asked the Chancellor of the Exchequer if he has any further plans, consequent upon his recent Budget, to increase public expenditure in order to bring down still further the number of unemployed.

My right hon. Friend described his plans in this respect in his Budget Statement.

While welcoming the details of the tax cuts for the lower-paid and the free school milk, and so on, and while knowing that there would be twice the level of unemployment if the Tories were in power—[Interruption.] That always provokes Opposition Members, because it is true. While I welcome the measures that have been taken, may I ask my right hon. Friend whether he agrees with me that the impact on unemployment can be of only the slenderest kind and that it is therefore necessary for a major amount of cash to be pumped into the economy in order to ensure that unemployment is brought down even more than it has been so far?

I certainly agree with the first part of my hon. Friend's supplementary question, but I am afraid that I do not agree with him on the second part. As I pointed out in my speech in the Budget debate, I think that to pump more into the economy might in the short term add a little to output, but I do not think that in the longer term it would be at all helpful to the objective that we both have in mind.

It is true that if one adds all the unemployment benefit that is paid out to the cost of the various job creation and allied schemes, the total amounts to about £1,822 million a year?

I should like the hon. Gentleman to put down a Question about the precise figure, but it is certainly a lot of money.

Will my right hon. Friend confirm that if the inflow of foreign capital in October last year caused an increase in the money supply, the outflow of foreign capital which presumably accompanies the current selling of sterling will reduce the money supply? Should this not give him greater freedom on the public expenditure front?

As my hon. Friend knows, there are many factors to be taken into account in considering this matter, and we shall take them all into account in due course.

Has the right hon. Gentleman any estimate of the figure of the increase in public expenditure resulting the increase of unemployment during the period of office of the present Government?

As the right hon. Gentleman knows, he would need to table a Question about that. It is very difficult to be precise about that relationship, as he very well knows. However, if he cares to table a Question, I shall do my very best to answer it.

Does my right hon. Friend agree that more public expenditure would make a significant contribution to the whole question of unemployment, particularly in the construction industry, which on Merseyside is in a critical condition?

As my hon. Friend will know, we have increased public expenditure on the construction industry, over two years, by about £800 million. I am bound to tell him, however, that the simple fact of putting more money into the economy while disregarding the rest of the factors affecting it would not necessarily be helpful. I think that it is much better to do as we are doing, as my right hon. Friend the Chancellor laid down in his Budget Statement—namely, to go for a sustained growth of output over a long period.

Is the Chief Secretary aware that it is precisely because the Chancellor has allowed public expenditure to rise this year, as compared with last—by 6 per cent., or £4,000 million—that the Budget has so damaged confidence at home and abroad, and that this will have a very serious and bad effect on future employment prospects?

What would have an appalling effect on both the internal and external confidence would be the thought that the hon. Gentleman and his hon. Friends had the slightest chance of ever forming the Government of this country. He knows very well that the fact is that everything that Opposition Members have specifically suggested would increase public expenditure rather than cut it.

asked the Chancellor of the Exchequer when he next expects to meet the TUC.

Friend is in constant touch with representatives of the TUC at the NEDC and on other occasions, but he has no specific date in mind for a meeting at present.

When my right hon. Friend the Chancellor does meet the TUC will he acknowledge that the millions of ordinary working people who have made such a contribution to the fight against inflation will be looking forward to a justifiable relaxation of the reins of constraint and will wish to see a gradual return of their union representatives to a form of free collective bargaining? Can my right hon. Friend give an assurance that the lifting of the restrictions, when it happens, will apply to the public sector as well, and that it will not be discriminated against? In the public sector the restrictions have created many anomalies, which must be ironed out. Those in the public sector are entitled to full consideration.

My hon. Friend is quite right. I am happy to acknowledge the contribution to the fight against inflation by the trade union movement, as are the Government generally. My hon. Friend is also right to point out the increase in the number of anomalies. The Government must, of course, have responsibility for the public sector. It is this that throws in doubt the aims of the Conservatives, because they cannot avoid this. The Government have responsibility for the public sector and for that reason they have responsibility in the matter of pay generally.

Can the Chancellor be persuaded to explain to the TUC when he next meets it why the average working man is paying far more tax today than he was when this Government came in?

I suppose that the hon. Gentleman has in mind income tax. The proportion of income tax is lower than it was a number of years ago. I see that the hon. Gentleman seems to doubt this. May I give him the figures. Compared with the golden days of Macmillan, when the proportion of our revenue paid in income tax was 35·3 per cent., it is now 33·9 per cent. What the hon. Gentleman has in mind is the decline in real take-home pay as a result of the levels of import payments that we have had to make as a result of North Sea oil and other commodity prices.

Is my right hon. Friend aware that the TUC and the Labour Party are still pressing for a full restoration of the cuts in housing, health and education, particularly because of the massive unemployment? Secondly, we hope that the action promised by my right hon. Friend the Chancellor—or, rather, hinted at by my right hon. Friend—will take place this summer.

I note the regular concern that my hon. Friend brings to these matters. To the extent that it is possible to bring about these increases—and we have been very successful in these areas in the past—I accept much of what he says, but he must bear in mind that this expenditure can only go hand in hand with our economic recovery. That must be the prime motive force behind the kind of expenditure that he wishes to see and that I wish to see, too.

Following the point made by my hon. Friend the Member for Croydon, South (Mr. Clark), will the right hon. Gentleman confirm that at the time of the last Conservative Budget the percentage of the pay packet of the average family with two children being paid in income tax and national insurance was 21 per cent., and that after the Budget that this Chancellor has just introduced the percentage is still in excess of 25 per cent.? For those on twice or three times average earnings the increase in the bite taken by taxes is even larger.

I am fully aware of the credit that the right hon. and learned Gentleman seeks to claim as a result of the tax reductions of the Chancellor of the Exchequer of that time, Anthony Barber, but the right hon. and learned Gentleman knows and I know how that was paid for. It was paid for by the gross inflation of the money supply, which is still a matter of concern and a matter on which the Conservatives continually fight battles, not against us but against their own predecessors.

asked the Chancellor of the Exchequer what assumption he has made in his Budget judgment of the overall increase in earnings in the year from August 1978.

I refer the hon. Member to the Financial Statement and Budget Report.

I am grateful to the right hon. Gentleman for that reply. Is he aware that the Financial Statement makes it clear that the Chancellor is assuming pay increases at an average of one-half the present pay round levels, which means not more than 7 per cent.? As this is less than the expected rate of inflation, is he telling us that the British people, under Socialism will again, next year, be worse off?

No, but I tell the hon. Gentleman that he wholly misunderstands the purpose of what was said. It would mean not a fall but an increase in real living standards, as has been going on over the current pay round. What matters over the period after the current round is that there should be moderation in pay settlements. This is understood by the TUC, and I have no doubt that in co-operation with it, of the sort that we have had before, we shall achieve our objective.

Does my right hon. Friend agree that the Opposition's advocacy of substantial increases in the pay of the Armed Forces and the police, at the same time as the Opposition indicate that they intend to cut public expenditure should they achieve office, would mean a cut in hospital and health services?

I agree with my hon. Friend, but I am never surprised at the irresponsibility of the Conservative Front Bench. My hon. Friend is right, but the Conservatives will never spell out precisely what they would cut. Perhaps one day they will tell us.

asked the Chancellor of the Exchequer what formula he employs for determining the relationship between import prices and wage costs.

The formula is rather complex. It begins … "ERPR over ERPR to the power of minus one equals, Z square bracket 0·5 sigma Alpha 1, where I equals 0 to 2, bracket, PR over PR to the power of minus 4 minus one". It goes on a lot further. I therefore think it might be better if I refer the hon. Member to the publication "HM Treasury Macroeconomic Model Technical Manual 1977", a copy of which is available in the Library. The formula that he wants is set out on pages 8A, 4, 5 and 6.

I am much obliged to the Chief Secretary, but the formula is also contained in a somewhat abbreviated form in his latest Treasury working paper. The question that I wanted to put to him was this: as changes in the exchange rate inevitably feed through to domestic costs and prices, and as we now have a much clearer understanding than we used to have of the way in which these offset any initial change in price and cost competitiveness, is it not the case that if the Government were once again to embark upon a policy of repeated devaluations, such as some of their Friends have ben suggesting to them, any resulting gain in competitiveness could be obtained only at the cost of accelerating inflation?

I do not agree with what the hon. Gentleman says. Of course, changes in the exchange rate have an effect on inflation, but this is not the only element in industrial costs. A major element in industrial costs is, of course, pay. That is why we need, and hope to achieve, moderation in pay settlements, which will help everyone on both sides of industry and in the country generally.

If that is how the Treasury does it, is it surprising that its macro-economic advice has been persistently wrong?

I am surprised at the right hon. Gentleman. I would have thought that he at least would have understood it.

Is my right hon. Friend aware that he did not read his brief entirely correctly? Neverthless, the point made by the hon. Member for Hazel Grove (Mr. Arnold) is a complete parody of the Treasury working paper. That working paper shows that there is a very long-lasting devaluation effect, which could improve the balance of payments by about £4,000 million a year four and six years after a 10 per cent. devaluation?

I am happy to pay tribute to my hon. Friend as another who will understand these complex figures. But he was quite wrong when he said that I read the answer incorrectly. I read it quite correctly. I have it here, and I should be happy to read it again if it pleased the House. I take my hon. Friend's point about the paper to which he referred, but the consequences for the balance of payments and many other matters depend on the time extrapolation as well as many other factors.

asked the Chancellor of the Exchequer what proportion of total revenue is raised by indirect taxation in each of the member countries of the European Economic Community.

With permission, I will arrange to have the information printed in the Official Report.

Is it not true that the standard rate of VAT, for example, is almost twice as high in the other member countries of the EEC as it is here and that in France, for example, VAT is charged on food, passenger transport and fuel? Therefore, is not the logic of the argument for a shift from direct to indirect taxation that either the rates at which indirect taxation are charged rise, which is inflationary, or that the net is spread ever wider to cover more and more essential goods and services, which is regressive, or a combination of the two?

My hon. Friend is right in drawing attention to the considerable variations in the incidence of the value added tax in many other countries. There is a very wide range indeed. But I point out that the amount of indirect taxes collected in Denmark, Luxembourg and the Netherlands is less than ours therefore, we are not so much out of line with what applies in many other Community countries. As for the regressive incidence of the indirect taxes, it is not as much as it used to be.

Is the right hon. Gentleman aware that the working man with two children in this country on average wages pays more in direct tax than any other comparable worker in the Community? As the right hon. Gentleman has also told us of three Community countries in which indirect taxes are lower than in this country, is he proud of the burden of taxation on our working people?

The consequence of low indirect taxation is relatively high direct taxation, because those are the two elements in total taxation. My right hon. Friend the Chancellor of the Exchequer has accepted that there should be a move from direct to indirect taxation in the way that he has announced. As for the total burden, this has to be taken into account with the changes that were made in the Budget, which amount to a reduction in taxation generally.

Will my right hon. Friend confirm that Britain's net contribution to the EEC for the current financial year will be £750 million, which is equivalent to 2p off income tax? That is the measure of the contribution that this country makes to Europe through direct taxation.

I am aware of my hon. Friend's continual concern with the problems of the Community, but this is a matter for another Question, and I urge him to seek his reply there.

I was happy to note that the Financial Secretary repeated the statement of the Chief Secretary that VAT is not nearly as regressive as had been thought. In view of that statement, and the statement of the Chancellor of the Exchequer, which he repeated, that there will have to be a shift from direct to indirect taxation, when can we expect that shift to take place?

The hon. and learned Gentleman will have to wait for developments in the economic situation.

asked the Chancellor of the Exchequer at what percentage rate he expects consumption to be rising in the second and third quarters of the current year.

My right hon. Friend's forecast of the economy, published in table 5 of the Financial Statement and Budget Report, suggested that the real value of personal consumption in the second half of the year would be 5 per cent. to 6 per cent. higher than a year earlier. Forecasts of individual quarters are not published.

But is it not the case that in the Budget Report, in projecting the figures for consumption and also the critically related figures for imports, the Treasury has abandoned the use of its own model and has preferred to rely on the middle range of views of a number of economic forecasters—to use its own language? Doubtless this includes astrologers as well as Greek scholars, but why has the substitution been made?

I am always glad to hear that the Treasury from time to time abandons some of its models. I think that the point that the hon. Gentleman was trying to make was that there is a danger that when an extra amount of money is put into the economy, some of that will go into imports. This we accept, partly because our industry has not been able to compete as well as it should with the industries of our competitor countries.

Given the fact that, if we deduct the cost of fuel, two-thirds of our import bill is now made up of finished and semi-finished manufactured goods, will my right hon. Friend give us an indication or guesstimate of how much of this increased consumption will find its way into the import of finished and semi-finished manufactured goods? Will he, even at this late hour, consider introducing selective import controls on those goods?

As to the amount of money that will go into imports, the October measures and the Budget measures in April meant about £3,000 million extra personal spending power. Of that amount, in 1978–79, the estimates—I agree that "guesstimates" might be a better word—are that about £500 million to £700 million will go into imports. That is not just semi-manufactured and manufactured goods but all imports. That is the kind of proportion in 1978–79.

asked the Chancellor of the Exchequer what is the latest annual rate of inflation.

In the year up to March 1978 the retail prices index rose by 9·1 per cent. I shall not be satisfied with our progress until our inflation rate is down to the level of our international competitors.

As the Chancellor of the Exchequer stated on 15th July last year that the double-figure increase in earnings would mean double-figure inflation, what prospects are there for inflation with aggregate earnings running at 14 per cent.?

First, we do not know what aggregate earnings are running at. But the hon. Gentleman is surely aware that although earnings represent a major part of industrial cost, they are not the only element. Indeed, it will be clear to him that that is the case, because we have a 9·1 per cent. year-on-year rate of inflation.

What prospects are there for inflation if we are to remove all control of prices, as the Opposition want?

I never try to make forecasts about what would happen if we did what the Opposition wanted. What we know is that the rate of inflation, year on year, will be down to 7 per cent. by this summer, and should stay there throughout the rest of this year.

Has the Chief Secretary noted that the almost unanimous reaction to the Budget has been that rising public expenditure, combined with the consequential fall in the international value of sterling, is likely to bring about a rising rate of inflation from the second half of this year?

I know that the hon. Gentleman, when not in the House, spends most of his time in the City, and that it may be the view that he hears there. The fact is that the rate of inflation next year should continue to decline, but it will do so only if we have moderation in pay settlements. It will also depend, of course, on what happens to the growth of world trade and to import prices. The simplistic view that the hon. Gentleman and his friends in the City seem to be taking is a misleading and wrong view of what is likely to happen.

asked the Chancellor of the Exchequer what representations he has had in connection with abolishing or reducing investment income surcharge on income derived from compensation awarded by the courts.

My right hon. Friend has received occasional representations to this effect.

Since this compensation is awarded by the courts to someone who, by definition, has suffered great misfortune, perhaps bereavement, certainly resulting in a substantial loss of income, what conceivable moral justification is there for applying a penal rate of taxation on the interest on such sums?

Several problems arise in connection with this matter, but we hope to be able to deal with certain aspects of it. I am sure that these matters will be brought up during the Committee stage of the Finance Bill.

Arising out of the Financial Secretary's reply and the anomalies that have been disclosed as the result of my hon. Friend's Question, and in view of the Labour Party's continuing commitment to a wealth tax, does the Financial Secretary not feel that there may be a case for the total abolition of the investment income surcharge?

The views of the Opposition seem to be curiously divided on this matter. If the hon. and learned Gentleman is now saying that it is the Conservatives' intention to abolish the investment income surcharge, I should have thought that that would be a matter for his right hon. and learned Friend the Member for Surrey, East (Sir G. Howe). If the Conservatives draw no distinction between money that is in the form, say, of inherited wealth or acquired assets, and that which is obtainable by the work of the individual, with the consequential expenses incurred in earning a living, I can only say that that is not the view of the Government.

asked the Chancellor of the Exchequer when he next intends to meet the Governor of the Bank of England.

asked the Chancellor of the Exchequer when he intends next to meet the Governor of the Bank of England.

My right hon. Friend maintains close contact with the Governor of the Bank of England, meeting him on a regular basis and also as and when circumstances require.

Will the Minister tell the Governor of the Bank of England that if the Government do not accede to the SNP demand that there be a 2p cut in the standard rate of income tax, the Budget strategy will be in ruins? Does the Minister understand that the SNP, unlike other parties in the House, is in deadly earnest about this?

After the Garscadden by-election, I am not sure whether the SNP is in a position to make demands on anybody. Indeed, after the next General Election there will be fewer SNP Members here to make such demands.

In view of the welcome given by industry to the more competitive pound, will my right hon. Friend instruct the Bank of England to take an equally relaxed view, and make it clear that, far from spending £100 million per day from the reserves, it should neither raise interest rates nor use money from the reserves in futile and damaging attempts to prop up the exchange rate?

My hon. Friend's views on this matter are well known. It is not true to say that the whole of industry always welcomes the depreciation of the pound. Some companies do well and some do not, as a result of it. In our case the main problem is not price competitiveness but, rather, the quality, design and nature of the products that we sell. If we can make them better, we shall solve our industrial problems.

Do the Government these days have a policy on exchange rates? If so, is the decline in the value of the pound since the Budget inconsistent with it?

The Government do have a policy on the exchange rate, but I cannot tell the hon. Gentleman.

Is my right hon. Friend aware that more than 100 of his right hon. and hon. Friends have put their names to a motion asking for statutory powers for the Council for the Securities Industry—the new Council which is to supervise the City? Will he consult the Governor of the Bank of England about this matter and see whether statutory powers, or at least public participation, can be introduced in respect of this body?

I am well aware of the motion that has been put down. My hon. Friend will appreciate that this is primarily a matter for my right hon. Friend the Secretary of State for Trade, who, I believe, has had consultations with the Bank of England about this matter.

When he next meets the Governor of the Bank of England, will the Chancellor announce when the Government intend to keep their promise to repay the first £1 billion of the IMF loan? Until such loans are repaid, the Government are under an obligation to carry out the economic policy that was imposed when the IMF made the loan.

As the hon. Gentleman will know, the Government are repaying money that they borrowed from the IMF. I am sure that he and his hon Friends welcome that development.

asked Mr. Chancellor of the Exchequer what is his estimate of the additional amount of income tax which will be paid in 1978–79 as a result of the increases in national insurance pensions and benefits announced on 12th April 1978.

About £40 million.

Can the right hon. Gentleman confirm that well over 1 million people will be liable to tax this year who were not liable last year? Can he tell me how many, in respect of that figure, will be retirement pensioners and widows?

I cannot give the hon. Gentleman the exact figure for the percentage among retirement pensioners and widows, but he will appreciate that the proposals in the Budget to increase personal allowances and introduce a reduced rate band are in the main more beneficial to retirement pensioners and widows than reducing the standard basic rate of income tax. Since he is concerned about this matter, I take it that he will not be supporting the views put forward in his party for a reduction in the basic rate as opposed to a reduced rate band and increased allowances.

In view of the right hon. Gentleman's last answer, is he not ashamed of the fact that we are one of the few countries which charge income tax on war widows' pensions?

This is a complicated matter. Of course, 50 per cent. of the pension is not now so charged. I think that the basic principle is a right one—that income should be charged to income tax from whatever source it comes. The way to deal with these problems is to increase thresholds and try to reduce the rate of tax that we charge rather than to exempt some incomes and not others.

asked the Chancellor of the Exchequer which countries now have a higher top rate of tax than 83 per cent. other than those countries which incorporate local rates or taxes into their general tax structure.

The countries known to have top rates of over 83 per cent. on employment income, if we leave local income taxes out of account, are Algeria, Egypt, Portugal and Tanzania.

Does the Minister feel that that answer indicates the depths to which the Government have brought the economy of this country? Was the Chancellor of the Duchy of Lancaster correct in saying at the weekend that the Chancellor of the Exchequer agreed with him that a reduction in top rates of tax was overdue and would be implemented soon?

If one takes local income tax into account there are a number of developed countries that come into the category as well. As for the highest rates of income tax, the Chancellor of the Exchequer has said from time to time that he looks forward to easing this burden when circumstances allow.

asked the Chancellor of the Exchequer when he expects to introduce his next Budget.

I have nothing further to add to what my right hon. Friend said in the Budget debate on Monday 17th April on the possibility of introducing further measures this year.

As the Chancellor's thirteenth Budget, like all his others, has again failed to provide the incentives to restore prosperity and jobs, will the Government at least support the Conservative amendments, which will go some way to making this a Conservative Budget?

I am not sure how the hon. Gentleman can say that the Conservatives will deal with the problems when the tax reliefs have not yet worked their way through. When they do, I am sure they will be beneficial. I do not yet know what kind of irresponsible amendments the Conservatives will be tabling.

Will my right hon. Friend tell the Chancellor, when he introduces his next Budget, to take account of the fact that public expenditure has been reduced by more than £1,000 million, due to the cash limit methods introduced in 1976–77, and that all the present estimates of the outturn this year are that the shortfall will be even greater than that figure?

I think that my hon. Friend misunderstands the working of the cash limits system. Only about one half of the shortfall in 1977–78 relates to cash-limited expenditure. In any event, I hope that my hon. Friend will agree with me that when we fix our priorities in expenditure we want to try to ensure that those priorities are met. Of course, I do not welcome a massive underspend. What I would not welcome either would be an overspend that resulted in our own priorities being put out of line.

Will the Chief Secretary take this opportunity to apologise to the House and to the country on behalf of himself and the Chancellor for the fact that their irresponsible talk, subsequently repudiated by the Prime Minister, of a further Budget in July has knocked thousands of millions of pounds off the value of Government bonds and industrial shares and weakened international confidence in sterling?

I can only tell the hon. Gentleman that he and his hon. Friends, and those who seek to misinterpret words that have been spoken in this House, do much more damage than any Labour Member could ever do.

asked the Chancellor of the Exchequer how many letters he has received from members of the public on the subject of his Budget Statement of 11th April.

About 100 a day.

Will the Chancellor make it plain, when answering these letters, that the Tory slogan "pay as you spend" really means that Conservatives want to transfer the burden of taxation from the rich to the poor—particularly to pensioners and those who are not paying income tax at present?

My hon. Friend's assumption will be tested in due course during the Committee stage of the Finance Bill. Certainly, we have sought to ensure that the burdens of taxation are shared equally, bearing in mind the problems that we inherited. The country as a whole has come to understand that and is grateful to the Government for the way in which they have acted.

Does the Minister think that a cut of 1p in the standard rate of income tax would so destroy the Government's Budget strategy that the Chancellor and Prime Minister might put their heads together and decide that it would be too much for the country to stand, and that a General Election would be necessary? If 1p is not enough for that, would those on the Treasury Bench get toegther and decide how much would have to be cut from tax before a General Election was needed?

We shall come to all these questions in the Finance Bill debates. The Budget judgment itself is a matter that cannot be quite so easily tampered with as some hon. Members, without the necessary experience, might suggest. When one makes changes one must take account not only of the total amount but of the phasing, to ensure that the money coming in is in line with what is required, at the right time. Otherwise one may find that there are certain distortions. I urge Opposition Members to study this more effectively than they have in the past.

Does the Financial Secretary agree that we should try to bring in a different direct tax system? Is it not a fact that at present, in order to give £100 in tax rebates to a person on £2,500 a year, we also have to give £750 to a person on £25,000 a year?

I am aware of some anomalies and problems in the present taxation system. I urge my hon. Friends to take account of the fact that there would be greater difficulties if we were to change these fundamental matters in the way that has been suggested by professors and others. These are complicated matters, and one must bring about changes to meet particular problems. The restructuring of the taxation system needs much more careful consideration.

asked the Chancellor of the Exchequer what plans he has to meet representatives of the City of London in the near future.

My right hon. Friend has no plans to meet representatives of the City of London in the immediate future.

Will my right hon. Friend say what measures we shall take against those sections of the City which once more seem determined to sell the pound short, which would fuel inflation at the expense of the nation? That seems a queer form of patriotism to me.

Many sections in the City seem to react in a short-term way to any policy charges. Indeed, I sometimes think that, on average, there are more manic-depressives in the City than in other parts of the community.

Is the right hon. Gentleman aware that, none the less, there are some uncertainties about Government policy which are causing difficulty and which we would do well to resolve at an early opportunity? Can he therefore indicate what the Government's policy is in respect of curbs on dividends when the present statutory constraints run out?

The policy was clearly enunciated by my right hon. Friend in a Written Answer. As the hon. Gentleman knows, it is that if action is not taken—if more measures are not introduced to the House—the present statutory restrictions will be lifted. That is the answer that my right hon. Friend gave. The hon. Gentleman must wait and see.

If my right hon. Friend does at some time meet representatives of the City, will he ask them not to act like frightened fillies at the sight of a stallion in the next field whenever my right hon. Friend, or any other of my right hon. Friends suggests that following a Summit meeting there might be further proposals to help the economy of this country? Will he also ask them actively to encourage the use of the money that is lying around in the City for investment in this country?

My hon. Friend's second point is quite right; there seems to be a general desire in the City to invest any available money abroad. Over the years it seems to me that the City has paid more attention to foreign investment than investment in this country. That is to be deplored.

Will the Minister of State make clear what the Government's policy is with regard to dividend restraint?

I have answered that question, although it was not on the Order Paper. The policy remains as my right hon. Friend the Chancellor mentioned to the House in a recent Written Answer.

asked Mr. Chancellor of the Exchequer what is the current number of firms on the blacklist and subject to discretionary sanctions for having made payments to their employees in excess of the voluntary pay guidelines.

Thirty-one.

Having now stuffed their objectionable contract conditions down the throats of British industry, why do the Government still need to keep the secret black list as well?

It is actually rather interesting. When we debated this matter we were told that we should publish the names of the people on this black list. We said that we would write to the firms concerned stating that if they were agreeable we would publish the names. Out of the numbers to whom we wrote, 16 replied and only one agreed.

Are there any large firms on this black list, or are they all small firms, which are easy to bully?

No, there are both.

asked the Chancellor of the Exchequer if he is satisfied with the operation of the Building Societies Act so far as it relates to the protection of investors.

This is one of the questions that we shall be considering when inquiries into the irregularities at the Grays Building Society are completed. Meanwhile the hon. Member will have noted that the Building Societies Association has undertaken that the Grays shareholders and depositors will not lose their money.

I pay full tribute to the Building Societies Association in general and the Woolwich Equitable in particular for their action in the aftermath of the Grays Building Society affair. Will the Minister make sure that the legislation, which was introduced nearly 20 years ago, for the protection of building society investors remains adequate in the light of recent events?

The hon. Member is right. Section 43 of the Building Societies Act 1962 covers cases of this kind. Discussions are going on with counsel and others with a view to putting the scheme into operation to safeguard depositors.

Will the Minister confirm that the Government's present so-called guidance to building societies about the level of lending is unlawful, arbitrary and unjustified by the Building Societies Act, or any other lawful authority? It is particularly unfortunate because it is forcing building societies to buy gilts, which is against the whole spirit of their establishment in the first place.

These guidelines are not unlawful; they have been arrived at by voluntary arrangement and agreement between the building societies and the Government. I see nothing unlawful in that.