asked the Chancellor of the Exchequer whether he intends to announce any further cuts in public expenditure; and if he will make a statement about the level of public expenditure.

asked the Chancellor of the Exchequer whether he has any plans for further reductions in public expenditure in the year 1977–78.

I have nothing to add to my statement of 22nd July.—[Vol. 915, c. 2010–20.]

Does not the Chancellor yet understand that until he cuts public spending the decline in sterling and the present astronomical interest rates will go on? Would it not be better to announce public spending cuts now rather than do so in much more humiliating circumstances later?

The hon. Gentleman will recall that in my statement on 22nd July I announced cuts in public spending of £1,000 million—substantially larger than have been made in previous circumstances—leading to a fall in expenditure in real terms next year compared with this year. The hon. Gentleman's views would be taken more seriously if he could persuade the Leader of the Opposition not to pretend, as she did in a series of interviews last week, that cuts of £5½ billion to £6 billion, as proposed by the Vice-Chairman of the Conservative Party, can be made without very high unemployment and intense distress to many millions of people.

Will my right hon. Friend tell the House what proportion of the public sector borrowing requirement is made up of the nonsensical inclusion of public sector capital investment, the results of an indefensible system which puts 1½ million people on the dole, and continuous public handouts to private industry, including stock appreciation relief?

I have already told the House that we are making proposals which will be put to the Select Committee for dealing with the capital expenditure of the nationalised industries in the same way as it is dealt with in all other countries. On the element in the public sector borrowing requirement which is caused by excess unemployment, I have already told the House that it is between one-third and one-quarter of the total.

If the Chancellor finds that his planned level of public expenditure next year is too heavy for this overtaxed country to bear, what action will he take then?

If I find that the public sector borrowing requirement is too heavy, I shall cut it.

Apart from the damage that they do to the community, are not these cuts bound to increase the numbers of unemployed? [HON. MEMBERS: "No."] Yes, they are. Does the Chancellor seriously believe that, with 1½ million unemployed and vast unused industrial capacity, it is possible to absorb that number and more in export and other industries?

I am not quite clear whether my hon. Friend is referring to the cuts already made by the Government. They will increase unemployment, as I told the House in my statement on 22nd July.

Will the Chancellor stop misrepresenting the policy of the Conservative Party and recognise that our programme for the reduction of public expenditure is spread over some years ahead? Will he further recognise that the longer he puts off starting on that task, the worse the problems will become? Will he also recognise that it is no use now referring to the statement he made on 22nd July when the figures published the day after he spoke in the House on Monday show that the assumptions about output that he then made are now without foundation?

On the question of the output figures published on Monday, the right hon. and learned Gentleman will be aware that the CBI issued a statement yesterday saying that all its information from its constituent members suggested that the desired output would be achieved. On the question of the unemployment that would be caused by the Opposition's policies, if the right hon. and learned Gentleman endorses, as I suppose he does, a cut of £5½ billion to £6 billion in public expenditure, he must know that that will lead to massive unemployment—

indicated dissent.

—and that the Leader of the Conservative Party, in telling Mr. Havilland on 4th October that a very small increase would be incurred, was falling far short of the standards of honesty which are expected of political leaders in this country.

On a point of order, Mr. Speaker. In view of the terrifyingly complacent nature of the Chancellor's remarks, I beg to give notice that I shall seek an early opportunity of raising the matter on the Adjournment.

asked the Chancellor of the Exchequer if his July economic package has yet improved the situation concerning inflation, unemployment, and the value of sterling.

The measures announced by my right hon. Friend on 22nd July relate to the financial year 1977–78. They have improved the prospect for that year and succeeding years.

Could there be a reply from the Treasury Bench that would more clearly underline the charges of complacence, ignorance and sloth which have been levelled against the Government than that reply? Do the Chancellor, his Financial Secretary or any of those humbugs on the Government Bench imagine that that reply will do anything to arrest a further slide in unemployment, a further increase in inflation or the increase in unemployment that is now taking place?

I find it extremely difficult to take talk about unemployment from the hon. Gentleman or, indeed, from any Opposition Members, knowing, as they do, what their proposals would do to unemployment. The kind of bitter and twisted statements that come from the hon. Gentleman will do very little to help sterling or this country.

For the record, let me say that it is not permitted to call anyone a humbug in this place. One may say that an argument is humbug, but not the hon. Gentleman concerned.

Further to that matter, Mr. Speaker, I apologise to the House and to those on the Treasury Bench for referring to them as humbugs. It is just their policy which is humbug.

Does my right hon. Friend agree that the effects of the cuts on the construction industry have been disastrous? Is he not aware of the NEDC report which indicates that unless something is done, when there is an upturn there will be no construction industry left for construction to go ahead? Is it not time for a great deal of rethinking of Government policy as regards the construction industry?

I very much appreciate my hon. Friend's concern. However, I am sure he will appreciate that, whatever measures are taken to deal with our present problems, particularly the very large borrowing requirement that we still have, they are bound to have some effect on the construction industry, and particularly if he agrees with me and with the TUC that our priority must be to ensure that we pre-empt the maximum resources for manufacturing industry.

Will the Chief Secretary say what is the Government's inflation rate target for next year now that all hope of single figures by Christmas has presumably been abandoned? Is it right that Ministers are now moving to approximately 15 per cent. as their likely estimate for inflation next year?

Certainly, if we were working on the basis of the hon. Gentleman's proposals we would be working on the basis of something very much higher.

What hard evidence is there that the pound is undervalued to set alongside the unpleasant facts that we are continuing to run a very substantial deficit in our trade, particularly in our trade in manufactured goods with our Common Market partners, and that no one, least of all Chancellor Schmidt, seems to be buying pounds?

I appreciate what my hon. Friend has said, and I noted with interest the laughter of Opposition Members on the aspect about the pound being undervalued at present. Nevertheless, one is bound to recognise, as my right hon. Friend the Chancellor has done, that the level of the pound at any given time depends upon our industrial performance now and in the future. We have to get that industrial performance improved. That is our main task.

asked the Chancellor of the Exchequer when the standby credit arrangements with foreign bankers come to an end.

The standby credit facility expires on 9th December 1976.

As what has been spent of the June loan has to be paid on 9th December, and as the IMF loan is not available until later that month, what steps is the Chancellor taking to ensure that there is not another run on the pound during the intervening period? Will he confirm or deny that he is seeking yet another loan from the EEC countries?

On the first question, we shall, of course, repay out of reserves if the IMF borrowing is not fully negotiated by 9th December, but it is far too early to take the view that it will not be negotiated by then. We cannot be sure. As the House will know, the Government are supporting public authority borrowing. The Central Electricity Generating Board is at present negotiating a loan of £500 million from the Eurocurrency markets. I do not expect any pressure on the pound if it were necessary to call on the reserves to repay on 9th December a few days before the IMF borrowing came through.

May I inform the Chancellor very clearly that he will not for much longer be able to rely on Scottish oil revenues to fund any borrowing? Is he aware that the use to which those revenues are put will surely be determined soon by a sovereign Scottish Parliament and not by this House?

I am well aware that the inhabitants of the Shetland Isles have some misgivings about the claim made by the hon. Gentleman and some of his friends about the ownership of North Sea oil. However, I assure the hon. Gentleman that the North Sea oil belongs, and will continue to belong, to the people of the United Kingdom.

Would not our credit be improved and the pound strengthened if we were able to conclude a reasonable offset agreement with Germany on the ever-increasing deficit in the balance of payments arising from keeping the British Army of the Rhine?

Of course, it is necessary for us to conclude a satisfactory offset agreement, and we have every intention of doing so.

Will the Chancellor confirm that the figure of $1·6 billion which is being suggested in the Press and elsewhere as being the amount of the standby credit that has so far been spent is approximately the figure involved? Will he comment—though not in detail—on what he will be doing in foreign exchange markets? The pound was down this morning below $1·64 to $1·63½ at one time, and the Bank of England has clearly been intervening in the market again. What is the Government's policy? Do they intend to continue supporting sterling, to let it float or to borrow more when our existing credit is exhausted? There is total confusion everywhere about what is going on.

The Government's policy on both questions is exactly the same as the policy of the Government of which the hon. Gentleman was a member and a Treasury Minister, and on which he has since turned his back. First, it is that we shall publish reserve figures monthly and figures for drawings at quarterly intervals. The figures will therefore be published in December. Secondly, we shall not comment on intervention policy any more than the hon. Gentleman did when he was a Treasury Minister. He really should not carry his disgust with his own record in the past so far as to suggest that the present Government should overthrow conventions regarding the publication of policies which have stood all Governments in good stead since the war.

Instead of quite unjustly abusing my hon. Friend, will the Chancellor have the courtesy to tell the House what the nation appears to know—namely, whether or not the amount drawn on the standby credit by now is $1·6 billion? The figures were published by the Treasury in September. May we please have an up-to-date figure in the House?

Yes, Sir. The right hon. and learned Gentleman can have an up-to-date figure at the time when it is conventional to publish it—namely, in December. We have no intention of changing precedents set by previous Governments in this regard.

Does my right hon. Friend fully appreciate that one of the reasons why he is having this Tweedledum and Tweedledee argument with the Opposition is largely that he chose to follow, not exactly but partially, the advice of the Opposition in policies that have been pursued generally throughout the last two years, particularly with regard to the Treasury? Will he not now understand that if he is to get out of this terrible impasse he must consider adopting the policies that have been advocated not merely by those of my hon. Friends in the Tribune Group but by an increasing number of people inside the Parliamentary Labour Party and in the Labour movement generally?

I am not quite clear whether my hon. Friend is posing as Alice or as the monstrous crow in the particular fable to which he refers, but it is not my impression, having attended almost all the debates on the economy over the last two and a half years, that the Opposition would share my hon. Friend's view that we have been following their policy.

asked the Chancellor of the Exchequer what is the rate of inflation at the latest date.

asked the Chancellor of the Exchequer what is the present rate of annual inflation in the United Kingdom, the United States of America, Japan, West Germany and France.

asked the Chancellor of the Exchequer if he is satisfied with his progress in achieving his target for reducing the rate of inflation; and if he will make a statement.

The increase in the Retail Price Index for the 12 months to August was 13·8 per cent. We have already made considerable progress in bringing down the rate of inflation, but we shall not be satisfied until the United Kingdom rate is at least down to the levels of our main overseas competitors. The latest available OECD figures show that for the 12 months to July inflation was running at 9·5 per cent. in Japan, 9·4 per cent. in France, 5·4 per cent. in the United States of America and 4·1 per cent. in West Germany.

Why do my right hon. Friend and his hon. Friends insist on sending up the British inflation rate again by insisting on the removal of food subsidies, which were one of the main planks in the election manifesto on which we all came to power and which, as we are constantly reminded, we have to retain? Why are we sending the inflation rate up again?

I am sure my hon. Friend will appreciate that, however one deals with the particular matter to which he referred, the money has to be found for that rate to be financed, and that in turn will have some effect on inflation. I am also sure he will appreciate that we are determined to see, wherever possible, that we keep down the level of food prices. For example, he will know that we are determined to resist the pressure on us to devalue the green pound, which I know some Conservative Members want to see devalued.

Will the right hon. Gentleman now answer the question put by my hon. Friend the Member for Guildford (Mr. Howell)—namely, what he expects to be the rate of inflation for next year? Can he say how he expects the pound to pick up when our inflation rate is still way above that of our major competitors?

The hon. Gentleman is quite right. One of the reasons for the depreciation of the pound is that our inflation rate is higher than the rate in other countries. We have to get that down and we are determined to do so. Over the next few months, one anticipates that the rate of inflation will be broadly at the present level, but I am certainly not prepared to make any forecasts beyond that.

Does my right hon. Friend agree that the rate of inflation has been brought down because of the cooperation of the trade union movement through the social contract in restraining earnings and income? Will he and his Department look at the proposals which the TUC has brought forward, not so much for import controls right across the board as for selective import controls, so that we can get many more people back to work?

Of course, the social contract is absolutely central to the Government's policy. If one contemplates what would happen under the proposals of the Conservative Party, which would break the social contract and add hugely to inflation, one realises the sort of problem that this country would face. As regards import controls and the suggestions of the TUC, my hon. Friend will appreciate that we have already taken a great many steps concerning selective import controls.

What, approximately, will the recent depreciation in sterling add to the rate of inflation?

I do not think one should exaggerate the effect of that either. It tends to be exaggerated frequently. The effect is somewhere in the region of one-quarter of 1 per cent. for every 1 per cent. of the depreciation. It is around that kind of level.

With regard to the problems of selective import controls, does my right hon. Friend agree that the real meaning of selective import controls is that they have to be effective? Does he agree that the controls on black-and-white television sets have done more for the Japanese television industry than for the British industry? Will he take into account the Chancellor's statement in July and get on with introducing selective controls, particularly in the sensitive industries of textiles and footwear?

My hon. Friend will know that I have a particular interest in some of the areas to which he has referred. Certainly I want to see effective action taken in respect of dumping. I believe that action will be taken and is being taken. I certainly cannot agree with what my hon. Friend said about television sets.

Can we take it that the Government's target of single-figure inflation in the early months of next year has now been officially abandoned?

Yes.

asked the Chancellor of the Exchequer what percentage of the United Kingdom's total imports of food, drink and tobacco is met by earnings on invisible exports.

Over the last three years gross invisible earnings were between two and a half and three times the value of the United Kingdom's imports of food, beverages and tobacco.

Do not these figures reveal the acute and continuing dependence of this country for its standard of living on the success of invisible exports? Does the Minister think that threats of nationalisation of all the sources of these invisible earnings will help in any way? Is it not perfectly clear that if they were nationalised a great deal of Britain's invisible trade would go elsewhere?

The figures show that the City makes some contribution, as indeed do all the other industries, to the balance of payments. I should point out to the hon. Gentleman that insurance, for instance, in which I think he has a particular interest, contributes 4·1 per cent. of this total and banking contributes 6·9 per cent. of the total. The City should stop scratching itself on the back and perhaps consider more whether it has made a sufficient contribution to domestic British industry.

Will the hon. Gentleman give an equivalent figure for Scotland? Scotland is basically self-sufficient in foodstuffs and is a massive exporter of food and drink, all of which will give an independent Scotland a healthy balance of payments situation which is undreamed of at present by the United Kingdom.

I would not agree with much of what the hon. Gentleman has said. The figures are United Kingdom figures and are based on a United Kingdom balance of payments.

The figures that the Minister of State quoted simply cannot be right. Is he referring to gross figures or net figures? He surely cannot be referring to the gross figure of invisible earnings in the total balance of payments. The figures of 6 per cent. and 4 per cent. cannot be right if these are gross figures being compared with the gross figures in the total balance of payments figures.

They are percentages of the gross figures.

On a point of order, Mr. Speaker. In view of the unsatisfactory nature of that reply, I shall seek to raise the matter on the Adjournment at the earliest possible moment.

asked the Chancellor of the Exchequer if he is satisfied with the present level of investment in industry.

The latest Department of Industry investment intentions survey suggests that industrial investment decisions being taken now will lead to a more satisfactory level of investment than we have been seeing for the past year or so.

Is my right hon. Friend aware that the recent increase in interest rates will have a significant effect on the level of investment in the next year? Can he say how long he expects these interest rates to remain at their present level? Would he be prepared to undertake a specific direction to the banking sector in respect of the nature of its advances in order to ensure that wherever advances are made they go specifically to investment?

I can tell my hon. Friend that interest rates at their present level will stay as they are until the money supply is on target with what the Chancellor suggested in his statement of 22nd July. In respect of a direction to the banks that has already been done and I am sure that the banks will see to it that the maximum amount of resources goes to manufacturing industry.

Will the right hon. Gentleman tell the House by how much the minimum lending rate now exceeds the average return on capital of British industry?

I am sure the hon. Gentleman appreciates that that is an impossible question. [HON. MEMBERS: "Why?"] Because the interest charged is in most cases a comparatively small part of the unit costs. Opposition Members who are muttering in their seats must appreciate that the great bulk of new investment in manufacturing industry comes from ploughed-back profits and that the present Government and Chancellor have done more for manufacturing industry in this country than has been done by any other Government since the war.

While appreciating what the Chancellor said on Monday about the source from which firms get much of their investment capital may I ask my right hon. Friend to say how long he thinks we can keep the minimum lending rate up at its present level before investment intentions for the future will definitely be affected?

I certainly share my hon. Friend's hope that we will be able to get the minimum lending rate down as soon as possible, but it is not possible to say when just now.

asked the Chancellor of the Exchequer at what age men and women, respectively, are able to purchase index-related savings certificates.

65 for men and 60 for women.

What reason can there be for this discrimination against men? It cannot be said, can it, as with pensions, that its removal would cost more? In fact it would lead to greater savings, which are so badly needed.

The reason why the ages were chosen as they were is that it was felt that this form of saving should be confined to people of national retirement age, and they are based on the ages at which people receive national retirement pension.

asked the Chancellor of the Exchequer when he intends to bring forward further economic measures.

asked the Chancellor of the Exchequer whether he intends to announce further economic or fiscal measures in the near future.

asked the Chancellor of the Exchequer whether he intends to bring forward further economic measures in the near future.

I have nothing to add to my statement in the debate last Monday.

In the light of that answer, will the right hon. Gentleman give a categorical assurance to the 20 million people in this country who have bank accounts and the 8½ million people who have company pensions or are involved in life assurance schemes that the Government will not destroy their past and ruin their future prospects by nationalising the banking and insurance industries?

My right hon. Friend the Prime Minister has made it absolutely clear that this Government have no intention whatsoever of nationalising the banks and the insurance industry. He and I will do our best to see that it will not figure in the programme of the next Labour Government which will be taking office in a few years' time.

Is my right hon. Friend aware that the next Labour Government's programme will be drawn up by a liaison committee and that what will be in that programme will not be decided by my right hon. Friend or by any other individual but will be decided by the majority of such a liaison committee?

First, let me say that this Government have no ideological or political objection to import controls if they will help the economy. Traditionally, of course, the Conservative Party has been the party of protection in this country. There is nothing specifically Socialist about interfering with the flow of trade. This Government have already introduced controls on imports from many countries. Indeed, imports from almost all countries outside the OECD are already under some sort of control—that is to say, the COMECON countries and the countries of the Third World—but whether or not that makes sense depends on the interests of the British people. I have made it clear many times that I do not think that it would make sense from anybody's point of view to protect the less efficient and declining industries at the risk of destroying the markets on which the more efficient and growing industries depend for demand.

Is not Mr. Sam Brittan absolutely right when he refers to demoralisation in Government circles because, although Ministers know perfectly well what must be done to save our economy, they lack the political support or will to do it? Was that not clear in the right hon. Gentleman's answer to the hon. Member for Liverpool, Walton (Mr. Heffer)?

It is not for me to comment on Mr. Sam Brittan. Sometimes he is right and sometimes he is wrong—but he is quite wrong in believing that either the Government or I are demoralised.

Is my right hon. Friend aware that one of the basic problems of the economy is the lack of investment in British industry, although there has been some indication of substantial improvement in the near future? Will he consider making substantial cash grants for investment as a part of any future fiscal measures that he has in mind?

This Government have done more to stimulate investment than earlier Governments, particularly through our assistance by means of tax relief on stock appreciation, which ensures that no manufacturing company which invests its profit pays any tax whatever. But I do not think that across-the-board grants for investment have proved an effective way of encouraging investment. A recent study by the EEC shows that we have more generous investment incentives than any other country in Europe, yet we have a lower level of investment than many. I believe that possibly a better answer to this problem is the type of accelerated investment project programme such as we saw successfully applied this year.

In view of the horrifying burden of repayments of interest which the right hon. Gentleman has placed on the taxpayers of tomorrow, can he categorically assure us that he will not agree to further foreign borrowing by Her Majesty's Government or by nationalised industries? In view of the state of our borrowing, is he aware that if Britain were a public company he would be very lucky indeed to escape imprisonment?

Is my right hon. Friend aware that this week the Warwickshire County Council announced its decision to invest £96,000 of its employees' pension fund contributions in Japan? What has the Treasury done, if anything, to dissuade that authority from doing so? Does my right hon. Friend agree that such decisions are highly damaging to the British economy and amount to the use of British workers' money to damage British workers' interests?

I must confess that I am totally unaware of the case to which my hon. Friend refers. If he will give me details, I will look into it, but I understood that it was not possible for British bodies to invest money in that way abroad without exchange control permission. I suspect that my hon. Friend has his facts somewhat awry, but if he sends me details I will look into the matter.

If the Chancellor is not demoralised—I am using his term—by a fall in the value of sterling of 30 per cent., by a 15 per cent. minimum lending rate, by 1½ million unemployed and by inflation which is now beginning to rise again, what exactly will it take to demoralise him?

I am grateful for the hon. Member's curiosity. He will recall that the Chancellor under whom he served raised minimum lending rate to 13 per cent. at a time when inflation was lower than it is today and that, therefore, the effective interest rate was a great deal higher than it is at the moment. I regret to say that the hon. Gentleman, even today, shows no sign of demoralisation.

asked the Chancellor of the Exchequer what study he has made of import deposit schemes and if he can make an estimate of the effect a 50 per cent. import deposit scheme would have on the balance of payments.

Examples such as the 1968–70 United Kingdom scheme and the recent Italian scheme suggest some deferment of imports but only very small net effects. The main balance of payments effect would be temporary foreign financing of some part of the total amount of deposits, which would be reversed when the scheme ended.

Does not my hon. Friend agree that, even if he does not like this particular form of scheme, in view of our enormous deficits on the balance of payments with the EEC countries, with Japan and with many other parts of the industrialised world, it is time some form of import control was operated on manufactured goods? Although the Chancellor has just said that import controls are not themselves Socialist, does he not agree that, even so, they are humane if they can keep up the level of employment and the standard of living in this country?

My hon. Friend's Question related to import deposits. Again, I would point out that the effect on industry and its liquidity might he damaging if import deposits were introduced and that they might not have much effect on the balance of payments. As for the humanity of import controls, of course by introducing general import controls we would act in a way detrimental to the interests of many poor countries.

Is the Minister aware that his indecision on this matter and his failure to rebut at an early stage suggestions and calls for import controls, quotas and deposits of this kind are having the short-term effect of pressurising many importers into increasing their orders and, therefore, having a damaging effect on the short-term balance of payments position?

This Government have made it clear time and time again and are making it clear again now that we do not see any form of import controls as any way of solving the basic problems of the British economy.

asked the Chancellor of the Exchequer what representations he has received concerning his announcement on 22nd July of reductions in public expenditure; and what replies he has sent.

I have received a considerable number of letters about the measures announced on 22nd July, and my replies have explained the Government's purpose in introducing them.

Does my right hon. Friend accept that the strongest and most important representations he has received have come from the TUC and the Labour Party Conference? What reply does he intend to send to constituency Labour parties which will be writing to him in the coming months asking him to take note of the Labour Party Conference's resolution and drop these cuts, which are damaging to the social contract and to employment?

I suspect, although I would not commit myself absolutely, that I shall be sending them replies along the lines of replies to letters I have already received, explaining that it is essential that the Government should have made these cuts and should stick to the public expenditure levels they have set if we are to avoid a renewal of inflation and the choking-off of investment in manufacturing industry.

If the right hon. Gentleman cannot entirely anticipate the inflation rate, can he answer a simple question about the bond he announced on Monday? If one puts in £5 now and in four years' time gets out £7, does the Chancellor expect that the £7 will be worth more or less than the £5 today?

I suspect that it will be worth more. There is no question about the fact that, for the many who will be taking it out, the bond offers a very much better return than most other investment opportunities.

Does my right hon. Friend agree that, though it is important to keep down the rate of inflation, that in itself will not of necessity cure unemployment? Is he further aware that West Germany has the lowest inflation rate in Western Europe yet still has a substantial unemployment problem, with over 1 million out of work?

My hon. Friend has made a very important point. It is the case that the United States, for example, which has a much lower inflation rate than we have, has a substantially higher level of unemployment. On the other hand, we have learnt through bitter experience over many years that unless we can get inflation under control we have no chance of reducing the rate of unemployment. That is well understood by all sections of the Labour movement at this time. That is why the trade union movement for the second year running has accepted limits on settlements reached in pay negotiations, which has contributed so much to the fall in the rate of inflation in the last 12 months.

In view of the importance that the right hon. Gentleman rightly attaches to getting the inflation rate down, can he take a little further the confession made by the Chief Secretary just now? Will he confirm that the target of getting inflation below 10 per cent. has passed entirely out of sight and that the Government in their own calculations for next year are currently proceeding, as reported in the Press today, on the assumption of 15 per cent.? Does not that of itself underline the necessity for further economic measures?

The Press report to which the right hon. and learned Gentleman refers is totally wrong. There is no ground whatever for that belief. What the Government have said—and my right hon. Friend the Prime Minister repeated it on Monday—is that our objective, which we intend to ensure is achieved, is to bring our inflation rate down to that of the mean of our international competitors by the end of next year. But the right hon. and learned Gentleman well knows that one of the major factors in the progress we, like France and other countries, have made in bringing down the rate of inflation is the unexpectedly high increase in commodity prices in the early part of this year, an increase which has latterly resumed.

asked the Chancellor of the Exchequer if he intends to introduce an autumn Budget.

My right hon. Friend will take such measures as our strategy and the situation demand.

If ever the Chancellor of the Exchequer has a chance to introduce another Budget, will he remember that high taxation tends to cause bankruptcies and so to increase unemployment?

The Conservative Front Bench and the hon. Gentleman imply that somehow or other they will be able to reduce the present level of taxation. That is most dangerous nonsense and it does the greatest possible harm in the country.

In making preparations for the next Budget, will my right hon. Friend have in mind fiscal measures that will prevent the sort of activity of which we have had recent revelations in the cases of Lonrho, Slater Walker and other companies?

And Jessel.

I assure my hon. Friend that we should take all necessary measures, and I am sure that he will not be disappointed with them. At the end of the day, the crucial thing we have to do is to recognise that the central objective is to improve our industrial performance, and that is what we intend to do.

As the preparation of any Budget in the next year or so will be inextricably bound up with the proposed borrowing from the International Monetary Fund, will the right hon. Gentleman clarify the reply which the Chancellor gave to my hon. Friend the Member for Conway (Mr. Roberts) just now? Did he say that $3·9 billion would be enough and that there was no need to borrow more?

I am sure that, unusually, the hon. Gentleman did not hear what my right hon. Friend said, since my right hon. Friend did not say what the hon. Gentleman implies he said. The hon. Gentleman could not have been listening.

I was listening.

My right hon. Friend said that whatever remains outstanding on 9th December of the $3·9 billion will be repaid on time.

asked the Prime Minister if he is satisfied with the co-ordination between the Chancellor of the Exchequer and the Secretary of State for Industry in relation to the Government's industrial strategy.

Yes. There is close coordination between my right hon. Friends on this and all other matters of common concern.

In the interests of economic and industrial recovery, will the right hon. Gentleman take this opportunity of saying that he has no intention of adopting the alternative Queen's Speech proposed by Transport House?

I should be happy to receive proposals for the Queen's Speech from anyone, including the hon. Gentleman if he cares to put some forward, and in due course, when the Speech appears, we shall invite the House to support it in the terms that it will have been proposed by, I hope, myself.

Will my right hon. Friend ask his colleagues to give urgent consideration to the effectiveness or otherwise of regional economic investment incentives, because they seem to have been less effective than they should have been? Surely it is time for alternative and more effective measures.

I think that the regional policy on which we all embarked after the war has had a considerable measure of success in lessening the differences among the various areas but some of the macro weapons employed in the 1960s have become a little outdated, which is one reason why the selective assistance given under the Industry Act and in other ways applies the aid more where it is required. I think that we should continue to pursue that method.

When will the right hon. Gentleman acknowledge that the considerations that led him and the Chancellor of the Exchequer to turn their backs on the nationalisation of banks and insurance companies should lead them to turn their backs on the nationalisation of the aircraft industry?

That is not my view, nor that of the party I represent, of the way in which the aircraft industries of the world are moving. I think that the hon. and learned Gentleman might catch up with the latter part of the twentieth century in due course.

asked the Prime Minister when next he intends to make a ministerial broadcast on Government economic policy.

I refer my hon. Friend to the reply which I gave to the hon. Member for Norfolk, South (Mr. MacGregor) on 27th July.

Before my right hon. Friend makes another of his very effective ministerial broadcasts, will he look at the need to close some of the gaps between the Government's policies and the expectations of the TUC under the social contract? In the light of that, will he also look again at some of the social implications of the public expenditure cuts, at some of the possibilities of extending import controls, and at areas of social advance such as earlier retirement, which could be introduced at minimal cost?

The social contract will remain the basis of the Government's policy and we shall endeavour to carry it out as far as we can. On the question of import controls, I have received a very interesting document today, sent to me jointly by the TUC and the CBI—and coming as it does from those two stables harnessed together it clearly needs very careful consideration.

They are all Tribunites now.

I am arranging for that careful consideration to be undertaken. As regards the expectations of our people, I remind my hon. Friend and the House of what I said, among other things, in my first broadcast as Prime Minister. I looked it up because I thought that there might be some reference to it today. I said that

"despite the measures of the last 12 months, we are still not earning the standard of life we are enjoying."

Reading.

I am quoting:

"There's no soft option. I don't promise you any real easement for some time to come. There can be no lasting improvement in your living standards until we can achieve it without going deeper and deeper into debt as a nation."

On Tuesday the Prime Minister said that internal differences in the Labour Party were matters entirely for him and nothing to do with the rest of us. Is he aware that that cannot be the case, because the differences in the Government party are highly damaging to the national interest and to confidence abroad? When he next broadcasts, will he tell the country how long he is prepared to preside over this private and unacceptable coalition while the value of our currency plummets?

I cannot think of any better coalition that could do the job. The thought of the Liberals and the Conservatives attempting against the recent policy announcements by the Conservative Party to try to achieve such a coalition would divide the country hopelessly in two. Unless we make the approach which I outlined in my first broadcast, and which I have repeated today, I believe that we shall not be able to enlarge the manufacturing base of our nation and thus ensure that we obtain the social benefits that we require.

When he makes his next broadcast, will my right hon. Friend the Prime Minister give his views on the connection between education and economic performance, and will he confirm the reports that he is about to make far-reaching suggestions about changes in our national system that would involve the training of more engineers?

More mileage and column inches have been given to a speech I have not yet made than were given to many speeches I have made. That should be a lesson to all us publicists. Unfortunately, I did not have the wit to start this one.

But is the Prime Minister aware that we agree with a number of his speeches? The trouble is that his actions do not match them. Surely he is aware that the facts show we are facing the most serious economic crisis in the post-war period and that there is a total lack of confidence in sterling. That is where his actions have led. What actions does he now propose to take to restore confidence?

The right hon. Lady will find in due course that confidence is a plant that grows very slowly. There is no short-term action that can be taken to repair confidence—which, alas, now extends to the future prospects of the British industrial system. I believe that the pessimism is overdone. As I go round the country visiting factories and seeing the work that is being done I believe that there is a considerable future, because there is a growing realism on both sides of industry in our industrial system that it is possible to overcome the problems that have led to what "The Right Approach" calls the long-standing decline. If we worked on that aspect, confidence would be restored. However, I promise the right hon. Lady that no gimmicks or short-term cuts will achieve our aim.

But there appears to be realism everywhere except in Her Majesty's Government. Why does the Prime Minister not now follow the policies of these Governments which have a surplus to lend us in order to bail us out?

The policies of various Governments depend on their internal circumstances. For example, the United States does not depend on foreign trade to the extent that we do. Her foreign trade is an addition to her gross internal product. The United Kingdom depends on exports, and it is in that respect that we must push ourselves much further and faster. Obviously, in answering a supplementary question I cannot instance other countries and indicate all the differences. But I believe that as the industrial strategy has been agreed by both sides of industry—and I hope that it will not receive discouragement from the Opposition, even if they cannot find anything helpful to say—that is the best way to march on the long road back.

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

asked the Prime Minister when he last met the CBI.

asked the Prime Minister when he last met the CBI.

I refer my hon. Friends to the reply which I gave to the hon. Member for Conway (Mr. Roberts) on 12th October.

When my right hon. Friend meets the TUC, what reassurance will he give that the Government will continue to meet their side of the social contract? Is he aware that the faith of ordinary working people in the contract is taking a bit of a bashing in the face of rising food prices, high unemployment, and now a high level of mortgage interest rates? Will he re-examine the Government's policy on food subsidies and see whether he can do something to show that we are playing our part in keeping prices down?

Yes, Sir, we shall consider any of these matters. There is no doubt that the consequences of the common agricultural policy are at present helping to keep food prices down, but that is an adventitious factor that will not persist for ever. What is needed is a long-term reform of the CAP, and that is what we intend to pursue.

Does the right hon. Gentleman recall last year's invitation by the TUC to the former KGB boss, Mr. Alexander Shelepin? Will he say whether he shares the enthusiasm of the National Executive Committee of his own party for the forthcoming visit as an official guest of the Labour Party of Mr. Boris Pomonaryov, who is charged with supervising the furtherance of the interests of Soviet imperialism in countries outside the Eastern bloc, or will the right hon. Gentleman choose this moment to dissociate himself and the British Government from that invitation?

I do not think that will come up at my meeting with the TUC and CBI. The hon. Member for Stretford (Mr. Churchill) in his professional capacity has considerable experience of interviewing a number of gentlemen in other countries who are not entirely devoted to the democratic cause. I think that in pursuit of that professional exercise the hon. Gentleman has managed to preserve his purity undefiled. I promise him that my friends on the National Executive Committee are as tough as he is in that regard.

When my right hon. Friend next meets the CBI, will he discuss the desirability, and indeed the possibility, of reinstating enlarged advanced project schemes with a view to reinvigorating industrial investment, which unfortunately is now flagging?

I shall. I have already had discussions with the CBI about advancing investment. Some of the schemes introduced by the Government are tailor made for this purpose and, as I have pointed out in the House before, some industries have already taken advantage of them and we have secured very considerable investment. I shall continue to draw this to the attention of the CBI and ask it to continue to use the schemes to their full effect.

When he next speaks to the TUC, will the Prime Minister discuss the Government's proposal to require that 50 per cent. of the representation on occupational pension schemes should come from trade unions? Will he communicate to the TUC that members of these schemes take a very strong view against this proposal? Is he aware that, although they are not against participation—indeed, they are quite in favour of it—they see no reason why there should be a 50 per cent. representation from trade unions?

I take note of the hon. Gentleman's view, but I am not able to depart from the policy already put forward.

If my right hon. Friend sees Pomonaryov, will he express to him the deep concern of Members on both sides of the House about the treatment by the Soviet authorities of their minority groups in general and the Jewish minority in particular? As Pomonaryov will be leading a group of academicians from the Soviet Academy of Sciences, will my right hon. Friend protest in particular at the treatment of Academician Levich, who has a place at University College, Oxford, and who has been harassed and persecuted for so long?

I am sure that I shall be able to raise with Mr. Pomonaryov some of the consequences flowing from the Helsinki Agreement. I suggest to the House that if these discussions are held against a background of demonstrations and protests, we are unlikely to get a rational discussion going. I would much prefer to have the opportunity of quiet talks with these members of the Praesidium than to have a series of demonstrations taking place so that we spend all our time talking about the demonstrations and very little time discussing the real issues at stake.

Reverting to an earlier supplementary question on the cost of food, would it not be of great assistance and satisfaction to the TUC and the public generally if this country were able to buy food at advantageous prices in world markets?

Yes, I think it would. It was always one of the weaknesses of our entry into the Community that the CAP does not suit our requirements. That is why we must pursue in the Community with some, though not all, other member countries a policy of getting substantial reforms over a period. I believe that we shall be able to do that.