asked the Chancellor of the Exchequer whether he is satisfied with communications between the Treasury and the Bank of England with regard to responding to exchange fluctuations.

asked the Chancellor of the Exchequer what is his present policy with regard to the parity of sterling.

I confirm that I am well satisfied with communications between the Treasury and the Bank on these matters. As to exchange rate policy, I refer the hon. Gentleman and my hon. Friend to the account given by my right hon. Friend the Prime Minister in the House on 11th March.

I appreciate the difficulty of managing a floating currency, but will the Chancellor assure the House that it is being done without unnecessary strain either on our own foreign exchange reserves or on the co-operative arrangements with other central banks?

I am grateful for the hon. Gentleman's question. Our policy is governed, and will continue to be governed, in line with the letter of application to the International Monetary Fund and our pledges under the Rambouillet accord, and the IMF guidelines agreed in Jamaica for countering erratic fluctuations in the exchange market. I can assure the hon. Gentleman that as we have acted in accordance with these rules the loss to our reserves has been very much less than that of certain other countries whose currencies have been under pressure in recent months.

Will my right hon. Friend convince his fellow Finance Ministers abroad that it will never be possible in the foreseeable future to maintain a system of fixed exchange rates between a number of trading economies? If he can convince them of that we shall avoid a great deal of trouble and nonsense.

As I think my right hon. Friend knows, I have made this point repeatedly at the International Monetary Fund and to my colleagues in the European Council of Finance Ministers. I have a feeling that after recent events there is much more agreement with the line that I have been taking than there was perhaps a month ago.

After the last depreciation, a few weeks ago, the Chancellor denied firmly that the Bank of England had been selling sterling on a falling market, but in view of the evidence that the market would have supported the pound at $1·9385, the apparent pressures that continued after that level was reached and the general doubts about their origin, does not the Chancellor owe us a slightly fuller explanation of what went on?

I certainly do not. The hon. Gentleman should know that it has never been the practice of Chancellors of the Exchequer to comment on details of intervention policy. I can tell the House that there has never been any criticism in any international body, including the last meeting of the European Finance Ministers, of the way in which monetary authorities in Britain have handled pressure on the pound in recent months.

What reasons has the Chancellor for thinking that the fluctuations of the exchange rate are less severe with the intervention of the Bank of England than they would have been without it?

The evidence of experience over the past year.

asked the Chancellor of the Exchequer if he is satisfied with the current rate of inflation; and if he will make a statement.

asked the Chancellor of the Exchequer what is his latest estimate of the rate of inflation; and if he will make a statement.

The retail price index rose by 22·9 per cent. over the 12 months to February, the sixth successive month in which the year-on-year rate of inflation has fallen. The annual rate of increase, excluding seasonal food, in the six months to February, was 13·3 per cent. This represents substantial progress towards the target of single figures by the end of the year. But I shall not be satisfied until inflation is reduced to a level at least no higher than that of our competitors.

Yes, it is still very high. Does my right hon. Friend accept that the recent handling of the difficulties of sterling will to some extent undermine his problems when dealing with the trade union leaders in the next round of the incomes policy? Does he accept that a widening of the depreciation of sterling by about 4 per cent. against the other major currencies reduces real disposable income by about £800 million? Does that mean that any possible £800 million worth of tax cuts in the Budget next week have already been cancelled out and cannot become part of the incomes policy that my right hon. Friend is trying to arrange?

I think that my hon. Friend will understand, as my right hon. Friend the Member for Battersea, North (Mr. Jay) said a moment ago, that in a world of floating exchange rates it is inevitable that such rates over a period will reflect comparative inflation rates in various countries. The recent fall in the international value of the pound sterling reflects excessive inflation in our own system over the past 12 to 18 months, but inflation is now being reduced very rapidly, thanks to the £6 pay limit.

My hon. Friend will be aware of the argument in the recent National Institute Review that a depreciation of 5 per cent. would lead to an increase of 200,000 jobs by the end of next year. I am sure that that consequence, at least, is one which my hon. Friend would welcome.

Does the right hon. Gentleman recognise that he will not get inflation under control until we have a basic change in economic policy? Does he not realise that until we stop importing food which we could provide from our own land and resources this country will never get back on its feet?

The House knows that there was a fundamental change in our policy, introduced as a result of the initiative of the TUC in July. That has already led to a dramatic fall in our rate of inflation. I cannot see how controlling inflation will be assisted if we buy more expensive food at home, rather than cheaper food from abroad, though I recognise that for balance of payments' reasons it is important to maximise the output of home-grown food.

Bearing in mind that the Scottish conference of the Labour Party condemned the Treasury's counter-inflation policy, will my right hon. Friend give an assurance that when the City and the CBI start twisting his arm for even more wage restraint and less price restraint, he will tell them where to get off, in his own inimitable language?

I am glad to see that my hon. Friend is none the worse for the amenities that we recently exchanged. If I feel it necessary to tell anybody to get off anything, I shall make it clear that that is my view.

Will the right hon. Gentleman bear in mind and ram home more than he has so far the fact that if the downward floating of sterling is, as he says, an inevitable consequence of a higher rate of inflation in this country, there can be no escape from a fall in real living standards if our economic policies are to prosper? If we are not to lose whatever advantage there may be from the downward float, will he underline that fact and appreciate that his policies for getting inflation under control will come increasingly under threat and into danger if he fails to recognise the need to embark on public expenditure cuts now, because otherwise he will find it extremely difficult to maintain a policy to control inflation?

I think the right hon. and learned Gentleman is confusing quite discrete issues. Certainly the advantages of competitivity, which derive from a lowering of the external value of the currency, will be lost if the consequent increase in inflationary pressures lead to an increase in wage costs at home. Whether, in the situation in which Britain now finds itself, depreciation may lead to an overall fall in real disposable income is an entirely different question.

Before calling the next Question, I urge hon. Members to ask supplementary questions and not to argue a case.

asked the Chancellor of the Exchequer if he will make a statement on the progress made towards his target of reducing the rate of inflation to single figures before the end of 1976.

I would refer my hon. Friend to the answer I gave earlier to my hon. Friend the Member for Bolsover (Mr. Skinner).

I assume that my right hon. Friend was not using obscene language. Will he say whether or not he has the assent of the trade unions to the next phase of the incomes policy? Will he have it by Tuesday, and will he be announcing it in the Budget? Did he not say a few months ago that his Budget judgment would depend on whether he secured that kind of agreement?

It is not appropriate for the TUC at this stage of the current wage round to reach a final conclusion on the policy for the next wage round, which begins on 1st August next. However, I have been in continual contact with leaders of the TUC and I shall be framing my Budget in the light of what I know of their intentions.

asked the Chancellor of the Exchequer whether he will make a statement about capital outflows from Great Britain in 1975; and how this compares with previous years.

The measurement of capital flows is very complex. The statistics record the effect of net capital flows. In 1975, net capital inflows, including unidentified flows, are provisionally estimated at £610 million. This compares with net inflows of £3,160 million in 1974 and £1,111 million in 1973. Details were released to the Press on 8th March and will be published on 2nd April in the Central Statistical Office's "Economic Trends", a copy of which will be placed in the Library.

Does my right hon. Friend accept that the outflow situation is very serious? For example, does he realise that in 1973 the total direct outward investment from this country, excluding oil, was 120 per cent. greater than in 1972, more than the total fixed investment by nationalised industries in that year, and more than half the private investment by companies in the United Kingdom? Is it not time that the Treasury seriously examined its whole policy on outflows and inflows?

If my hon. Friend examines the figures, he will find that direct investment overseas is largely represented by profits retained locally—ploughed-back profits—which are subject to very strict exchange control.

Will the right hon. Gentleman recheck his figures, because, in every respect, his answer related to inflows while the original Question related only to outflows?

I do not blame the hon. Gentleman, but he may not have caught my whole answer. I said this is a very complex area, and all the records are for net flows. I was therefore giving the net flows, which happens to be net inflows.

What action is my right hon. Friend taking to stop the outflow of capital to South Africa?

If my hon. Friend cares to table a Question on that matter, I shall deal with it.

asked the Chancellor of the Exchequer what is his best estimate of the public expenditure as a percentage of gross domestic product during the calendar year 1975.

Provisionally, 59 per cent.

Is the right hon. Gentleman aware that the provisional figure is, if anything, on the low side, and that for the coming year it is likely to be higher? Is he further aware that it is for this reason and no other that it would be highly irresponsible for the Chancellor of the Exchequer to introduce any net reductions in taxation in his Budget?

I am sure that my right hon. Friend will note the hon. Member's advice.

Does my right hon. Friend agree with the Home Secretary, who says that if the percentage goes over 60 there are dangers for a pluralist democracy?

I do not necessarily agree with that statement. Both Norway and Sweden, which are excellent social democracies, have higher levels, although they also have very much higher levels of GDP, which I hope we shall be able to obtain if we continue to pursue our present policies, with my hon. Friend's support.

Does the right hon. Gentleman accept that during the past three years public expenditure has increased by 20 per cent. while output has increased by 2 per cent.? What forecast does he make for the next three years, assuming he will still be in office?

I am surprised the hon. Member asks that question. We put this information in the White Paper and told him precisely what it was. I have no doubt that this Government will be in office over the next three years and, indeed, very much longer, and that our position will improve considerably.

asked the Chancellor of the Exchequer whether he proposes to revise the present public expenditure White Paper in the next six months.

As explained in paragraph 33 of the White Paper, we shall be ready to modify and adapt our plans as the general course of the economy and the most important needs of the community require.

Would it not be reasonable to re-examine and redraft, as a matter of urgency, a document on which the Government were unable to command a majority in the House?

No, Sir.

After the pressures of the Budget are over, would Treasury Ministers consider an addendum to the White Paper to reflect, in the light of yesterday's defence debate, the cost of a separate Scottish army, Scottish air force and tartan navy?

I know of my hon. Friend's considerable interest in this matter. I do not see that it would be necessary to issue an addendum to the White Paper to deal with these questions, but if he cares to table a specific Question I shall be glad to see whether we can give him the appropriate answer.

When revising his attitude to public expenditure, will the right hon. Gentleman bear in mind the very strong representations from various parts of the community about educational expenditure, particularly in Scotland, where we have to bear 39 per cent. of these cuts? Does the right hon. Gentleman not agree that it will be necessary for Scotland to expand education in order to train people to take up the positions that we shall have in an independent Scotland?

I hear a lot on these matters from my hon. Friends and I tend to take more notice of their views than of the hon. Lady's. If she looks at the total public expenditure per head in Scotland, she will see that it is considerably more than in the United Kingdom as a whole.

asked the Chancellor of the Exchequer if he is satisfied with the present tax structure

My right hon. Friend has already introduced a number of improvements in the tax structure, and the process will continue.

Does my right hon. Friend accept that the redistributive element in the tax structure is far from perfect and that wealthy people could still make a considerable further contribution? Does he accept that other Western European countries, including those in the EEC, have a much higher rate of tax? Does he agree that it is time a wealth tax was introduced, so that the process which he and I want to see—the redistribution of wealth in favour of working people and their families—is carried forward with increasing momentum?

I agree with much of what my hon. Friend says, but in recent years the combination of inflation, the incomes policy and direct taxation has had a considerable redistributive effect, the details of which will be dealt with by my right hon. Friend in his Budget Statement on Tuesday.

Is the Chief Secretary aware that the Government's policy on VAT is a direct incentive to black market activities in the purchase of galvanised eye straining bolts, paraffin lamps and portable tools? Will he make sure that his right hon. Friend does something about it next year, otherwise I shall continue to draw the attention of the House to the anomalies of VAT?

I am sure that the hon. Gentleman will also bear in mind who introduced VAT. My right hon. Friend will bear in mind what the hon. Gentleman said.

When looking at the tax structure, will my right hon. Friend bear in mind that taxation was specifically excluded from consideration under the Sex Discrimination Act, which means that all women, not only widows, suffer serious injustices from taxation, as do people of either sex who are trying single-handed to bring up families?

I think my hon. Friend will know that we are indeed aware of the problems in relation to widows, and particularly single-parent families. We have done a great deal for them already, I am sure that my right hon. Friend in introducing his Budget on Tuesday, will have taken note of all that my hon. Friend has said.

Will the Chief Secretary tell the House whether the Government anticipated the effect of 25 per cent. VAT on employment—which in my constituency has been disastrous—and, if not, why not?

My right hon. Friend took all these matters into account, and will be doing so when he introduces his Budget on Tuesday.

My hon. Friend said that the various measures taken by the Government on inflation had a considerable effect on the redistribution of wealth. Will he explain what he means?

If my hon. Friend was listening, as I am sure he was, he may have noted that I was referring not to wealth but to the redistribution of income. If he looks at the figures he will find, as I do, that the combination of inflation, incomes policies, and the failure of successive Governments to revalorise personal allowances as much as they would have liked, has had a substantial redistributive effect.

asked the Chancellor of the Exchequer what is his estimate of the number of companies which have recently moved their headquarters from London to the Continent for tax reasons.

Treasury consent is not given where a move is planned for tax reasons. So far in 1976 three moves by companies to the Continent have been approved on commercial grounds.

Is it not very disturbing? Is it not because of the vindictive tax rates in the higher income brackets introduced by the Chancellor? Should not we give an incentive to foreign companies to come and work in this country instead of driving them away?

I do not know to what the hon. Gentleman refers when he says that it is very disturbing. In fact, the figures are quite low and there is strict control on the movement of company headquarters from this country. I do not accept what the hon. Gentleman said about high tax rates.

Does not the hon. Gentleman agree that a fair number of companies are also leaving London because of the growing crippling burden of local rates?

That is another question entirely. We exercise strict control on income tax and exchange control.

Does the hon. Gentleman know how many companies are moving their headquarters from London to the development areas as a result of his policies?

That is another question. Our development policies have produced some equalisation in wealth of productive capacity between London and other areas. That is a proper policy to adopt in a country in which there has been a considerable concentration of wealth in London and the South-East.

Does the Minister support the view expressed by the Chancellor in the Wall Street Journal of 2nd March this year that the levels and burdens of taxation have no effect on economic growth and performance in this country?

The levels and burdens of taxation are not the only factor. Levels of taxation impinge on all ranges of income. People at the lower as well as at the higher end of the scale suffer from the high burden of taxation.

Is it not true to say that many commercial and industrial undertakings in the City of London are deliberately withholding payment of rates, appealing against them and so avoiding payment for up to three years?

asked the Chancellor of the Exchequer if he will list for a two-child family the combined value of family allowance and child tax allowance for a standard rate taxpayer as a percentage of the average industrial take-home earnings for the years 1968 to 1976.

With permission, I will circulate the full information in the Official Report. Although there has been some fluctuation, the combined value of the family allowance and child tax allowance as a percentage of average industrial take-home earnings has declined slightly from 10·6 per cent. in 1968–69 to 8·7 per cent. in 1975–76.

Will the Government recognise that this is at the heart of the whole problem of incentive to work, and that a person on average earnings with two children is only £12 a week better off than if he were not working?

We have recognised that. As I said, there has been some reduction in the real value of these allowances. In framing taxation policy that is one factor of which we have to take account.

In view of that reply, will the Minister undertake to raise family allowances in the Budget?

I am sure that my right hon. Friend will note my hon. Friend's suggestion.

Does the Minister accept that over the past 10 years there has been a shift of the burden of taxation away from families without children to those with children? Does he intend to reverse that shift in the forthcoming Budget?

The figures that I mentioned show that there has been some shift and that the real value of the child allowance has fallen. I accept that there has been some shift of the burden from people without children to people with children.

asked the Chancellor of the Exchequer when he intends to re-integrate the investment income of children with that of their parents.

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

I accept that, but is my hon. Friend aware that this excellent Socialist redistributive measure was introduced seven years ago by my right hon. Friend the present Home Secretary when he was Chancellor of the Exchequer? Will the Minister remind his right hon. Friend the Chancellor of the Exchequer that in his forthcoming Budget he will not wish to appear to be any less Socialist than his predecessor was in 1969?

I have no doubt that my right hon. Friend is well aware of my hon. Friend's views on this matter.

Will my hon. Friend confirm that his right hon. Friend is still committed to this measure? On several occasions the Chancellor of the Exchequer has stated that he is committed to it but has put forward technical reasons, such as the length of the Finance Bill, why he cannot incorporate it. Is he still in favour of it?

As my hon. Friend says, a number of technical matters have to be considered. I assure him that everything he says will be taken into account.

Does not the Minister wish to encourage savings? Are not the Socialist measures that the Government introduce one way of preventing real saving?

Of course, we want to encourage savings. Most of these measures are tax avoidance, measures which have nothing to do with saving. They are an attempt to shift income from wealthy parents to children with lower tax rates.

asked the Chancellor of the Exchequer if he will estimate the additional burden of capital repayments on current overseas indebtedness, and extra annual interest charges, which will result from the recent devaluation of sterling.

The total outstanding foreign currency borrowing by Her Majesty's Government and the public sector converted at Exchange rates in force on 4th March was equivalent to £7·8 billion, against £8·1 billion using exchange rates at the close on 23rd March. Much of the borrowing is on floating interest rate terms and the servicing cost cannot be predicted exactly. But, at current interest rates, and using exchange rates in force on 4th and 23rd March, the annual cost of servicing outstanding borrowing would be equivalent to about £450 million and £470 million, respectively.

When and how will the Chancellor repay these crippling debts with which the nation has been lumbered by his policies?

He will not be helped by that kind of supplementary question. He will be helped by the policies that we are pursuing, which will ensure that the debts will be reduced. We shall get the economy into balance by continuing the economic policies that we have been pursuing over the past two years—and which we shall pursue for many years to come.

Will the Chief Secretary tell us the reasons for the significant further fall in the value of the pound? Does he put any credence on the view that it might be due to the possibility of the Secretary of State for Employment's becoming the next Prime Minister?

I suppose the answer to that is "Oh, really". The hon. Gentleman will be aware that the reason for the depreciation is that our rate of inflation is higher than is the rate of inflation in other countries. Present policies are bringing down substantially that rate of inflation.

Will the Chief Secretary explain what he meant when he said a moment ago that our overseas debts will be reduced? At the moment, the exchange rate is falling and overseas debts are increasing. How will they be reduced, short of repaying them earlier?

One way is by a higher rate of growth of GDP and a lower proportion of GDP being taken for public expenditure.

asked the Chancellor of the Exchequer if he will pay an official visit to Lymington for the purpose of assessing the effect of 25 per cent. VAT on the boatbuilding industry.

My right hon. Friend has no plans to visit Lymington.

As the price of the Chancellor of the Exchequer's spiteful leer at my right hon. Friend the Member for Sidcup (Mr. Heath), when announcing a rate of 25 per cent. VAT on boat building, is being paid by my constituents in terms of lost jobs, and notwithstanding the fact that the Chancellor of the Exchequer lost his deposit last Thursday, will he now reverse this damaging decision, the sole aim of which appears to have been to appease the left-wing of his party?

The hon. Gentleman, as usual, exaggerates and overstates his case.

No, I do not.

We have accepted that 25 per cent. VAT could have had some effect on employment, but the main effect on the boatbuilding industry and other industries has been the recession, in this country and world-wide. It has not been the 25 per cent. rate of VAT.

I dissociate myself from the rather silly remarks of the hon. Member for Christchurch and Lymington (Mr. Adley), but will the Minister nevertheless have another look at the employment position arising directly from the 25 per cent. rate of VAT on boatbuilding? I do not think that it is quite as good as the Minister thinks it is.

As we have said on other occasions, we are monitoring the effect of VAT on various industries, and the results will be taken into account in my right hon. Friend's Budget.

Is the Minister aware that five miles from Lymington is my constituency—the Isle of Wight—where 8·2 per cent of the people are unemployed, and where a reduction in VAT at this moment would be of great assistance to the boatbuilding industry?

Yes.

Is my hon. Friend aware that the boatbuilding industry has considerably increased its exports in recent months as a result of the fall in the home market? Will he examine the situation to see whether it is possible to find further measures to help it with exports, because, for the relatively small volume concerned, export credits are not as easily available as for much larger contracts?

My hon. Friend is quite right. There has been an increase in exports, and exports do not suffer from the 25 per cent. rate of VAT. The best way to help the exports of boats and other products is by containing our domestic inflation.

Is the hon. Gentleman aware that it is not only a question of lost jobs and lost exports but of the loss of hardly-acquired skills, which are not easily replaced? Will he bear that in mind in his future thoughts about the rate of VAT for boat building?

I was not aware that there was a question of loss of exports. Indeed, exports have improved. As I mentioned, a 25 per cent. rate of VAT might have had some effect on employment, but the main effect has been the recession.

Will the Minister take as many opportunities as are now left to him before the Budget to drive home to the Chancellor of the Exchequer the folly of ever having moved on to a multi-rate VAT system? Will he make it plain to the Chancellor of the Exchequer that it is not only in the boatbuilding industry that jobs are being lost, but that trade and industry throughout the country have been greatly disturbed by this, and that thousands of jobs are being cast away by the reckless spate and unnecessary change of taxes? Will the Minister tell the Chancellor of the Exchequer to get back to a single rate as soon as possible?

I do not accept what the right hon. and learned Gentleman says about the folly of multi-rate systems. The Common Market countries which have this tax—it was introduced here by a Conservative Government—do not seem to have suffered particularly as a result.

asked the Chancellor of the Exchequer if he is satisfied with the system of Treasury control over expenditure by Government Departments; and what measures he proposes to ensure the application of cost-effective techniques.

We are committed to a number of measures for better control of expenditure, and we are constantly seeking ways of ensuring cost-effectiveness.

Will the Chief Secretary look at the answer that the Minister for the Civil Service gave me last night, in which he stated that there are 200 computers in use in Departments? As most of these have been introduced since 1964 for the sake of saving manpower, how is it that Civil Service non-industrial manpower has gone up by 30 per cent. in the last 12 years? As this, surely, shows a degree of overmanning that is quite unacceptable, what is to be done about it to show an example to the rest of Britain?

As the right hon. Gentleman will have seen from the White Paper. steps are being taken to reduce the size of the Civil Service. I am glad of the right hon. Gentleman's support.

Is the Chief Secretary aware that in the Health Service, as the number of beds occupied has decreased so the number of administrative staff has increased, according to the Government's own White Paper? What will the Chief Secretary do about the growth of the bureaucracy? It will take over the whole of our life unless he does something about it soon.

As I am sure the hon. Gentleman is aware—he is always ready to criticise his own side—the reorganisation of the Health Service was largely the responsibility of a Conservative Government.

asked the Chancellor of the Exchequer when he next expects to meet the Director of the International Monetary Fund.

asked the Chancellor of the Exchequer when he next intends to attend a meeting of the IMF.

There are no arrangements for me to meet Dr. Witteveen at the moment, though he is always welcome here. The next meeting of the IMF Board of Governors is the annual meeting, planned to take place in October.

When my right hon. Friend meets the Director of the IMF, will be impress on him the great contribution that the IMF could make towards solving the present world recession problems by increasing special drawing rights for the benefit of developing countries, accelerating the sale of gold to provide them with extra purchasing power, and also expanding the compensatory financing scheme? This would have an impact not only on the developing countries but on our own economy.

I am grateful to my hon. Friend. He will be aware that the IMF Interim Committee took decisions in all these fields, under strong urging from myself, at the meeting in Jamaica in January.

Will the Chancellor of the Exchequer tell the IMF that he will very shortly have to rely on the good will of a Scottish Government in regard to Scottish oil revenues, in trying to keep English currency at a reasonably healthy level?

I always believe, like Dr. Witteveen, in confining my remarks to fact and not to fancy.

Will the Chancellor of the Exchequer say how much of the reecnt IMF loan has been drawn down by the Government, and what remains of the loan? Has the Chancellor of the Exchequer anything to change in, or add to, his latest letter to the Director of the International Monetary Fund?

On the first question, the only drawing under the application I made last year has been the drawing of the special oil facility. The first tranche is completely untouched. I have no intention of changing anything I said in my letter of application.

Will my right hon. Friend confirm that the International Monetary Fund in no way controls the will or desire of the British Labour Government to apply selective import controls if they so choose? Bearing that in mind, does he not agree that this is an economic technique that the Government must consider if British manufacturing industry is to recover?

I have always made it clear that the Government are prepared to consider selective import controls on the conditions agreed by the Labour Party conference—that they should not lead to retaliation or introduce a risk of an international trade war, from which the poorest countries would suffer most. My hon. Friend will remember that we introduced two such controls in the package of measures just before Christmas.

Will the Chancellor of the Exchequer say whether there are any additional facilities available to us from the IMF at the present time, and, if so, whether any of these facilities can be drawn without conditions?

We have a standby for SDR 700 million, which is equivalent to about £420 million. I have the right to draw under the letter of application which I tendered in December, but I have not yet drawn and I have no intention of drawing at present. Our further drawing rights, under the present extension of credit quotas to 45 per cent., will increase our total drawing rights by SDR 3,360 million.

On the question of a separate Scottish currency, will my right hon. Friend lose no opportunity of repeating the case so ably set out in my constituency by the Paymaster-General that that would mean a more serious employment situation in Scotland?

I am always happy to oblige my hon. Friend, particularly in this regard.

asked the Chancellor of the Exchequer if he is now prepared to extend the facility of "inflation-proofed" national saving.

The Government have no plans to extend the indexed savings schemes which were introduced as a modest experiment in mid-1975.

Does my right hon. Friend agree that during a period when wages and salaries are being diminished in real terms it would be a demonstration of confidence in the anti-inflation policy if he introduced and extended such a scheme?

There is a problem with indexed savings schemes in relation to the whole interest structure. We must see how these modest schemes are working before we consider anything further.

Has the right hon. Gentleman anything to suggest to the private savings media about how they can possibly compete against inflation-proofed national savings? Would it not be better for the Government to concentrate on reducing inflation rather than extending the inflation-proofed savings scheme?

I think that the hon. Gentleman knows that we are concentrating on reducing the rate of inflation, and he will no doubt be as pleased as we are at the substantial reduction that we have achieved. Private savings have increased considerably. As I indicated, one of the reasons why we did not have a much bigger indexed savings scheme was precisely that we do not want to hurt the rest of the savings movement.

asked the Chancellor of the Exchequer what representations he has recently received from Action on Smoking and Health concerning the relationship between the tax on tobacco and its consumption.

My hon. Friend the Financial Secretary met a deputation, including the hon. Member for Ealing, Acton (Sir G. Young) on 11th March. It represented that the price of tobacco is a major determinant of changes in consumption and advocated that the tax on cigarettes should be substantially increased so as to discourage young people from starting to smoke them and to encourage existing smokers to adopt safer smoking habits.

Is the Minister prepared to use the fiscal weapons at his disposal in order to reduce the consumption of tobacco in this country?

The points made by the deputation are most important and are being studied. I am not entirely convinced that fiscal policy is always the right way to protect the public as the hon. Member would wish.

Does the £50 million spent by the tobacco companies in promoting sales, particularly sales to young persons, qualify for tax relief?

Any sums spent by a company for promoting its sales, of tobacco or otherwise, are usually treated as a business expense if they are wholly and exclusively incurred.

If the Government put up the duty on tobacco and raised tax allowances to balance, it would have a relatively adverse effect upon the retail price index. Will the Minister therefore give some thought to preventing that effect percolating through the rest of the economy?

If indirect taxes generally are increased, that has an effect on the retail price index.

asked the Chancellor of the Exchequer what are the social objectives of the voluntary savings movement.

The National Savings committees see the social objectives as the teaching and inculcation of good money management and a sense of personal financial responsibility.

Is the right hon. Gentleman aware that it is total hypocrisy to invite people to save and then to make their money meaningless 10 years later?

I admire the hon. Member's management of that supplementary question. I am sure that he will agree that the best way to encourage savings of all kinds is to ensure that the rate of inflation is brought down—and that is what the Chancellor is doing.

asked the Prime Minister if he is satisfied with the progress being made in implementing the policies set out in the Queen's Speech.

As the House knows, my right hon. Friend is attending a meeting of the European Council in Luxembourg today and tomorrow and, in his absence, I have been asked to reply.

Yes, Sir.

I am sorry that the Prime Minister cannot be with us today, if only to wave the pound goodbye. Is the Lord President aware how sad it is that someone who began as a tour de force should have ended up forced to tour?

The hon. Gentleman asked what progress we were making in implementing the policies set out in the Queen's Speech. Of the Bills mentioned there, four have already received the Royal Assent, 13 are before Parliament—some having made substantial progress—and the remaining Bills are due to be introduced slowly—I am sorry, I should have said "shortly".

The Queen's Speech referred to improving the common agricultural policy. What progress has been made in that direction?

Perhaps I may explain that I meant to say that the Bills would be introduced quickly—very quickly, and certainly before Easter.

On my hon. Friend's supplementary question, I have no doubt that my right hon. Friends the Prime Minister and the Foreign Secretary will be raising this matter in the European Council in Luxembourg today and tomorrow.

On devolution, is the right hon. Gentleman aware of the significant improvements that have been suggested by the Labour Party at least on the Scottish part of the measures, and that no such improvements are suggested for Wales in spite of pressure from the Welsh TUC? Is the right hon. Gentleman aware that Wales will not long tolerate a status inferior to that of Scotland?

We have received hundreds of submissions from a great many bodies throughout the country, including an excellent one from the Welsh TUC. We shall take all these into account before publishing the Bill.

Is my right hon. Friend aware that the Scottish Labour Party conference may have made some suggestions for what it regards as improvements, but that it is totally opposed to any separation from the United Kingdom; and that it is as keen and dedicated to remain part of the United Kingdom as are the rest of us.

I am glad that my hon. Friend saw some light on the way to Damascus last weekend. He will also have seen the excellent statement by the TUC—not the Scottish TUC but the United Kingdom TUC—published last week on devolution, warmly supporting the Government's proposals.

Since the Labour Party in Scotland has made some improvements on the right hon. Gentleman's original package, since that package concerns one of the important promises in the Queen's Speech, and since all the starters in the race for the leadership of the Labour Party have been converted to devolution in the last two weeks, will the right hon. Gentleman bring the Bill forward as quickly as possible?

The draft Bill will be published as early as possible. Let me repeat: we have received hundreds of submissions, some of great length. We are trying to digest all these. We shall publish the Bill when we have looked at all the submissions.

The right hon. Gentleman referred to "the Bill" and "the draft Bill". Does that mean that the decision has been taken and that the idea of having separate Bills for Scotland and Wales has now been abandoned? If that is so, does the right hon. Gentleman appreciate that many people will think that that is a very bad decision indeed?

We have not yet taken a decision on this matter. I gave an undertaking to the right hon. Gentleman when he raised this matter in debate, and a number of other hon. Members have raised it. I think that a group of Members is coming to see me next week about this issue. Certainly we shall consider all the representations that we have had before we decide.

asked the Prime Minister whether he considers advice from public officials when making recommendations about the suitability of appointing individuals to Royal Commissions.

I have been asked to reply.

Yes, Sir. Official advice is always available to my right hon. Friend in the exercise of his official functions.

Does the Leader of the House know whether the Prime Minister is aware that many of those serving on Royal Commissions and public bodies are either octogenarians or Civil Service favourites? Will he please advise the Prime Minister to see that a greater cross-section of the community is involved in these public bodies, particularly minority groups, such as women, blacks, the physically handicapped, and young people, and in this way to enhance his effigy at Madame Tussauds?

I rather suspected that the hon. Gentleman would raise the question of age, so I had some research done on this matter. Of the last 66 appointments to seven new bodies, the average age was 52, and the ages of the chairmen averaged 59·6 years. On the point about extending the area, the hon. Gentleman will know that the Prime Minister has taken a number of steps recently——

He has resigned.

I agree. His resignation will considerably broaden and improve the quality of people available to serve on public bodies.

On the second part of the supplementary question of the hon. Member for Liverpool, Wavertree (Mr. Steen), he will know that the Prime Minister has recently created the Public Appointments Unit, which has been instructed to publish in the first half of this year a directory of paid appointments made by Ministers. Also, there is great scope for advertising some of the executive posts. The hon. Gentleman may have noticed the recent advertisement for a Director General of Fair Trading. Changes are taking place in these matters.

Will my right hon. Friend urge the Prime Minister, in his last few days of office, to get on with the appointment of the Chairman of the Royal Commission on the Legal Professions, as he promised he would? Is my right hon. Friend aware that there is a need to appoint a really distinguished layman to get a grip of the monopolistic practices of the legal professions, and that the sooner we get on with it the sooner we can do something about them?

My right hon. Friend the Prime Minister agrees that the Chairman should be a distinguished layman and not a lawyer. In the case of this Royal Commission, neither the Chairman nor any of the members has been appointed so far. In the case of the Royal Commission on the National Health Service, the Chairman has been appointed, but not the members. In the case of the Royal Commission on Gambling, both the Chairman and the members have been appointed, and I think that it has now started work.

When the Lord President says that the average age of members of Royal Commissions is 52, is he giving a weighted average, or is it, as I suspect, that some are 104 and others are down to something near to zero?

Although I cannot yet declare an interest, what is wrong with octogenarians?

They are too old.

Too old for What? Will my right hon. Friend the Lord President inform the hon. Member for Liverpool, Wavertree (Mr. Steen) of what the great Bacon once said, namely, that extreme youth and discretion are ill-assorted companions?

My hon. Friend asked what was wrong with octogenarians, as such. The answer is "Nothing—except that they are octogenarians." He answered the second part of his question himself.

asked the Prime Minister when he next intends to meet the TUC.

I have been asked to reply.

I refer my hon. Friend to the reply which my right hon, Friend gave to the hon. Member for Brentwood and Ongar (Mr. McCrindle) on 16th March, Sir.

Will my right hon. Friend suggest to the Prime Minister that when he next meets the TUC he pursues the question of industrial planning agreements? Is my right hon. Friend aware that there is increasing concern among trade unionists at shop floor level about the apparent failure to implement any such agreement to date? Will he advise the House whether there are any major problems in this area?

There are no major problems. The National Enterprise Board is getting to work. It has already been announced that planning agreements are to be drawn up with British Leyland and Chrysler, and the Government are engaged in formal discussions with a number of other leading companies about the prospects of introducing planning agreements into key sectors of manufacturing industry. Certainly this work is going on. My right hon. Friend the Secretary of State for Industry hopes to make an announcement on this matter shortly.

Is there any danger that if the Prime Minister is overcome, on the one hand, by the desire to meet the TUC again, or, on the other, by disapproval of the result of the election for his successor, he may not resign after all?

The person appointed to succeed my right hon. Friend will have the full support of the present Prime Minister and all his colleagues, without exception.

When my right hon. Friend the Prime Minister next meets the TUC, will be explain that the reason that its members will be unable to hear the Budget broadcast is the reluctance of the Leader of the Opposition, who is afraid to appear in public without the support of her script writers and public relations officers? Will my right hon. Friend reconsider the decision not to broadcast the Budget Statement, in the interests of democracy and open government?

No, Sir, I would not put it just like that. I said in the House last week or the previous week that if there were a demand for this we would have discussions through the usual channels. We had such discussions. I also received representations from a number of hon. Members, on both sides of the House, against having the Budget broadcast. In view of the discussions that we had and all the representations I received, I felt that I should not put a motion before the House ahead of the general motion on the permanent broadcasting of Parliament's proceedings.

Since this Question has now touched on matters of freedom of speech, will the Leader of the House please ask the TUC why it has supported the national executive of the National Union of Journalists, despite criticism by the Secretary of State for Employment, in the NUJ's attempts to pressurise news sources in Barnsley to deny access to news for the members of the smaller journalists' union, the Institute of Journalists?

Without accepting anything that the hon. Gentleman has said, I am sure that it does not arise out of this Question.

When the new Prime Minister meets the TUC, would it not be a good idea for him to initiate a system of trouble-shooters for the next round of pay talks? Is it not crazy that during a strike at British Leyland, because of a pay anomaly affecting a handful of men, there is no body set up to examine the matter quickly and to bring the strike swiftly to an end?

As my hon. Friend knows, the Advisory, Conciliation and Arbitration Service is involved in the dispute at present. It would be unwise for me or for any of us to pursue the matter now.

asked the Prime Minister whether he is satisfied with the coordination between the Chancellor of the Exchequer and other Ministers in implementing the Government's White Paper on Public Expenditure.

I have been asked to reply.

Yes, Sir.

Will the right hon. Gentleman try to give the House a rather more imaginative reply? Is it not the case that if there is to be a recovery in the wealth-creating sector of British industry, which Britain's interest requires, there need to be substantial cuts in public expenditure in the coming year?

We reject that suggestion entirely. When the economy is running below capacity, such a suggestion would result in further unemployment. We have made our proposals in regard to public expenditure to create an improvement in investment and in exports when the economy begins its upturn.

Will my right hon. Friend explain how, following any cuts in public expenditure, the resulting resources will be transferred to British manufacturing industry? Is it not the duty of a Labour Government to take action in this sphere, rather than leave the matter to the vagaries of private enterprise by allocating that money to property companies or fringe banks, or sending it to South Africa?

The matter will not be left to the people my hon. Friend mentioned. No doubt private enterprise will play a considerable part. We shall ensure that not too great a share of resources will be absorbed by public authorities, and I am sure that there will be an opportunity greatly to increase our exports.

Does the Lord President agree that the House refused to accept the Government's proposals on Government expenditure?

The following day the House passed a motion of confidence. Perhaps I could also remind the right hon. Lady that the Government of which she was a member were rejected. The Conservative Party received 1 million fewer votes than did the Labour Party in the election only 18 months ago, and 43 fewer seats than the Labour Party won in that election.

But the right hon. Gentleman has not answered my supplementary question. I repeat that the House rejected the Government's White Paper on Government expenditure.

As a matter of strict fact, it did not do so; it rejected the alternative put forward by the right hon. Lady the Leader of the Opposition. But the vote of confidence the next day was a vote of confidence in Government policies.

Many of us deplore certain aspects of the Government's expenditure cuts, but will my right hon. Friend point out to the SNP the significance of a parliamentary Answer given to me recently by the Secretary of State for Scotland, that in education the percentage to be borne by Scotland will be much less than our percentage of the United Kingdom population? In view of this nonsense, does not the figure of 39 per cent. that is being bandied about by Members of the Scottish National Party indicate that either their arithmetic is of the same abysmal standard as their politics or else they are telling lies?

I hope that my hon. Friend will do some more research and attack all the silly figures put out by the SNP about Scotland at the present time.

Is the right hon. Gentleman aware that the figures put forward by the SNP in its analysis of the public expenditure cuts have been supported by a major teachers union in Scotland, and does he appreciate that SNP Members, along with the teachers, are totally opposed to public expenditure cuts in Scottish education?

I have a little experience of teachers unions. I would not say that they were right just because they are teachers unions.

asked the Secretary of State for Northern Ireland whether he has any statement to make on the deaths of four British soldiers in County Armagh in the last 36 hours.

Yesterday, three soldiers of the 1st Battalion, the Royal Scots were killed when a land mine exploded under their Land Rover. They were on a patrol near Belleek between Newry and Newtownhamilton to counter sectarian crimes in the area. A fourth soldier was injured. The occupants of a second Army vehicle were uninjured. In addition, on Tuesday a soldier of the 3rd Battalion the Royal Regiment of Fusiliers was killed when a booby-trap device exploded in an Orange Hall near Craigavon.

I know that the House will wish to join with me when I express my deepest sympathy to the relations of those soldiers. I am also sure that the vast majority of the people in Northern Ireland from both communities will be appalled by this atrocity. These soldiers were carrying out their duty to protect citizens of the United Kingdom and to preserve both communities in Northern Ireland. We mourn with their families.

The Provisional IRA has admitted responsibility for yesterday's cowardly atrocity. As my right hon. Friend made clear to the House last week, the Government will not be deterred from exercising their responsibilities in Northern Ireland and will keep the Army there as long as necessary. We shall not succumb to such pressure.

I join with the Minister in his expression of sorrow at the deaths of these young soldiers. Should we not also pay tribute to the fine record of the 1st Battalion the Royal Scots in the past few weeks under Lt.-Col. Davies, especially as we hoped that there would be some improvement in the situation in South Armagh during that period? Is it correct to say that no fewer than 42 Regular soldiers have been killed in South Armagh since February 1971? What steps are the Government now taking to prevent the mining of roads in this area and to strengthen military intelligence to prevent terrorism?

I join the hon. Gentleman in his tribute to the Royal Scots for the work they have carried out in the area. It is true that that number of soldiers have been killed in the period to which the hon. Gentleman referred. I must point out that the security forces have achieved considerable successes. It is the Army's job to apprehend and bring to trial people who carry out acts of violence. The Army will not stop at any measure and the Government will not deter it in its endeavours to that end.

A number of cases involving the mining of roads have occurred recently, and the security forces are aware of the situation. Indeed, helicopter patrols are used in trying to detect this type of mining. It must be said that yesterday's incident, which led to the death of three soldiers, could easily have involved three or four civilians travelling along that road, irrespective of their religion or the community from which they came.

Will the Minister of State accept that my colleagues and I wish to be associated with the expressions of sympathy to the relatives of the deceased men? Will he also note that we wish to record our admiration and gratitude to all the members of the security forces in Northern Ireland, particularly to the Royal Scots, for the difficult and dangerous job they have undertaken in South Armagh in the past three months? Is the Minister aware that this incident underlines the fallacy of believing that the war in my constituency can be won overnight? Therefore, will he insist that the Government should press ahead with the measures announced by the Prime Minister in January, including, if necessary, reinforcement of the SAS?

I note the hon. Gentleman's expressions of sympathy. The endeavours of the Army will continue. Members of the Army are present in the area in sufficient force at the present time and are taking every step to apprehend the people who are responsible.

Does my hon. Friend appreciate that the Under-Secretary of State for Energy, my hon. Friend the Member for Midlothian (Mr. Eadie), and I wish to express our condolences to relatives who are our constituents?

I thank my hon. Friend for what he has said, and I appreciate his feelings and those of my hon. Friend the Under-Secretary of State for Energy. I am sure that the House will take note of that.

rose——