asked the Chancellor of the Exchequer why the current rate of duty on diesel fuel is at a level which raises the retail price above that of petrol; and if he will make a statement.

In his last Budget, my right hon. Friend proposed to increase the duties on both petrol and diesel fuel by 5p a gallon to 35p a gallon. In response to views expressed in all parts of the House, he removed the increase on petrol in August. The House accepted the higher duty on diesel fuel.

Has not the Treasury noticed that nearly every other EEC country applies a lower duty on diesel fuel than on petrol in order to encourage the use of diesel fuel in the interests of energy conservation? How can the Government's energy conservation programme be taken seriously when there is so little co-ordination between Departments, and what will the Government do about it?

I do not know what the position is in the EEC countries, and it may well be that the hon. Gentleman is right, but I must point out again that the Government proposed the same level of duty for both fuels and the House of Commons, in its wisdom, decided otherwise.

In an effort to protect the consumer with regard to the cost of both diesel fuel and petrol, will the Government look into costs of advertising and promotion, since it needs only the same commodity for a car to move and we could probably save a lot of money by having a pool system, as we did in war time?

My hon. Friend will recognise that that is primarily a matter for my right hon. Friend the Secretary of State for Transport.

In view of the totally unsatisfactory nature of the reply, I shall seek to raise the matter on the Adjournment at the earliest opportunity.

asked the Chancellor of the Exchequer whether he will make a statement about the Government's policy towards a fixed parity for sterling.

The Government's policy for the exchange rate is set out in the reply I gave on 10th November 1977 to my hon. Friend the Member for Lough-borough (Mr. Cronin) and the hon. Members for Eastleigh (Mr. Price) and for Norfolk, South (Mr. MacGregor), in the Letter of Intent to the International Monetary Fund of 14th December 1977.

May I ask the Chancellor to pay no attention to his right hon. Friend the Chancellor of the Duchy of Lancaster and to some of his hon. Friends below the Gangway who are clamouring for a return to a fixed parity? Will he confirm that the Government have no intention whatever of altering the decision to allow sterling to float freely.

I cannot undertake to pay no attention to my right hon. Friend's views. I pay very close attention to them, as I pay close attention to the views of all my hon. Friends. The point which the House must recognise is that a fixed exchange rate is impossible in a world of floating rates. The parity is the relationship between one's own currency and other currencies, and in a world of floating currencies we have no control over the movement of other currencies to which ours is related.

Are Ministers having any success in their commendable efforts to persuade the Economic Committee of the TUC that liberalisation of exchange controls, far from leading to a loss of jobs at home, can—as so many specialised inquiries both here and in the United States have proved—actually help job creation and also the sterling relationship to other currencies?

I have read a large number of the studies to which, I assume, the hon. Gentleman refers. I notice, for example, that The Banker carried out a poll of 100 leading City firms recently and two-thirds of those questioned thought that the abolition of exchange controls would have very little effect on the exchange rate. I agree with them. One can see that this is true from the behaviour of exchange rates of countries which have no exchange control, such as Germany, Switzerland and Japan.

Is it true that the Government have made representations to the United States and other countries that settlements for oil should in future be made in a group of currencies? What would be the implications for the management of the sterling exchange rate if that were the case?

That statement is completely untrue and has already been denied.

asked the Chancellor of the Exchequer what expenditure on defence and housing, respectively, has been for each of the years since and including 1970, expressed as a percentage of gross domestic product.

With permission, I will circulate a table showing this information in the Official Report.

Is my right hon. Friend aware that the cost of a single Tornado warplane would provide new houses for 700 families? In preparing his Budget, will he consider sympathetically the urgent plea of the Labour Party and the TUC that at least the serious cuts in housing of the past two years should be fully restored?

I note what my hon. Friend says and appreciate his concern, which I share, about the need to improve housing for so many people who are badly off in many parts of the country. But it is not true to say that housing expenditure has declined. Under this Government, despite the cut-backs we have had to make, it has risen substantially.

Would the right hon. Gentleman care to remind his hon. Friend of the Chancellor's words when he was Secretary of State for Defence, when he told the House on 5th March 1969 that if we cut our defence expenditure to the level at which our defence was imperilled we should have no houses, no hospitals and no schools, but only cinders?

My right hon. Friend makes many wise statements and has done for many years, including the last four, and I would not wish to disagree with them.

Does my right hon. Friend accept that a reallocation of resources to housing as suggested by my hon. Friend the Member for Salford, East (Mr. Allaun) would be of considerable benefit to regions such as Merseyside which suffer from an inadequate housing stock and a large number of unemployed construction workers? Will he therefore urge my right hon. Friend the Chancellor to ensure that far more resources are put into the construction industry?

I appreciate my hon. Friend's concern, but within a given level of public expenditure one must have a balance of priorities as between housing construction, social services, health and many other areas of expenditure, even if the expenditure in total were much larger than at present. There must be a balance between all the strong demands that are constantly being urged upon me.

While it may be true that expenditure on housing has gone up, is it not a fact that the number of houses produced is smaller? Would not the right hon. Gentleman's time be better spent looking at the district auditors' reports criticising Labour councils for having a large number of empty council properties?

I would not be prepared to criticise Labour councils so much as Conservative councils which in areas of great need of council housing are not building it.

asked the Chancellor of the Exchequer what would be the cost in a full year of increasing the thresholds for investment income surcharge to the levels, in real terms, of April 1973.

About £130 million at 197–78 income levels.

Is it not very hard of the Chancellor to have increased the State pension to cover pensioners against the erosion of the standard of living by inflation but at the same time to have taken this sum of money out of the pensions of those who have saved? Will he make it a top priority in his Budget to restore the real value of the threshold?

The hon. Gentleman's supplementary question presupposes that the level fixed by Lord Barber for the investment income threshold when he was Chancellor in 1973 was right. We dispute that, because we changed the rate when we came into office. Investment income surcharge is a tax not merely on pensions but on all unearned incomes.

Is the hon. Gentleman aware that the effect of inflation on the threshold for investment income surcharge is causing particular hardship to retired elderly people who had made certain savings during their lifetime which they thought would prevent their having to apply to the State for charity?

I am fully aware, as are the Government, of the effect of inflation on savings and other incomes. If the Conservatives had been more responsible when in office over the control of the money supply, for example, we would not have been suffering the rates of inflation that we have had in the past few years.

Will the right hon. Gentleman reconsider his stony reply? Is he not aware that of all those who are liable to pay the investment income surcharge 43 per cent, are old-age pensioners?

I am fully aware of the figures, but I repeat that this Government have brought inflation under control, whereas the previous Government, through their financial policies, caused inflation to increase to very high levels.

asked the Chancellor of the Exchequer to what extent the United Kingdom's economic performance is overstated by better financial statistics rather than characterised by any real term progress at the present time.

The tremendous improvement in our financial position and the basis that this gave us for improvement in the real economy was recognised world-wide six months ago. Since then, the stimulus of the measures my right hon. Friend announced on 26th October has begun a progressive expansion of demand.

May I not thank the right hon. Gentleman for the propaganda but ask him to agree that no significant recovery of the British economy is possible, beyond perhaps a marginal improvement this year and next year, because the rate of growth of gross domestic product needed materially to reduce unemployment is well ahead of any target rate of growth that the Government have envisaged for this year or 1979?

I do not accept that. I do not know how the hon. Gentleman can make that statement without looking at what has been happening. In the past six months there has been—I am sure that the hon. Gentleman has welcomed it—a regular and steady fall in the level of unemployment. We want to see a much better rate of economic growth and growth of GDP in the coming year, and I expect that that will happen. I am sure that the hon. Gentleman will look forward with interest to the remarks of my right hon. Friend in his Budget Statement.

I do not minimise the serious economic problems that still lie ahead, but is it not right that today, the anniversary of the Lib-Lab pact, we should mark the fact that the rate of inflation—the serious matter facing us a year ago, when the monthly rate was equivalent to nearly 20 per cent, in annual terms—is now satisfactorily down and we are in a position at least to tackle these serious problems?

I am happy to mark the anniversary, and I note as the right hon. Gentleman does, with great interest the enormous improvement in our economic position over the past 12 months.

Is it not equally right, just after the fourth anniversary of this Labour Government, to mark the fact that production in British manufacturing industry is still lower than it was four years ago, when this Government came to office—a disastrous record unequalled in any other country like our own anywhere else in the world?

Even that is not strictly true, as the right hon. and learned Gentleman will see if he looks at the growth of GDP from the first quarter of 1974 to the latest comparative figures for the third quarter of 1977. We compare with many other countries, including West Germany. We are better than Italy. West Germany's growth has been very poor in the past four years. It is remarkable that the right hon. and learned Gentleman is not prepared to recognise the reality, but he will have many more years in Opposition to get used to it.

When the right hon. Gentleman is claiming to have got inflation under control, should he not have the grace to admit that it was under his supervision that it went out of control?

I am always ready to be gracious on all kinds of matters, but the responsibility for the growth of inflation four years ago rests with the hon. Gentleman's party, and he knows it.

asked the Chancellor of the Exchequer what is the latest figure for the growth of the money supply.

Over the month to mid-February, sterling M3 grew by a little over 1 per cent, on a seasonally adjusted basis.

When my right hon. Friend the Chancellor is considering the Budget, will he take into account the need for more public spending and, if tax cuts are to be given, for import controls to ensure that any increased spending does not go on foreign goods?

I am sure that my right hon. Friend will take into account the need for high public expenditure, as he will take into account the need to reduce levels of taxation. I entirely accept that if we had substantial tax cuts, as the Leader of the Opposition was advocating the other day, to use the North Sea oil revenues, there would be an effect on imports and we should fritter away the benefits of the North Sea on those imports.

As both the Chief Secretary and the Minister of State appear to believe that the growth of the money supply is the principal cause of inflation, how does the right hon. Gentleman explain that the growth of the money supply measured by M3 has increased by 20 per cent, since last August and makes a mockery of any hope of keeping the rate of inflation below 10 per cent, for any appreciable period?

The hon. Gentleman must know, if he is a monetarist, as I believe he is, that one of the prime causes of the rate of inflation of the past few years was the disastrous money supply policy, if it can be called that, of the Opposition. They issued that wretched document "Competition and Credit Control", which brought the whole banking sector almost to bankruptcy.

In striking what is a difficult balance between the amount of our income which we shall spend on public expenditure and the amount of tax relief which we get, may I ask my right hon. Friend to bear in mind, when formulating his Budget, that not many of us are prepared to spend our own money on other people's children, other people's grandparents, the disabled and the sick and, therefore, we need to do it communally? Will he please take these things into account when striking his balance?

A balance has to be struck, and sometimes it is difficult to do so. We have to look at tax levels because of the effect of the present tax structure on people with low incomes. We have also to maintain high public expenditure.

Will the Minister comment on the report in the recent Quarterly Bulletin of the Bank of England that in the nine months to mid-January M3 increased by 11 per cent, above the target figure of between 9 per cent, and 13 per cent.? Does that not clearly indicate that by the end of the year inflation will be above 10 per cent?

No. The annualised rate of M3 since mid-April is 14¾ per cent. The figure over the past month shows that it is coming back to trend and by the end of this financial year we shall be back on the target trend.

Does not the Minister accept that the annualised rate over the past 10 months at 14¾ per cent, has been followed by an annualised rate over the past six months of 18 per cent, and that the growth rate for Ml is in each case running about 10 per cent, ahead of those figures? Why on earth is it that the Government continue to blame the inflation over which they have presided on the monetary expansion of the last Government and are blind to the risks of inflation which will follow from the money supply expansion now taking place?

The right hon. and learned Gentleman shows again in Opposition what the Tory Party demonstrated in office—that it does not understand the money supply. However much he wriggles and tries to reallocate the figures, it is clear that the Government have pursued a responsible montary policy, whereas a Tory Government pursued an irresponsible one.

asked the Chancellor of the Exchequer what further representations he has received about his forthcoming Budget.

My colleagues and I have received many representations, in the form both of deputations and of letters and papers. We are bearing them in mind in drawing up our plans for the Budget.

In view of the many letters from all over the country which I have forwarded to my right hon. Friend, may I ask him to include in his Budget a measure to increase public expenditure in favour of deserving causes such as pensioners and children receiving school meals? Will he stop all unnecessary public expenditure for the over-privileged, including the £1,000 per week pocket money which we give to a parasite like Princess Margaret?

Order. The hon. Gentleman must withdraw that remark. It is not permissible in this Chamber to pass derogatory remarks about the Royal Family. The word "parasite" must be withdrawn.

I am sorry, Mr. Speaker, if my remark has offended you. I withdraw it.

It has not offended me. It has offended the House.

In answer to my hon. Friend, I say that I will, as always, take care to make possible all deserving cases of public expenditure and to cut out all unnecessary forms of public expenditure.

Will the Chancellor congratulate the Prime Minister on his newfound doctrine of listening to public opinion when discussing taxation proposals for the forthcoming Budget with his right hon. Friend? Will the Chancellor find out whether this new-found doctrine of the Prime Minister's relates solely to tax cuts which he thinks might be popular, or will the Prime Minister also listen to the voice of the public on nationalisation, immigration policy, law and order and education policy?

The hon. Gentleman may be surprised to hear that listening to the public is not a new-found doctrine for the Labour Party. Our ability to take note of public views and to lead where leadership is necessary is reflected in the dramatic improvement in our election prospects, as indicated in recent by-elections and in today's opinion polls.

Since one of the bodies which made representations to my right hon. Friend was the national executive of the Labour Party, which has called for a reduction in taxation, particularly for lower-income groups, and a boost to the economy to help construction, health and education policies, may I ask my right hon. Friend to give us a clear indication that he will listen to this advice carefully and, I hope, follow it, particularly since the emphasis is to create employment and to reduce the serious level of unemployment?

As my hon. Friend knows, we have listened in the most literal sense most carefully to all the views put forward to us by the national executive of the Labour Party. We have also listened to the somewhat different views put to us by the general council of the TUC. We shall take them all into account when we come to take decisions on the forthcoming Budget.

Now that the Chancellor has renounced, some time ago, the squeezing of certain unspecified people until the pips squeaked, may I ask whether he is now sufficiently broad-minded to look at the result of the French elections? Will he bear in mind that that result took place in a society and in an economic system in which all the rates of personal tax are more modest than in this country—reaching a maximum of 60 per cent.—where there is no distinction between earned and unearned income in the spurious way in which this Government insists upon, and where there is a much more just economic situation in terms of income, despite certain disparities in incomes at the higher levels?

Perhaps I can inform the hon. Gentleman that the group whose pips I said I proposed to squeeze if I became Chancellor was the property speculators.

Rubbish.

That is the only remark I have made about pips squeaking. Their pips are now too tired to squeak. As for the French election, I note whith great interest that the President of France has made it his first act, following the elections, to call for the type of co-operation between both sides of industry which has already been successfully achieved by this Government. The main casualty of the elections in France was that part of the Government majority which follows the sort of line followed by the Tory Front Bench.

Will my right hon. Friend bear in mind that only this week hon. Members from both sides of the House met the Tory deputy-leader of the GLC, who impressed upon us the need for much more public spending to ease the problems of the inner cities? He suggested that this increased public spending should be via the Budget and North Sea oil. That seemed a genuine appeal. However, is my right hon. Friend aware that on the next day the Leader of the Opposition said that the lion's share of any benefit to the nation from North Sea oil should arise as a result of cutting taxes? Does my right hon. Friend appreciate that it is difficult to know whether that was a genuine expression by the Tory deputy-leader of the GLC or whether it was part of a piece of organised hypocrisy?

My hon. Friend will know that we have already allocated a good deal of money towards renewal of our inner cities. We regard this as having a high priority for expenditure of the benefits obtained from North Sea oil. I take the point that to "blue" all the benefits of the North Sea in a short-lived spending spree, largely by the better-off members of the community, would not benefit the country in any way,

Is the right hon. Gentleman aware that it is a question not of "blueing" North Sea oil money on a spending spree but of whether it is used for public expenditure or cutting taxation? Will the Chancellor clear away the clouds of waffle in the North Sea oil White Paper and say clearly what proportion of the North Sea oil revenues he thinks ought to be used in increased public expenditure?

The hon. Gentleman will know that the Government have already published their public expenditure plans for the next five years and, despite the determined attack by the Tory Party, received an overwhelming endorsement for those plans from the House last week.

asked the Chancellor of the Exchequer if he will reduce the rate of value added tax on power-driven lawn-mowers.

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

Is the Minister aware of the great advantage which would acrue following the reduction of VAT on power-driven lawn-mowers, and, indeed, on everything else? Is he not aware that a return to a flat-rate VAT of 10 per cent. would be greeted with great satisfaction by small businesses and those other unpaid tax collectors, the shopkeepers? Will he confirm that a flat rate of 10 per cent, would raise an extra £600 million in revenue?

It may be that certain small businesses and shopkeepers would welcome a reduction to a flat rate of 10 per cent., although I believe that the difficulties have been exaggerated. The hon. Gentleman will be aware that other Common Market countries have three or four rates of VAT and seem to manage quite well. The disadvantage of doing what he suggests is that there would be an increase in prices, which would not be to the advantage of the British people.

Is the hon. Gentleman's resistance to this proposal part of the Government's job creation programme?

asked the Chancellor of the Exchequer what meetings he has held with widows' organisations in his Budget preparation.

My right hon. Friend the Financial Secretary met a deputation from the National Association of Widows and the All-Party Group on Widows and One-Parent Families on 22nd February.

Is the hon. Gentleman aware that that visit has become almost an annual pilgrimage? Is he further aware of the bitterness felt by working widows when comparing their take-home pay and tax with those of working married women? Will he do something about it in the Budget? Will he consider, for example, relieving tax on widows' pensions or some small earned income relief, which is another proposal put by the widows?

I am aware that certain classes of widow in particular, especially those who do not receive an age allowance because they are under 65 and those who do not get additional personal allowance, suffer as a result of taxation. But it is not true to say that they are taxed in a different way from working wives. The take-home pay may be different for various reasons, but the tax rate at the end of the day is the same.

asked the Chancellor of the Exchequer if he is satisfied that inflation is now under control.

Inflation is falling and in single figures, in sharp contrast to the situation we inherited from the previous Administration, when it was well into double figures and rising fast; but it would be wrong to be complacent.

Does the right hon. Gentleman stick to his claim that inflation was caused by the last Government, who left office in February 1974, but that he had it under control and reduced it to 8·4 per cent, by October 1974? If that claim at the last General Election is true, will he please reaffirm it today and therefore say what has happened since that was the fault of the previous Government rather than of this Government?

As the hon. Gentleman knows, when I referred to an inflation rate of 8·4 per cent. I was referring to the annual rate of the previous three months. Inflation on that calculation is now 7 per cent.

Will my right hon. Friend tell us what the rate of inflation was in February 1974, after four years of Tory Government, and what it was in February 1978, after four years of Labour Government? Can he also say whether he still thinks that we shall be in single-figure inflation by the end of this year?

I cannot give the exact figures, but the inflation rate was 13 per cent, point something in February 1974. That was the situation I inherited from the Tories, along with threshold agreement arrangements which brought about 22 triggers of the threshold, increasing wages and prices by October of the same year. That was the first news to greet me when I arrived at the Treasury. The inflation rate in February this year was 9·5 per cent. It is still falling, and it will be well into single figures right through this year.

In view of the significance of the public sector borrowing requirement in the whole question of inflation, is it the expectation of the Chancellor that during the year in prospect, 1978–79, the PSBR expressed as a percentage of gross domestic product will be lower than that experienced for the year just ending?

I shall give my assessments in my Budget Speech. But the hon. Gentleman exaggerates the importance of the public sector borrowing requirement, or the public sector deficit, in determining the rate of inflation. West Germany's inflation rate is well below ours at this time, yet her public sector deficit, as she defines it, is 5 per cent, of gross domestic product, which is well above our rate.

Does the right hon. Gentleman recall that in his first Budget speech he stated that the biggest single problem left to him by the outgoing Government was a public sector borrowing requirement of £4 billion?

I recall that very well. I also recall that the right hon. Gentleman cuts a very much shabbier figure four years later.

If the Chancellor is right in his insistence on the importance of monetary policy over the past four years, why is he determined that the next Tory Government shall inherit a rate of monetary growth far in excess of his own target of 9 to 13 per cent.? Or will he confirm what the Minister of State has said—that the Government intend to take action to bring the monetary growth rate up to next April below the desired limit of 13 per cent.? Does the Chancellor believe that the consequences of the failure to control monetary supply will not come through in inflation until the Government have left office?

The Tory Government left me with a money supply increase of 28 per cent, as against an increase in money GDP of well under half—indeed, almost one-third. At present, the increase in money supply is roughly the same as the increase in money GDP and will be back on trend by the end of this financial year. It is too soon to be certain whether it will be 13 per cent. or somewhat above. But in West Germany, which the right hon. and learned Gentleman always holds up as the paragon of monetary control, the money supply has been running at an annual rate of over 15 per cent, in the past few months over the general target of 1 per cent, last year. At some time over the next year it is likely to be 2 per cent, above the expected rate of money GDP.

For the purpose of educating both the Tory Party and the monetarists in the Labour Party, as well as the Governor of the Bank of England, will my right hon. Friend enunciate to the House that there is no evidence whatever in this country of a link between money supply and the rate of inflation, except perhaps in land values? Secondly, will he also enunciate to the House that there is no evidence of any link whatever between the borrowing requirement and the rate of inflation or any of the other significant economic factors to which he has just referred?

I am afraid that on this matter I cannot wholly agree with my hon. Friend. There is a link between money supply and the rate of inflation, although the arch-guru of monetarism. Mr. Milton Friedman, explained in a Nobel lecture recently that it was difficult to take a firm view as to how long are the lags in time between increases in money supply and increases in the rate of inflation. The one thing on which all economists of all persuasions are agreed is that the degree to which money supply was allowed to increase in the last two years of the Tory Government was a major factor in inflation over the past three years.

asked the Chancellor of the Exchequer what was the rate of inflation over the financial year 1973–74; and what was the analogous figure for 1976–77.

The date on which data are collected in order to compile the April retail price index does not coincide with the end of the financial year. The index increased by 15·2 per cent, in the 12 months up to April 1974 and 17·5 per cent, in the 12 months up to April 1977. The equivalent figure for April 1978 will, on present trends, be significantly below its level a year earlier.

The Minister has not answered the Question. Does he agree that the average rate of inflation under the Conservative Government was considerably lower than under this Government? Does he also agree that it is very misleading to quote one month—as his hon. Friends have been attempting to do in the last two or three months—when the way to do it is over a complete year?

If they look at the figures, the hon. Gentleman and the House will find that the position on inflation is improving dramatically, and will continue to do so, in comparison with the position in February 1974, when it was rising equally dramatically.

Will the Minister comment upon the Chancellor's earlier reply to my hon. Friend the Member for Oswestry (Mr. Biffen) with regard to the public sector borrowing requirement? Will he confirm that the public sector borrowing requirement has a very important effect, since it poses a choice between the printing of money or the raising of interest rates, which has a severe effect on both investment and employment?

With respect, the trouble with the hon. Gentleman is that he tends to take one single indicator and to look at it in isolation from everything else. That is not the way to judge the economy, inflation or anything else.

asked the Chancellor of the Exchequer if he has any plans to discontinue the use of the halfpenny; and what is his estimate of the percentage of transactions which involve the halfpenny as a price differential.

There is no intention whatever to discontinue the use of the halfpenny. No estimates have been made on the percentage of transactions in which it is used.

As four years of Labour Government have halved the purchasing power of the pound, and as the halfpenny is now worth less than the old ½d., abolished in 1969, and is not worth much more than the farthing, abolished in 1961, would it not be more realistic to scrap it?

No. I disagree with the hon Gentleman. If he looks at the recorded prices of groceries and small household items, he will see that the halfpenny figures in at least 20 per cent., and, therefore, it is still very important.

asked the Chancellor of the Exchequer, assuming no change in the rate of tax, how much revenue he would expect to raise from road tax on cars in 1978–79.

The estimated yield from cars in 1978–79 at current rates of duty is £761 million.

Is the hon. Gentleman aware that there is continuing public concern about widespread evasion of the £50 car tax, which not only loses public revenue but is very unfair to the majority of car owners who pay the tax? What action is the Treasury taking to get cooperation from the Department of Transport and the police authorities to do something about it?

As the House knows, the Department of Transport has announced that a survey is going on to determine the level of evasion. When the results have been looked at and the estimates have been made, no doubt my right hon. Friend will make an announcement to the House.

In his original reply, did my hon. Friend include lorries and heavy vehicles, because the Question referred only to cars? Is he aware that one of the biggest groups of evaders is the "cowboys" who have heavy lorries and that the cost runs into hundreds of millions of pounds? This evasion has been growing for 15 years and the revenue has been losing hundreds of millions of pounds. Why is it that only now my hon. Friend is undertaking a survey?

My hon. Friend is quite right in one respect—that the Question referred only to cars. The total yield in 1979, including lorries and heavy vehicles, is estimated at £1,077 million. Of course there is evasion in respect of all types of vehicles, and the survey will look at that.

asked the Chancellor of the Exchequer what further steps he proposes to take to restrain wages when stage 3 of the present policy ends.

It is too early to make any statement on this subject.

Is my right hon. Friend aware that, while many of us object strongly to the present pay policy and to the anomalies and injustices that are part of it, we would warmly welcome a Socialist incomes policy which would deal with all forms of income and wealth? If we are to have an incomes policy at all, that is the way in which we should be progressing.

My hon. Friend knows that it is the Labour Party's intention to introduce a wealth tax after winning the next General Election with a majority that is adequate to ensure its passage through Committee. I welcome my hon. Friend's support for an incomes policy. I believe that there is growing understanding among the British people and the trade union movement that an unregulated free-for-all is not likely to be conducive to either economic health or social justice.

Does not the Chancellor think that it is made even clearer in this morning's newspapers that the Government's attempt to restrain wages by means of contract clauses was grossly inadequately thought out in detail and in advance as well as being objectionable in principle?

I do not think so. The interesting thing is that the objection in principle comes largely from the Conservative Front Bench, which was heavily defeated when it put its views to the House in successive debates in recent weeks. I am glad to see that both of the main employers' organisations are not prepared to fight the principle of sanctions through such clauses. We have had extensive discussions with them in order to make the proposals a great deal more acceptable than they appeared at first sight.

Will the Chancellor tell the House why it is that the Government have guaranteed to the firemen that they will be restored to comparability regardless of the financial constraints of the day and why he has not made the same promise to the Armed Forces?

We have not yet taken any decision, or announced a decision, with regard to the Armed Forces. The decision in respect of the firemen was welcome to the House in general, although the Conservative Party initially appeared to be pressing the firemen to continue an indefinite confrontation with the Government. The whole House will be grateful for the remarkable success which the Government's pay policy has had during the current round, which makes nonsense of the predictions of explosion which came from the Conservative Front Bench only nine months ago.

In order that the Chancellor does not persist much longer with the illusion that he has total agreement in what he is saying, will he have a word with the Secretary of State for the Environment, who, in an important lecture the other day, said that normal collective bargaining must be restored in order to produce new relativities and differentials, which have become badly compressed over the last four years?

I never expect to have the full agreement of the House, especially from Conservative Members. My right hon. Friend made it completely clear in the whole text of his lecture that collective bargaining must be operated in such a way that it does not lead to the sort of pay explosion which led the Conservative Party to introduce statutory controls on incomes not so very long ago.

asked the Prime Minister whether he will list his official engagements for 23rd March.

In the absence of my right hon. Friend, I have been asked to reply.

Will the Lord President today be replying to the letter from the Communist Party which was sent to Labour MPs inviting them to join in a formal political alliance? What will his answer be? As this is the first anniversary of the Lib-Lab pact, does the prospect of another pact allure him?

I am afraid that the hon. Gentleman has not looked at these matters as closely as he might. If he read the newspapers more fully, he would see that the secretary of the Labour Party has already replied to the letter rejecting any such proposal.

Will the Lord President also take a little time to drop a friendly memorandum to the Prime Minister pointing out that if the Government in a forthcoming General Election campaign were to follow the policies set out in the White Paper "The Challenge of North Sea Oil"—especially the proposals with regard to the National Enterprise Board—they would lead to rightful disaster for the Labour Party?

I reject in total everything that the hon. Gentleman has said, including his suggestion that this might be an appropriate moment in time to send a billet-doux to the Prime Minister.

When my right hon. Friend meets the Prime Minister, will he mention to him that the whole House applauds his endeavours to achieve reasonable co-operation between the Powers of the free world regarding the present economic situation? Will he also mention to him that he ought to see the general secretary of the TUC and perhaps have a world conference held by the Confederation of World Trade Unions, because I am sure that they have a contribution to make as well?

I believe that the trade unions have a contribution to make. Indeed, the trade union organisations of Western Europe have been urged by their Governments to adopt some of the measures which the British Government would like to see adopted much more widely. I believe that the whole country wants to see something really effective done on an internationtal scale and welcomes the initiative that the Prime Minister has taken—and will continue to take—until we get the widespread international action that is so sorely needed.

Does the Lord President support or not support the proposals of his party's Scottish conference to nationalise the 220 largest manufacturing companies?

The Labour Party does not support those proposals. Those proposals, and the proposals made by other sections and representatives of the Labour Party, will be discussed in the normal manner. The manifesto that we shall present at the next General Election will be devised accordingly to the general constitution of the party. But I can give a clear answer to the right hon. Gentleman that we do not accept the proposals that have been made by the Scottish section of the Labour Party.

asked the Prime Minister if he has any plans to seek to pay an official visit to South Africa.

I have been asked to reply.

Can the Leader of the House explain the Government's approach to British investment in South Africa following the Foreign Secretary's speech at Carlisle last Friday when he said that it was Government policy to discourage investment in South Africa? If that is so, what is to be gained by adding to black unemployment in that country?

The hon. Member refers to a speech made by the Foreign Secretary. I would suggest that all hon. Members should study the whole speech, because that speech, made in Carlisle on 17th March, dealt with these matters very fully. We face a painful dilemma over investment and trade with South Africa, but we think that it would be wrong to be economically over-dependent on that link. We believe that fresh policies must be developed in both trade and investment, just as some policies have already been developed in relation to the arms embargo.

When he discusses these matters with the Prime Minister, will the Leader of the House remind him of the code of conduct drawn up by the nine EEC countries? Will he tell the House what plans the British Government are making to monitor that code of conduct and to report the results of the monitoring to the House?

I accept the importance of this matter. This was part of the consideration in the Foreign Secretary's mind when he mentioned these matters. About the way in which the reports should be made to the House periodically, I shall be happy to discuss this with the Foreign Secretary and see how we can assist.

When he considers this matter, will the Leader of the House take account of the views of Chief Gatsha Buthelezi and other opponents of the Vorster Government who have claimed that the growth of the South African economy and employment and prosperity among the Africans are the best ways of exposing the impossibility of apartheid?

There are arguments on both sides of this matter. That is why the Foreign Secretary, in dealing with this in Carlisle, put the matter in a proper sense of proportion. We believe that new policies towards South Africa must be developed and that we must take account of the fact that our dependence upon South African trade must be reduced.

Will the Leader of the House ask the Prime Minister to send a message to the South African Prime Minister telling him that the British Government applaud South Africa's help in the Rhodesia problem? Will he also say that on reflection the Government have decided to give their support to and promote the internal settlement because they feel, on reflection, that moderation is preferable to murder?

Both the Prime Minister and the Foreign Secretary have already made clear to the House the Government's attitude to the internal settlement and the desirability of assisting this with a proper long-term, full-scale settlement in Zimbabwe. We believe that this is the way to move. We welcome any assistance from South Africa in this matter, but that does not mean that there is any departure from the Government's rigid opposition to any form of apartheid that is operated in South Africa.

asked the Prime Minister whether he expects to discuss the trade deficit with the West German Government when he visits Bonn.

I have been asked to reply

Is the Leader of the House concerned not only about our deficit with West Germany but about our deficit with other EEC countries, particularly in manufactured goods? Will he tell those countries that they cannot solve their unemployment problems at our expense? Will he also tell them that failure to take any action could lead to import controls being imposed against them?

The deficit in our trade with West Germany, other EEC countries and, indeed, other countries in the world is a matter of concern. We are doing our best to rectify it. There have been improvements in the balance as a result of improvements in our exports to West Germany. We are seeking to promote these exports as much as possible. The general methods of overcoming these difficulties were discussed by the Prime Minister in Bonn on his recent visit.

As a matter of general policy, will the Government, when unfavourable international economic comparisons are made, spend more time trying to improve our performance than trying to make other countries appear worse than we are?

Certainly we shall present comparisons in the fairest way for all concerned. Maybe that will provoke the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) into occasionally making a patriotic utterance. However, that is a bit too much to hope for. He is too eager to damn everything done by this country, whatever the figures might say.

Does the Leader of the House consider that there is any political significance in the fact that every Western leader today agrees that the worldwide problem of bilateral trade deficits cannot be solved by the free market mechanism? Does he not agree that this development wholly justifies the Socialist case made over the years, that there is now a necessity to plan world trade by interventionist policies? This can be done only if there is total rejection of the free market system in the Western world.

There should be much closer and urgent co-operation, and this is needed to overcome the immediate problems between the nations and Governments to which reference has been made on the Question. If the British Government, particularly at this time, were to turn their back on such discussion, this would be an absurdity. That does not mean that we cannot get long-term arrangements for improving the whole way in which international trade is conducted, although I do not necessarily believe that we should take the line that my hon. Friend has recommended. We need an immediate and major effort to overcome the present problems, and the Prime Minister's efforts in this respect will have the wholehearted support of hon. Members on this side of the House and of the overwhelming majority of people in the country.

Is not my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) right in believing that to a large textent the remedy for deficits lies in the hands of the Government, if only the Government would take the necessary steps to cut taxation and encourage enterprise and effort at all levels in the economy?

We know that the right hon. Member for Leeds, North-East (Sir K. Joseph) and the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) often agree with one another. That is not a compliment to either of them.

Will the Lord President agree that, whichever pair of glasses he uses, there must be some lessons to be learned from Germany and from the way in which the German trade unions have behaved over many years? Would he select some of the best examples and precepts of the German trade union movement that he would like to see followed by British trade unions?

High wages.

The German trade unions have had considerable achievements to their credit over many years, and no one would deny that. The House should take note of the fact that many trade unions in Germany are now urging some of the extensionist policies that many of us wish to see. There is a close conformity of interests between trade unions in this country and in Germany, and we are seeking to foster these developments.

asked the Prime Minister if he will list his official engagements for 23rd March.

I have been asked to reply.

Will my right hon. Friend accept that the employment and industrial problems on Merseyside are special and peculiar to that area? Does he agree that a much more sensitive approach is needed than that which is available under the current regional policy? Will he urge on the Prime Minister the need to take immediate action as an emergency measure and ask him to see a delegation of trade unionists and industrialists from Merseyside to discuss the reinvigoration and regeneration of industry in the region?

I acknowledge, as I did on Monday, that there are special aspects of unemployment in Merseyside to which the Government must give special attention. All the proposals that were made in that debate by my hon. Friends the Members for Ormskirk (Mr. Kilroy-Silk) and Liverpool, Walton (Mr. Heffer) will be discussed with the Prime Minister, and we shall see what action can be taken on those individual proposals.

In view of the fact that the constituency interests of the Prime Minister and the Lord President dictated the Labour Party's policy on steel before the election, will the right hon. Gentleman suggest to the Prime Minister that we should shortly have a debate on steel so that they may both take part and personally retract all the promises they made to steel workers at that time?

I shall be happy to take part in such a debate, as, indeed, I took part in some of the debates with the right hon. Member for Worcester (Mr. Walker) in earlier years. I would be able to point out in such a debate, if it were held, that, if the right hon. Gentleman's policy on these matters had been followed, the whole of our steel-making capacity would have been closed down two or three years ago without a single new industry being provided. We must provide new industry on a much bigger basis. On many matters the right hon. Gentleman can instruct fellow Conservatives with great advantage, but before he makes any further boasts on this subject he should go back and look more carefully at what he said in those earlier years.