibited by the Prime Minister personally, or by the Cabinet, in performing his traditional conciliation rôle in relation to the gas dispute, or can he go ahead and take the steps which would normally be expected of a Secretary of State for Employment in such a situation?

The right hon. Gentleman understands, I think, that there is a standstill, which was laid down by Parliament. We are now asking Parliament for powers to move into the second stage on which the guideline has been laid down, and we shall ask Parliament for approval. Therefore, within the scope of that there is room for negotiation. As I understand it, however, the Gas Corporation has already offered the maximum under the guidelines. As for conciliation on other aspects of industrial relations, of course, my right hon. Friend's Department is at the disposal of all of industry, whether employers or unions.

As for the present situation, which is the subject of correspondence between the Leader of the Opposition and myself, my right hon. Friend is inviting the unions so that they can discuss this with him.

As the Prime Minister omitted to reply to the second part of the question asked by his hon. Friend the Member for Hertfordshire, South-West (Sir Gilbert Longden) about my Question on Tuesday, will he now tell the House, instead of waiting for television tonight, that the letter he has sent me is a flat rejection of what I proposed on Tuesday, and that he must now bear full responsibility for the industrial disruption that followed that rejection?

The letter will be published, and the House and the public will be able to judge for themselves. The right hon. Gentleman is absolutely, completely and utterly mistaken. I have said in the letter that we are setting up the Pay Board, that the nominations will he made and the men designated at the earliest possible opportunity, and that immediately they are nominated they will start work. What I have said is that for them to do the work, with the full staff, and to hear any submissions that any trade union or anyone else likes to make, it is not necessary to designate them as a Royal Commission for the next four or five weeks. They will be established, and they will carry out the task——

When?

Immediately they are established. We shall announce the appointments as soon as they have been settled——

When?

The way in which the right hon. Gentleman constantly loses his temper is becoming rather monotonous.

If the Pay Board were set up as a Royal Commission it could not be set up any earlier than the announcement of members' appointments. They will be appointed at the earliest possible opportunity. The unit, under a deputy chairman, that is to concentrate on dealing with anomalies will be set up at the earliest opportunity. It will be available to hear any submissions, or any evidence—[interruption.] It will have exactly the same possibilities and opportunities as a Royal Commission——

No.

It will, indeed. The union can make any presentation to it that it wants, as can the employers. They can put any information before it. It is a matter of four or five weeks before the actual Pay Board is established. Those members will then continue, and the work they have done will be continued with them.

The Prime Minister says that those members will have the same powers as a Royal Commission. A Royal Commission, which the right hon. Gentleman could have recommended to the Crown in the past two days and announced today, would have had power to send for persons and papers. Until the Counter-Inflation Bill receives the assent of this House and another place, what powers will the nucleus—consisting, as far as I can see, of an establishment officer and two or three other people—have to send for persons and papers?

Any union or employer involved can go immediately—they can go at this moment—to the secretary and present the information. I see no difficulty whatever about the unit operating directly it is established. I said in my letter to the right hon. Gentleman that we were in a very great measure of agreement about the sort of consideration required, and that this would continue under stage 2, and that there would be the opportunity to deal with the anomalies under stage 3. All of these are matters on which we are agreed, and I welcome that. I have rejected nothing. I have said that the unit will immediately begin to operate.

If the right hon. Gentleman is saying that everything depends on calling the people concerned a Royal Commission, I can only say that he is completely mistaken, and that they will be able to do everything that is required—[Interruption.] Is the right hon. Gentleman aware that the General Secretary of the TUC has said in public, and repeated in the United States, that the trade union movement does not want a confrontation, and neither do the Government—[Interruption.] The General Secretary has repeated his view that the Government do not want a confrontation. I suggest that the views of Mr. Feather should be listened to instead of the disruptive—[Interruption.] But why should not I quote the General Secretary of the TUC? He has confirmed that the Government do not want a confrontation. It seems to me that the right hon. Gentleman is just trying to pursue disruptive tactics himself.

On a point of order, Mr. Speaker. Is it in accordance with the high standards of the House that an ex-Prime Minister—the present Leader of the Opposition—should use the Dispatch Box to give a twisted version of a letter which has not been produced?

That is not a matter of order.

On a point of order, Mr. Speaker. As the Prime Minister has already answered Question No. Q3, although inadvertently, may I please be allowed to put my supplementary question to him?

I am afraid not.

On a point of order. May I revert to the point I raised on Tuesday, Mr. Speaker, and draw your attention to the fact that out of a total of 29 Questions to the Prime Minister today only Questions Nos. Q1, Q2 and Q24 have been answered? How are back-bench Members to be allowed to pursue their Questions to the Prime Minister when we are allowed only 15 minutes or less to put them? May consideration be given to the Prime Minister's Questions coming on the Order Paper at a reasonable hour, perhaps at 3 o'clock?

As I have said before, that is not a matter for me, but rather shorter supplementary questions and a little less noise would help.

Further to that point of order, Mr. Speaker. As it is a rule of the House——

Mr. 280 per cent.!

The hon. Gentleman will have to ask his Front Bench about that.

As it is a rule of the House—[Interruption.]

Order. I must ask the House to behave itself.

Watch your pockets.

It sounds rather like Chester-le-Street.

As the same Question cannot be tabled twice in the Session, and as the Prime Minister has inadvertently answered the Question of the right hon. Member for Wednesbury (Mr. Stonehouse), are we to take it that the right hon. Gentleman cannot re-table the Question, which is one of considerable importance and interest?

The right hon. Member for Wednesbury (Mr. Stonehouse) was rather fortunate to receive an answer, because it was given in error. The asking of a supplementary question is a matter for me. I shall consider the point that the right hon. Member for Devon, North (Mr. Thorpe) has just raised.

On a point of order—

The hon. Gentleman has given me notice of his intention to raise a point of order. I shall be grateful if he will raise it at the end of Business Question time.