asked the Chancellor of the Exchequer when he next proposes to have discussions with the Managing Director of IMF.

I shall, of course, be meeting Dr. Witteveen at the IMF/IBRD annual meeting in October. There are no arrangements for me to meet him before then.

Does the Chancellor of the Exchequer accept that short-term dollar borrowings are no answer to the fundamental problem of sterling? Will he therefore use the few months' time that he has bought in seeking longer-term solutions, perhaps in conjunction with the IMF, which will restore sterling to more fundamental health and involve severe limitation of Government borrowings, as the longer action is put off the worse the cure must be?

Of course, I do not believe that short-term measures are an answer to long-term problems, but I believe that the standby credit arranged last week has already proved its immense value to the economy, and particularly to the strength of sterling. I intend to ensure that our economy continues to progress over the months to come.

Will my right hon. Friend confirm that the IMF would raise no objection to the introduction in this country of two-tier borrowing rates? Does he agree that there is no necessity for us to impose upon manufacturers a lending rate that is designed to attract funds from overseas, when the manufacturers themselves are engaged in export activity and are now having to borrow money at between 12 per cent. and 15 per cent., which is a crippling burden on any export-led recovery?

I have not sought the views of the IMF on two-tier borrowing rates. As I explained to the House last week, I do not think that in our circumstances they would answer our problems. On the other hand, they would give speculators and financial experts a chance of making uncovenanted gains at the country's expense.

Does the Chancellor of the Exchequer think that the IMF shares the view of the Bank of England that positive steps of a budgetary nature may well be necessary in the coming months? Does the Chancellor of the Exchequer share that view? Will he assure the House that he remains entirely free in his responsibility to the House either to raise taxes or to cut public spending, and to do either or both of those things if it turns out to be necessary in his judgment? Does he recognise the Bank for International Settlements point that this country has now reached the limits of taxable capacity, and that the only tolerable way for him to proceed is by cutting public expenditure?

If the right hon. and learned Gentleman had read a front-page article in today's Financial Times he would have seen that he has gravely misinterpreted the views of the Bank of England. If it proved necessary to reduce the public sector borrowing requirement, I would take the necessary steps, whether by raising taxation or by reducing public expenditure. I have already told the House that that is the case.

asked the Chancellor of the Exchequer what was the net receipt of funds from the EEC Regional Fund for 1975.

The United Kingdom contributes to the budget of the Community as a whole and not to individual funds. Gross receipts up to 15th January, the end of the fund's operating year, were £7·75 million. In the same period the United Kingdom received commitments of £35·9 million.

Is the Minister aware that in a reply to me recently he said that the gross receipts in 1975 were only £307,000, that for 1976 they were estimated to be £10 million, and for 1977, £14 million? These are very small figures compared with what this Government give—and what successive Governments have given—in general regional aid to industry. Will he put this EEC regional aid in perspective, as the European movement is putting out somewhat misleading figures about it?

There may be some mis-understanding on the part of the hon. Gentleman. The difference is between payments and commitments. The payments will invariably come a considerable time after the commitments have been made. The total availability to this country from from the Regional Fund is £150 million. I agree with the hon. Gentleman, and would like to see it considerably higher. That will be our objective in later years, but for the period we are talking about the commitment is £150 milion.

Has the Minister any plans to abolish the green pound? If not, will he consider holding an inquiry to see what effect it has on the agriculture industry?

I have no plans to abolish the green pound. It is not quite within the terms of the Question, but the answer is "No."

Will the Minister assure the House that the £150 million that we are getting from the European Regional Fund is in addition to the money available from United Kingdom sources and will not replace it, so that the net benefit to the areas that need help will be very low?

The total expenditure in the regions will be decided separately, and the amount that we receive from the Regional Fund will be taken into consideration in deciding the total amount. The amount that we receive from the fund will enable us to do more in the regions than would otherwise have been the case.

In spite of what my hon. Friend the Member for Banbury (Mr. Marten) said, does the Minister appreciate how grateful Scotland is for the money we have received from the European Regional Fund, especially in recent years for the fishing industry in North-East Scotland?

I note what the hon. Gentleman said. That applies not only to Scotland but to other areas of need throughout the United Kingdom.

asked the Chancellor of the Exchequer if he will make a statement on the current level of sterling.

asked the Chancellor of the Exchequer what plans he has to stem the external exchange value of sterling.

asked the Chancellor of the Exchequer if he will carry out an inquiry into the recent fall in the value of the pound in international trading; and if he will make a statement.

I would refer the hon. Members to the answer that I gave on 7th June to the right hon. and learned Member for Surrey, East (Sir G. Howe).

As the pound, even after the welcome recent rise, is only just back to its level of a month ago and is still almost 10 cents below its Budget level, does the Chancellor stand by his recent opinion that sterling is under-valued? If so, has he any further measures in mind to support its value?

I think that sterling is still under-valued, but if the level stabilised at the present rate and was likely to remain stable for the next 12 months, I would not complain if it remained under-valued for a few months yet.

Does my right hon. Friend intend to verify the strength of sterling by permitting nationalised industries to borrow in Eurocurrency markets?

Nationalised industries are free to borrow in that way if they wish. I do not think that there has been a very recent borrowing in the Eurocurrency market, but there was a successful borrowing in the United States market recently by one of the nationalised industries.

How much of the £5 billion standby credit has now been spent?

None, Sir.

Does my right hon. Friend agree that accusations that people are speculating against sterling should be taken seriously? If they are true, should not action be taken to stop speculation? If they are false, should not that fact be revealed, so that the true causes of pressure on the pound can be discovered? Is there not a distinct need for more light to be shed on the subject?

In my answers to Questions on Monday last week I gave the best description that I was able to give of the sources of pressure on the pound. I revealed at that time that speculative pressure, in the pejorative sense to which my hon. Friend referred, played a very small part in it.

If part of the standby credit has already been drawn, and if it carries interest and has to be repaid within six months, how can the Chancellor go on pretending that it is not a loan and that it will do anything to solve our problems, when only a cut in public expenditure can do that?

I fear that the climate has infected the hon. Gentleman with a certain lethargy. The rest of the House heard me say that none of the standby credit has been spent—and none has been drawn, either.

asked the Chancellor of the Exchequer if he is satisfied with the powers of, and the current complement of, Her Majesty's Customs.

Yes. Sir.

Does the Minister accept that it is unrealistic and unfair to expect the current complement of Customs staff effectively to police the coastline against those who seek to break the animal quarantine regulations? If the Chancellor accepts that, does he agree that we need an effective deterrent of stiffer penalties, including the empowering of magistrates to imprison people, the immediate destruction of illegally imported animals and, if possible, the impounding of boats such as the one in Hull today?

I agree that we cannot expect Customs officials to police the coastline and solve this problem. Customs officials will liaise with harbour authorities, police authorities and other bodies asked to cope with the problem. Perhaps at the end of the day the answer will be stiffer penalties, but that is a matter for my right hon. Friend the Minister of Agriculture, Fisheries and Food.

Supposing that the hon. Member for Western Isles (Mr. Stewart) and his hon. Friends were to get their ludicrous way, what would be the cost of a 24-hour Customs service at Gretna, Carter Bar, Norham and Berwick? How would the Treasury propose to avoid the queues of cars when there are Glasgow holidays and Blackpool illuminations?

I am sure that my hon. Friend will agree with me that there is no danger of the hon. Member for Western Isles (Mr. Stewart) and his hon. Friends ever taking control of this matter.

The Minister will be aware that the House of Commons has always been jealous of its powers, in that it requires the Ministers responsible to it to have ultimate authority. The Home Secretary has ultimate control over all matters affecting people. Will the hon. Gentleman assure the House that in necessary cases the Chancellor has power to instruct Customs officers to waive Custom duties on goods entering the country?

That is another question. There is no general power for Ministers to waive duties. If Customs regulations are broken, the law has to take its course. It would be very dangerous for Ministers of the Crown to be able to waive penalties in the way suggested.

Following the supplementary question asked by the hon. Member for West Lothian (Mr. Dalyell), does the Minister agree that one of the great attractions to hon. Members who represent English constituencies and English people generally is that, as a result of the imminent events to which the hon. Gentleman referred, English visitors to Scotland will have a generous supply of duty-free whisky to take back to England?

asked the Chancellor of the Exchequer how many representations he has received from small businesses asking him to relieve the incidence of VAT by raising the exemption figure based on annual turnover.

In the 12 months up to 31st May Treasury Ministers received about 40 letters asking for the exemption limit to be raised.

Will the Minister confirm that a figure of almost £9,000 represents the current value of the £5,000 turnover exemption first introduced in 1972? In view of the contribution made to the economy by small businesses and the self-employed, especially in rural areas, does the hon. Gentleman agree that this exemption figure should be increased?

I agree with the hon. Gentleman that from the point of view of inflation the figure should be between £8,500 and £9,000, but it does not necessarily follow that small businesses would benefit from a higher exemption limit. Many other considerations have to be taken into account. Many businesses would probably not wish to deregister, because of the benefits they get from operating within the registration exemption limit. Most of our friends in the European Community have a much lower exemption limit, and they seem to be able to manage.

As VAT was part of the price that we had to pay for joining the Common Market, does not the Minister think it somewhat objectionable that those who voted for entry should now complain about the effect upon small business people?

I agree with my right hon. Friend that many features of the Common Market that are now part of our law were supported by Opposition Members. I do not think that they can complain too much now if the effects are not entirely beneficial.

Is not one of the factors the Sixth Directive concerning VAT, which is under discussion in the Community? As the Minister said, Community levels are much lower than ours. If the levels are to be harmonised, could not that be one reason why the Government are reluctant to lift the threshold?

No, Sir; these questions are not related to the Sixth Directive. As the hon. Gentleman knows, that directive has been under consideration for a long time. It is still not approved, and no decisions have been taken. The hon. Gentleman is correct in saying that the exemption limits set out in the draft of the Sixth Directive are lower than the present exemptions.

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 if he is satisfied with his progress in achieving his target for reducing the rate of inflation.

asked the Chancellor of the Exchequer if he is satisfied with the progress being made in tackling inflation.

The retail price index rose by 18·9 per cent. over the 12 months to April—the eighth successive monthly fall in the year-on-year rate of inflation, which now stands at its lowest level since November 1974. Continued observance of the current £6 pay limit and the new lower pay limit for the next round should enable us to achieve our objective of halving the inflation rate again by the end of next year, so as to get it down to the level of our main international competitors.

Does my right hon. Friend agree that notwithstanding the figures that he gave in the early part of his answer, his attempt to shave off minute proportions in the forthcoming months will be much more difficult than in the past few months, when the rate of inflation has been falling?

Order. Several hon. Members this afternoon have been asking very long supplementary questions. There was a long reply from the Chancellor on this Question. I hope that everyone will bear in mind the danger of falling into sin.

I am suitably abashed and terrified by your warning, Mr. Speaker. I would take my hon. Friend's remarks much more seriously if he allied himself with the overwhelming majority of trade unionists who have supported both the £6 pay deal and the 4½ per cent., and were responsible for the triumphant success at yesterday's congress.

Will the Chancellor now deal with the truly important aspect of this matter? How does our prospective rate of inflation this year compare with the rate of inflation of our main industrial competitors?

The rate of inflation in the OECD as a whole in the 12 months to March was 8·9 per cent. and our rate was substantially above that. However, in the last six months the annual rate of inflation in this country has been 13·6 per cent. We have more than halved the gap between our inflation rate and that of our main industrial competitors over the last nine months, and we shall halve it again by the end of next year. By that time, some of our competitors will have higher rates of inflation than we have. This is the view of at least one other country—indeed, it was put forward by Dr. Jelle Zijlstra, Head of the Dutch Central Bank, and Chairman of the Bank for International Settlements.

Is the Chancellor aware that the £3 billion cuts in public expenditure in the White Paper in February were specifically designed to secure a shift in resources to the exports and manufacturing investment to which he referred? Therefore, may we have an assurance that the Chancellor is not contemplating any further cuts above that figure?

I am grateful for my right hon. Friend's support for the White Paper and her recognition that it was necessary to make these cuts in order to make room for exports and industrial investment. Industrial investment forecasts by the CBI and industry indicate that this should rise at a rate of about 15 per cent. over the next 12 months. It seems possible that exports will rise in volume faster than I anticipated at the time of the Budget. My judgment about the desirable level of public expenditure next year is bound to be governed by the likely rate at which our economy recovers. If it recovers rather faster than we expected, there will be some implications for the public sector borrowing requirement.

Does the Chancellor agree that the recent 14 per cent. decline in sterling will give price inflation a further push? The push, which will come from imports, will be as much as 65 per cent., and will take some time to work its way through the economy. Given that, the original target of 10 per cent. inflation at the end of this year will not be reached. In fact, is it not the case that the level is likely to be 15 per cent. or 16 per cent., or perhaps even higher?

If, in fact, the level of parity remains as it is now, the total increase in the retail price index by the end of this year resulting from that is likely to be some 3 per cent. But we did expect, when I negotiated with the TUC and made my Budget speech, that the external value of the pound would decline at least in line with the difference between our inflation rate and that of other countries.

Yesterday's vote at the TUC congress and the recent speeches of Mr. David Basnett and Mr. Jack Jones should convince the Government that they need to prepare in plenty of time for a return to free collective bargaining next year. Does my right hon. Friend accept that the understanding that will then be necessary will be more complicated and will require selling not only to the trade union executive, but to members throughout the movement?

Personally I welcome the statements of Mr. Basnett and Mr. Jones. After the next pay round, we need an orderly return to free collective bargain- ing in order to make certain that we do not have an explosion of wages of the kind that followed the collapse of the last Government's pay policy. I welcome the suggestion that we should begin discussing with the trade unions and industry the requirements of a pay policy to meet these objectives.

Does the Chancellor accept that food prices are still rising to an alarming level and are making shopping a nightmare for ordinary families? Will he give us an outlook for food prices?

The hon. Member is somewhat of an expert in these matters. The outlook for food prices depends on the weather over the next 12 months. If the hon. Member can give me accurate forecasts for weather conditions in that period, I shall tell him what food prices will derive from that.

Since Mr. Hugh Scanlon said at the conference yesterday—in support, incidentally, of the wages policy—that there would be a reduction in the living standards of the workers, will my right hon. Friend give an assurance that a wealth tax will be introduced early next year in order that there can be some measure of equality of sacrifice?

I welcome the fact that my hon. Friend associates himself with the remarks of Mr. Hugh Scanlon yesterday. It is, indeed, the case that a further small fall in real take-home pay is likely over the next 12 months, though it will be a smaller fall than has been seen in the last 12 months. There is a Question on the Order Paper about the wealth tax and it would be quite improper of me to attempt to anticipate an answer to it.

We welcome the continued recognition of the need for restraint in pay bargaining as a means of checking unemployment and checking the size of public spending, but we regret very much the time wasted in the first year of the Chancellor's term of office when he personally presided over the explosion of public pay to which he has referred, with the explosion of all other forms of public spending. Will he accept from us that the only way to ensure that the sacrifices now being demanded of people are not demanded in vain is for the Government to take the time to put their own policies in order by getting public spending under control?

I welcome with an open heart the fact that the right hon. and learned Gentleman is now in favour of the agreement reached by the Government with the TUC. May I take it that he no longer regards the leaders of the working-class movement as being ageing, doctrinaire, prejudiced Socialist trade union leaders, as he disgracefully described them in the House the other day, confirming that that was still his opinion in a television programme last Friday?

asked the Chancellor of the Exchequer what is the total cost expressed in £ sterling per head of the population on an annual basis of: (a) food subsidies, (b) housing subsidies and (c) the deficit in the nationalised industries.

The cost in 1975–76, in pounds per head, of food subsidies, housing subsidies and subsidies paid to nationalised industries was £10, £20 and £13 respectively.

Does the Chief Secretary not understand the view that subsidies such as food subsidies are an extravagant use of taxpayers' money? Would it not be better to abolish them now and give real help to those in need?

No. The underlying cash figure for food subsidies for 1975–76 was £572 million. That is reduced in 1976–77 in cash limit terms to £409 million, and we are planning to reduce it altogether over the next few years.

Will my right hon. Friend confirm that in 1975, £1,500 million went to industry in the form of grants, subsidies, amortisation allowances, and so on? How much went to farmers in the form of subsidies? Will my right hon. Friend give the figure off the cuff—I know that he is familiar with these things—per head of the population, represented by this massive injection into industry and farming? Is there any private enterprise left these days?

I am obliged to my hon. Friend for his confidence in my having that sort of figure at my finger tips. I am sorry to have to tell him, however, that the precise figure, to the nearest pound, escapes me, and since I would not want to be even slightly out in answering him I hope that he will table a specific Question on the point.

asked the Chancellor of the Exchequer what level for the composite rate of tax in the current year he is proposing to the building societies.

The composite rate of tax for the current year finally proposed to the building societies will depend on the results of the investigation currently being made into the tax liability of building society investors.

Will the hon. Gentleman confirm that the level of the composite rate that the building societies will have to pay is likely to be higher this year? Will he consider varying the composite rate and using it as a regulator, either if the flow of savings to the societies moves sharply downwards or if interest rates generally move upwards, with implications for the rate of mortgage interest that ordinary mortgagors have to pay?

I have no idea whether the composite rate will be higher or lower. The rate is determined after discussions with the Building Societies Association after taking account of tax allowances and the level of income. It is not possible to say what the rate will be. The answer to the second part of the question is "No". That would not be the right way to help people who want to borrow money to buy houses. There are other ways in which one could subsidise house purchase. The hon. Gentleman's suggestion would not be the right way of doing so, because it would impose a burden on other taxpayers, who would have to pay more tax.

There is general dissatisfaction with the behaviour of building societies, particularly over lending on older property. Will my hon. Friend ensure that that sort of point is seriously taken up with the societies in any negotiations?

The question of lending on older property is a matter for my right hon. Friend the Minister for Housing and Construction.

asked the Chancellor of the Exchequer if he will make a further statement concerning his Budget proposals in the light of the special TUC conference of 16th June.

I refer the hon. Member to the Answer that I gave earlier today to the hon. Members for Bolsover (Mr. Skinner), Hazel Grove (Mr. Arnold) and Glasgow, Cathcart (Mr. Taylor).

Will the Chancellor tell the House whether it is the case that so far from the members of the big trade unions, such as those of Mr. David Basnett and Mr. Jack Jones, having made big sacrifices, the sacrifices that the nation must make in the way of falling living standards bear particularly heavily on higher-paid workers, such as those represented by the unions of Mr. Clive Jenkins and Mr. John Lyons, and above all the bear on middle management, whose lot is made worse by the Budget proposals.

The whole House will be as fascinated as I by the prospect of an alliance between the hon. Member and Mr. Clive Jenkins. I hope that this axis is as durable as the earlier one. Of course, everyone has sacrifices imposed upon him when inflation is at the rate that we have seen in the last few years. What is impressive, however—I hope that the House is as impressed by it as opinion abroad and the overwhelming mass of the British people have been—is that members of the TUC have voluntarily accepted further sacrifices in order to cure inflation, and that the sacrifices they are making will benefit millions of people who are not members of trade unions.

In view of the TUC's agreement yesterday on the 4½ per cent. wages policy, and in view of the Government's commitment to bring inflation down to just under 10 per cent. at some time early next year, does it not mean that even when we reach that target prices will still be rising twice as fast as wages? Does that not mean that we should have stricter price controls, especially on basic essentials like food, fuel and housing?

It is of course essential that prices should be strictly controlled, but it is also essential that price control should not operate in such a way as to risk employment or damage investment. This matter is now being considered by the Government in their discussions about possible modifications to the Price Code.

Does the right hon. Gentleman agree that, difficult as it may be, the gap between earnings at the bottom of the scale and those at the top will have to be narrowed, and that we should now all bend our minds as to how that will be done with reasonable fairness?

The right hon. Gentleman must recognise that there has been a remarkable narrowing of the gap in the past 20 years, which has proceeded very much faster in recent years. At the risk of associating myself with persons with whom I do not normally associate, I must draw his attention to the remarks of the hon. Member for Blaby (Mr. Lawson)—namely, that the compression of differentials that has resulted from this has put great strains on pay policy, and has done some damage to the economy. I hope that the right hon. Gentleman will accept that.

Does my right hon. Friend accept that although the agreement reached yesterday was most welcome it is only part of the inflation batttle, and that one of the biggest risks now facing the Government is a monetary explosion? Will my right hon. Friend ensure that we do not undertake the process of printing money next year only to fuel inflation?

I have made it clear repeatedly that I do not regard the pay agreement as the answer to all our economic problems. However, I believe—I wish I could feel that the whole House agreed with me—that without such an agreement the solution of our other problems would be totally impossible. As for a monetary explosion, I hope that my hon. Friend will take note of the fact that in the past two years I have'succeeded in keeping the growth of the money supply under strict control. The fact that it grew by only 8 per cent. last year, compared with 28 per cent. in the last year of the previous Government and 23 per cent. in 1972, is a matter for congratulation, and a reason for confidence that I will not permit the monetary explosion of which my hon. Friend spoke.

Is the right hon. Gentleman aware that to prevent that explosion the Bank for International Settlements and the Bank of England have implied that the Chancellor will have either to reduce public expenditure this year or raise taxation? As his party will not allow him to reduce public expenditure, does he agree that a rise in VAT and indirect taxation before the end of the year is now almost inevitable? Will that not be contrary to the spirit of the whole of the TUC conference yesterday and the deal that the Chancellor has worked out with the TUC? Is it not now inevitable that there will be a rise in taxation before the end of the year?

First, I do not agree with the hon. Gentleman. I ask him to adopt the humility urged on the House by his right hon. and learned Friend the Member for Surrey, East (Sir G. Howe), and to recognise that as a member of the Treasury when the money supply was totally out of control and inflation was rocketing to its present heights, this might be a wonderful opportunity for him to keep his mouth shut.

asked the Chancellor of the Exchequer what representations he has received asking him to alleviate the burden of double taxation of capital transfer tax and capital gains tax being payable on the same transaction.

Representations on this subject have been received from a number of professional bodies, chiefly in the context of lifetime transfers of businesses and farms.

Is the Minister aware that this double taxation destroys the motivation of small businesses? Does he realise that he cannot hope to get an expansion of the economy without small businesses with motivation?

First, I do not accept that it is double taxation. We are talking about two entirely different taxes. But as I told the hon. Gentleman on the last occasion on which we debated these matters, we recognise that there is a problem, especially for small businesses. I promised to look at the matter in the context of the review that we are now undertaking on capital transfer tax both in lifetime and at death. In that context, I shall be happy to consider the matter. However, small businesses are not hurt in the exaggerated way that the hon. Gentleman would have us believe.

Will my right hon. Friend say how many of the representations he received on this subject came from the 635 Labour Party constituencies and the many tens of thousands of trade union branches throughout the country?

I do not have the full list in front of me, but I doubt whether there are many.

asked the Chancellor of the Exchequer, how much cash travellers are entitled to take out of the United Kingdom on each occasion.

Travellers are normally allowed to take out of the United Kingdom up to £25 in sterling notes and up to £300 in foreign currency notes on each occasion they leave the country.

I thank the right hon. Gentleman for that reply, but will he confirm that when he uses the term "sterling" he is referring to Bank of England notes? As his Department objected to the Bill that I introduced, to give Scottish bank notes the status of legal tender, will he confirm that the £300 to which he refers in the context of foreign currency would apply to Scottish notes and that Scottish travellers are entitled to take £300 instead of £25 composed of English notes?

People in Scotland are entitled to exactly the same number of notes as are people in England, Wales and Northern Ireland—namely, £25 worth. These are notes for the benefit of travellers, to enable them to have the small amount of money that they may need on the way, as it were. The £300 is available to people in Scotland as well as everywhere else.

Will my right hon. Friend repeat the assurance that he gave me in correspondence—namely, that the report by Mr. William Clark of the Glasgow Herald that Treasury officials spoke to SNP Members about using Edinburgh as a clearing house for the protection of the English pound and about the Scottish debt being paid off by recycling oil revenues is entirely without foundation?

I think I told my hon. Friend that in answer to a Question yesterday, but I am happy to confirm it today, and on as many days as he asks me.