asked the Chancellor of the Exchequer what representations he has received from registered disabled drivers about the increase in value added tax on petrol and other motoring costs.

We have received a number of representations, mainly about the supply of cars to disabled persons through the Motability organisation. As my right hon. Friend the Secretary of State for Social Services announced on 26 June, we are taking steps to relieve these difficulties.

Will the Minister accept that the increase in the minimum lending rate and the increase in VAT have had a particularly hard and damaging effect upon disabled drivers and, indeed, those who drive the disabled? Will he say what further plans he has to give assistance to this deserving group of people, who are undoubtedly going through a difficult period?

I recognise the difficulties to which the hon. and learned Gentleman has drawn attention, but the adequacy of allowances for the disabled is a ques-for my right hon. Friend the Secretary of State for Social Services.

Will my hon. and learned Friend accept the thanks of all those concerned with the Motability leasing scheme for the relief from VAT which has been afforded for the purchase of cars under that scheme? But will he consider, before next year's Budget, applying the same relief to cars supplied under the Motability hire-purchase scheme, which is now being introduced?

I have taken note of what my hon. Friend has said. There is no blocking order applying to inputs relating to hire purchase.

Will the hon. and learned Gentleman accept that the measures taken by the Government, coupled with the huge additional increase in the price of petrol, have had a serious effect upon large numbers of disabled people? Will his right hon. Friend take an early opportunity to meet representatives of disabled drivers and disabled passengers to discuss their problems with them?

That again is a question for my right hon. Friend the Secretary of State for Social Services. I am sure that he will have taken note of what the right hon. Gentleman has said.

asked the Chancellor of the Exchequer how recent changes in the exchange value of the £sterling are likely to affect the prospects for the British economy.

Changes in the exchange rate affect the economy in different ways. The recent rise in the rate may make it harder in the short run to sell our exports, but the rise also lowers the cost of imported raw materials.

Will my right hon. Friend say whether, as a result of the new strength of the pound, he is able to forecast whether, over a period of years, the benefits from lower import prices will be greater than the disadvantages through higher export prices?

No. Any such forecast would be very hazardous.

Will the right hon. Gentleman try to prevent statements emanating from Government quarters which suggest that a rise or fall in the exchange rate causes an acceleration or a deceleration of inflation?

I have noted the views of the right hon. Gentleman, but I do not regard it as my responsibility to correct my colleagues, who I am certain are well able to take responsibility for their own views.

Will my right hon. Friend have discussions with the Secretary of State for Defence about the desirability of ending the practice whereby overseas defence sales are quoted in dollar prices?

I shall draw my hon. Friend's point to the attention of the Secretary of State for Defence.

Is the right hon. Gentle. man at all concerned about the growing anxiety expressed by leaders of British industry—particularly yesterday, according to the Financial Times, which mentioned the heads of Courtaulds, of Wedgwood and of Gestetner—that the present sterling rate is totally incompatible with the survival of their companies as viable businesses? Is the right hon. Gentleman yet in a position to give us the date on which he will follow the example of Switzerland, which in the end decided to abandon its monetary policy for the sake of saving its industry?

Representations made by people such as the chairman of Courtaulds will obviously be taken into account, and certain areas of British industry, particularly with a low value added tax content, are bound to experience difficulties with a movement in the exchange rate, as we have seen recently. I shall bear very much in mind the views expressed by the right hon. Gentleman's right hon. Friend the Member for Llanelli (Mr. Davies), who, during the Committee Stage of the Finance Bill, said that the exchange rate of sterling was something that was substantially beyond the control of the Government.

Surely the right hon. Gentleman has followed the Swiss experience. Since Switzerland abandoned monetary policy for the time being, its exchange rate has reverted to a more normal pattern. That is the best possible example, coming from a country whose monetary policies I am sure the right hon. Gentleman has admired, to show that it is possible for the Government to influence the exchange rate.

The Government have no intention of abandoning their monetary policy. I am surprised that someone as intellectually powerful as the right hon. Gentleman should suppose that the abandonment of that policy would lead to a reversion of sterling.

asked the Chancellor of the Exchequer when he next expects to meet other EEC leaders; and if he will make a statement.

I expect to meet my fellow Economic and Finance Ministers of the Community at the next meeting of the Finance Council on 17 September. I shall be reporting the outcome of that meeting to the House.

When the right hon. and learned Gentleman does meet them, will he remind them that the figure of more than £1,000 million, which is now our contribution to the Common Market budget, is looming large in our balance of payments account every month? Will he also ask them what the reaction will be when we ask for a reconsideration of our contribution over the next two years? If, for example, the Finance Ministers refuse to agree to the concessions for which we are asking, will the right hon. and learned Gentleman give a guarantee to this House that he will say forthrightly to them that there will be no further contribution from Britain until this matter is resolved?

My right hon. Friend the Prime Minister and all my right hon. Friends lose no opportunity of reminding our colleagues in the Community of the importance that we attach to securing a substantial reduction in our budgetary contribution. I am glad to say that as a result of the more constructive attitude adopted by this Government towards the Community the Prime Minister was able to achieve substantial progress in getting recognition of our case at the Strasbourg meeting. We shall continue to press the case with as much conviction as the hon. Gentleman, but with rather more success than he has had.

I have never been there.

If my right hon. and learned Friend receives any advice from the financial leaders of the EEC to the effect that he should follow the Swiss example of abandoning monetary restraints, even temporarily, will he remind them that the Swiss example is not relevant here, that the Swiss have an entirely different social and financial history, that they have a background of nil rates of inflation and that the Swiss people are unlikely to take up a large increase in the money supply in the way that the British people would?

I am grateful to my hon. Friend for drawing my attention to those points, and also to the fact—which was implicit in what he said—that the Swiss response was founded upon the successful record to which he drew attention, rather than upon the record of disastrous money supply growth that we inherited from the right hon. Member for Leeds, East (Mr. Healey).

As the right hon. and learned Gentleman is well aware, the European Commission has put forward a proposal to increase the VAT ceiling from 1 per cent. Will he make it clear to the House that the Government will not agree to that increase—in fact, to any increase—until the question of the budgetary contribution has been satisfactorily resolved?

The Government certainly do not regard as acceptable any proposal of that kind for increasing the Community's resources. Quite apart from that, the case for a reduction in our budgetary contribution has to be pursued, and will be pursued, in its own right.

Can my right hon. and learned Friend say whether the Government propose to join the European monetary system?

As my right hon. Friend the Prime Minister told the House recently, we shall be reaching our next stage of consideration of that after the review of the convergence mechanism has been undertaken, which will not be before September of this year.

Will the Chancellor try to persuade his EEC colleagues to slash their expenditure on regional aids by as much as the Government have slashed ours, otherwise areas such as the North-West will increasingly suffer from the vast aids that European countries give to their depressed regions?

It is certainly a legitimate part of the Community's organisation to see that the contributions to regional and other aid programmes do not get out of line with each other so as to produce unfair competition of that kind. But, beyond that, one must recognise that the success of our Community partners depends largely upon the fact that they have a much more sensible system of taxation than we do. It is to that that we are moving as a result of the measures that we are taking.

asked the Chancellor of the Exchequer if he will make a statement on the taxation of short-term unemployment benefits.

As our pre-election manifesto made clear, it is our aim to bring short-term unemployment benefits within the tax system. We are at present examining ways of overcoming the administrative difficulties which have up to now stood in the way of taxing short-term benefits, and when this examination is complete I shall let the House know of our conclusions.

I accept that there are administrative difficulties, but does my right hon. Friend agree that there is considerable resentment among those who are employed against those who choose to stay unemployed, even when jobs are available? Will my right hon. Friend confirm that the taxation of short-term unemployment benefits would provide a considerable incentive to take up jobs where they were available?

Yes.

How many extra civil servants will be needed to bring that about?

Extra staff costs in relation to taxing short-term benefits for the unemployed would be relatively modest, but it is true that the wider-scale scheme would involve quite substantial increases in staff. That is precisely why an examination is now being undertaken, so that a proper and up-to-date evaluation can be made.

Does my right hon. Friend accept that when social security and unemployment benefits are raised in line with inflation it produces distortions with those whose wages are not rising in line with inflation, and that when those distortions are magnified by the failure to tax the former while taxing the latter it produces the encouragement to stay out of work?

I very much accept that point, and it underlines the necessity for the review.

asked the Chancellor of the Exchequer what is his estimate of the current rate of growth of the M3 money supply.

In the eight months to mid-June, sterling M3 grew at an annual rate of 13·3 per cent.

In view of the disappointingly slow progress towards the target of money supply that he announced in the Budget, will the Chancellor explain whether he is now abandoning a policy that could not reach accomplishment without killing off large sections of British industry?

The hon. Gentleman totally misunderstands the position. In respect of money supply growth, the Government inherited a situation that was badly off course, and was getting more so. When we came into office the money supply growth rate was well above the top limit of the 8 to 12 per cent. range set by the previous Government, and the action taken in the Budget, including the increase in minimum lending rate, cannot be expected to have had an effect on that yet.

Does the Chancellor agree with the statement last night by one of the senior managing directors of the Union Discount Company, that to bring the money supply back within the targets interest rates will have to go higher before the end of the year?

I should not like to accept that proposition. What I have no doubt about is that to overcome the explosive rate of growth of the money supply that we inherited it has been necessary for the Government to introduce firm monetary policies, including an increase in minimum lending rate, and it remains necessary for us to adhere to that. I hope that it will not be necessary to go beyond that. I cannot emphasise too strongly that these measures are an inevitable response to that part of the inheritance that we received.

asked the Chancellor of the Exchequer, in view of the strength of the £ sterling, what further steps he intends to take to reduce exchange controls.

I refer my hon. Friend to the answer that I gave to my hon. Friend the Member for Ruislip-Northwood (Mr. Wilkinson) on 18 July.

Following my right hon. and learned Friend's written answer yesterday, what is the extent of the remaining exchange control restrictions, and what economic or, indeed, national purpose do they serve?

As my hon. Friend appreciates, we have made two substantial reductions in the scope of exchange control. The substantial part that remains concerns arrangements for the control of portfolio investment outside investments denominated in EEC currencies. The apparatus of which they represent a part has been with us for about 40 years, and we are proceeding to its progressive dismantlement at which I judge to be the right pace in the circumstances.

Will the right hon. and learned Gentleman comment on a point in the original question, namely, the implication that the relaxation of exchange control that he has just announced will reduce the strength of the £ sterling? How does he reconcile such a view, if he holds it, with what his right hon. Friend the Financial Secretary said a moment ago, that there was nothing that the Government could do that would influence the sterling exchange rate?

As the right hon. Gentleman appreciates, the sterling exchange rate is substantially set by market judgments. The case for reduction in exchange control stands in its own right and is justified for that purpose. The fact that sterling now stands high provides circumstances in which it becomes possible to make those changes.

If the Chancellor is anxious to reduce unnecessary bureaucracy and waste of resources, will he say whether it will still be necessary for travel agents and others issuing foreign currency to individuals to mark their passports? Secondly, is it still proposed that those buying shares in Europe will have to leave them with a recognised depository?

At present, the basic arrangements for applications under the existing exchange control regime remain in force. I shall have to look at the detailed points raised by my hon. Friend, but it would be our intention to proceed towards the removal of unnecessary administrative obstacles as quickly as possible.

Why is the Chancellor so pleased with the high level of sterling, bearing in mind the statements by prominent industrialists about the harm that it is doing to manufacturing industry? In view of the right hon. and learned Gentleman's addiction to market economics, does he agree that the higher the cost of our exports the fewer we sell, and that the cheaper the cost of our imports the more we buy, to the detriment of our manufacturing industry? Why does he not instruct the Bank of England to intervene sensibly in the market?

The movement of the exchange value of the £ sterling has effects on both factors to which the right hon. Gentleman referred, but experience under successive Governments has shown that attempts to predetermine or determine the proper exchange value for the pound sterling are difficult to achieve, even if it is right to try to do so.

asked the Chancellor of the Exchequer what representations have been made against the increase in value added tax.

Over 400 representations, covering a wide range of subjects, have been received since the Budget.

When the Minister receives representations from his Cabinet and ministerial colleagues and other hard-hearted and prosperous-looking Tories about taxing the unemployed and those on social security benefits, will he remember that VAT hits those on lower incomes much harder than it does the rich people who put the Tory Party into office? Will he accept that the swingeing increases in VAT help to underline the OECD report, published today, which suggests that this country is heading quickly towards recession and increasing inflation? Surely the VAT increases will accelerate that trend?

On the hon. Gentleman's first point, I remind him of what his right hon. Friend the Member for Heywood and Royton (Mr. Barnett) said at an earlier stage, namely, that VAT is nothing like as regressive as was at first thought.

I do not agree with that.

Is my hon. and learned Friend aware that when the previous Conservative Government left office the flat rate of VAT was 10 per cent. and it is now 15 per cent., so the intervening five years of Socialist Government correspond with the 5 per cent. increase? We are having to pay 1 per cent. VAT per annum for Socialism. Is he further aware that most people are confident that five years from now the Government will have added a reduction in VAT to the reductions already made in direct taxation?

I note my hon. Friend's optimistic prognostications.

Has the hon. and learned Gentleman had his attention drawn to the speech by Sir Maurice Laing and other constuction employers, who are no longer as enthusiastic as they were about Government policy in relation to the construction industry? Does he agree that the Government's proposals on value added tax will be disastrous for the future of that industry?

The hon. Gentleman will be aware that VAT is not imposed on new building projects.

asked the Chancellor of the Exchequer what is the estimated year-on-year rate of inflation for the period 3 May 1979 to 3 May 1980.

asked the Chancellor of the Exchequer what is his latest estimate of the rate of inflation at the end of December 1979.

I refer my hon. Friend and the hon. Gentleman to my reply to the hon. Member for Glasgow, Maryhill (Mr. Craigen) on 18 June 1979.

Does my right hon. Friend agree that the level of inflation that we are experiencing at present and are likely to experience until 3 May next year is virtually the entire responsibility of the profligate pre-election spending spree engaged in by the right hon. Member for Leeds, South-East (Mr. Healey) when he was Chancellor of the Exchequer?

I have no doubt that, given the time lag, the monetary expansion associated with the closing months of the previous Government will bear a major responsibility for price rises over the coming few months.

Will the right hon. Gentleman consider introducing a special cost of living index for the elderly based on their pattern of spending, which is entirely different from the norm, and increase pensions based on that index?

I understand that separate assessments are made for the purposes of calculating the cost of living, but I shall certainly bear that point in mind.

When my right hon. Friend is considering the elderly, will he consider the possibility of reviewing old age pensions twice as opposed to once a year?

It would be misleading if I encouraged my hon. Friend to be optimistic about that course.

At what stage will the Chancellor of the Exchequer tell his Cabinet colleagues that enough is enough and that the Government's present monetarist policies are leading to totally unacceptable levels of inflation and hardship?

The present monetarist policies have the wholehearted support of the Cabinet and are recognised as the essential precondition for a reduction in the rate of inflation.

asked the Chancellor of the Exchequer what effect the current level of minimum lending rate is having on his economic policy.

asked the Chancellor of the Exchequer what steps he is taking to promote a reduction in interest rates in London.

Control of monetary growth is central to our economic policy. The commitment to progressive reductions in the public sector borrowing requirement and cuts in public expenditure should mean that, as they take effect, less emphasis has to be placed on interest rates to secure our monetary objectives. The increase in the minimum lending rate was necessary immediately to reduce the excessive rate of growth of the money supply. It should be possible to allow a fall in interest rates when we can be sure that monetary growth is under control.

When is that likely to be?

As I stated in my answer, as the reductions in public expenditure and public spending plans foreshadowed in the Budget Statement take effect. My hon. Friend must understand—and Labour Members must understand equally clearly—that when we came into office we were committed to plans for the expansion of public expenditure that were quite unrealistic and unsustainable. They are being reduced, and that will be one of the factors that will lead to the result that my hon. Friend wants.

Is it not folly to meet a temporary strength in the exchange value of sterling by relaxing exchange controls rather than by lowering interest rates? In that case, interest rates will never come down, with all the damage that that will do to industrial investment and productivity in the long term.

The right hon. Gentleman must understand that the case for relaxation of exchange control stands fairly and squarely on its merits. The case for achieving lower interest rates is plainly equally desirable, but until the rate of growth of the money supply and public spending plans are brought under control it would be folly to reduce interest rates just for the sake of doing so.

Has my right hon. and learned Friend heard even the faintest whisper of pleasure from Labour Members about the decision of the building societies to postpone any increase in mortgage rates to 1 January next year, if indeed it ever happens at all?

I have not, but I listen expectantly and with hope every day.

Will the Chancellor confirm that if the growth in bank lending does not moderate in the next few months he will have no alternative but to put up interest rates in order to keep within the monetary targets?

I would not expect that to happen, but I emphasise that the rate of growth of bank lending was one of the aspects of monetary expansion that was occurring when we took office, so we inherited this situation. All these measures that are necessary to restore control of the monetary balance of our economy are the responsibility, fairly and squarely, of the previous Government.

asked the Chancellor of the Exchequer what tax concessions he is contemplating for recycled products; and if he will make a statement.

None, Sir.

Do Treasury Ministers accept the principle that it is proper to use the fiscal system to encourage the use of recycled products?

We certainly do not accept the principle that VAT is a suitable mechanism to provide incentive to increase the use of recycled products.

asked the Chancellor of the Exchequer what effect recent oil prices have had on the Budget assumptions.

The recent increase in oil prices, while affecting economic prospects for both the world and the United Kingdom and hence the background to the Budget, does not materially affect the economic strategy to which the Government are committed. Indeed, it confirms the need to maintain strict control of monetary growth and to reduce Government borrowing in order to reduce inflation.

Will the Minister take the opportunity to explain clearly to the House and the country that the increase in oil prices inevitably represents a cut in our standard of living, which must be met? Does he agree that the increase in oil prices is sucking money into the system and that this, combined with high interest rates, is making the achievement of control of the money supply ever more difficult?

On the first part of my lion. Friend's question, there is no doubt that the increase in oil prices involves a transfer of resources from the OECD industrialised sector of the world economy to the oil-producing sector. To that extent it must necessitate an adjustment in living standards throughout the Western world. On the second part of the question, the movement of moneys, associated with oil price increases, underlines the importance of having a relatively free exchange rate. Otherwise, we shall find ourselves in the position of having serious money supply difficulties. That would be the inevitable result of a rigid exchange rate in the face of such movements.

In the light of the OECD report that the world may be heading for a slump, how does the right hon. Gentleman explain the desirability of high interest rates? In view of the fact that the lifting of exchange control will mean that higher profits made as a result of the Budget can be as easily invested abroad as at home—as has so often happened in the past—can he avoid a double blow to the prospects for British economic recovery?

The necessity for high interest rates is explained by the need to finance a borrowing requirement of £8,000 million. The reason for liberalising exchange control stands in its own right. We believe that there should be the opportunity for British industry to invest freely on a world scale, because we believe that the best way to fight a prospective slump is by encouraging a world concept of trade and investment.

I accept what my right hon. Friend says, but if the pound goes on as it is now, rather than being the equivalent of $1·80, which it would be without oil, is it not true that unless something is done to make the pound truly free there is a great danger that we shall become the greatest industrial cemetery in Europe?

I welcome the stress that my hon. Friend puts upon the words " truly free ". What is now happening underlines the argument for liberalism rather than protectionism.

Does the right hon. Gentleman accept the prediction by OECD, on the same assumptions that the Government made about the fall in the growth of the domestic produce in the coming year, that unemployment will be 200,000 higher in a year than it is today?

I shall follow the course invariably set by the previous Government of not making a forecast of future levels of unemployment.

asked the Chancellor of the Exchequer, what steps he is taking to ensure that the £25 and £50 premium bond prizes are retained.

No decision has yet been made about the retention of the £25 and £50 prizes in the prize structure to apply from 1 January 1980. We hope to make an announcement before the end of September.

Does the Minister not appreciate that this is an innocent form of gambling, which gives a lot of pleasure to elderly people who take the view that they would rather have a chance of winning £25 than the more remote chance of winning £25,000? Are not the Government committed, when they sell these bonds, to honour their pledge?

I hope that my hon. Friend will not take my answer as reflecting on the innocence or otherwise of gambling or of premium bonds. The temporary suspension of the smaller range of prizes is entirely due to the backlog caused by the industrial action that occurred earlier in the year.

Would it not be possible, as a means of getting rid of the backlog caused by a strike under the previous Government, to have more than one draw a month, instead of reducing the prizes?

I note my hon. Friend's remarks, but I do not believe that that would speed up the clearance of the backlog. However, we hope to resume these prizes in due course, and an announcement will be made before the end of September.

asked the Chancellor of the Exchequer what is his present policy in regard to the possible introduction of either a voluntary or statutory incomes policy.

I have no plans for introducing such a policy.

Will the Chancellor accept that that answer will be reassuring to those trade unionists who believe that Government researches into the creation of a standard of living index is a forerunner to the introduction of a statutory incomes policy? That fear can now be put to rest. Does the Chancellor agree that trade union wage bargainers should now try to get for themselves wage agreements that will at least protect their members from any increases in the cost of living?

I can understand why trade union wage bargainers might wish to achieve such a result. The reality is that in a society where growth over the past five years has been at or below 1 per cent., and where our total national resources are practically static, it would be unrealistic for trade union bargainers to believe that they could protect their members' living standards against the changes that are taking place. The reality to which they should pay attention—and it is crucial that they should—is the limitation on the resources available to the organisation for which their members work. It is only in that sense that we can achieve some reconciliation between the outcome of responsible collective bargaining and the realities which the nation must accept.

Does my right hon. and learned Friend agree that the experience of prices and incomes control and statutory incomes policies over the past 20 years confirms that inflation has always been higher at the conclusion of such policies? Therefore, will he resist any temptation to indulge in such policies in the future?

It is the experience to which my hon. Friend draws attention, and which has been shared by Governments of both parties, that leads us to the conclusion that the whole thrust of our policies should be designed to avoid that kind of arbitrary action.

Reverting to the Chancellor's original reply, is he aware that those of us who have been here for some years know that each Government give a pledge against an incomes policy and within months they break it? How long does he intend to keep to his original pledge'?

For the reasons that I have given, the experience of each Government has fortified successive Governments. Certainly it has fortified the determination of this Government. The whole thrust of our policies is designed to avoid recourse to the kind of arbitrary action that has proved so unsuccessful in the past, under Governments of both parties.

asked the Chancellor of the Exchequer what is the latest estimate of the loss of revenue resulting from tax exemption of short-term benefits.

The latest estimate based on expenditure for 1978–79 in the United Kingdom calculated at benefit rates apply- ing during the year is approximately £400 million.

Does my right hon. Friend agree that the fact that short-term benefits are exempt from taxation is a prime reason for people becoming caught in the unemployment trap? Will he assure the House that early action will be taken to tax all income alike to remedy this awful anomaly?

I am in broad sympathy with that view. No doubt my hon. Friend heard the earlier exchanges concerning unemployment benefits, which indicated that a review was being undertaken.

Does the right hon. Gentleman agree that the financing of long-term unemployment benefits will be a greater problem under the present Government than taxing short-term unemployment benefits?

Although I do not doubt that unemployment is likely to rise over the next year, I must say that condemnation comes ill from the Labour Party, which presided over a massive increase in unemployment during the previous Parliament.

asked the Chancellor of the Exchequer how much annual revenue he estimates would be lost by reducing stamp duty on the sale of houses by 50 per cent.

A total of £55 million this year and £85 million in a full year, on the assumption that each rate of duty on residential property was halved from 1 August.

is my right hon. Friend aware that quite modest houses now attract a severe level of stamp duty because of the exceptional inflation that has occurred in the property market? Although I appreciate that my right hon. Friend the Chancellor of the Exchequer cannot do everything at once, will he please take some action to ease the burden on house buyers when he next examines taxation changes?

A useful debate was held on this subject on the Report stage of the Finance Bill yesterday, following the initiative of two of my hon. Friends. I do not think that I can go beyond what was said by my hon. and learned Friend the Minister of State, Treasury, in answering that debate.

Would not a reduction in stamp duty, particularly at the lower level of house prices, assist potential owner-occupiers? Would it not also materially assist if the Government considered getting rid of the solicitors' conveyancing monopoly so that their lavish charges are reduced to help owner occupiers, or are the Government not interested in that kind of thing?

The conveyancing monopoly falls outside the responsibility of the Treasury, but I must point out that it is easy enough to suggest means of depriving the Government of revenue but extremely hazardous when we have a public borrowing requirement of £8,000 million.

asked the Chancellor of the Exchequer if he will introduce further income tax concessions to assist disabled persons.

I consider that assistance to the disabled can be more effectively provided through the social security system.

Is the Minister aware of the particular difficulties facing the disabled, particularly in view of the savage rise in VAT? Will he consider making a tax allowance on clothing for the disabled?

Although I recognise the need to which the hon. Gentleman draws attention, it is a long-accepted principle that deductions should be allowed only for costs actually incurred in the course of a job and should not be related to the particular circumstances of an individual.

In view of the fact that within the short period that the Government have been in office the price of petrol has increased from below 80p to £1·20, will they now think about the additional 10p tax which they have imposed on petrol, because of its effect on the mobility of disabled persons?

I am sure that the hon. Gentleman will recognise that the mobility allowance has been increased to take account of that.

asked the Chancellor of the Exchequer if he will take steps to end the current practice whereby a married woman's income is deemed to be that of her husband.

I am considering this matter and will be making a statement in due course.

When my hon. and learned Friend makes that statement will he jettison this antiquated Victorian principle and put the matter on a proper basis, once and for all?

If and when the statement is made we shall be considering both antiquated Georgian and Victorian principles.

asked the Chancellor of the Exchequer what steps he has taken towards the United Kingdom's membership of the European monetary system; and when he intends that the United Kingdom should become a full member.

Although we do not participate in the exchange rate arrangements of the EMS, we are members of the system and have recently deposited 20 per cent. of our reserves against European currency units. We shall consider our position on the exchange rate arrangements later in the year.

Does the right hon. and learned Gentleman recall giving an interview in April in the monetary letter " Europe " in which he expressed substantial reservations about EMS? Does he still hold those reservations, and, if so, what are they?

Everybody who has considered this subject with any care recognises that the arguments are by no means all one way and has some reservations about them. That is why my right hon. Friend the Prime Minister has made it clear that we shall be reviewing our position after the matter has proceeded as far as September.

Does the Chancellor agree that to enter the EMS system fully would be to take a significant step along the road towards a united federal Europe?

I know that that view is held by some people, including my hon. Friend. It is not the view taken by those who participate fully in the system at the moment.

asked the Prime Minister if she will list her official engagements for Thursday 19 July.

This morning I presided at a meeting of the Cabinet. In addition to duties in this House, I shall have further meetings with ministerial colleagues and others, including one with the Prime Minister of Sri Lanka.

Will my right hon. Friend make clear. preferably in answer to this question, that the recent welcome decision of the Chancellor of the Exchequer further to liberalise exchange controls was an act of economic self-confidence in this country, that it is part of a long-term policy which can bring continuing financial benefits to this country long after oil and gas have been exhausted, and that it is in marked contrast to the attitude of creeping protectionism so evident on the Labour Benches?

I agree that the action of my right hon. and learned Friend the Chancellor of the Exchequer in further relaxing exchange controls was an act of confidence, and that the investment that we shall obtain overseas will be of long-term benefit to this country, and indeed will be an investment when North Sea oil has gone.

Will the Prime Minister, in what I am sure is a very busy day of engagements, refresh her mind as to the virtues of abrasive competition and make a short, sharp visit to Chancery Lane to the headquarters of the Law Society? Will she tell that body, in stern language, that some of the restrictive practices in certain areas of legal services are contrary to the spirit of competition for which her Government purport to stand? Will she further underline—[HoN. MEMBERS: " Too long."] Will she further underline that the restrictive solicitors' monopoly of conveyancing, which is an onerous burden on those who buy and sell, will be swept away by her new broom?

As I think the hon. Gentleman knows, a study is being made of this problem, I think under Henry Benson, and it would be best to see how he reports before making any further comment.

When my right hon. Friend meets the Prime Minister of Sri Lanka will she convey to him the best wishes of the Britsh people and reflect that that country, despite its difficulties, has kept true to parliamentary democracy? Will she also reflect that the most positive way of helping that country would be to look favourably on the Mahawehli Ganja project, which is now before her Ministers?

I shall convey my hon. Friend's best wishes and mine to the Prime Minister of Sri Lanka and say how very much we value those Commonwealth nations that are still fully democratic. I shall bear in mind the other comment made by my hon. Friend.

As the right hon. Lady continually claims that because she has a mandate from the country she must press ahead with legislation against the rights of trade unionists, may I ask whether she accepts that trade union leaders have every right to fight this legislation as strongly as they can because they have a mandate from their members to do so?

The ordinary people of this country also have rights against powerful institutions. After the events of last winter, I believe that we have a mandate—which includes the wishes of many trade union members—to go ahead with legislation on secondary picketing and closed shops and to help with secret ballots. If we were to put that legislation to a secret ballot, I believe that we should get overwhelming support for it.

asked the Prime Minister if she will list her official engagements for Thursday 19 July.

I refer my hon. Friend to the reply that I have just given.

Will my right hon. Friend make inquiries today about the demands of council house tenants from all over the country to buy their own homes? Will she let us know when we can expect to see the Housing Bill? A number of Labour-controlled authorities seem to be determined to prevent people from owning their own homes.

I agree with my hon. Friend that a number of complaints are being received from ordinary people who live in the area of Labour-controlled authorities. They want to buy their own homes but they are being denied permission to do so. It is our intention to introduce the Housing Bill when the House returns from the recess.

Will the Prime Minister confirm or deny the report in the Financial Times today that she has had a meeting with the Secretary of State for Industry and told him to prune the £125 million of Government support for the microelectronics industry? Is the right hon. Lady aware that if that industry is not developed within the next 10 years we shall become a technological backwater, importing hardware and software from abroad with no trade of our own that will be worth speaking of?

I have many meetings with my right hon. Friend the Secretary of State for Industry, and very valuable they are, too. I am most anxious to do everything to encourage the microprocessor industry. I believe that the best way to do that is by the tax reliefs that we have given, which will encourage many in that business to set up in this country instead of in the United States, where so many of them started off previously.

Bearing in mind the recent remarks on the subject by the new President of Iraq, will my right hon. Friend take an initiative to see whether it is possible to establish an institutionalised form of dialogue between the OECD countries and the OPEC countries about a more sensible method of oil pricing in the future, in the interests of everyone?

The possibility of achieving an institutionalised dialogue between the consumer countries and the OPEC countries was discussed at the time of the Tokyo summit. For the time being we felt that it was better to have more informal contacts, but the institutionalised form has not been ruled out.

asked the Prime Minister what are her official engagements for 19 July.

I refer the hon. Gentleman to the reply that I gave earlier.

Is the Prime Minister aware that this week many councils have been forced to consider cutting pensioners' pocket money, home helps, nursery schools and teachers' jobs? Does the right hon. Lady approve of that meanness?

We should all like to spend as much public money as possible on the many projects that are our particular favourites. However, when a nation has been living beyond the means that its taxpayers can finance, it has to return to live within those means. Overall expenditure this year in real terms is equal to that of last year. Its distribution is a little different, but the total amount is the same. Even that amount requires a great deal of public borrowing.

Does my right hon. Friend agree that ordinary trade unionists agree not only with the proposals for modifying the labour laws but with her economic proposals? I urge my right hon. Friend not to take the advice of the economic cripples on the Opposition Benches.

I will refrain from taking their advice. It was catastrophic for Britain during the past five years.

Will the Prime Minister spend a few moments in her busy day contemplating the latest opinion polls in The Daily Telegraph? Are not those polls evidence that millions of trade unionists, who the right hon. Lady alleges voted for her in the last election, realise already that they were badly conned and that voting Tory was the biggest mistake of their lives?

Perhaps the position will be much better after we have introduced and passed the legislation.

Has my right hon. Friend seen the details of the report published today by the Price Commission? It recommends an increase in the price of gas. Is it not a remarkable proposal from an institution which, the Labour Party constantly claims, exists to keep prices down?

I have seen the report to which my hon. Friend refers, and it confirms that an increase in the price of gas was applied for on 1 April—before the election. It was granted for domestic gas on 17 May, but the Price Commission believes that that increase was insufficient.

asked the Prime Minister if she will list her official engagements for 19 July.

I refer the hon. Gentleman to the reply that I gave earlier.

Does the Prime Minister know what the inflation rate and the total of unemployed persons will be by the time the House returns from the recess? Will she consider making one of her nice broadcasts and explaining to the country why the British people are being punished because of her own doctrinaire views? Is it not a fact that the real economic wreckers in this country are the Secretary of State for Industry and the right hon. Lady herself?

I am glad that the hon. Gentleman enjoys my broadcasts, but I cannot promise him that I shall be broadcasting officially soon. He misunderstands what we are trying to do. We are trying to enable many of his constituents to keep more of their own earnings in their own pockets to spend in their own way.

Earlier today the right hon. Lady mentioned the need to protect individuals against large organisations. Will she arrange to have a meeting with her Law Officers later today to find out why they have been putting up such a spirited defence of the closed shop in Strasbourg?

I should not have interpreted the evidence to the European Court in that way. The hon. Gentleman knows that I am absolutely against the closed shop in principle. We shall be legislating upon that matter when the House returns from the recess.

Did my right hon. Friend see the report in the Financial Times that showed that, for the first time, imports of motor vehicles and components have exceeded exports? Does she realise the serious implications of that? Will she take time today to explain to the country how that position came about during the last five months of the previous Labour Government's period of office?

I have seen that report, and I agree with my hon. Friend that part of the blame lies with the previous Government. We have given improved tax incentives, and the remedy lies in the hands of those who work for the car industry. We hope that there will be great improvements in productivity and delivery times and that sales in this country and overseas will rise.

As the Prime Minister is alone in knowing about the reality of international problems through her visits abroad, will she find the time to find out more about the realities of the grave domestic problem of unemployment by visiting an area of high unemployment and talking to the unemployed in that area? She will discover that the innuendo from her Government that all the unemployed are scroungers is malicious and unmerited.

I must take the right hon. Gentleman to task most severely. That was a totally unwarranted comment and very unlike him. We all hate unemployment, but we all remember that it was the previous Government who increased it so much.

asked the Prime Minister if she will list her official engagements for Thursday 19 July.

I refer my hon. Friend to the reply that I gave earlier.

Will my right hon. Friend take time to reflect on the extent to which a rising pound will force the Treasury to revise downwards its forecast of inflation and the effect that that will have on the context in which pay bargaining takes place in the autumn?

Undoubtedly, a rising pound at the levels that we are seeing now will help inflation to come down. It is a factor that helped the previous Government, and it will help this one to combat inflation. It brings other problems with it, but I hope that it will have the effect to which my hon. Friend has referred.

Will the right hon. Lady reconsider her answer to the hon. Member for Antrincham and Sale (Mr. Montgomery) about the sale of council houses? Is she aware that I have just posted a letter to a lady constituent of mine who is living with her husband and two small children on the fifteenth floor of a tower block? Will the right hon. Lady reconsider her policy of support for Sir Horace Cutler, who is selling off council houses with gardens and preventing people with modest means from living in them? Is not such a policy antifamily and anti-children?

No, Sir. A large number of council tenants want the opportunity to make the investment of a lifetime and to own their homes. We shall give them that chance. They would never have got it from the previous Government.