asked the Chancellor of the Exchequer whether he will detail those economic factors which will have an upward influence on the retail price index within the next 12 months.

A variety of factors may have an upward influence on the retail prices index over the next 12 months: the level of wage settlements, however, will undoubtedly be of vital importance in deciding whether the index rises, falls or remains around the same level over the period.

Can the Chief Secretary deny that, with inflationary factors already at work in the economy, among which can be numbered the recent expansion in the money supply, the increase in total earnings of 15 per cent. and the rise in mortgage rates, to men- tion only three, the rate of inflation will be rising again before the end of the year and will go even higher in 1979?

I do not know why the Opposition are always apparently so eager to believe that the rate of inflation will be in double figures. The Prime Minister and the Secretary of State for Prices and Consumer Protection have said that for the rest of this year the rate of inflation will be in single figures. I endorse that view. What will happen next year depends on many other factors.

Will my right hon. Friend confirm that if the Government had not opted to put up the employer's national insurance contribution but had opted for other alternatives, including an increase in VAT, those would have had a more immediate and lasting effect on the RPI?

My hon. Friend is absolutely right. This only shows what we get from the Opposition—on the one hand apparent concern about the rate of inflation and on the other deliberate intent to get us to increase it.

Does the right hon. Gentleman agree, however, that the three-month annualised rate is in double figures, that the six-month underlying trend turned sharply upwards in April and has continued upwards, and that even the year-on-year trend has only one better month to go before it too turns upwards, on even the most optimistic assumptions about the future movement of commodity prices and sterling?

What I did notice was the way in which the hon. Gentleman deliberately juggled his question. What he has done is take the three-months basis in one case and the six-months basis in another. With the greatest respect, the position is as I have described it.

asked the Chancellor of the Exchequer if he will appoint a panel of experts to inquire into the reasons why the level of the public sector borrowing requirement or the money supply has had little or no influence over the rate of price inflation during the past five years.

No, Sir. As to the implications of the Question, I have repeatedly make it clear that the prime task of the Government is the control of inflation and that this depends not only on moderation in pay bargaining but on firm control of the monetary aggregates. The monetary record of the last Conservative Government had a massive impact on the rate of inflation during the last five years. I think that that is now common ground between the two Front Benches.

Does my right hon. Friend not acknowledge that he has failed to carry with him the Labour movement, and the trade unions in particular, as well as more progressive opinion among economists, and that his fear that increasing Government expenditure will bring rising prices is not borne out by our experience over the last 10 years, when it has been shown that neither prices nor wages have responded to the level of demand?

With respect to my hon. Friend, I think that he is mixing up the level of public expenditure with the level of the public sector borrowing requirement and the money supply. If the PSBR cannot be financed without increasing the money supply, that will undoubtedly add to inflation. That, of course, is what happened in 1972 and 1973, when the rate of increase of money supply was twice the rate of increase of GDP.

As the Question refers to the public sector borrowing requirement, and in the light of the reports today that the Greater London Council's loan in Swiss francs may have incurred a foreign currency loss of about £25 million already, does the Chancellor accept that there are very severe lessons to be learned by the Government and other public sector authorities about borrowing abroad? What view does the right hon. Gentleman take about the substantial loss incurred in the case of the GLC loan?

That does not have very much reference to the Question on the Order Paper, but I will answer the hon. Gentleman. Of course some foreign borrowing turns out to be very unwise, if the terms and conditions and the currency are not well judged, but it has played a useful role in enabling this coun- try to survive the impact of the increase in oil prices. I am glad to say that we are now repaying foreign borrowing at a very fast pace.

Will my right hon. Friend reiterate the point that the crucial factor here is the way in which the public sector borrowing requirement is financed? Does he agree that there have been considerable problems arising out of the undershooting of Government targets for the PSBR? Have any investigations or studies been undertaken to see why this degree of undershooting has taken place?

I have done my best to attribute the various elements in the undershoot of the PSBR last year to a number of factors. One was the very much faster fall in interest rates than we had earlier expected; another was the fact that public expenditure was well below the limits that we set; another was the fact that we introduced new ways of refinancing export credit. I am as concerned at the failure of public expenditure to expand as fast as possible as I am with a failure of public expenditure to keep within the limits.

Will the Chancellor address himself to the reasons for concern at what is happening to the money supply in today's circumstances? Will he recognise that it is his responsibility that money supply—M3—grew at over 16 per cent. over the last 12 months, that M1 is growing at a much faster rate, and that he is creating these problems for himself by the size of his borrowing requirement and his very determination to expand public spending by 6 per cent?

No, Sir. As always, the right hon. and learned Gentleman is absolutely wrong. The 16 per cent. increase in money supply last year had nothing to do with public expenditure, which was a great deal smaller than expected. In fact, 40 per cent. of the growth in money supply—M3—last year was due to inflows of foreign currency due to the strength of the pound. If it had not been for that, the annual increase in money supply last year would have been 10 per cent. and not 16 per cent. The Swiss money supply figures at the moment are more in excess of their target than ours were last year; so are the German figures. That is having none of the malign effects which infantile monetarists ascribe to it.

asked the Chancellor of the Exchequer in view of the fact that the Government have abandoned their scenario II target for an average annual growth rate of 7·9 per cent. for total manufacturing industry, what is the current growth target for the Government's industrial strategy.

The aim of the industrial strategy is to improve industrial performance. There is no overall quantified growth target but many sector working parties have set quantified targets for their own sectors.

Will the Chancellor assure us that with his abandonment of the scenario III targets—and he has abandoned them—the Treasury has also abandoned its belief in fairy godmothers as a substitute for industrial policy?

I regret to say that one cannot believe in fairy godmothers for long if one is Chancellor of the Exchequer. I know that the hon. Gentleman is very concerned with the welfare of British industry and will be glad to know that industrial production rose by 1·6 per cent. in April and that its level in the last three months was 1·3 per cent. above the rate in the three months before that. In other words, our industrial output is now growing at a very satisfactory rate.

Will my right hon. Friend say how the proposed 2·5 per cent. surcharge on insurance contributions will encourage manufacturing industry to expand?

My hon. Friend may have missed the news. The increase in the national insurance surcharge is likely to be 1½ per cent. rather than 2½per cent. I pointed out in the recent debate that we had a very rapid expansion in private industrial investment during the last 12 months, which is expected to increase at the same rate this year, despite the fact that that was the year when the 2 per cent. surcharge was in force.

Is the Chancellor aware that as a result of his taxation and incomes policies, at a time of record postwar unemployment one manufacturer in five is now reporting a shortage of skilled labour? What sort of industrial policy and strategy is that?

I know that there are shortages of skilled labour, but that is no consequence of the incomes policy. It may well be the case that under free collective bargaining differentials between production workers and skilled workers, particularly in the engineering area, were compressed, but that has not happened in the past year.

asked the Chancellor of the Exchequer if he is satisfied with the growth in output.

The latest figures show output growing at 1 per cent. a quarter. The House will share my satisfaction.

At least we on the Government Benches welcome those figures. Will my right hon. Friend confirm, however, that they are in line with his Budget forecast?

Yes, Sir. If anything, they are slightly ahead.

I welcome the increase in output, but is it not disturbing that our competitors, such as America, Japan and West Germany, have outputs far higher than ours?

I do not know how fast the German output will grow this year, but I notice that the German Economic Institute estimated that it would grow at about 2½per cent. On that showing, our rate of growth is likely to be higher than Germany's.

Would my right hon. Friend characterise that growth as consumer-led or export-led?

Some of it is export, some of it is consumption, and. I am glad to say that a good part is capital growth. But, of course, the output is output in Great Britain—in other words, it is generated by the demand for British goods.

Is it not a fact that manufacturing output in the first quarter of this year was still below what it was during the three-day working week and subsequently below what it was in 1973, and that over the four years of stagnation that the Government have produced, other Governments have succeeded in doing very much better?

I pointed out that this year, on current figures, our rate of growth is likely to be somewhat higher than that of Germany, and also somewhat higher than that of France. Our inflation rate is already lower than that in France and may well be level with that in the United States. Considering the problems that this country has had to cope with in a world recession—problems aggravated by our inheritance from the Conservative Government—I think that we are doing quite well and I think that, when the time comes, the British people will take the same view.

asked the Chancellor of the Exchequer whether he has any plans to renew the powers to control dividends.

I have nothing to add to the reply given to the hon. Member for Stoke-on-Trent, Central (Mr. Cant) on 6th June.

Does the Chief Secretary agree with the evidence given by the Treasury witnesses to the Wilson Committee, to the effect that dividend control has tended to distort the equity market and thus to increase the cost of new capital, which provides new wealth and new jobs?

The hon. Gentleman is quite right. Of course there is something in that, but it must be considered in the wider context of counter-inflation policy.

Will my right hon. Friend bear in mind that if capitalism and capital are allowed uncontrolled rewards there is little possibility of labour, through the trade unions, agreeing to wages being controlled?

I am not entirely sure that I would agree with every syllable of my right hon. Friend's comment, but I shall bear in mind what he says.

Did the statement, a week ago, by the Leader of the House, that the Government had no intention of fresh legislation on this subject, represent Government policy?

The hon. Gentleman should not pick out one or two words from what my right hon. Friend said. He also said that a statement would be made at an appropriate time.

Does my right hon. Friend agree that with all the methods of avoiding dividend control by one-for-one issues, and the rest, all this nonsense about control over dividends is really one of the biggest of myths?

My hon. Friend will no doubt have seen all the figures about the growth of dividends over the last 10 years or so, and will have noted that the actual growth has not been all that great.

Does the Chief Secretary not realise the imperative need for certainty in industry and commerce over this matter? Will he at least give an assurance that, following the gaffe by the Leader of the House, dividend control will either be continued by law or abandoned altogether, and will not be perpetuated by an arbitrary system of blacklisting and economic sanctions?

I will give this assurance to the hon. Gentleman: a statement will be made at the appropriate time.

asked the Chancellor of the Exchequer what was the composite rate of tax charged to building societies for the financial year 1977–78; and how this compares with the likely rate for 1978–79.

24¼ per cent. for 1977–78. No estimate of the rate for 1978–79 can be made until the Finance Act is passed fixing the tax rates and allowances for the year.

Does my right hon. Friend agree that the composite rate of tax is bound to fall substantially this year as a result of the tax changes already made? Does he not also agree that that will bring a substantial financial windfall to the building societies, and, further, that the benefit should be passed on to those people buying houses? Will he make representations to the building societies to see that house purchasers benefit from this tax windfall?

As my hon. Friend will know, the composite rate is fixed not only in accordance with the levels of taxation but on the basis of the assessment of those people who invest in the building societies. This falls to be determined, and the outcome should be known by about September of this year.

If the composite rate does fall, does my right hon. Friend agree that the margin between borrowing and lending rates will be too great, and ought to be reduced in the interests of house purchasers?

My hon. Friend will know that this is always a very sensitive subject, in which the Government are always closely involved. It will be necessary to see the levels of liquidity of the building societies and to make one's assessment in due course, when more information is available.

What does the right hon. Gentleman intend to do about those who invest in building societies but who are not liable to pay income tax, and are charged to income tax by the composite rate and are unable to claim it back?

I understand that problem, and, in the main, those people who choose to invest in building societies also understand it. Many regard the advantages of the building society—the easy form of long-term investment and the way in which money can quickly be withdrawn when required—as offsetting that disadvantage.

asked Mr. Chancellor of the Exchequer in which quarter of 1978 or 1979 he expects the rate of inflation to begin to rise again.

As a result of Government action on pay and prices, the rate of inflation is now likely to remain broadly stable until the end of the year. Beyond that, the outlook depends critically upon the rate of earnings increase after 31st July.

Since every economic commentator, with the exception of the Chief Secretary and the Secretary of State for Prices and Consumer Protection, believes that the rate of inflation will rise at the end of this year, may we assume that the Chief Secretary will be advising his right hon. Friend the Prime Minister to hold a General Election in the autumn, as that may be the last time that the Government will be able to con the people that all is well?

It is certainly not true that all outside, experts—if that is the right word—on these matters believe that the rate of inflation will be in double figures this year. I note the view of Conservative Members, and I also note the hon. Gentleman's urgent desire to test these matters in the country. I shall give appropriate advice to the Prime Minister.

Has my right hon. Friend noticed that in recent years, when we have been talking about the retail price index and inflation, there has been a chorus from Opposition Members referring to 8·4 per cent.? In view of the fact that the figure is now 7·7 per cent., will my right hon. Friend remind us what the figure was when the Conservatives left office?

That is an interesting question, and the figure just happens to be in my mind. It was 13·2 per cent.

Is the Chief Secretary aware that his right hon. Friend the Chancellor of the Exchequer has been quoted as saying that he wants to be to economic forecasters what the Boston strangler was to door-to-door salesmen? Has he informed the Secretary of State for Prices and Consumer Protection of this ambition?

I am sure that my right hon. Friend the Secretary of State for Prices and Consumer Protection will know about the ambitions of every other colleague in the Cabinet.

asked the Chancellor of the Exchequer what recent discussions he has had with representatives of banking and insurance.

My right hon. Friend has frequent contacts, both formal and informal, with representatives of the financial community.

When the Chancellor of the Exchequer next meets the leaders of the banks and the insurance companies, will he be able to confirm not only that the Labour Party has now no plans for the nationalisation of these concerns but that without a mandate so to do it would not propose, in the unlikely event of being returned to form the next Government, to legislate for the direction of the funds of these institutions, no matter what the Wilson Committee may recommend?

We have, of course, set up in the meantime the Wilson Committee, which will be reporting, and which is taking a wide degree of evidence. It would be foolish to produce conclusions while so much work has yet to be done, let alone before receiving the report, which we await with great interest.

I trust that my right hon. Friend and the Chancellor of the Exchequer will take note of the decisions of the Labour Party conference in relation to banking and insurance companies. Even if there is not a full-scale public ownership of these institutions, is it not quite clear that the time has come for greater control over them, in order that we can get the investment where it is needed in this country, in a planned and intelligent way?

I fully understand the point that my hon. Friend is making. I have also noted fully the statement on banking and finance that was made at the conference. The Wilson Committee is at present taking the second part of its evidence—the very interesting part, on the supervision of financial institutions—and will be reporting in due course. That report, together with the vast amount of information that it will bring together, will form the basis of the final plans of the Government in these matters.

Will the right hon. Gentleman assure the banking and insurance world that, whatever the Labour Party conference may say, there will be no encroachment of public ownership on these sectors so long as the Lib-Lab agreement is in force?

I am not sure of the length of life that the right hon. Gentle- man has in mind for the Lib-Lab pact, but, of course, I can confirm quite clearly that it is the Government's view that major structural changes in financial institutions are not necessary at the present time.

Does the Financial Secretary agree that those Labour Ministers and hon. Members who are advocating direction of investment are posing a threat to the ultimate value of the pensions of millions of workers in this country?

I think that the hon. Gentleman is overstating the case. I do not think that the pension funds and financial institutions are over-worried about that side of these matters; I think that they are interested in seeing the information that is being gathered by the Wilson Committee and the full consideration that will be available in due course.

asked the Chancellor of the Exchequer what benefit will accrue to pensioners whose only form of income is the State pension, as a consequence of the Budget amendments carried by the Opposition parties.

None. My right hon. Friend's Budget proposals already ensure that no pensioner whose only income is the standard State pension will be liable to tax this year.

I thank my right hon. Friend for that emphatic reply. Does he agree that the policies being advocated by Tory spokesmen would lead to millions of pensioners being called upon to pay much more through indirect taxation, particularly VAT? Should this not be widely known in the country?

My hon. Friend is absolutely right, and I am sure that he and I will be seeking to ensure that that is more widely known.

What benefit will accrue to pensioners as a result of the increase in national insurance contributions?

If the hon. Gentleman will look at the national insurance contribution increase as an alternative to what the Opposition are suggesting, he will see that it will be much better for pensioners. I bear in mind particularly that he and his hon. Friends voted for two amendments from which pensioners receive no benefit whatsoever. He and his hon. Friends also suggest that we should increase VAT, which would harm the pensioners.

Will my right hon. Friend therefore give an assurance that not only pensioners but workers who have been responsible, by their constraints, for the lowering of inflation, will not carry the imposition of the deficit which now occurs in the Budget arising out of these Tory amendments?

I note what my hon. Friend says. I can assure him that these points will be borne in mind when we seek to meet the deficit created so irresponsibly by the Opposition.

Is not the Chief Secretary aware that the purpose of cuts in income tax is to restore the incentives and to create fresh incentives, which will get the economy moving again and make Britain more prosperous, so that everyone benefits, incuding the pensioners?

That is an interesting point. It would be even more interesting if anything that the hon. Gentleman and the Opposition did in those two amendments helped pensioners or those on low pay.

asked the Chancellor of the Exchequer how much revenue is now expected in the current year from direct taxation; and how much from indirect taxation.

Taking the proposed increase in the national insurance surcharge into account in conjunction with the Finance Bill, receipts in 1978–79 from direct taxes, including employees' national insurance contributions, are expected to be around £27·9 billion, compared with £29·0 billion from indirect taxes, which include employers' national insurance contributions and local authority rates.

In order to cut income tax substantially and put incentives into the economy, when do the Government intend to try to bring about a really massive shift from direct to indirect taxation?

The hon. Gentleman will be aware that there has been a considerable movement as a result of the last Budget. I have pointed out that the burden has shifted in the way that I have described. If the hon. Gentleman looks at the figures, he will see that this is so.

Does my right hon. Friend agree that indirect taxation bears most heavily on that section of the community which can least pay? Is that not the policy of the Conservative Party—to make those people who have least pay more? Inside the next few weeks, should that not be made known as widely as possible?

Certainly it will be my aim to ensure that the information that my hon. Friend has given is made more widely known. Although not as progressive as income taxes, indirect taxes, as a result of certain changes that have been introduced—such as the extension of these zero ratings and certain other changes—are not quite so regressive as they once were.

asked Mr. Chancellor of the Exchequer when he expects agreement to be reached on the sixth review of International Monetary Fund quotas.

Increases under the sixth review were agreed in January 1976. I hope that it will be possible to make substantial progress on the seventh review at the next interim committee meeting in September.

Does the Chancellor agree that an increase in quotas, as a method of increasing international liquidity, is preferable to an increase in the United States deficit? Will he say whether he will support proposals for a substitution account to deal with the dollar overhang?

I certainly agree that one of the most desirable ways of increasing international liquidity, and the lending capacity of the IMF, is an increase in quotas. As the hon. Gentleman knows, I supported the last one, and I shall support a substantial increase now. The IMF is now considering proposals for a limited substitution account which were made at the Mexico meeting, and I shall certainly support it.

While we are on the subject of the IMF, will my right hon. Friend take the opportunity of repudiating the serious charge of deceit made against him by the right hon. and learned Member for Surrey, East (Sir G. Howe) over the question of the standby of June 1976?

I am grateful to my hon. Friend for reminding me of that. Yes, I shall. I cannot accuse the right hon. and learned Gentleman of mendacity because parliamentary protocol would forbid it, but on that occasion he did show the familiar fogginess which he has on matters of fact. The day after the standby was negotiated, I told the right hon. and learned Gentleman that

"if any drawing on them could not otherwise be repaid on the due date, Her Majesty's Government would be prepared to seek further drawing from the International Monetary Fund."—[Official Report, 7th June 1976; Vol. 912, c. 915.]

Mr. Peter Emery.

rose—

Order. I have called Mr. Peter Emery.

Returning to the original Question, in dealing with IMF borrowing, will the Chancellor tell the House what consideration has been given by the Government to the vast amount of United States paper which is being floated on the international market in order to cope with the imbalance of payments in the United States? Will he press the IMF and his European colleagues to make the American Government realise that if this continues it is bound to have an adverse effect on the investment and industrial expansion of the free world?

One of the most worrying features in recent years has been the enormous increase in volume of footloose funds in the Eurocurrency markets. One of the five points on which the Governments attending the Bonn Summit are hoping to reach agreement is a means of achieving greater stability in relation to currency. The point that the hon. Gentleman has made is at the centre of our preoccupations.

The House will appreciate how sensitive the Chancellor is on these matters. Will he understand that on the occasion in question he told the House without qualification that there were no strings attached to the drawing which he was then making. Nevertheless, as subsequently appeared, he was bound to apply to the IMF, as he did. His statement stands on the record as one of deceit and not of candour with the House.

I hope that when I sit down, Mr. Speaker, you will ask the right hon. and learned Gentleman, if those are the right adjectives by which to describe him, to withdraw a remark which I have just proved to have been totally untrue. Using the same words as I used to my international colleagues on that occasion, I told the House something which the right hon. and learned Gentleman denied that I told the House. I made it absolutely clear in answer to my hon. Friend the Member for Birmingham, Handsworth that there were no strings in relation to domestic policy.

You did not say anything about domestic policy.

I made it quite clear that we had agreed to go to the IMF for a further drawing. I shall read out exactly what I said:

"If any drawing on them"

"could not otherwise be repaid on the due date, Her Majesty's Government would be prepared to seek further drawing from the International Monetary Fund."—[Official Report, 7th June 1976; Vol. 912, c. 915.]

Order. Strange as it may sound to the House, I did not hear the Chancellor's last words. Perhaps wrongly, I was my self engaged in conversation. I want to tell the House that the word "deceit", like the word "mendacity"—[HON. MEMBERS: "Lie"]—We shall come to the word "lie". Everyone knows about that. The words "deceit" or "mendacity" applied to any right hon. or hon. Member are unparliamentary expressions. The word "lie" is most certainly an unparliamentary expression. Did the right hon. Gentleman use the word "lie"?

I am grateful for your guidance on this matter, Mr. Speaker. I certainly withdraw the word "lie", in view of what you have said. As the right hon. and learned Gentleman has now been caught out twice in making statements at variance with what he knows to be the facts, I hope that you will insist that he withdraws the word "deceit", which he has now used on two occasions.

This exchange could go on for some time. I certainly withdraw the word "deceit", provided the Chancellor withdraws his earlier use of the word "mendacity", so that it can stand on the record.

asked the Chancellor of the Exchequer what is the most up-to-date estimate of the public sector borrowing requirement for the current year.

asked the Chancellor of the Exchequer what forecast he can now make on the public sector borrowing requirement up to April 1979.

My best estimate of the public sector borrowing requirement for 1978–79 remains the Budget forecast of £8·5 billion.

Bearing in mind that in each of the last two financial years the Treasury has overestimated the public sector borrowing requirement, will my right hon. Friend take immediate steps to increase public expenditure now in areas such as education, where the educational opportunity of thousands of children could be improved by employing extra teachers who are otherwise threatened with unemployment? Will he also initiate a more generous school building programme, which will help to provide jobs for some of the 250,000 construction workers on the dole?

With great respect, much as I should want to achieve the objectives set out by my hon. Friend, I doubt whether increasing the borrowing requirement and increasing public expenditure in the way that he described would help either those people or anyone else in the country.

If the estimate is the same as in the Budget, what has happened to the effects of the amendments made to the Finance Bill in the course of its passage?

As the right hon. Gentleman will be aware, the Finance Bill is not yet through. We do not yet know whether there will be any change to the Budget Statement of my right hon. Friend the Chancellor of the Exchequer.

asked the Chancellor of the Exchequer if he is satisfied with the trend of manufacturing output and consumer spending in the British economy in the first five months of 1978.

The encouraging growth in both these indicators is fully consistent with a steady improvement in the economy.

I appreciate that that is the only answer that the Minister can give, but is that not the same as saying that as a result of the miraculous economic policies pursued by the Chancellor of the Exchequer in recent painful months, this country now hopes its economy to be 55 per cent. of the size of the German economy at the end of this year, instead of 52 per cent.?

I am not sure whether the hon. Member was in the House when my right hon. Friend the Chancellor of the Exchequer dealt with an earlier question and pointed out that due to cutbacks in the German economy ours was growing at a very satisfactory rate by comparison with that economy. That should give considerable satisfaction to the House.

Will my right hon. Friend please note that the finest mark of the success of what my right hon. and hon. Friends are doing in lifting the British economy from the state in which we found it is the constant carping criticism of Tory Members, who become very anguished and upset at the news of any good progress that is made in the name of Great Britain?

I also see the connection between any good news and the disappointment on the faces of many Opposition Members. It is a feature that we may have to live with for quite a time yet.

Is it not a deplorable reflection on this Government's handling of the real economy that manufacturing output today is lower than it was when this Government first came to power more than four years ago?

The hon. Member will have heard the figures for the last month and will be aware that they show very considerable improvements, which we fully expect to be sustained over the period ahead. If the hon. Member is making a comparision with a situation in which the money supply rose by an incredible extent in order to achieve a spurious and temporary productive gain, I should say that our improvement is based on a much firmer foundation than that.

asked the Chancellor of the Exchequer what is the estimate for (a) manufacturing production, and (b) import of goods and services, for the 12 months to mid-1979, based on a projection of existing figures.

The Government's forecasts of manufacturing production and of imports of goods and services were set out in table 4 of the Financial Statement and Budget Report.

Will the right hon. Gentleman tell the House whether that is the main forecast? They were not set out clearly in the Red Book. They were set out in two alternatives—a normal forecast and a stronger forecast. Is it not a fact that in one case—that of imports—it is a weaker forecast that is likely?

I do not think that anyone can doubt that the general level of imports is likely to be higher at a time of expansion than at another time, but it is within the capacity of the forecast that we announced, and we should note, too, the improvements in the other indicators that I mentioned, which give rise to a cautious optimism, which I believe to be entirely justified.

Is my right hon. Friend aware that a little more than 10 years ago 30 per cent. of our imports were finished and semi-finished manufactured goods and that now they represent almost two-thirds of our total import bill? As the party which believes in planning and priorities, does not my right hon. Friend think that we should have a planned trade policy rather than leave it to multinational companies and the market mechanism?

I shoud be more convinced by that statement if I believed that as a result of that we would see a significant amount of investment over such a short period of time. I accept my hon. Friend's point about the high level of manufactured imports. This is a general consequence in most industrialised countries. We need to see that our levels of manufactured exports increase to compensate for this.

Is there yet any glimmering of improvement in output per person employed in manufacturing industry, which has been such an abysmal feature in the past four years?

I have not the latest figures before me. However, the hon. Member will know that I gave the improvements in production as a whole and, bearing in mind the steady level of employment, that obviously presupposes an improvement in productivity, which we must hope will continue and improve still further.

Has my right hon. Friend seen the predictions made in one of the forecasts today about future unemployment? Should not the Government look seriously at the possibility of selective import controls to deal with certain industries, such as our electronics industry? Is not this action which the Government will have to take in the end?

We have been active in promoting selective import controls in certain areas, and there are others that can be looked at from time to time. However, in the main, generalised import controls have been reduced both by international organisations and by Britain.

asked the Prime Minister if he will list his public engagements for 29th June.

This morning I presided at a meeting of the Cabinet. In addition to my duties in this House, I shall be holding further meetings with ministerial colleagues and others.

Will my right hon. Friend find time in a very busy day to reflect further on the talks that he had earlier in the week with American aircraft manufacturers? Does he appreciate that all those who want to see the development of the British aircraft manufacturing industry will be very pleased that he had those talks? Will he consider making a statement about his talks with the McDonnell Douglas Company, because it is very important that we hear the offer being made to Britain by the Americans?

I am obliged to my hon. Friend. The talks were valuable, certainly to me, and they revealed that there is a very big and rapidly growing market for air transport, especially in the United States. We shall have some difficult decisions to take as between the three corporations that we have, and certainly the facts must be laid before the House. I understand that my hon. Friend has the opportunity of a debate quite soon. If he chose this subject, I—and I am sure this applies to the Ministers concerned—would welcome it.

Will the Prime Minister say whether his Government have finally made up their minds about their Budget and, if so, exactly what changes they propose? Is not the only firmness shown so far his support for policies of high taxation and his determination to persist with a levy that will put a tax on exports, a tax on jobs, and a tax on food?

We made up our minds about the Budget in April. Unfortunately, we could not carry the House wholly with us on every proposal. However, if the right hon. Lady is now repenting of her vote and wishes to go back to the position that we announced in April, I shall be very happy to do that. As for the rest, I must say that it is very odd to say that we are in favour of high taxation, considering that over the last two Budgets we have reduced it steadily.

Does the Prime Minister remember saying from that Dispatch Box a few weeks ago that the tax changes that the Opposition had chosen would reduce unemployment, whereas the tax changes that he had chosen will increase unemployment? Why does he persist in policies that increase unemployment, one of which is tax and the other defence policy, which has already cut jobs by 180,000?

As I have answered the right hon. Lady's first question, I quite understand her now moving on to another and entirely different one. I dare say that if she goes on biting for the entire 15 minutes of Prime Minister's Questions, she will score a scratch somewhere. The Government's economic policy is well understood in the country, and it is meeting with increasing satisfaction there.

In his busy schedule will the Prime Minister find time to visit the Cafeteria, where the loyal and unhappy staff have been ordered by their unions to strike, which does little credit to the House of Commons in general? Will he consider opening the catering facilities of No. 10 Downing Street to right hon. and hon. Members who are deprived of catering?

I cannot say that I entirely recommend the second proposal. Hon. Members might find themselves a little hungry now and again. On the catering facilities generally, I have no comment to make, as I have not studied the matter. I am sure that the Lord President will make a statement if necessary.

To be fair, are not the efforts of the Tory Opposition to unbalance the Budget this summer entirely consistent with their profligate financial policies of 1972–73?

Yes, but the Opposition show no signs of recalling that or learning from that, as is shown by their attitude to wage increases and to industrial relations generally.

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

I met representatives of the TUC and CBI when I took the chair at a meeting of the NEDC on 1st February. Further meetings will be arranged as necessary.

When my right hon. Friend next meets the TUC and the CBI will he remind them that the scale of tax cuts proposed by the Opposition could be achieved only through cuts in public expenditure, which would be damaging to industry, to the regions and particularly to the lower-paid? Will he also remind them that their chances of consultation on these matters would be very remote if the Opposition were in power, in view of the fact that the former Shadow Foreign Secretary has indicated that the Leader of the Opposition refused to consult him on foreign affairs? Is that not indicative of the contempt in which she holds everyone who happens to disagree with her?

I do not wish to comment on the internal relationships on the Conservative Front Bench, past or present. There are too many painful sores there.

Before the Prime Minister next meets the TUC and CBI will he reflect that it is now nine years since he sabotaged "In Place of Strife"? In those nine years the purchasing power of the pound has fallen by 65p and there are another 800,000 people out of work. Does he think that the price that the country has had to pay for him as leader is worth it?

The answer to the last part of the question is definitely "Yes".

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

I refer my hon. Friend to the reply which I have just given to my hon. Friend the Member for Rossendale (Mr. Noble).

Will the Prime Minister discuss with the TUC and the CBI the development of the Government's regional policies? In the Northern Region we have once again the highest level of unemployment in the country, excluding Northern Ireland. Is he aware that on Teesside, despite the highest levels of investment and productivity, there is still severe unemployment? Will he consider carefully the suggestion of the Cleveland County Council and the North of England Development Corporation for the introduction of selective assistance to employment intensive industries and for help to service industries in the northern area?

I am aware that the North-East has suffered particularly, because of the structural decline in industries such as coal, steel and shipbuilding. Opportunities for the expansion of service industries should be considered. I believe that the Minister of State, Department of Industry met the Cleveland County Council recently, and he has written the council a long reply in response to its representation. Perhaps I could ask my hon. Friend to study that reply.

When the Prime Minister next meets the TUC will he remind trade union leaders of his own words when he said that he would find it "intolerable and not at all acceptable" that people should lose their jobs because of their political opinions? How does he reconcile that advice with the dismissal by British Rail, without compensation, of 42 employees, two of whom have 39 years of faultless service?

I am not aware of this. Is the hon. Member referring to new dismissals, or is this an old issue?

Forty employees who had been employed when the closed shop came in were dismissed, and two were dismissed when they resigned from the union after the closed shop agreement came in.

This issue has been debated on numerous occasions. It does not alter my general view that people should not be dismissed for their political opinions. However, I am not going into a particular dispute on this matter, any more than I shall do on any others.

asked the Prime Minister if he will list his official engagements for 29th June.

I refer my hon. Friend to the reply which I gave earlier today to my hon. Friend the Member for Kingswood (Mr. Walker).

Will the Prime Minister find time today to give an assurance that the Government will do everything possible next week to repair the damage done to the Scotland Bill by the House of Lords? Does he agree that one of the many advantages of the Scottish Assembly will be that devolved legislation will not have to go through the House of Lords, where many a good Bill has been wrecked beyond recognition by a crowd of political vandals and hooligans?

I can promise my hon. Friend and the House as a whole that the Government intend to ensure as far as possible that the Scotland Bill will be on the statute book by the end of the current Session. The House of Lords has behaved irresponsibly in a number of matters, but I look to the House of Commons to put them right.

On an earlier question the Prime Minister made the silly statement that Tory tax cuts benefited only the rich and would not do any good for the men and women who were out of jobs. If that is so, why is he on the record as saying on 8th June in column 366 of Hansard "The Tory tax cuts will reduce unemployment"? When was he right and when was he wrong?

The hon. Member has quoted me incorrectly. I said that if it was a choice between tax cuts and—

No.

It is no use the hon. Member shouting "No". I know what I said. I said that if it was a choice between tax cuts and seeking jobs we would choose jobs. I do not know what the hon. Member would do, but that is our attitude. Of course it is true that there would have been a small reduction in unemployment as a result of tax cuts, but if we had been able to stick to our original Budget there would have been no change at all and unemployment would have fallen further.

On the matter of silly statements, does the Prime Minister agree that statements from the Conservative Front Bench, particularly in speeches in the country, are becoming increasingly silly every day? Does he further agree that we have had a speech by the hon. Member for Abingdon (Mr. Neave) which suggested that we on the Government side of the House are Nazis, and we have had speeches by the Leader of the Opposition suggesting that we are trying to bring about an East European State? Does he agree that the silliest speech of all was by the right hon. and learned Member for Surrey, East (Sir G. Howe), who wants to set up some sort of spiv outfit in the inner cities?

I am not sure whether the most dangerous speech has not been the one in which the Leader of the Opposition promised free collective bargaining for private industry but suggested that public industries should be kept within some sort of cash limits. If she really does not understand the degree of comparability between skilled workers in public industry and those in private industries I am sure that if she ever has any responsibility, she has a wonderful disillusionment coming.

Will the Prime Minister earn his award for statesmanship by repudiating the harebrained suggestion of his Foreign Secretary that the multi-racial security forces of Rhodesia should be stood down and replaced by the terrorist thugs of Mr. Mugabe, who continue to slaughter black and white civilians alike in Africa? Is it still the Government's policy that they should go ahead along those lines?

Yes, Sir. There is no change in the policy. It is important that those who are engaged in fighting outside the country and who at the same time are members of that country should be brought into reconciliation with the forces that exist inside the country. There will be no long-term peace in Rhodesia until that is achieved. That is the situation which the country must follow up. I hope that the Opposition will give some support to the idea of getting the two groups together if blacks and whites in Rhodesia are to have a future.