asked the Chancellor of the Exchequer by what proportion direct taxation would have to be increased to produce the same yield as value added tax; and what would be the rates of corporation and personal income tax which would result.

The yield of value added tax for 1973–74 is about 20 per cent, of the yield of all Inland Revenue duties, so that those duties would have all to be increased by approximately one-fifth. This would result in rates of income tax for 1973–74 ranging from 36 per cent. to 90 per cent., with an investment income surcharge of 18 per cent. The rate of corporation tax would be 47 per cent. compared with the present 40 per cent.

Is not the real answer to this that if the policies advocated by the Opposition were to be implemented the threshold of direct taxation would have to come down, affecting the lower paid and undoing the work done by the Government in that respect?

I entirely agree with my hon. Friend. The tax threshold, which we have raised considerably while we have been in office, would of course fall should the Labour Party ever come to power again and there would be greatly increased taxation on the ordinary people of this country.

:Will the Minister say what the rate of VAT would have to be if income tax and corporation tax were abolished?

I cannot answer that question without notice.

Will the Minister agree that it is utter twaddle to try to compare indirect and direct taxation in this way? Will he make an estimate of what the various rates of taxes would be if value added tax had never been introduced and if we had stuck to purchase tax and selective employment tax, if we had not joined the Common Market and if we never had to pay for the common agricultural policy and various matters of that nature?

If we had set out to raise the same amount of revenue from indirect taxation as when the Labour Party was in office, value added tax would have had to come in at a rate of 15 per cent. instead of 10 per cent. In 1969 indirect taxation represented 156 per cent. of the gross national product. By 1972 we had reduced indirect taxation and the figure had come down to 12·9 per cent.

asked the Chancellor of the Exchequer what were the percentages of the revenue taken in direct taxation and indirect taxation in the year 1972– 73;and how the figures compare with those in the year 1969–70.

Figures for the financial year 1972–73 are not yet available. For the calendar year 1972 the share of central Government's total current receipts taken by direct and indirect taxation were 40· per cent. and 34·4 per cent. respectively. This compares with 39·9 per cent. and 38-8 per cent. for 1969.

Does my hon. Friend agree that the figures show clearly that the tax changes which have taken place under the present Government have favoured less-well-off people rather than those who are well off?

I entirely agree with my hon. Friend. The biggest single tax cut made by the Government was in direct taxation. The increase in personal allowances made in last year's Budget gave the equivalent of £1 a week to every family. That, of course, was of particular benefit to the lower paid. The decreases in indirect taxation have also been of great importance.

asked the Chancellor of the Exchequer if he is satisfied with the way the introduction of VAT has worked in practice.

Bearing in mind that the abolition of purchase tax and SET and the introduction of VAT has involved the biggest change in our taxation system since the war, the transition has gone reasonably well. I should like in particular to thank and congratulate all those in the retail trade and the business community generally for the way in which they have co-operated.

Will the Chancellor explain how it is that in the case of taxi-cabs owner-drivers have to pay no VAT while hire drivers have to pay 3 per cent., even if they earn less than £5,000 a year? Will he give any information that the Government have on the extent to which people who provide services are not deducting SET and are still charging the full rate of VAT?

We spent a lot of time last year debating the circumstances of individual traders and business people and how VAT would affect them. We gave careful consideration and debate here to the question of taxis and transport generally. If the hon. Member has any specific questions he would like to put down, I hope he will do so and I and my hon. Friends will be glad to answer them.

Will my right hon. Friend clarify the position concerning vending machines which dispense food and drink, and say how the introduction of VAT fits in with phase 2 guidelines under the counter-inflation policy?

The action we have taken on VAT is consistent with the proposals for phase 2, but if my hon. Friend has a particular aspect in mind it will be much better for the general interest if he puts down a specific Question which could then be answered.

Is the Chancellor aware that value added tax is already giving a major new boost to price inflation, running at 8 per cent., over which he is presiding, and that, according to his right hon. and learned Friend the Minister for Trade and Consumer Affairs, in the first few days after the introduction of the tax there were 11,000 complaints that retailers were taking advantage of it to make unjustified price increases? Moreover, it is already clear that weights and measures authorities are quite incapable of monitoring the price increases as the Government intended and that on many vital issues the Customs and Excise is still unable to give a ruling.

I realise that the Opposition, and the right hon. Gentleman in particular, take the view that all shopkeepers are cheats. The fact is that the overwhelming majority of traders have co-operated magnificently in what has been a major changeover, the biggest change in taxation since the end of the war.

asked the Chancellor of the Exchequer whether he will take steps to provide for the refund of VAT in respect of services provided on credit where bad debts are suffered.

No, Sir.

I thank my hon. Friend for that rather negative reply. I wish to draw his attention to the problems of the plant hire industry. Is he aware that even the medium- to small-size plant hire company, with good and effective credit control, could make a contribution to the Exchequer in respect of VAT on bad debts of approximately £5,000 a year? Is he prepared to take action during Report on the Finance Bill to try to ensure that this loss of investment to the plant hire industry can be rectified?

I do not think it is true to describe the situation in the terms which my hon. Friend has used. I agree with him entirely that my reply was somewhat negative. In fact, it was entirely negative. The reasons for the imposition of VAT on bad debts were spelt out at considerable length, as the House will recall, in Committee on the Finance Bill on 23rd May 1972. The debate continued until 24th May. On that occasion, in the interim, I provided the Committee with figures and arithmetical examples showing precisely what were the issues at stake. I think that greatly helped our debate and helped the House to reach the conclusion that it would not be right to give bad debt relief. I should not like to hold out any hope for a reversal of that decision.

Is it not the case that when a trader is faced with a bad debt he not only loses money on the debt but has to pay VAT on the loss which he has incurred? It cannot be right both to lose the debt and to have to endure the final insult of having to pay VAT upon that debt.

The hon. Gentleman is taking a somewhat different line from that which he took in the last debate when the matter was discussed at great length. The main point in principle is that normally by the time a debt becomes bad the debtor, if a taxable person, will already have taken the credit in his own VAT account for the VAT element, and there would be a double loss of tax for the Exchequer. That was spelt out at great length in Committee and many arithmetical examples were given last year. The Government see no reason to change the view that they took on this matter, which was generally acceptable to the House.

asked the Chancellor of the Exchequer whether he will take steps to arrange for income from pin tables, at present an exempt supply, and income from bar billiards, at present standard rated, to be treated in the same way for value added tax.

No, Sir. Receipts from a pin table are exempt as it is a game of chance; those from bar billiards are outside the scope of the exemption as it is not a game of chance.

If gambling is free of VAT but games of skill are taxed, is it the policy of the Government, in this sector as in others, to encourage gambling and discourage skill?

That would be to widen the principle too far. The point is clear and the House understands it. Most betting and gaming is already subject to other duties specifically designed for them and this seemed to us to be a sensible arrangement.

asked the Chancellor of the Exchequer whether he will call a representative round-table conference of charities of different kinds and sizes to review the impact of VAT upon their work.

No, Sir.

Is the hon. Gentleman aware that there is a great deal of bewilderment and genuine anxiety amongst a large number of charities and similar voluntary service agencies? As they understand it, the Government are keen to stimulate voluntary action in society yet, with the exception of a small handful of larger charities which were to some extent compensated by the Chancellor's recent concessions, the majority of charities have been gravely penalised. The hon. Gentleman has only to consider the predicament of the Samaritans, for example, who are dependent greatly on the telephone which is now subjected to VAT. Would it not be sensible for Treasury Ministers to get together with a wide cross-section of the charities and see how these problems can be dealt with?

The Government could not have taken more action to consult charities than they have done. We have done everything possible. We published a Green Paper far in advance of the introduction of VAT. We welcomed all representations which were made. Last year my right hon. Friend also asked for further representations, which were received, carefully analysed by Customs and Excise and fully considered. As a result, we made further changes.

To a few of them.

The hon. Gentleman says that they have been made only for a few. I do not accept that view. My right hon. Friend has made provision with regard to estate duty, for example, in that none of the legacies of up to £50,000 left to charities will be liable; none of the transactions whose proceeds go to charity will be liable to capital gains tax; charities primarily established for the relief of distress are zero rated on resale by the charity; all goods exported by any charity are zero rated; goods and services provided by charities for the relief of distress at below cost are outside the scope of the tax; and with regard to income tax my right hon. Friend has provided transitional arrangements for covenants. [HON. MEMBERS: "Too long."] It is no good hon. Members asking on the one hand for more concessions and then, when I point out to them what has been done, shouting "Too long". I think it is perfectly right to give this list. As we have pointed out, the net cost of these concessions will be £20 million.

But does not my hon. Friend understand that the charities to which he is referring are the larger and better established charities? There are newer charities, particularly those dealing with welfare, such as the Samaritans and the friends of hospitals, and funds are also collected by public subscription for individual items. I have one of these latter cases in my constituency where a collection is being made for a kidney machine. Yet this good and neighbourly work is being penalised by taxation, to the eventual cost of the Exchequer.

There is a later Question about kidney machines and it would be more appropriate for me to answer the point then. I have read out a very long list of concessions of considerable benefit to charities. It is the case that charities as a whole will benefit substantially by about £20 million this year, and the dynamic effects of the concessions on giving, which are consistent with our manifesto pledge, must be added to the other provisions which I gave in my list.

We welcome the concessions which the Government have made and which we pressed for consistently during discussion of last year's Finance Act. But a large number of charities will be a great deal worse off. Was it really the Chancellor's intention that they should be worse off? If not, will he take action to see that they are not worse off? Will he look particularly into the situation of the Churches, which are deeply concerned about the impact of VAT on them? Is he aware of the recent estimate by a responsible official of the Church of England that VAT will mean an increased cost to the Church of England of £1½ million in the coming year?

We have studied the figures very carefully. My right hon. Friend has made an additional concession to the Churches with regard to covenants, which are of considerable importance to them. On the overall aspect, however, the right hon. Gentleman cannot tell me of an occasion when the Labour Government, of which he was a leading member, reduced taxes on charities or gave concessions to charities worth £20 million.

On a point of order, Mr. Speaker. In view of the totally unsatisfactory nature of the reply, I beg to give notice that I shall seek to raise the matter on the Adjournment at the earliest opportunity.

asked the Chancellor of the Exchequer why he refuses to remove the imposition of value added tax on toilet paper and sanitary towels.

Because value added tax is a broadly-based tax on consumer expenditure. Relief has been given from VAT for the main items of expenditure of importance to low income families and there is no reason to suppose that this changeover from purchase tax and SET to VAT will be regressive or have a significant effect on the general level of prices.

Are not these items which were exempt from purchase tax basic necessities of life, so that value added tax is in effect a tax on being alive, the first poll tax we have had in this country since 1698?

The hon. Gentleman refers to the "tax", which is the crux of the matter. It is very important to look at the overall picture of the tax as a whole. It is obviously quite absurd to look at the effect on individual items. That being so, we have made it clear throughout that some items will bear an increased burden of taxation while some will bear a lesser burden. There is no reason to suppose that, in its overall effect, the tax will be regressive or will have a significant effect on the general level of prices.

Will my hon. Friend accept that there is considerable feeling on both sides of the House that this tax is moving towards the same sort of situation as purchase tax was in and may require the intervention again of my hon. Friend the Member for Worcestershire, South (Sir G. Nabarro) to show up the stupidities which are beginning to creep in? Will my hon. Friend at least say that he will look at this matter again with sympathy?

I think we are moving in precisely the opposition direction from the situation which was complained about by my hon. Friend the Member for Worcestershire, South (Sir G. Nabarro), who on many occasions brought to the attention of the House the absurdities of discriminating between various items of consumer expenditure. We have given relief to those items which are of most importance to families on low incomes, thereby ensuring that the tax is not regressive.

asked the Chancellor of the Exchequer what representations he has received on the question of whether kidney machines should be subject to value added tax.

My right hon. Friend has received several letters.

Does not my hon. Friend agree that there is a strong case for zero-rating medical requirements of this kind? I remind him of the case of my constituent who needs a kidney dialyser which costs £302. This sum is being raised by local subscription and the fact that VAT may be payable is a considerable source of local annoyance.

This is a difficult area. We can all have sympathy with such a situation. As regards medical aids as a whole, it would not be appropriate to look at specific items because we would then rapidly be back in the old purchase tax situation, with a long list of detailed items extending over pages and pages, with continuing debate about whether or not we should add an item. We have given relief to medical aids linked to their source of supply and to clinical diagnoses or judgments by doctors or qualified staff of hospitals or nursing homes. [HON. MEMBERS: "Too long."] Hon. Members again shout "Too long", but they want sensible replies. It is a very important matter and I am making a proper reply to it. We debated this question at considerable length last year and on 16th May my hon. Friend the Minister of State made it clear why we thought that our approach to the problem was the sensible one.

The Financial Secretary has many times said that this is a broadly-based tax and he has therefore refused requests such as that just made by his hon. Friend the Member for Twickenham (Mr. Jessel). Would he say why he will not give exemptions in value equal to the amount of relief in income tax in the past three years?

I do not think that arises on this Question.

As on previous Questions the Financial Secretary has given us lectures about anomalies, would he not agree that it is palpably absurd that a kidney machine purchased by a hospital should not bear the tax while one purchased by charitable subscription does? Is not that completely ridiculous and should not the Financial Secretary, on this narrow issue, give exemptions on all kidney machines, whoever subscribes for them?

If we were to do that, many representations would rightly be made to us and we should have changed the principle on which the tax operates on many other items of equipment for the disabled. I refer the hon. Gentleman to the speech by my hon. Friend the Minister of State on 16th May last year, because I cannot spell out the entire argument in answer to a suplementary question. If the hon. Gentleman reads the report of that speech he will see that the whole matter was debated very fully. as was the tax on aids of this kind, and that the House reached a conclusion, I think the right conclusion.

asked the Chancellor of the Exchequer whether he will review the application of VAT to motor-powered disabled people's chairs.

No, Sir.

Is it not palpable nonsense to impose value added tax on chairs for the disabled, which make it easier for the disabled to get around? Is it not nonsense to tax the efforts of voluntary groups, such as the Merthyr Mendicants in my constituency, who have raised more than 1 million Green Shield stamps and money to buy chairs and who are coming to collect them today only to find that they need another 10 per cent. to achieve the same result?

I understand what the hon. Gentleman is saying, but it must be put in the context of what was said on the two earlier Questions, the first about the overall position of charities and the second about the position of aids for the disabled. Equipment for the disabled is not relieved as such, but relief is linked to the source of supply and to the clinical diagnosis and judgment of the doctor or other qualified staff in hospital or nursing home. The whole matter was debated at considerable length. I cannot, in answer to a supplementary question, read out the entire speech by my hon. Friend the Minister of State on that occasion, but I can say that the House accepted it.

Will my hon. Friend be kind enough to reconsider? I ask this not because I believe he does not want to do the right thing but because this arrangement does not seem to be fair. If it does not seem to be fair, surely it is worth my hon. Friend saying that he will look at it again.

We looked at it at great length when we debated the matter last year. We believe that we have reached the right decision. I do not accept that the solution we found was not fair. I believe that this is a more sensible arrangement than was purchase tax, and I cannot undertake to review it.

Is not the Financial Secretary aware of the inconsistencies of the effect of the tax for many local authorities? Many local authorities are installing telephones in the homes of disabled people. The effect of the tax will be to increase the cost and thus to lead to a reduction in the number of telephones that local authorities will be able to install for disabled people in their areas. Surely the observations by the Minister's hon. Friends illustrate why the matter should be looked at again.

That is a separate question and we debated it separately last year. Different considerations apply to the supply of telephones for the disabled. Specific provisions are made in general for local authorities, particularly for their input tax, to ensure that the effect of VAT is not a burden on the rates, but that is a different matter and I refer the hon. Gentleman to the separate debate we had last year on the specific issue.

Would not my hon. Friend agree that last year we discussed the theory and now we are seeing what is happening in practice, and that there is a considerable difference? In practice it is the unfairness which is causing resentment and is doing no sort of good to the cause of VAT.

I think that the distinction is between good theory and bad theory, not between theory and practice. Our discussion last year covered all these issues and I think that we reached the right conclusion.

Is it not obscene that the Government should reduce taxation by £100 million and more on sweets and ice cream and yet tax kidney machines and chairs for the disabled? Is not that an obscene policy that is indefensible?

I do not accept that. The hon. Member must look at it in the context of the provision made for relief for items which help the disabled, subject to the source of supply. The Opposition have consistently opposed my right hon. Friend's concession on sweets, confectionery and ice cream, but those are important items in the expenditure of low-income families. The Government are determined to protect the position of low-income families and that is why the tax has been devised as it is.

On a point of order. In view of the unsatisfactory nature of that reply, I beg to give notice that I shall raise the matter on the Adjournment at the earliest possible opportunity.

asked the Chancellor of the Exchequer what percentage change compared to a year ago is shown by the last quarter capital investment figures where information is available.

The recorded level of gross domestic fixed capital formation in the fourth quarter of 1972 was little changed from its level in the corresponding quarter of 1971. But it is expected to rise strongly during 1973.

Is not the Minister aware that the latest evidence at current prices shows not only a strike among capital investors but a collapse in profit rates last year to an all-time low of less than half the rate of a decade ago? As falling profits cannot boost capital investment, and falling capital investment cannot boost profits, is not this the death knell of private capital accumulation in this country?

Wishful thinking.

The Labour Party's unfulfilled promises of growth left a legacy of idle plant and machinery which had to be brought into productive use before new investment was made. It is true that the share of profits in the national income has been falling for a number of years, as it has in most Western countries. Between the fourth quarter of 1971 and the corresponding quarter of 1972 the share of profits fell from 12⅓ per cent. to 11¾ per cent., while the share of wages rose from 68½ per cent. to 69⅓ per cent. I should have thought the hon. Gentleman would welcome that. As for the outlook for capital investment, all the surveys are extremely promising.

That is wishful thinking.

Will the Minister comment on another important item in investment—the build-up of stocks? In view of the current trade figures, will he say how much of the import figure represents items likely to be re-exported?

A substantial stock rebuilding programme appears to be in process. That has to some extent affected the import figures for March. In due course many of those stocks will come through in manufactured goods and be exported. The build-up of stocks will in the end greatly benefit our exports.

The House will note with surprise the Government's continuous optimism about the rate of investment in industry. The latest figures show that the level of manufacturing investment at the end of last year was lower than it had been at any period since 1967. When will the Government do something about this most important matter?

I can only repeat that all the surveys are very promising. They indicate that the level of manufacturing investment is likely to be higher in 1973–74 than for many years. Indeed, all the signs are that it could be a record.

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 l00p in June 1970.

asked the Chancellor of the Exchequer what is the purchasing power of the £ sterling to the latest available date, taking it as l00p on 18th June 1970.

Taking the internal purchasing power of the £ sterling as l00p in June 1970, its value in February 1973 is estimated to be 81p.

In the light of the total failure of the price freeze revealed by that disgraceful answer, and yesterday's catastrophic trade figures, so very much worse than the June 1970 figures of which the Minister's right hon. cheat the Chancellor made so much capital in the 1970 election campaign—

Order. I will not have offensive observations like that.

If you rule me out of order, Mr. Speaker, I obviously withdraw. The right hon. Gentleman himself used that word a few minutes ago, but I withdraw under your direction.

That has nothing to do with the hon. Gentleman's original Question. I shall comment on the trade figures in answer to a later Question, if the House wishes, but the hon. Gentleman's comments do not apply to this Question.

Is it not now clear that Minister's speeches in the Budget debate this year were so complacent as to be grossly misleading? As the first year of EEC membership has coincided with a record balance of payments deficit, how much longer will the Chancellor sit by and do nothing about it?

The right hon. Gentleman knows perfectly well that one month's figures can be thoroughly misleading. The figures in January and February were on the whole satisfactory, and exports in the past three months have been very encouraging. Most of the rise in exports was due to an increase in volume, and much was attributable to exports to the highly competitive markets of Western Europe and North America. The strong rise in imports was to a large extent due to the investment by industry in capital goods and it indicates excellent prospects for growth during this year.

But does not the Minister agree that the trade figures make total nonsense of the bouncy complacency the Chancellor showed in a debate in the House only nine days ago, and that the appalling figures are due in large part to a devaluation of nearly 12 per cent., for which the Chancellor was responsible only a few months after inheriting the largest balance of payments surplus in our history?

I do not agree with a single word of that. Today's leading article in The Guardian is interesting. It asks the pertinent question:

"can Britain afford to go on growing if the result is such an alarming trade gap?"

"the evidence suggests a favourable answer."

Does the hon. Gentleman agree that with price inflation already running at 8 per cent., with Government-sponsored increases in rates, rents and mortgage interest, with the impact of VAT on prices, and the feed-through of big increases in imported raw material prices, the Government will have a major inflation on their hands by the autumn just at a time when their only means of maintaining growth in face of the balance of payments situation will be to reduce the parity still further and so increase inflation?

The right hon. Gentleman always was a prophet of gloom. I hope he will be in a more optimistic mood about the economy when he returns from the Easter Recess. He always looks on the worst of all possible situations. He always looks for the worst. The figures for February and earlier months show that the standstill has succeeded in largely halting the rise in non-food prices. In fact, prices have risen by only about ½ per cent. since November when the standstill was introduced. Therefore, the Government's prices and incomes policy is being extraordinarily successful.

asked the Chancellor of the Exchequer how much of the £5 million EEC Information Budget in the present year will be used in payment of secret retaining fees to undisclosed persons for services to the EEC.

None to my knowledge.

Is the hon. Gentleman aware that the British public's money is involved? Is it not the duty of Ministers to find out how the money is being used and to give that information to the House?

I shall try to make the position clear. I am aware that the right hon. Gentleman raised this question on an earlier occasion. I have made inquiries and it is my understanding, based on the inquiries made of the Commission which is responsible for the various programmes within the budgetary agreements agreed by the Council of Ministers, that no element of the British contribution is itemised in any particular section within the Commissions' budget. As my hon. Friend the Chief Secretary indicated, if the hon. Gentleman has a specific point in mind it would be helpful if he were to raise it.

Does the hon. Gentleman agree that it is extremely important that the standards of disclosure of the affairs of the EEC should at least be equal to those adopted by the United Kingdom? What is the hon. Gentleman doing to ensure that those standards will apply in future?

Clearly the circumstances are not precisely the same, and both institutions must be considered on their merits. It is not immensely helpful for the right hon. Gentleman to put down a Question which indicates that he is referring to a specific matter and then to deal with the matter by way of generalities.

asked the Chancellor of the Exchequer what steps he is taking to prevent a recurrence of the unexplained disappearance of £50 million of EEC budget funds in the year 1970.

As I told the hon. Member for Walthamstow, West (Mr. Deakins) on 10th April, I am not aware of any evidence that an amount of this order has been lost.—[Vol. 854, c. 265.]

Has the hon. Gentleman had drawn to his attention the report of Mr. Heinreich Aigner, on behalf of the Committee for Finance and Budgets of the European Parliament, which indicates that there is constant fraud in the operation of the Common Market Agricultural Fund? It is estimated that about £40 million a year is lost. No one seems to know where that money is going. Is the hon. Gentleman aware that from 1st July the Commission is proposing—the proposal will operate from 1975—that the budget will neither come before the European Parliament nor be vetted by any national Parliament in any of the EEC countries? Is it not an absolute scandal that this position should arise? What are the Government prepared to do about it?

I do not know where the hon. Gentleman gets these facts—

Read the report of the European Parliament.

The European Parliament has a budget which is discussed and which has to be agreed by the Council of Ministers. Undoubtedly frauds have taken place in the Community, but there is great confusion about the matter. Nobody quite knows from where the figure of £50 million has come. There is nothing to substantiate that such a loss has taken place. Effective control by Community institutions, and in particular, effective scrutiny by the Audit Board, is very important. With that the Government wholly agree.

Does not this Question and what we have heard indicate that the sooner the hon. Member for Liverpool, Walton (Mr. Heffer) joins the hon. Member for Belfast, South (Mr. Pounder) in the European Parliament the better?

If my hon. Friend the Member for Belfast, South (Mr. Pounder) feels that that would be a good idea, and that he would like the hon. Member for Liverpool, Walton (Mr. Heffer) as a companion, I am sure that the whole House would welcome it.

Does the Minister agree that the questions put both by my hon. Friend the Member for Liverpool, Walton (Mr. Heffer) and by my right hon. Friend the Member for Battersea, North (Mr. Jay) concern money supplied by the British taxpayer? Is he prepared, on behalf of the British public to investigate what is happening to British taxpayers' money within the European Parliament?

I can understand that hon. Members are extremely interested in this important matter. Why does not the Labour Party join the European Parliament, which is the forum for discussion of these matters? The hon. Member for Ealing, North (Mr. Molloy) feels strongly about the matter, and I am sorry that the Labour Party is not participating in the discussions in the European Parliament. I agree entirely that these are matters of great importance. It is of great importance that the Audit Board's work is carried out with the maximum dispatch and with the maximum efficiency. Certainly we agree with that.

Will the Government give some attention to a matter which is likely to be of great consequence to the House of Commons? Is it not the case that scrutiny of the Council of Ministers or the actions of a non-elected Parliament, which has no authority to displace the Ministers of the Council of Ministers, is nothing like the same as our system? Are there not serious constitutional matters which the Government should think about?

There are important issues at stake. As I have already said, we will press for any improvements which appear to be necessary in the Audit Board's procedures. The figure which was mentioned in the Question of the hon. Member for Liverpool, Walton (Mr. Heffer) is, I emphasise, an alleged loss which is said to have taken place in 1970 before we joined the Community.

asked the Prime Minister if he will take personal charge of the arrangements for the next round of production and exploration licences for the United Kingdom sector of the Continental Shelf.

I refer the hon. Gentleman to the reply which I gave to the hon. Member for Manchester, Wythenshawe (Mr. Alfred Morris) on 12th April.—[Vol. 854, c. 1498–9.]

I find it difficult to recall that reply. Will the Prime Minister give an assurance that, whatever arrangements are made for the next round of licences, this nation will receive the maximum return from the exploitation of these indigenous resources? In view of current developments, will he consider setting up a national energy commission with the additional responsibility of founding a research and development institution on the French model to deepen and widen our petroleum technology base?

I think the hon. Gentleman knows, because of the deep study he has made of the subject, that the Government have been carrying out a complete review of the whole of the licensing arrangements. As the Public Accounts Committee Report has been published, we are able to take its recommendations into account and of course we shall take note of what the hon. Gentleman has said. Obviously I cannot commit myself at this stage to agreeing to the sort of institutional arrangements that the hon. Gentleman is now suggesting. As he knows, we have ourselves made changes in the arrangements for dealing with these matters and we must see how they work.

As the right hon. Gentleman has already shown his broad-mindedness by appointing Lord Rothschild to advise him on general subjects, would it not be a good idea if he were to appoint Lord Balogh to advise him in this matter?

I do not think that a further adviser is necessary.

asked the Prime Minister if he is satisfied with the co-ordination between the Department of Trade and Industry and the Department of Employment over worker participation in industry.

Yes, Sir.

Would my right hon. Friend give some indication of his views on this subject of worker participation? For example, does he think that it is a suitable subject for the future agendas of talks with the TUC and CBI? In view of the current diversity of opinion on the subject, does he not think that we should have an early opportunity to discuss it in the House?

I should welcome a discussion of this subject in the House, because it is of great importance, but a debate is a matter for my right hon. Friend the Leader of the House. We touched on the subject in the original Chequers talks with the CBI and the TUC. We did not carry it very far, but I hope that in future meetings we shall be able to discuss it.

As a step towards greater worker participation in industry, would the right hon. Gentleman like to indicate what steps are now being taken to amend the Industrial Relations Act until such time as Labour gets power and repeals it altogether? Would he say what discussions have already been held between the Secretary of State for Employment and Sir John Donaldson—I understand that they have taken place—and what has come out of those discussions and what proposals the Government are now making in relation to the Industrial Relations Act?

I have told the House on many occasions that we are prepared to consider detailed and specific proposals for amending the Industrial Relations Act. I know, as it has become public, that the TUC has been discussing the matter. We have not had any recommendations from the CBI on specific matters. We remain ready to consider any proposals.

In view of the Prime Minister's earlier encouraging reply about the need for a debate on this important subject, may I ask whether he is aware that after the Easter Recess I shall introduce a Workers Council Bill under the Ten Minutes Rule? One constructive step that the Government could take would be to allow the House to have a full debate on that constructive measure, which is modelled closely on the successful legislation of West Germany.

That, too, is a matter for my right hon. Friend. The Commission is now considering this matter in Brussels. It was one of the matters decided at the summit in Paris. We are also considering proposals that the Commission has been working out. I fully appreciate what has been done in West Germany. As I told the House previously, I talked to Chancellor Brandt about it. I do not think it necessarily follows that a pattern that is suitable for one member of the Community should be completely transferred in its existing form to another member. If there is to be a debate, one would want a wider debate on various forms so as to make some sort of judgment as to what might be suitable for our own arrangements.

In view of my right hon. Friend's known personal interest in this subject may I ask whether he will urge the CBI and the TUC and others to hasten their studies and so help others in the European Parliament working on this important subject?

I have said that I hope we can discuss this at meetings with the TUC and the CBI. I hope that they will note what my hon. Friend has said.

Is the right hon. Gentleman aware that the position whereby workers may lose their jobs as a result of factory closures or be made redundant without there being any consultation or any legal rights arising is a major source of anxiety in industry? Can he tell the House when he expects a reply from the CBI and the TUC about the proposals that have been put forward? Do the Government intend to legislate by means of a Companies Act during the next Session?

I cannot tell the right hon. Gentleman when the other organisations will be letting us have their views. It would obviously be a matter for consideration as to whether it is possible to fit these matters into the next Companies Act. The right hon. Gentleman will know that closures and redundancies are covered by the code of practice. I would not accept his allegation that this is causing widespread anxiety in industry because more and more firms are carrying out full consultation. We had a case raised last Tuesday in which it was claimed that the need for speedy action to avoid a takeover had not given time for consultation. We all regretted that. I do not think that that is an accusation which can be levelled across the whole of British industry.

asked the Prime Minister if he will pay an official visit to the United Nations.

I have at present no plans to make a further visit.

When the Prime Minister decides to go to the United Nations, will he be prepared to press the case put forward by this Government and Parliament and try to find a solution to the Rhodesian problem and the grievous problems in South Africa generally? Is he aware that if these are not resolved there may be horrendous results? Is he prepared clearly to state to the United Nations that recent statements by the Foreign Secretary have the support of this Parliament, that we believe that the situation is dangerous and that we have an important rôle to play?

Our representative at the United Nations has already done that. I agree with what the hon. Gentleman says about the importance of these matters. It is accepted that it is the responsibility of the British Government to try to find a solution to the Rhodesion problem. The House knows that a settlement was worked out which was not acceptable. It is now a matter in which the races in Rhodesia must come together to try to work out their future.

Since my right hon. Friend has taken a personal interest in the plight of the 90,000 Pakistani prisoners of war and will no doubt have been glad to see the initative taken by the Indian Government yesterday to the effect that they agree in principle to the release of the prisoners, may I ask him to approach the United Nations urgently to see whether that body would be willing to supervise the complex exchange arragements for personnel, thus ensuring that this initiative does not come to nothing?

We were pleased to see the initiative yesterday. We have always said that we will help in any arrangements of this kind if the countries concerned want us to take part. I am prepared to ask our representatives at the United Nations to discuss with the Secretary-General whether he thinks this is an area in which the United Nations can play a part. The initiative is to be welcomed and I hope that speedy means can be found to solve these problems.

While I applaud the sentiments behind the Prime Minister's last reply may I ask him to consider pressing for admission to the United Nations of the newest member of the Commonwealth, namely Bangladesh, when the United Nations next meets? Is it not now apparent that the solution to the problems in that area would be made easier by such an admission?

The right hon. Gentleman knows that we have been in favour of the admission of Bangladesh to the United Nations and have done our best to bring that about. It still remains a matter on which there is probably some more diplomatic activity to be carried out before we can be sure of a settlement. The right hon. Gentleman can be firmly assured that we shall do our utmost.

Instead of waiting to visit the United Nations— which seems to be a modern Tower of Babel—may I ask my right hon. Friend to urge the United Nations to set aside its ideological wrangles, such as we hear from Labour benches, and mount an immediate practical operation to assist in the terrible drought conditions in India? Is he aware that this is the sort of thing that the United Nations can do best on behalf of the world? Will Her Majesty's Government support any such operation?

In fairness to the United Nations I hope my hon. and gallant Friend would agree that on past occasions it has tried to organise relief on a massive scale. We have always played a part in it. In this present situation it must be acknowledged that we have devoted a large part of our resources to helping Bangladesh in particular because we felt that this was a member of the Commonwealth which, in order of priorities, needed a great deal of help. In anything that we are able to do in the Indian sub-continent as a whole, we must be allowed to take that into account.

asked the Prime Minister if he will take the chair at the next meeting of the National Economic Development Council.

asked the Prime Minister when next he plans to take the chair at an NEDC meeting.

I refer the hon. Gentlemen to the reply which I gave on 12th April to my hon. Friend the Member for Hertfordshire, South-West (Sir Gilbert Longden.)—[Vol. 854, c. 338.]

Can the right hon. Gentleman tell the House what the views of the NEDC are likely to be about yesterday's appalling trade figures? Can he further tell the House how the Government seem to be set to achieve the impossible, of moving from a £1,000 million balance of payments surplus to a £1,000 million balance of payments deficit in the space of two years?

It is not for me to prejudge what the members of the NEDC will say. If I may be allowed to venture an opinion, they will say "We have constantly urged you as a Government since 1970 to expand the economy. This is now taking place at the rate of something over 5 per cent. and the consequences are a steady increase in our imports to meet the demands of an expanding economy". That is what "Neddy" will say. Right hon. and hon. Gentlemen opposite have to make up their minds about whether they want an expanding economy. In the circumstances which the hon. Gentleman mentioned there was stagnation and no expansion.

Although the Prime Minister was reluctant to sanction an investigation into the payment of wages below the poverty datum line in South Africa, may I ask whether he will investigate the payment of wages below the British poverty datum line by British firms in Britain? Is he aware that one of his Ministers said recently that there are in Britain more than one-third of a million people living in the families of those in full-time work earning a poverty wage below the supplementary benefit line? Since his own policies have mani- festly failed to help these poverty wage earners, will the right hon. Gentleman set up a commitee of inquiry?

No, Sir.

Would not the right hon. Gentleman agree that the disturbing trade figures for March at least underline the great difficulty which this or any other Government in these circumstances will face in maintaining a 5 per cent. growth rate without a substantial increase in inflation? Is he aware that although the figures already published by the Government show that we have had 5 per cent. growth, throughout the freeze there has been a fall in real earnings because the cost of living has risen by nearly 8 per cent while earnings have gone up by only 2 per cent.? Is he further aware that there will be no chance of getting co-operation within the NEDC on a policy against inflation unless the working people who have helped to create the increase in the nation's wealth are also allowed to share in it?

I agree with the right hon. Gentleman in that the figures obviously show the vital necessity of dealing with inflation. This is what the Government's policies are designed to do, and they are meeting with success. What I welcome is that those who the right hon. Gentleman described as the working people of this country have co-operated fully with stage 1 of the standstill. We are now out of that and the awards of £1 plus 4 per cent. are quite substantial by any criteria—between 7 per cent. and 8 per cent., with earnings rising in an expanding economy. This is the reason why, again, they are co-operating with stage 2.

Would not my right hon. Friend agree that one of the worrying features about Britain's international trading position has been our continuing decline in the share of the export market? Does he not further agree that while the value figures for imports announced yesterday increased sharply, largely because of increases in commodity prices, the volume figures for exports are increasing even faster? Does not that provide some ground for long-term optimism about the balance of payments?

In volume terms imports and exports have risen at about the same rate. But the fact that stage 1 and stage 2 are operating successfully gives us grounds, with the floating pound, for believing that exports can increase faster and that we can then stabilise the situation.

Since the Prime Minister obviously is not worried about the growth rate, is he not worried at all about the trade figures or does he regard alarming trade figures of this kind as an inevitability and a consequence of the growth rate? Is not he concerned at all about the trade figures?

I have said that in an expanding economy—this applies especially to the British economy because such a large part of our raw materials comes from overseas—we must expect at a time of expansion and when private investment is beginning to expand that imports of raw materials will increase and that our general import figures will increase. That is to be expected. At the same time, with a floating pound, we shall see a lag in time before exports themselves increase still faster. In volume, imports and exports are moving roughly together. If we are to have sustained expansion instead of the series of stop-go which we have seen since 1945, we must see it through.

Does not the Prime Minister agree that there is little evidence that the appalling increase in imports is due to investment? Does not the evidence put out by the Department of Trade and Industry suggest that it is due largely to imports of consumer goods or goods for consumer industries and the rebuilding of stocks? The big increase in the import bill due to investment, if we get investment, is still to come and will still further worsen the balance of payment figures.

The figures show that imports of raw materials have increased substantially. That is essential if we are to expand output. There is also an element of stocking up in this because industry has been working on low stocks. When industry sees that in certain raw materials, for instance copper, world prices are rising, naturally it begins to stock up further. Those are the important elements. I agree with the right hon. Gentleman that when investment in plant and machinery comes about —and all the forecasts now are that it is coming about—if the plant and machinery comes from overseas countries it is bound to affect imports. On the other hand, when it is made here it will be the raw material side which is affected. One has to achieve a balance of these, taken over time.