asked the Chancellor of the Exchequer what representations he has received in favour of financing the BBC from the Exchequer.

Apart from some of my hon. Friends, very few.

Does not my right hon. Friend agree that financing the BBC by means of the television licence is an extremely unfair and unsatisfactory system and that many people, especially the retired and low-paid workers, find it extremely difficult to pay the current licence fee? Does he not also agree that the administrative costs are very high and that the evasion level is growing? Will he join with his right hon. Friends in the Home Office in an urgent and proper investigation into how the BBC can be financed from the Exchequer?

I agree with some part of what my hon. Friend said, but I am sure that he will recognise that any of the alternatives also raises problems. My right hon. Friend the Home Secretary has indicated that he has initiated studies which, as my hon. Friend will know, will include other methods of financing the BBC out of taxation. All these matters will be discussed, though entirely without commitment on the Government's behalf.

At the end of those proposed studies, will the Chief Secretary bear in mind the need to resist the siren calls for doing what the hon. Member for Sowerby (Mr. Madden) suggests, first, because television is not a social service, secondly because United Kingdom licence fees are well below European levels and could usefully be raised, and, thirdly, because there is always the danger of political control if television is financed in the way suggested?

I know what the hon. Gentleman says. I never think of my hon. Friend's requests as being siren calls. He puts his requests assiduously and well. I do not necessarily agree with all the points that he makes. If we are to have a study, let us have it and see what the results are.

asked the Chancellor of the Exchequer what is the present level of inflation.

asked the Chancellor of the Exchequer what is the current rate of inflation.

The year-on-year increase in the retail price index for December 1978 was 8·4 per cent.

Has my right hon. Friend noticed that there is no pay explosion at present, as recent figures have indicated? If there are agreements on phased comparability awards in the public sector, will he be able to consider a cut in interests rates in the near future?

As to the first question, there is certainly no pay explosion. On the other hand, the average of settlements is somewhat above that envisaged in the Government White Paper last year, and in time that is bound to have its effect on prices. On the second question, I am not clear about any necessary relationship between comparability awards and the increase in the minimum lending rate.

Does the right hon. Gentleman accept that the attainment of the Prime Minister's objective of an inflation rate of 5 per cent. or less within three years depends primarily upon the contents of his Budget this year and next?

I am grateful for the right hon. Gentleman's confidence in my durability in this office. The contents of my Budget this year and next will, of course, include relevant factors, but I do not share the right hon. Gentleman's view that what happens to pay settlements depends wholly on what happens to the money supply. If that were the case, the gross excess in money supply in Germany and Switzerland would have consequences for the inflation rate in those countries, of which there is no sign.

Does my right hon. Friend still hold to the view put forward by the Prime Minister at the Labour Party conference, namely, that, if pay settlements cannot be kept within the 5 per cent. norm, the Chancellor will have to take budgetary measures to correct the situation?

I have said on many occasions, both in this House and elsewhere, that the Government will stick to their fiscal and monetary policy. In recent weeks we have proved our resolve in both these regards, and I think that is one reason for the stability of sterling at the present time.

May I underline the point with which the Chancellor last dealt by asking him to confirm his acceptance of the advice of the Governor of the Bank of England today that it would be fatal to accommodate inflationary pay settlements by relaxing either monetary or fiscal policy? In view of the fact that at least two large sections of public sector workers have now received pay settlements of 9 per cent.—plus 7 per cent. for productivity in one case and an unknown sum in the other—does he not recognise that if fiscal policy is to be kept under control it will be essential for him to abandon his plans to increase public spending next year?

I am grateful to the right hon. and learned Gentleman for drawing my attention to the speech made by the Governor of the Bank of England yesterday. I hope that he noted the welcome which the Governor gave to the joint TUC-Government statement yesterday, which was in sharp distinction to the crabbed response of the right hon. Lady and the right hon. and learned Gentleman on television last night. As to pay settlements and fiscal policy, I have made it clear on many occasions—indeed, I did so a moment ago—that the Government intend to stick to their fiscal and monetary policy. We have proved our will and ability to do so.

asked the Chancellor of the Exchequer if he is able to estimate the date of publication of the Wilson committees' report on City institutions.

I understand that the committee on the functioning of financial institutions hopes to complete its work in the latter part of this year.

As there is widespread expectation that that report, whenever it appears, will recommend some degree of direction of the investment of the institutions, and in view of the recent speech of the Chief Secretary to the Treasury in which he said that such direction "was not on", will not the Chancellor have great difficulty in implementing this report, no matter when it is delivered?

The hon. Gentleman should not pay too much attention to gossip which from time to time he reads in newspapers. As to what my right hon. Friend the Chief Secretary has said, I cannot recall any occasion on which I have disagreed with him since we both entered the Treasury five years ago.

Will my right hon. Friend tell the House why it is that this committee is not examining those financial institutions which operate in the United Kingdom but which are registered in the Channel Islands or the Isle of Man? For example, recent figures for total companies' distribution have shown that there is one company registered in Jersey for every six of its population, whereas in the United Kingdom the ratio is 1 to 72.

I am afraid I am not able to say precisely what the Wilson committee is examining. It is an independent committee established by the Government. However, I have no doubt that it is examining all matters which are relevant to its terms of reference.

Will the Chancellor acknowledge that one of the benefits of setting up the Wilson committee has been the quite outstanding quality of the evidence submitted by City institutions?

I would certainly go so far as to say that one of the benefits of the Wilson committee's investigations has been to elicit explanation and description from City institutions which previously have preferred to keep their doings, shall I say, discreetly covered.

asked Mr Chancellor of the Exchequer if he is yet able to announce when he expects to present his next Budget.

An announcement will be made in due course.

Should not the Chancellor tell us now when he next expects to punish the British people for his irresponsible overspending? Will it be before or after the election?

I suspect that I shall do that when the hon. Gentleman stops beating his wife.

Will my right hon. Friend say whether the studies about switching television licensing to the Treasury will be completed in time for any Budget announcement? I am sure he will recognise that many of the anomalies which at present cause severe difficulties would be very welcome if it could be indicated that during the current year something will be done about the matter. Will he assure the House that in any case the Budget will not be a hair shirt Budget?

The time when the report will be submitted is a matter for my right hon. Friend the Home Secretary. Of course, I shall take account of all relevant considerations in framing my Budget. Whether the vestment is made of hair, silk or some other fabric, remains to be seen.

In preparing for his Budget, what allowances is the Chancellor making for the effect of recent events in Iran on the British economy? In that Budget, what specific plans is he making to compensate for higher oil and gas prices, for the loss of major export contracts, for the wiping out, perhaps, of much of the ECGD's reserves, and for the default in payments to major British companies?

The hon. Gentleman's delight in gloomy prognostication is typical of his party. Of course, what has happened in Iran continues to happen, and that will have an important impact, not only on the economy of this country but on the economies of all countries in the developed world. It is far too early to form a final view of this, but I shall have to form a provisional view by the time that I present my Budget.

Is the Chancellor aware that before presenting his Budget he is committed to presenting the cash limits for the coming year—1979–80? Is he further aware that in the economic debate three weeks ago he said that these would be published within a few weeks? What is the reason for this further delay? Is it that the Government cannot agree on what should be the payroll increase for the coming year, or are there more fundamental Cabinet difficulties? Can the Chancellor now say when the cash limits will be published?

I am aware of all relevant considerations, including those which the hon. Gentleman has just drawn to my attention. When I spoke in the debate a fortnight ago I made it clear that the cash limits would be published within a few weeks. Two weeks have since passed, and they will be published very shortly.

asked the Chancellor of the Exchequer if he will now reaggregate the investment income of children with that of their parents.

I have noted my hon. Friend's suggestion, but I am not at present in a position to make a statement.

Does my right hon. Friend remember that as long ago as 1968 Mr. Roy Jenkins carried out this reform, which was changed by the Conservative Party and has never been put right? Is he aware that, if there are any further public expenditure cuts affecting the public education system, any failure to act on tax fiddles of this kind—which bolster the private education system—would be an absolute scandal from a Labour Government?

My hon. Friend is talking about one aspect of aggregation, but he will recall that we have moved from child tax allowances to child benefit, and there is a linking between these two problems. At a later stage there will be a Green Paper on the taxation of the family, which will deal in part with the matter with which he is concerned.

asked the Chancellor of the Exchequer what was the amount of the national debt on 1 March 1974 and on the latest available date; what was the amount of interest on the debt for the year ended 5 April 1974; and what is his latest estimate of the interest on debts during the current financial year.

The amount of the national debt on 31 March 1974 was £40,458 million and on 31 March 1978 was £79,180 million, or roughly £42,400 million in March 1974 prices.

Do not these figures underline the extent to which there has been massive overspending by the Government during the last five years? Does the Chief Secretary understand that this debt and the Government's borrowing requirement are the primary causes of the present unexceptionable—outrageously high—interest rates?

So far as I could hear what the hon. Member said, he was wrong in every respect. The national debt, as a percentage of GDP at market prices in the financial years 1973–74 to 1977–78, has fallen from 56 per cent. to 54½ per cent. The views on debt of Opposition Members, including the hon. Member for Eastbourne (Mr. Gow), bear all the hallmarks of an incompetent, wealthy and amateur business man, who is so well represented on the Opposition Benches.

Here is another one.

Instead of insulting my hon. Friend the Member for Eastbourne (Mr. Gow), will the Chief Secretary correct his figures and tell the House that the interest on public sector debt for 1978–79 will be about £8½ billion? Will he attempt to justify to the House policies which over five years have raised the cost of servicing the public sector debt above, for example, the cost of defence?

That is an interesting question. It is not connected with the one that I was asked, but I shall answer it. I was asked about the national debt. The interest on the national debt as a percentage of GDP at market prices has risen from 3¼ per cent. in 1975–74 to 3½per cent. in 1977–78. The percentage of GDP represented by the public sector borrowing requirement in the United Kingdom is not wildly out of line with that in many other countries.

asked the Chancellor of the Exchequer when he last met representatives of the TUC.

asked the Chancellor of the Exchequer what discussions he has had recently with the Trades Union Congress on pay policy.

With my right hon. Friend the Prime Minister, I met representatives of the TUC yesterday, when we discussed various economic matters, including pay.

Can my right hon Friend say whether, in the course of those discussions, anything was leaked to the press which gives substance to the report in The Guardian this morning that there is likely to be a settlement this weekend for the health workers and local government employees of about 9 per cent., with a promise of an additional payment in August? Is he aware that, if that report is true, my hon. Friends and I would welcome it?

There was no discussion on individual negotiations at my meeting with the TUC yesterday.

Since the Chancellor has kindly told us how often he has disagreed with the Chief Secretary, can he say how often he has disagreed with the TUC and who has won the argument?

The TUC and I have not always agreed on all matters. I shall be able to make an estimate of where the honours lay and how the match turned out when I leave this office, which, it has been suggested, will be in at least 14 months' time.

Will my right hon. Friend attempt to continue the discussions with the TUC on the synchronisation of pay claims and awards? Is not the mood now right for further discussions on this matter? Would it not be a grave mistake not to pursue this in the present climate?

My hon. Friend is right that the mood for making progress in many of the difficult areas of pay is appropriate at present. The statement published yesterday, which was agreed by the Government and the TUC, involved a large number of matters, such as the establishment of adequate comparability, dealing properly with relativities and trying to arrange that certain groups forgo the right of industrial action in return for guaranteed treatment of their pay. All those maters are ripe for discussion. I hope that in the coming weeks we shall reach agreement on them and prove how wrong the Opposition are in believing that such matters can be dealt with by the force of law, since that has failed so often in the past.

As the Chancellor has said, the White Paper deals with many matters. May I remind the Chancellor that, when he spoke in the House three—not two—weeks ago, he stressed that the Government would not accommodate excessive wage increases in the public sector by increasing cash limits and that the cash limits would reflect the Government's pay guidelines? In view of the importance that the Chancellor attaches to cash limits, why is there no reference to them in the White Paper? Did he try to secure a reference to them and an understanding of their importance by the TUC and fail, or did he just forget?

The right hon. and learned Gentleman is inaccurate, as always. The speech to which he referred was made 16 days ago, on Tuesday of the week before last. On this, as on so many matters, the right hon. and learned Gentleman is sloppy in his regard to the facts.

Can my right hon. Friend say anything further about the reference in the White Paper to urgent consultations on relativities? Is he aware that many hon. Members on this side of the House know that it is no good operating an economic forum and an agreement about the overall level of settlements when there is no agreement about relativities? Can my right hon. Friend give us some news about that?

My hon. Friend must not be too hasty. This matter was referred to in a statement which was finally concluded yesterday morning and presented to the House yesterday afternoon. The important thing about the statement is that it recognises that it is not possible for every group to improve its relative position and that the concept of a going rate which rises continuously because people build on previous settlements is self-defeating.

Does the Chancellor of the Exchequer think that it is right that all these issues involving incomes policy should be settled by private argument between the Government and the TUC without the House of Commons having any say at all?

The House has had a great deal of say on these matters. We have had many debates. I regret that the Opposition, in their enthusiasm for free collective bargaining, have helped to land us with the problems which the country now faces and from which the Government and the TUC are determined to extricate it.

asked the Chancellor of the Exchequer if he will seek to alter the current value added tax rates.

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

Will the Financial Secretary ask the Chancellor of the Exchequer to give careful consideration to introducing a single rate of VAT at 10 per cent? Bearing in mind the expected rates of inflation, is it not time the threshold was raised further?

The threshold has been raised regularly in the last few years. It is now almost as high as that which is permitted under the harmonisation of the Community arrangements. The hon. Member referred to a uniform rate of VAT. That is a matter which falls to be decided at the time of the Budget.

Will my right hon. Friend bear in mind that elderly people whose State pensions are their only form of income could not benefit from any gestures involving income tax if VAT were to be raised?

I understand my hon. Friend's case. He will be aware that we have committed ourselves to a move towards obtaining a greater amount of revenue from indirect taxation as opposed to direct taxation over tile period ahead. He will also be aware that we have failed to revalorise indirect taxes over a long period. In particular, I refer him to the vehicle excise duty, which is at a rather low level by comparison with its level in real terms only a few years ago.

Will the right hon. Gentleman reassure the House that, if he is unable to persuade his right hon. Friends to moderate public expenditure, direct taxation will not be increased, that the Government will not shirk their obligation to adjust personal allowances and that they will prefer instead, as he has indicated, to review indirect taxation?

I should be more convinced by that argument if the hon. and learned Gentleman and his right hon. and hon. Friends had not voted against the increase in vehicle excise duty. Having stated how strongly they were in favour of the move towards indirect taxation, when the time came for a decision they forgot what they had said.

asked the Chancellor of the Exchequer whether, in the light of current wage settlements, he proposes to revise the public sector borrowing requirement figures for next year given in the Government expenditure White Paper; and, if so, when he will announce the details.

I have nothing at present to add to what my right hon. Friend told the House in the debate on 25th January.

Does the Chief Secretary remember that the Government borrowing requirement of £7·8 million that appeared in the White Paper was predicated on earnings increases of only 7 per cent. in the coming year? It was added that if earnings rose beyond that the Government's revenue would not rise as fast as Government expenditure. Bearing in mind that earnings look like rising by a figure in excess of 11 per cent., is the right hon. Gentleman committed to ensuring that the borrowing requirement next year is not in excess of the figure quoted in the White Paper?

Yes.

Is the right hon. Gentleman aware that in the deteriorating economic situation the worst way to deal with the problem is to continue to raise interest rates, which makes investment more expensive and growth and jobs more unlikely to be achieved in future? Does he accept that he should be curtailing public expenditure so that we may live within our means?

I always find it remarkable that the Opposition are constantly telling us to curtail expenditure, as the hon. Gentleman puts it so delicately. They mean that we should cut public services—

Yes.

when if anything they need to be improved. The hon. Gentleman says "Yes". The only public services that Conservatives talk about in the House are those on which they want an increased amount spent. If they would spell out where they want to see public services cut or charges made for them, we would be able to listen to them more carefully. They have never been credible and they continue to be incredible. When Opposition Members refer to a deteriorating economic situation, they are wrong. There is no sign yet that the pay out-turn will be as poor as the Opposition are so gleefully expecting. I hope that they will be with us in wanting to see a moderate pay outturn. That is what we are seeking to achieve.

Would my right hon. Friend care to comment on the hypocrisy of the Opposition? Is he aware that they talk about cutting public expenditure in a variety of ways but run an advertising campaign criticising the National Health Service? They queue up eagerly at every Government Department to ask for more money for industry or public services within their constituencies.

I could not agree more with my hon. Friend. He knows how much I like to agree with him. It does not happen too often, so I am glad to have the chance. As I have said, my hon. Friend is right. However, I would not want to use his language. He knows how moderate I am on these matters. However, on this occasion I go even further and say how hypocritical the Opposition are in their demands for increased expenditure on almost every subject for which I am responsible.

The House will have noticed the Chief Secretary showing all the bluster of a deeply worried man, as well he may be as he has reiterated the pledge given by the Chancellor that the public sector borrowing requirement for the coming year will not exceed the figure in the White Paper, which is £8½ billion in money terms. Is he not aware that the prospect now, if no changes are made, is something substantially in excess of that figure, in which case the Government are bound either to cut public expenditure or increase taxation? Which is it to be?

I am sorry that the hon. Gentleman takes a view of what he sees that is different from that taken by other hon. Members. It seems a pity that there are not cameras around the Chamber to portray just how worried I look. The hon. Gentleman asks what we shall do to meet our borrowing requirement target. I hope that the hon. Gentleman accepts that neither he nor anybody else knows yet what it will be for next year. We do not know what the pay out-turn will be. My right hon. Friend has indicated what it might be in certain hypothetical circumstances, but it is far too early to jump to the conclusion that we shall have the gloomy out-turn that the Opposition are so happy to prognosticate.

On a point of order, Mr. Speaker. Following the Chief Secretary's answer to this question, I give notice that at the earliest possible opportunity I shall seek to raise the matter on the Adjournment.

asked the Chancellor of the Exchequer when he next expects to meet the other Common Market Finance Ministers.

I refer the hon. Gentleman to the reply I gave to my hon. Friend the Member for Hazel Grove (Mr. Arnold) on 18 January.

In view of the appalling net annual cost of Britain's membership of the Common Market, what will the Government propose to the other member States by way of getting some reduction of the net annual cost? How far is the right hon. Gentleman prepared to go to ensure that he gets a net annual reduction, which may help to answer the question of my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley)?

I have made it clear to the House on many occasions, as have my right hon. Friends, that the cost to the United Kingdom of the budgetary contribution to the European Community is grossly excessive. We are now negotiating with our partners to reduce it. The main area in which improvement is needed is the cost of the common agricultural policy. I know that the hon. Gentleman approves of the robust action taken by my right hon. Friend the Minister of Agriculture, Fisheries and Food in seeking to redress the balance in that area.

Has my right hon. Friend discussed with his colleagues in Euprope the French proposal to do away with monetary compensatory amounts? Does he agree that, if the monetary compensatory amounts were done away with and common prices were adopted throughout Europe, the result would be a totally unacceptable burden for the British people to bear?

We have made that clear on many occasions to our partners in the Community. We have said that we are not prepared to accept a settlement of the argument between the German and French Governments that would lead to higher food prices for the British consumer. I shall re-emphasise that point when I meet my colleagues at the Finance Council on Monday.

Will the right hon. Gentleman take the opportunity of that meeting to tell his Finance Minister colleagues and this opportunity to tell the House when Britain will honour its obligation to move to the free transferability of capital inside the Common Market? Will he take the opportunity to reassure the House that he will not erect an apparatus of exchange control between this country and Eire?

I regret to say that the Irish Government have already erected an apparatus of exchange control for transfers between Eire and the United Kingdom. We have made it clear that we would be prepared to do so if the European monetary system came into operation and that led to a divergence in value between the Irish pound and the English pound. That is well understood on both sides of the Irish Sea.

asked the Chancellor of the Exchequer what is the current pay norm.

The Government remains committed to the policies set out in the White Paper "Winning the Battle Against Inflation" with the modification of the £3·50 underpinning for low-paid workers.

Is the right hon. Gentleman aware that he has not answered the question that I put on the Order Paper, which concerns the current pay norm and is not about the Government's supposed pay policy? Does he appreciate that the pay norm regarded as about 20 per cent. in the private sector and 16 per cent. in the public sector? What action are the Government taking to counter that view, which was created by the Government as a result of their 5 per cent. policy? Will the Government explain to the public that if some workers are to get more others must automatically get less?

I am tempted to ask the hon. Gentleman whether he is still beating his wife. The White Paper to which I referred laid down a 5 per cent. limit in normal cases, with £44·50 underpinning for very low-paid workers, provision for special cases and provision for self-financing productivity deals. These elements of flexibility were further increased by the statement by my right hon. Friend the Prime Minister in the House last month.

Will my right hon. Friend say what the cost would be if nurses and other National Health Service and public employees were paid an increase up to the level of two-thirds of the average wage?

I am not able, without notice, to give a specific figure. However, my hon. Friend must bear in mind that there is no point in raising the pay of low-paid workers to two-thirds of the average earnings if better paid workers then insist on restoring their differentials with the lower paid workers. That point was made with great force to me in my discussions with the TUC recently. It is because of the impossibility of improving the real condition of the low paid without dealing with the problem of differentials and relativities that the Government and the TUC have agreed to find a common solution to the problem.

The Chancellor reminded the House of the original pay limits adopted by the Government, sub- ject to the modification made by the Prime Minister in January. Will he confirm—as it is important—that the cash limits to be published in a week or two will reflect precisely those pay guidelines? Will he also emphasise that if pay bargaining is to be consistent with those cash limits, problems of overmanning in the public sector must be tackled along the lines proposed by Mr. Frank Chapple.

I have made the point on many occasions that excessive settlements in the public sector are bound to lead to a reduction in manpower in the public sector. My views on cash limits were carefully explained to the House in general in the debate 16 days ago. The detailed cash limits will begin to be presented, as is normal, to this House in a week or two.

asked the Chancellor of the Exchequer what representations he has received from the general aviation industry concerning the change from vehicle excise duty to petrol tax.

I have reecived representations from general aviation interests and private flying associations that either the proposed increase in light oil taxation should not apply to aviation spirit or compensating relief should be given from other charges connected with light aviation.

As the Minister said that the object of the change was not to increase revenue, would he not agree that to impose an extra £2 million of taxation on this small industry is unfair? Is he aware that aviation fuel is currently 25 per cent. more expensive than motor fuel? Therefore, even with an increase of 20p or 30p per gallon in tax there would be no incentive on motorists to use aviation fuel and therefore no risk of loss of revenue.

Yes. The difficulty is that the Customs and Excise tax the fuel and not the purpose for which the fuel is intended. As a result, there are obvious control difficulties. This is a complication that the hon. Gentleman is trying to introduce into the operation of the tax. No final decisions have been taken on these matters. There is scope yet for Consultation. The phasing period is lengthy, during which time these consultations may proceed.

Is the Minister aware that a marked proportion of horticultural production still uses petrol-driven tractors? An increase in petrol duty will mean a direct increase in the price of horticulural produce, which is approximately one-third of the value of everybody's food?

Yes. I am aware of the problems to which the hon. Gentleman refers. He will be aware that there will be a number of discussions to deal with these precise points. A number of discussion documents are yet to be issued. These points may be examined in due course.

asked the Chancellor of the Exchequer, what representations he has received concerning the proposed phasing out of vehicle excise duty.

I have received representations from organisations representing motorists, petrol retailers, general retail traders, rural motorists and tourist interests, and non-road users of petrol. I have also received letters from about 60 private individuals.

Will the Government reconsider the decision to phase out the vehicle excise licence? Does not the Minister realise that it will adversely affect financially many of my constituents who live in rural areas, many of whom are not well off?

I am aware of many of these points. They were debated last year. Some recent estimates precisely on this matter have been made by the Department of Transport which suggest that a private rural motorist on the average annual mileage should find his motoring costs increased by only about 3p per week and that about 50 per cent. of private rural motorists will break even or gain from the changeover. This is a lengthy period of changeover. Discussions may take place on the documents that will be issued in due course.