asked the Chancellor of the Exchequer whether he will make a statement on the United Kingdom's participation in the OECD Policy Committee meeting on 24th and 25th June.

United Kingdom officials attended the meeting of the Economic Policy Committee of the OECD in Paris on 24th and 25th June. The main items discussed were the problems of inflation in all OECD countries and the balance of payments imbalances resulting from the increases in the price of oil, together with the appropriate policies for dealing with them.

Will the Chancellor of the Exchequer confirm the report in The Times that the United Kingdom was almost the only country among those present to press for a degree of reflation in the international economy? Does he agree that when Germany is deflating, France is deflating, when even the Italians have managed to agree on a deflationary package, and when the Americans are raising interest rates, given our inflationary situation and our balance of payments, we should be the last rather than the first to opt out of the burden that is to be borne in slowing down inflation?

As hon. Members will know, Her Majesty's Government are never responsible for that type of report in The Times. In fact, it is an inaccurate report. The view taken by all members of OECD has always been that it would be a great mistake for all countries to try at the same time to close their balance of payments deficits that have resulted from the oil price increase. We know that this year there is certain to be a surplus of approximately $70 billion of currency payments made to the OPEC countries, which they will be incapable of absorbing in terms of imports.

Is my right hon. Friend aware that there is strong support for the mistaken report in The Times about my right hon. Friend's views on reflation, and that those who support that point of view are hoping that he will translate words into action and come across with a spot of reflation.

I must tell my hon. Friend that I receive a great deal of advice from many sources. I fear that all of it is conflicting. I shall take all of it into account before I finally come to a decision.

Will the Chancellor of the Exchequer answer the question which was put by my hon. Friend the Member for Kingston-upon-Thames (Mr. Lamont)? The fact is that the Americans and the Germans have a large payments surplus. Therefore, any reflation must come from them first. If we were to lead the way in reflation that would be, in the words of Sir Alexander Cairncross in The Times of Tuesday, to court disaster.

I have the impression that the hon. Gentleman himself has answered the question.

asked the Chancellor of the Exchequer whether he will now increase the regional employment premium.

I would refer my hon. Friend to the answer my hon. Friend the Minister of State for Industry gave him on 1st July in response to a similar Question.—[Vol. 876, c. 9.]

Does my hon. Friend agree that the case for increasing the regional employment premium now has the support not only of the development areas but of both sides of industry, including the TUC? Does he accept that the main strength of the argument for increasing the REP now is that it would help to stave off unemployment without at the same time adding to the already considerable inflationary pressures?

I am very much aware of the points that my hon. Friend has made. My right hon. Friend will bear these matters in mind in the review of the future of REP which he announced in the Budget.

Does the Minister realise that to improve the regional employment premium would not stave off unemployment but merely shift it to the intermediate areas, which are already suffering distortion as a result of the present rate? Will the Minister not raise the premium but kindly phase it out?

The answer to that is, "No" ". I do not agree with the hon. Lady's views.

Does my hon. Friend agree that the real value of the regional employment premium, compared with when it was first introduced, has now decreased considerably? The problem of high unemployment in the development areas must be taken into consideration. Will the Minister seriously press his right hon. Friend to increase the premium?

Yes. I very much appreciate my hon. Friend's point. As I said earlier, we are bearing all these points in mind.

Is the Minister aware that it is no good giving people encouragement to go to development areas unless he can curb the tongues of his hon. Friends who turn the position round to make it appear that those who respond patriotically are putting out the begging bowl, and that the premiums are being used for their own selfish purposes?

I do not think that it is my hon. Friends who are doing any harm. I would have thought that it was the other way round.

asked the Chancellor of the Exchequer how much money has been borrowed from the present Government by the building societies at 10½ per cent. interest; what information he has had from the societies about how much of this has been re-lent to the money market for periods of three months or more and six months or more; and what have been the average rates of interest received.

The Building Societies Association accepted the offer of £100 million from the Bank of England in April and further tranches of £100 million from public funds in May and June. The whole of the loans for April and May have been issued and the indications are that the whole of the third tranche will also be taken up. The building societies are not required to consult the Government about their investment policies, but their liquidity ratios, which fell in the early part of this year, are now generally back to the levels obtaining at the end of 1973.

Is the hon. Gentleman aware that I do not think that he has answered the second part of my Question? Is he aware that there is every indication that the building societies have been re-lending the taxpayer's money in the money markets, and that that money is being used for purposes for which, presumably, his Government did not wish it to be used? Does he agree that that is a highly inflationary policy?

Building societies are non-profit-making institutions. Any return they receive on temporary investments of this sort—and they must have a liquidity ratio—will ultimately be available for further mortgage lending.

Is it not rather odd that one can borrow money from a building society and lend the same money back to the same building society at a higher rate of interest? Would it not help if building societies were encouraged to recover outstanding loans to borrowers, which, after a period of 10 years or so, because of inflation, could be repaid by those borrowers?

Certainly, many odd things happen in the short-term money markets. There are often reverse yield gaps occurring. I do not think that it would be for me to interfere with the building societies' policies on recovering the loans they have extended to mortgagors.

Does the hon. Gentleman agree that one of the difficulties with the building societies is that they borrow short and lend long? Consequently, is it not high time our tax laws were altered so that there would be an encouragement for pension funds to lend money to building societies? Does the Financial Secretary not agree that pension funds are the only long-term investors, as such, in this country, and that it is ludicrous that this money is available but, because of our tax laws and the tax exemption of pension funds, the repayment of building society tax is not allowed?

The hon. Gentleman raised this point at rather greater length in Committee on the Finance Bill, and I undertook to examine it. I have done so, and shall give the hon. Gentleman a detailed answer on Report, but at present I am not inclined to go any further than I did in Committee.

asked the Chancellor of the Exchequer what were the results of his meeting with a deputation from the National Association of Widows relating to tax allowances for widows; and if he will make a statement.

On 26th June I met a deputation from the National Association of Widows who were introduced by my hon. Friend the Member for Walsall, South (Mr. George). We had a detailed and comprehensive discussion of a number of taxation questions affecting widows. I undertook to write to my hon. Friend in more detail about some of these issues and this I have now done.

Is my hon. Friend aware that our taxation system is still unfair to large numbers of widows, particularly working widows, and that it does not take into account the extra expenses, such as the upkeep of homes, and so on, that many widows have?

I am well aware that widows have serious economic burdens to carry. Those burdens are common not only to widows but to many single people running homes on their own. It is because of this that the single person's allowance is well over half that of the married person's allowance.

Will the hon. Gentleman stop being so complacent about this matter? Does he not realise that the widow is worse off today than she was in June 1973, because of the present taxation system? If he wishes, I can send him details to show that.

That was certainly not the burden of the representations made to me by the National Association of Widows, which is very grateful for the considerable increase in pensions that this Government are giving to widows.

asked the Chancellor of the Exchequer whether inflation in the British economy in the last three months has exceeded his expectations at the time of making his Budget Statement; and whether he plans any further steps in this connection.

I recognised in my Budget Statement that it was inevitable that the rate of increase of the retail price index would continue to be substantial for a time. But we are taking vigorous measures to keep the rate of inflation to a minimum.

In his Budget Statement the Chancellor also said that we must restore the people's confidence in money. Does he not agree that, apart from the world fall in commodity prices—for which he can hardly take credit—nothing his Government have done since Budget Day has gone any way towards achieving that honourable end? Will he confirm that when he introduces his mini-Budget later this month he will not bring in inflationary measures for electioneering purposes—measures that could have the effect of turning the present disastrous rate of inflation into maxi-inflation that will finally destroy the confidence of every saver-investor in this country?

I cannot agree with all the hon. Gentleman's remarks. Shortly after entering office we found that the rate of inflation we had inherited was 13 per cent. and that the increase in oil and commodity prices was bound to feed through for another nine months and increase that rate substantially. Therefore, we froze rents, subsidised food, tightened price control, put an effective control on the money supply, and took care not to inflate demand, as the previous Government had done, to a point beyond the capacity of our economy to meet it. If the hon. Gentleman shares the views that some of his hon. Friend expressed earlier, as he appears to do, he should applaud what we have done rather than seek to attack it.

Does my right hon. Friend agree that my right hon. Friend the Secretary of State for Prices and Consumer Protection has had little appreciation from the Opposition? When she seeks to control prices she is condemned by them, and then they try to make capital out of rising prices.

I have no difficulty in agreeing with everything my hon. Friend says.

Are not wage increases of 20 per cent. or more likely both to exacerbate inflation and endanger employment? Will the Chancellor say clearly whether or not they are consistent with the social compact?

The hon. Gentleman will be well aware that the major inflationary element in wage increases at present is the threshold agreements which were part of the pevious Government's policies.

Rubbish.

That is a point which has been put to me repeatedly by the Confederation of British Industry, and if the hon. Gentleman thinks that it is rubbish he should say that to the Confederation.

asked the Chancellor of the Exchequer what immediate plans he has for adjusting the economy.

asked the Chancellor of the Exchequer if he will now take urgent steps to reflate the economy.

asked the Chancellor of the Exchequer whether he now considers the time appropriate to stimulate the economy, and if he will make a statement.

asked the Chancellor of the Exchequer what proposals he has for reheating the economy.

I am now looking carefully at the latest indicators of demand and output to see what action, if any, might be necessary. If I decide to introduce new measures in advance of my autumn Budget I shall announce them in the normal way.

When he gets down to his job in the course of the next few days, will my right hon. Friend bear in mind that, with the slightly reducing interest rates both here and in Western Europe generally, and with falling commodity prices, he should continue a policy of redistribution of income, should be prepared to spend more money on hospitals, housing and education, and should take steps to reduce value added tax with a view to abolishing it altogether, as a prelude to our coming out of the Common Market? Will he bear in mind that that will assist the social compact?

I note the mini-Budget representations of my hon. Friend.

Does the right hon. Gentleman accept that the statement, at the time, that his Budget was neutral has not proved to be the case, and that it was in fact deflationary? If this is so, what steps will he take to try to avert a rise in unemployment this winter?

I made it clear in my Budget Statement that the Budget judgment on which I acted and the measures I took were liable to be slightly deflationary. I made clear at the time that there was to be a £200 million reduction in overall demand. I am now considering whether that would appear to be excessive. I note the wide variety of views on the benches opposite. I would have been more impressed by the pleas of some Members opposite that I should adopt a deflationary stance if they had not repeatedly passed amendments to the Finance Bill upstairs which will lead to increases in the Government's borrowing requirement.

Since the rate of increase in money supply and the rate of inflation must both be relevant to the Chancellor's considerations, is he proposing to allow the rate of increase in the supply of money to keep up with the rate of increase of price inflation?

The hon. Gentleman will probably be aware that for the first time in many years we have the rate of increase in the money supply under control. I propose to keep it so. It is running at roughly half the rate at which it was running under the previous Government.

Is my right hon. Friend aware that his predecessor, in his December cuts, inflicted cuts on many spending Departments—including the Department of Health and Social Security—which have had an absolutely disastrous affect on local authority services and hospital services'? Will he do everything he can to see that those cuts are restored at the earliest opportunity?

I shall see what I can do to restore the cuts at the earliest appropriate opportunity, but my hon. Friend will be aware that the previous Government found it necessary to impose these massive and Draconian cuts because the whole of their economic policy had fallen into ruins. It takes some time to reconstruct a healthy economy, particularly against a background in which, for two months, production was subject to three-day working.

Will the right hon. Gentleman reject the advice he is getting about taking reflationary measures, as these can only add to the burden of inflation which is increasing so quickly at present? Does he accept that our rate of inflation is higher than the rates of inflation of almost all major countries in the world, and that our balance of pay ments position is almost the worst? Does he not accept the danger to sterling which would occur if we were to have a reflationary Budget?

I note that my French colleague, speaking to his Assembly last Friday, said that the French rate of inflation was higher than that of any of France's neighbours. Until last year our rate of inflation was very much higher than that of any other country, but now there are many other countries with rates of inflation comparable with Britain's.

Will my hon. Friend constantly bear in mind the acute financial difficulties which are now facing, and will continue to face in increasing measure, our colleagues in local government, following reorganisation? Is he aware, for instance, that colleagues in the Yorkshire-Humberside area tell us that they will have to think in terms of fewer jobs and increased fares in the local transport system? There are many examples of similar situations. Will my right hon. Friend look at this situation and do something about it?

I am deeply concerned at the present situation of many local authorities, including that of the great Yorkshire city which I represent, but on top of the economic situation which the previous Government described as the gravest since the war, Britain, like all oil-consuming countries, has been shuddering under the effects of the biggest increase in oil prices in recorded history. It is bound to take time before we can see our way clearly through this so as to be able to do everything we would wish to do for everyone in the country who deserves it.

Will the right hon. Gentleman say, as a matter of fact, putting aside the histrionics, how much public expenditure has increased net since his increases in the Budget, as this would help the House to form a judgment on his problems?

I cannot answer that without notice—but the hon. Gentleman made a mistake. I was talking history, not histrionics.

asked the Chancellor of the Exchequer if he will make a statement on the out-turns of his March 1974 Budget predictions.

Preliminary estimates of the out-turn in the first half will not be available until mid-August. However, it is now clear that the three-day working week had a less depressing effect on output and demand than had been feared earlier, so that when the out-turn for the first half is known it will probably show a smaller drop in gross domestic product than was estimated in the Budget.

Will my right hon. Friend weigh that information against the strategy which he announced last March which was to design a Budget capable of improving our balance of payments situation? Faced with the present situation he can now regulate the economy in his mini-Budget to plus or minus 2 per cent. in VAT terms and plus or minus 10 per cent. in Customs and Excise duties; therefore he can only have a minimal influence on the balance of payments in future. Will he therefore join those of his hon. Friends who are now asking him and the rest of the Government to introduce selective import control so that we can make a direct contribution towards a better balance of payments in the future?

One of the most encouraging things since the last Budget is that the growth both in volume and value of exports has been greater than I then expected. It would be a disaster to take any steps which might lead to other countries restricting growth in our exports, since it is on export-led growth that we base our chances of breaking out of the stagnation from which our economy has suffered since the war.

Is it not apparent that the Budget predictions are of somewhat limited value now, in view of the endless flood of additional public expenditure which is churned out week after week? Will the right hon. Gentleman at least get one thing clear for us? He said earlier that it was desirable that all countries should not try to close the gap in their balance of payments at once. Will he confirm that the countries with the biggest balance of payment gaps, such as ourselves, should give the lead in starting the process?

My view, like that of my colleagues in OECD and in the Community Committee of Finance Ministers, is that consumer countries should not seek to meet the exceptional problems created for their balance of payments by reducing demand overall. It is highly desirable that Germany and the United States, which have big balance of payments surpluses, should lead the way in maintaining effective demand in the world economy. I find it somewhat baffling that the hon. Member should talk of the Government increasing public expenditure when, a few days ago, he and his hon. Friends voted for a reduction of £100 million in the yield from value added tax.

Will the right hon. Gentleman give an assurance that there will be no about-turn on the promise he made to me in the Budget debate that the loop-holes in the tax arrangements for the oil companies, so badly messed up by the last Government, will be filled in before the Government go to the country? If the right hon. Gentleman intends to keep this promise, may I ask him when he will do so?

I am delighted to be able to tell the hon. Lady that if she has the patience to sit here for another three quarters of an hour her anxieties will be met by my right hon. Friend the Secretary of State for Energy.

asked the Chancellor of the Exchequer what estimate he has made of the effects of wealth tax on the sale of works of art currently in Great Britain.

This will be a matter for later discussion in the light of the Green Paper.

I am grateful that my hon. Friend is thinking seriously about this. Is he aware that many people find the prices now being paid for works of art to be offensively high, as the wealthy in our society, instead of using their money for investments which would bring general public good, are using it more as a hedge against inflation? Is he aware that there is equally widespread feeling that it would be a grand thing, via a wealth tax, for the public at large to have the benefit of taking the cream off the preposterous prices now paid for works of art?

I note what my hon. Friend says. His remarks will be amongst those matters for discussion when the Green Paper is issued.

Will the hon. Gentleman confirm that he has received representations expressing the strongest possible misgivings on this subject from the Standing Commission on Museums and Galleries and from the National Art Collections Fund? Is he aware that a tax control such as the hon. Member for Bedwellty (Mr. Kinnock) has suggested would open the floodgates to potential foreign buyers of our national heritage? Will he bear in mind that valuations of works of art for such a tax would be not only unfair but impossible?

I do not know how the hon. Gentleman or anyone else can say that, when they have not seen the Green Paper. The hon. Gentleman and others may see the matter differently after they have seen the Green Paper.

Is the hon. Gentleman aware that in past generations this country and France have done enormously well out of their free world market in art, and that any attempt to clog the market now would be highly protectionist and selfish towards the rest of the world.

It is becoming clear that when the Green Paper is issued the discussion will be very interesting.

asked the Chancellor of the Exchequer if he will seek to have further meetings with the TUC and CBI to discuss economic matters relating to combating inflation; and if he will make a statement.

I regularly meet the TUC and CBI, in NEDC and elsewhere, to discuss all aspects of economic policy, including the problems of inflation. I am in contact with both at the moment, and am in fact looking forward to a meeting with the CBI this afternoon.

While thanking my right hon. Friend for that reply, may I ask him whether he does not agree that, as inflation is the foe and increased productivity the means of combating it, he should be prepared to talk with the TUC and the CBI about the possibility of amending tax regulations as they apply to industrial overtime?

I do not know that I would gain very greatly by working out specific proposals on this with the TUC and the CBI. It is a matter constantly put to me by my hon. Friends and by my constituents. It is never far from the forefront of my mind.

Does the Chancellor agree that one of the main problems facing industry today is that of liquidity, which has been made considerably worse as a result of his March Budget? Does he not further agree that from last December to the present date there has been a dramatic reduction in industrial investment intentions?

The liquidity of British industry as a whole stood at £10,000 million gross at the end of the year. I am glad to say that it showed no signs of falling, gross, over the first quarter. I am well aware that some firms do have liquidity problems. I have instructed the banks to take account of their needs if they should be approached for particular help. I am glad to say that so far the banks have had no excessive requests for help of this nature.

Does the Chancellor stand by the recent speech he made in Durham to the effect that excessive pay increases were the greatest danger to inflation over the coming year? If so, will he make it clear in his forthcoming talks with the TUC and the CBI that the higher pay increases are the more dangerous it would be to reflate?

It would have been helpful if the right hon. Gentleman and his hon. Friends had borne this in mind when they constructed phase 3 of the counter-inflation policy. Conservative Members will know, perhaps better than my hon. Friends, how many companies are now facing intense problems in their liquidity flow because of the automatic application of threshold agreements. I do stand by what I said. The General Council of the TUC has taken the same view and made clear in its advice to its constituent members that it believes that, by and large, wage increases over the coming year should be limited to what is required to cover the increase in the cost of living. The whole country would feel that it would be gracious of the right hon. Gentleman, as a former Secretary of State for Employment, if he were to express his satisfaction at the terms and form of the guidance given.

asked the Chancellor of the Exchequer if he will make proposals designed to increase investors' confidence in the capital markets.

The Government's economic policies have always been directed towards providing a stable fiscal and monetary framework within which confidence can be strengthened, including confidence as it affects investors in the capital markets.

If the Chancellor wants to stop the slump in savings and investment and restore confidence in industry should he not persuade the Prime Minister to sack the Secretary of State for Industry and then introduce a Budget which will reverse the penal anti-business measures in his last Budget?

It would probably be as well if the hon. Gentleman addressed his remarks personally to the Prime Minister. We are perfectly confident that our policies will have the success we always intended.

Is my right hon. Friend aware that there are many thousands of people who do not want to become investors or capitalists so that they may exist on the fruits of other people's labours, but who simply want the value of the money they earn to be protected? Will he consider a system of saving whereby interest rates may be minimal but the saver has money repaid at the value it was when it was invested? He would find that there were many honest people who would like to invest in this way.

I thank my hon. Friend for his extremely constructive suggestion. I am sure that he will be aware that there are considerable problems in trying to index any medium of savings. I was glad to note the approval which greeted my hon. Friend's suggestion for protecting the value of money and to observe that it ranks high in the priorities of the Conservative Party—particularly bearing in mind its record in the past four years.

asked the Chancellor of the Exchequer to what extent local authorities requiring funds beyond their overdraft facilities will be adversely affected by the Bank of England's instructions to clearing banks operative from 1st July limiting overdrafts to specific amounts.

The new overdraft arrangements were proposed by the clearing banks in response to a general request from the Bank of England, endorsed by the previous administration, for steps to be taken to reduce excessive fluctuations in the demands for bank credit. The local authorities are currently estimating the effect upon them of these arrangements but it is likely to be relatively small.

Does the hon. Gentleman agree that there must be some effect and that to this will be added the high labour costs which local authorities are having to meet this year, the continuing high level—almost unprecedented—of interest rates, and the reluctance of ratepayers to meet their rate bills this year? Is he aware that I was interested in what the Chancellor had to say about his deep concern for the financial situation of local authorities? Will he tell us what proposals there are to speed up the payment of the rate support grant, and whether there are any other special measures in hand to assist local authorities in the especially difficult circumstances of this year?

We are considering the resolution passed by this House dealing with the rate support grant, as the hon. Member would expect in the light of what happened. The additional costs would not be more than £1 million or £2 million, compared with the total local authority expenditure of around £9,000 million.

Does my hon. Friend appreciate the dire distress of many county treasurers? Is he aware that the Staffordshire County Council, whose finance meeting I attended on Monday morning, has already spent the whole of its £6 million contingency fund as a result of factors outside its own jurisdiction, many of which are associated with inflation and budgetary measures? Does my hon. Friend realise that county treasurers are being forced into the money market and are having to pay 15 per cent. for yearling bonds? Will he give them some immediate help before he introduces the customary Rate Support Grant Increase Order in December?

I am afraid that I cannot promise to do that. We are aware of the serious problems of local authorities, but they have to be considered in the context of the whole economic situation, which my right hon. Friend the Chancellor of the Exchequer is studying at present.

asked the Chancellor of the Exchequer what studies are being made by Her Majesty's Government of the implications of introducing multiple rates of value added tax.

I would refer the hon. Member to the answer I gave on 12th June to my hon. Friend the Member for Sheffield, Attercliffe (Mr. Duffy).—[Vol. 874, c. 561–2.]

Is the hon. Gentleman aware that the introduction of further rates of VAT would have serious disadvantages? If his right hon. Friend is considering such a move, will the hon. Gentleman resist any suggestion of discrimination against the tourist industry? Is he aware that such a move has been adopted in other countries but has had to be abandoned because of the severe adverse effects?

I shall take note of the hon. Gentleman's suggestion. I am well aware of his interest in these matters.

Is my hon. Friend aware that millions of people are fed up to the teeth with VAT? They see it as a device for getting us into the Common Market and keeping us there. Will my hon. Friend promise that when we get out of the Common Market we shall get rid of VAT and replace it by purchase tax?

My hon. Friend will recall that the Conservative Party made clear that it was introducing VAT whether or not we went into the Common Market. I take my hon. Friend's point that the great advantage of purchase tax over VAT is that it makes it easier to discriminate against luxury goods.

Cannot we rely upon the good-natured xenophobia of the Treasury Bench to prevent us from adopting this most unwholesome characteristic of Common Market nations' tax systems—multiple rates of VAT? Surely, one's experience suggests that the single rate plus the zero rate is far preferable to multiple rates?

I am glad that the hon. Gentleman agrees that there should be a zero rate. That in itself introduces two rates into the VAT system. I cannot accept the general philosophy behind the hon. Gentleman's supplementary question, because the Government think that it is a proper function of the tax system to discriminate between socially desirable and socially less desirable goods and activities.

asked the Chancellor of the Exchequer, in the course of his renegotiation with the EEC, for what items he intends to insist on zero rating in the event of harmonisation of the rate of VAT.

asked the Chancellor of the Exchequer what is his policy with regard to zero rating and harmonisation of value added tax in relation to the EEC renegotiations.

The EEC Commission has made no proposals for harmonising the rates of VAT. Its proposals in the draft Sixth Directive on VAT would, if unanimously adopted by the Council of Ministers in their present form, provide for the retention of all zero ratings in force in this country on 1st July 1973, unless and until the Council should in the future unanimously decide to restrict zero ratings or to abolish fiscal frontiers. We shall not accept any harmonisation of VAT which would restrict our discretion to refrain from taxing necessities.

I thank my hon. Friend for that full reply. Will he assure the House that, irrespective of the date of 1st July 1973, he will not agree to terms for our continued membership of the Common Market which will mean the removal of zero rating on aids for the disabled and protective clothing, which were exempted in the recent Budget? Will my hon. Friend confirm that continued membership of the Common Market, irrespective of the renegotiated terms, will mean the continued imposition of VAT, with all its inflexibility and its tendency to produce inflation which was so deplored by his right hon. Friend in his Budget Statement?

My right hon. Friend has no intention whatever of removing the zero rating on aids for the disabled which he so recently introduced.

I note that the Government are insisting upon the right to retain zero rating, but does that imply that the Government accept the principle of harmonisation in respect of the scope of VAT, apart from zero rating?

I draw the hon. Gentleman's attention to the fact that both my right hon. Friend and his predecessor the right hon. Member for Altrincham and Sale (Mr. Barber) have extended zero rating since the Sixth Directive of 1st July 1973.