asked the Chancellor of the Exchequer whether he has any plans to change the law concerning the building societies.

I refer my hon. Friend to the answer that I gave to the hon. Member for Thurrock (Dr. McDonald) on 15 November.

Does not my hon. Friend agree that building societies operate a cartel on interest rates and that that cartel has two main effects? First, does he not agree that it denies a proper market return on investment? Secondly, does he not accept that it encourages the growth of very large building societies? Will he give an undertaking that the Government will not introduce any legislation that is designed to continue that cartel?

I am not sure that my hon. Friend was right when he said that the existence of a cartel would encourage the growth of large building societies. The cartel maintains mortgage interest rates at lower rates than might otherwise be expected. I shall bear in mind my hon. Friend's remarks concerning legislation.

As buildings societies collect money in areas that include my constituency, is it not reasonable that they should undertake to lend money also? At present, a lot of money is taken out of Shetland and Orkney by building societies that will not lend money for building in those areas.

One must commend the thrift of the people of Orkney and Shetland. It is for building societies and their customers to decide where they lend and borrow. It is not an issue for the Government to decide.

Should not greater protection be given to those who invest in building societies and to those who receive loans? Does not my hon. Friend accept that the present craze for building society mergers seems designed to further the interests of the managers of those societies, not those of the depositors or those taking out mortgages? Will he reconsider his reply to the right hon. Member for Orkney and Shetland (Mr. Grimond) concerning the relationship between the deposits that are made and the advances that are given?

My hon. Friend is a robust interventionist in many ways. Protection is important. The issue concerns the Registry of Friendly Societies and the registrar. Legislation may be needed. We shall have to apply the EEC directive on credit institutions to building societies, just as that directive was applied last year to those operating under the Banking Act. Other changes may be necessary if we are to follow up the report of the inspectors on the collapse of Grays Building Society and to tidy up existing legislation. Consultations on all those issues are taking place.

Does the Financial Secretary realise that we need legislation to control some of the wasteful practices of building societies? Does he not accept that the streets of Ipswich—like many other towns—are wastefully littered with expensive and prestigious offices? Does he not further accept that many of those offices do nothing for many weeks of the year? Should not some of those wasteful activities be curtailed?

I am not sufficiently familiar with the town of Ipswich to be able to comment on the hon. Gentleman's specific remarks, but there is a great deal of waste in many areas of the country. However, I am not sure that that necessarily calls for legislation.

asked the Chancellor of the Exchequer whether he will make a statement on the progress of his programme to bring the money supply under control.

Since the measures of last November there has been a marked slowing down in the rate of monetary growth. In the last six months sterling M3 has grown at an annual rate of 6½ per cent.

That is welcome progress. However, does my right hon. and learned Friend accept that, although the timing must be for his judgment, it should be an urgent and substantial priority of Ministers to bring down the level of interest rates?

I recognise the point that my hon. Friend makes. Indeed, I have made it myself on a number of occasions. However, we do not wish to see a move in that direction which cannot be justified by a movement of all the other factors in the monetary market.

Can the right hon. and learned Gentleman answer the question put to him by the president of the CBI on Tuesday, namely: if the right hon. and learned Gentleman boasts that he has the money supply under control, why is he keeping interest rates at this punitive level, particularly as they are having little or no effect on bank lending to private companies but a disastrous effect on the value of the pound, which rose 4 cents yesterday purely in response to relative interest rates between ourselves and the United States?

The right hon. Gentleman should surely acknowledge that a far more significant factor in yesterday's movement of the exchange rate of the pound sterling was the movement in oil prices. I need no reminding from the right hon. Gentleman of the case that was made to me on Tuesday night for a reduction in interest rates as soon as possible. Interest rates are only one of the factors affecting bank lending. The increase in bank lending is still being sustained. We wish to see firm evidence of a reduction on that front before we can be entirely confident about the timing of interest rates.

Does the right hon. and learned Gentleman agree that those enormous and punitive interest rates are having little effect on the volume of bank lending but a disastrous effect on business liquidity and the value of the pound? Why is the right hon. and learned Gentleman sticking to the fetish that we must keep very high interest rates, when he boasts, rightly or wrongly, that he has the money supply under control?

The right hon. Gentleman characteristically overstates almost every aspect of the argument. Interest rates are having an effect on bank lending. Bank lending is one of the facts about which one needs to have more confidence before one can be sure about the movement of the money supply. Interest rates will be coming down in due course.

asked the Chancellor of the Exchequer by how much the current account of the balance of payments was in deficit for the most recent 12-month period for which figures are available.

The most recent figures indicate a current account deficit of £1,923 million in the 12 months up to 30 April 1980.

Does my right hon. and learned Friend agree that that figure would have been much more satisfactory had the exchange rate been at a more sensible level? When will the Government take steps to get the exchange rate to a more realistic level in relation to manufacturing costs?

My hon. Friend may claim to have insight into what is either a sensible or a more realistic level for the exchange rate. However, the exchange rate is determined primarily by market factors. The influence that we can have on it over a sustained period is limited. If we attempted to achieve more than would make sense we would be repeating the experience of the right hon. Member for Leeds, East (Mr. Healey) and finding ourselves losing control of the money supply.

Will the Chancellor put the figures that he has given the House into more realistic perspective by indicating what the non-oil deficit has been?

The non-oil deficit would be a misleading factor. If we sought to unwind the clock of history as if oil did not exist, we should not have had an inflow of investment to oil and an outflow of revenue in respect of investment in oil, and many other factors would have been different. I agree with the hon. Gentleman that the availability of North Sea oil has made and is making a substantial contribution to the position of this country.

Does my right hon. and learned Friend agree that it may be more sensible to regard oil revenues to some extent as a capital inflow, and to intervene as a Government, through the institutions, to create a balance in capital outflow, so that the manufacturing sector would be dealing with an exchange rate against which background it could better compete?

My hon. Friend's analysis was part of the background and justification for the speed and completeness with which we abolished exchange control.

Does the right hon. and learned Gentleman agree that our total non-oil deficit is £10,000 million and our non-oil deficit with the EEC is £5,000 million, and that the measures that he is taking are making our non-oil deficit worse than it need be?

I urge the hon. Gentleman not to indulge in a too over-simplified breakdown between oil and non-oil deficit. However, I repeat that, if oil were not there, the factors leading to a greater deficit would be substantial. As a result of the availability of oil revenue, we are in a stronger position to reduce the borrowing requirement and so reduce interest rates, which is a sensible linkage policy.

asked the Chancellor of the Exchequer if he will seek to zero-rate babies' feeding bottles for value added tax.

No, Sir.

Is my hon. Friend aware that by that answer he is perpetuating the concept of taxation from the cradle to the grave? Will he accept that these bottles are a necessity for families who have babies, and that to increase VAT on them, as was done in last year's Budget, is to fly in the face of our manifesto commitment not to impose VAT on family necessities?

I thought for a moment that my hon. Friend was about to refer to taxation from the womb to the tomb. The imposition of VAT on these bottles is not an innovation. In our manifesto commitment we said that we would not remove existing exemptions, and we have not done so.

With regard to manifesto commitments, do the Government now regret increasing VAT to 15 per cent.?

No.

asked the Chancellor of the Exchequer what representations he has received from the Confederation or British Industry and other employers' organisations regarding a reduction in the rate of interest.

We have received a number of representations from employers' organisations, individual business men and industrialists regarding a reduction in the rate of interest.

Will the right hon. Gen-man confirm that the CBI is making strenuous efforts to get the Government to change their lunatic economic policy of high interest rates, which are ruining, in particular, small firms? Does the right hon. Gentleman accept that many organisations want the Government to take measures with regard to the massive profits that the banks are creaming off? If the Government cannot help to increase the number of jobs and extend industry instead of wreck it, will the right hon. Gentleman and his cronies resign from office?

We do not intend to resign from office. We are not quitters. We are determined to pursue a monetary policy which, of necessity, includes the current level of interest rates until we see tangible signs of success that a reduction in the lending rate can be embarked on with wisdom and prudence. Premature action would be foolish.

Does my right hon. Friend agree that, as an advocate of the CBI, the hon. Member for Keighley (Mr. Cryer) is like a gourmet at a health farm? Will my right hon. Friend point out to the CBI and other bodies that make representations on the level of interest rates that the rate is still negative against the rate of inflation? Will he further point out that a recrudescence of inflationary pressures, resulting from a premature cut in interest rates, would be far more damaging to industry in the long term than a reduction in interest rates?

The answer to all three parts of that constructive question is "Yes, Sir".

Is not the real reason why the Government cannot reduce interest rates not the reason given by the Chancellor, that bank lending was too high, but that inflation is so high? As we are to have an inflation rate of probably 20 per cent. at the end of the year, does the right hon. Gentleman accept that there is no way in which interest rates can fall before then?

The right hon. Gentleman has made that point on a number of occasions.

It is still right.

In the past, and during the lifetime of the Government of whom the right hon. Gentleman was a member, minimum lending rate tended to be a lead indicator and a move ahead of the rate of inflation.

As we have had peak interest rates for a longer continuous period than before, and as inflation is still increasing, will my right hon. Friend spell out precisely why there would be such dire consequences from even a moderate reduction in MLR of one or two points now?

We believe that a fall in interest rates at this moment, unless it were clearly indicated by market conditions, would have a serious impact upon the Government's monetary target.

asked the Chancellor of the Exchequer what are the latest estimates of the revenue expected from North Sea oil over the next five years, broken down between the relevant revenue elements.

I have nothing to add to my replies to the hon. Member for Batley and Morley (Mr. Woolmer) of 14 April and 22 April 1980.

Will the right hon. and learned Gentleman tell the House why the Government seem deliberately to have under-estimated the revenues from this source? Does he agree with the assumptions made by Phillips and Drew and Wood Mackenzie & Co.—namely, that revenues from this source will be at least four times what he has estimated for 1983–84? From where do those firms get their figures and from where does he get his?

One of the more obviously conspicuous reasons for variation is that a number of other forecasters are forecasting on their projection of current price terms several years ahead, which immediately produces scope for a wide difference. Beyond that, the hon. Gentleman will remember that this is an area in which there is notoriously scope for over-estimating and over-optimism. It will be apparent that most of the forecasts made in previous years of the volume of output have exaggerated what actually happened. The fact remains that the figures for North Sea revenues contained in our medium-term financial strategy provide our best assessment of the reality.

Whatever the totals and eventual breakdown of these windfall North Sea oil revenues, will my right hon. Friend assure the House that suitable priority will be given in using those revenues to necessary capital expenditure, to infrastructure projects, to reducing public debt and preferably to investment in replacement sources of energy?

That is a substantial catalogue of possibilities. I think that my hon. Friend recognises that the medium-term financial strategy attaches prime importance to the value of North Sea revenues and securing a progressive reduction in Government borrowing.

Does the right hon. and learned Gentleman agree that Britain has the most benevolent oil tax regime in the world outside the United States for oil companies? What does he think of the proposal in the Norwegian Government's white paper that in future oil companies should be reduced to the status of consultants and paid agents of the State and should merely receive a fee for the cost of exploration and production?

The hon. Gentleman's last suggestion seems to be a prescription for disaster. If one thing is beyond doubt, it is that Britain owes a great deal to the skill and managerial competence of the oil companies in exploiting North Sea oil. I do not agree that our oil tax regime is the most benevolent in the world. It produces a substantial yield and one that is likely to grow.

asked the Chancellor of the Exchequer if he will set up a unit to monitor the issue of new money.

No, Sir.

I hardly heard that brief reply. Does my hon. Friend agree that it would be of great benefit to Britain if a unit were set up completely apart from any British Government to monitor the issue of new money, so that British Governments of either party could not print new money close to an election time to build up their election promises to the electorate, which would in the long term do great damage to the economy, and could not print post-dated cheques, an activity which was so typical of the previous Government at the general election?

I fully understand what has prompted my hon. Friend to make that suggestion. However, I think that it would be wrong to take monetary control out of the hands of the elected Government and Parliament. Nevertheless, it is incumbent upon Governments to be responsible in monetary matters; and this Government are responsible.

If the Government will not set up a unit to monitor the issue of new money, will the hon. Gentleman explain to the House why it was that a few weeks ago the Treasury formed a unit or consortium which represented the form of a lifeboat for Stone-Piatt to bail it out and provide it with new money? I think that he has a duty to tell the House why he intervened on that occasion.

The hon. Gentleman is misinformed. The Treasury had nothing to do with Stone-Piatt.

The Governor of the Bank of England was there.

The Governor intervened, but that is a different matter.

As it is nearly 10 years since decimalisation, is it not ironic that new money continues to be denominated in new pence? Is it not time for changes in our currency? Would not at least the removal of the misnomer "new" be a modest start?

My hon. Friend has a good point. However, legislation would be required to make the change. Legislative priorities will decide when such a measure should find its place in the queue.

I revert to the question of my hon. Friend the Member for Bolsover (Mr. Skinner) on the Stone Platt issue, which was interesting and important. Will the hon. Gentleman con firm or deny that Treasury Ministers approved—

They did.

—the rescue operation taken by the Bank of England?

I think that the right hon. Gentleman has been in this place long enough to know that he should table a question on the Order Paper when he wishes to raise such a matter. His supplementary question has nothing to do with the question of my hon. Friend the Member for Macclesfield (Mr. Winterton). [HON. MEMBERS: "Answer".] However, from my knowledge it appears to me that the Governor of the Bank of England behaved in a constructive manner.

asked the Chancellor of the Exchequer what was the aggregate percentage increase in domestic credit expansion over the latest period of six months at an annualised rate; and whether this was in conformity with the monetary policy of Her Majesty's Government.

Since no stock figure corresponding to domestic credit expansion is available a percentage growth figure cannot be given. Domestic credit expansion was £3.7 billion seasonally adjusted in the six banking months to mid-April. This compares with £5.8 billion in the previous six months. These figures are consistent with our monetary policy, which is formulated in terms of a target range for sterling M3 growth.

I am grateful to my hon. Friend for that reply. I am sure that we all welcome—certainly all my right hon. and hon. Friends—the way in which monetary aggregates are coming back on target. However, will he and the Treasury team take care to note that at a time of continuing balance of payments deficit domestic credit expansion statistics are vital to indicate the scale of liquidity growth in the economy?

My hon. Friend is right. Domestic credit expansion needs to be monitored, and we monitor it. If he is suggesting, as I think he may be, that monetary policy should be even tighter than at present, I must disagree with him. We are pursuing a tight monetary policy, as the growth rate of sterling M3 of 6½ per cent. as an annual rate over the past six months testifies.

If, as the Prime Minister told the House last week, the rise in the RPI to 21 per cent. is largely due to higher pay settlements, how can it be checked without an incomes policy?

It can and will be checked by monetary policy.

asked the Chancellor of the Exchequer what revenue has been obtained from North Sea oil during each of the past four years; and what is the estimated figure for the current year.

Total revenues from royalties, petroleum revenue tax and corporation tax from North Sea oil and gas over the last four years were:

The estimate for the current year is about £4.1 billion. These figures are at out-turn prices.

Does the right hon. and learned Gentleman understand that those figures, according to many experts, seem very low? Will he bear in mind that this proves that the Government are not planning too wisely and are failing to build up manufacturing inudustry and investment in production? If he considers that such steps cannot be afforded on present income from oil revenues, will he take into account the fact that, according to many experts, the oil companies are getting away with over £1,000 million a year that ought to be going into the coffers of the Government? Will he take some action?

The hon. Gentleman may have founded his first question about comparison with outside calculators on a misunderstanding of what I described. I was not dealing with forecasts but reporting a state of fact. On the use of oil revenues for building up industry, the hon. Gentleman must surely recognise that the revenues I have recounted are playing a crucial part, alongside the public expenditure reductions upon which we have embarked, in merely reducing public sector borrowing to a manageable figure. His suggestion that the Government are neglecting substantial profit by the oil companies is wide of the mark. The hon. Gentleman must take account of the extent to which oil company profits are earned world-wide. We are making a substantial take from those profits earned in this country.

Will my right hon. and learned Friend confirm that the present level of PRT and other taxes paid by oil companies on the average oilfields is well over 85 per cent.?

I would not like to be precise about an average figure without notice. My hon. Friend is right in identifying the extent to which the average take from profits of North Sea oilfields is very substantial.

In view of recent further increases in the world price of oil, will the right hon. and learned Gentleman be revising his estimate for the revenue from North Sea oil?

That is one of the factors to be taken into account. The right hon. Gentleman will have seen that, almost at the same time, there have been revisions in the estimates for likely production of North Sea oil. There are constantly varying factors on both sides of the equation. When prices tend to go upwards, production tends to fall short of forecasts.

asked the Chancellor of the Exchequer what is the expected yield from stamp duties on conveying of domestic properties in the current financial year.

The duty from residential property is expected to yield £240 million this year.

Can my right hon. Friend offer any defence for the existence of this tax on home ownership? Does he not agree that it should be phased out?

No. I cannot agree that the duty should be phased out, given the Government's necessity for substantial revenues. The yield of this tax of £240 million a year indicates its importance to the revenue.

Will my right hon. Friend bear in mind that stamp duty, estate agents' and solicitors' charges, and value added tax, mean that the cost of moving house now must be very substantial?

I note and accept that point.

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

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

The retail price index rose by 21.8 per cent. over the 12 months up to April 1980. A better indication of the underlying rate will appear when the once-and-for-all effects of last year's VAT increase drops out of the arithmetic in July.

Will the Chancellor of the Exchequer say how public services such as the National Health Service and local government can possibly be expected to meet the cash limits set by the Government on a basis of 14 per cent. inflation since, to average that figure over the year, inflation at this time next year will have to be as low as 7 per cent.? Does the right hon. and learned Gentleman believe that there will be a 7 per cent. inflation rate at this time next year? If not, will he guarantee to protect these public services against the ravages of inflation created deliberately by the Government?

It is not possible to guarantee protection for this, that or any other sector of the economy, or the community, against the ravages of inflation. It is crucial to continue to achieve a reduction in the cash expansion of public expenditure. It is worth noting that one of the contributory factors to the substantial cost of the Health Service is the very substantial increase in salaries payable in that service.

Now that the Government's insane monetarist policies have succeeded in doubling inflation over the past 12 months, why do they not do the logical thing and try a prices freeze? Does the Chancellor seriously expect public sector workers to accept wage rises less than the rate of inflation, especially after Government attempts and press attempts to disparage the trade union movement?

The hon. Gentleman should notice that we are almost the only industrial country that has not accepted a rate of pay increase several percentage points below the rate of price increase. It is inevitable that there should be that relationship between prices and earnings growth, particularly in this country where, over the past three years, pay has risen 12 per cent. more than prices at a time when output has grown by only 5 per cent. One has to face the realities of economic life.

Has my right hon. and learned Friend given consideration to the possibility of strengthening the purely qualitative advice to banks and other institutions on their lending decisions?

I have given consideration to that. The lesson of places where it has been tried and of times when it has been tried in this country is that it tends, in due course, to produce distortions and lead to alterations in the pattern of bank lending that are not sustained. There is, in the end, no escape from the discipline of price in controlling the availability of money.

Does not the Chancellor agree that it argues disgraceful incompetence that a Minister who has made his main purpose the bringing down of the rate of inflation should have seen it more than double in his first 12 months in office to the highest level in the industrial world, higher than Italy? Does he not agree that it would be 3 per cent. or 4 per cent. higher still were it not for the 18 per cent. increase in the real value of the pound that is crippling British business?

One of the misfortunes of the right hon. Gentleman is that while holding his present shadow office, he has to live down his record in real office. I cannot understand how he is able to make that kind of assertion. He knows better than anyone the extent to which monetary policies over the 12 months before we came to office are the main cause of our problems.

Will the Chancellor accept that further persistence of this rate of inflation will consolidate public expectations of continuing inflation? It is, therefore, of urgent importance to introduce an incomes policy with the authority of this House.

I accept fully that it is important to secure, as steadily and swiftly as possibly, a reduction in the rate of inflation and a reduction in such expectations. I have pointed out previously that the first step in that direction is likely to take place between July and August. I am afraid that the hon. Gentleman will find only a modest degree of support on both sides of the House for the proposition that an incomes policy is likely to be a long-lasting step in that direction.

Is it the collective view of Treasury Ministers that in the next wage round in the public sector a good example must be set by the Government.

It is the collective view of everyone who has given serious consideration to the subject that, as an essential part of reducing inflation, the public sector must play a role in securing progressively lower rates of pay settlements. It is most important, as my hon. Friend says, that this should be achieved.

In view of rising inflation, rising unemployment, the fact that the balance of payments is as bad as ever and that interest rates are as high as ever and not likely to go down, will not the right hon. and learned Gentleman consider that the monetarist policies of the Government might be wrong?

I will consider any suggestion made by the hon. Gentleman with the respect to which it is entitled. It must be clear by now that the impact of monetary policies on inflation and the state of the economy is bound, as the right hon. Member for Leeds, East (Mr. Healey) has frequently pointed out, to take time.

asked the Chancellor of the Exchequer if he will take steps to simplify the income tax system before proceeding with the transfer of Pay-As-You-Earn to computers; and if he will seek to put personal taxation on a unisex basis.

The Inland Revenue's plans for computerising PAYE envisage automation of, broadly, the existing system, but of course we are always seeking to simplify this where possible. My right hon. and learned Friend announced in his Budget Statement that we would be issuing a Green Paper on the taxation of husband and wife later this year.

Will my hon. Friend give an undertaking that putting PAYE on to a computer will not place obstacles in the future to reforms of the income tax system, with a view to simplifying it and removing its disincentive effects? Can my hon. Friend say, in particular, that computerisation will not obstruct the recognition of social changes such as the fact that women are entitled to be treated as independent and equal persons both as to their property and their income?

As with any large computer project, computerisation of PAYE implies some constraints on changes in the personal tax system during the implementation period. I hope that the conclusions that are reached as a result of the consultations which follow the publication of the Green Paper to which I referred will not be impeded by those constraints.

Will the Minister take an opportunity to describe the procedures in which the individual contributor to the tax system will be involved? These are complex matters. Will the Minister also ensure that the computer and equipment to be used will be British?

The hon. Gentleman is right. These are complex matters upon which I do not feel professionally competent to pronounce. Certainly all these considerations will be gone into very carefully.

Will my hon. Friend ensure that he is not bamboozled by civil servants into believing that a computer system necessarily makes it more rigid and that provision can be made not only to amend the system in future, if need be, but that it will be easier to do so if appropriate steps are taken at an early enough stage?

My hon. Friend has slightly misunderstood the position. Once the computer system is fully operational there will be much greater flexibility, not greater rigidity. The constraints appear only during the period when the changeover takes place.

Will the Financial Secretary give a clear assurance to the House that the computer system will not be so inflexible as to prevent any future Government from changing the PAYE system to a non-cumulative system or bringing in a system of self-assessment?

I hope that when the system is fully operational—we hope that that will be by 1986–87—there will be that degree of flexibility.

asked the Chancellor of the Exchequer what views were expressed by the Trades Union Congress and the Confederation of British Industry to the May meeting of the National Economic Development Council on how North Sea oil and gas revenues could best be used to benefit the economy; and what is his policy on the matter.

Use of the North Sea revenues was not discussed in detail during the May meeting. These revenues will constitute an increasingly important part of the Government's income, permitting lower levels of Government borrowing and of taxation than would otherwise have been needed. This will help to achieve a lower level of interest rates and encourage a higher level of investment.

Does the Chancellor agree with the Director General of the National Economic Development office that North Sea oil revenues should be the basis of a positive industrial policy? Does the Chancellor further agree that North Sea oil revenues are currently being spent on consumption instead of on investment? When will the Government bring forward a proposal to the House to show the use of North Sea oil revenues as strengthening British industry instead of destroying it as at present?

One of the principal arguments advanced earlier this afternoon was that the most significant contribution one could make to strengthening British industry would be to achieve lower interest rates. One of the most formidable contributions now being made by North Sea oil revenues is to help reduce public borrowing to precisely that end.

Is it not the case that the £4,000 million of tax revenue which the Chancellor told us he expects this year from North Sea oil will be spent entirely on financing a rise in unemployment and making good the loss of revenue due to the recession produced largely by the policies of the present Government?

That question represents the most curiously perverse and naive analysis of economic facts.

Will the Chancellor inform the NEDC of the effects of our having a petro-currency, an over-valued pound, high interest rates and high unemployment and will he indicate to the NEDC where we would be if we did not have these revenues?

In that question the hon. Gentleman has succeeded in aptly summarising the argument that the possession of North Sea oil contributes advantages and disadvantages. It contributes advantages in the way of higher revenue which would not otherwise be available. On the other hand, it does have the effect upon our currency about which several hon. Members have complained.

asked the Chancellor of the Exchequer whether he has any further plans to reform the tax system to provide sufficient incentives to those who at present can obtain without working benefits equivalent to the take-home pay which they would be likely to earn in employment.

The Government's objective is to reduce the burden of direct taxation for all members of the community, including the lower paid. The present imbalance between in-work and out-of-work income will also be reduced by taxing the short-term social security benefits available to those not working.

Does my hon. Friend agree that it is neither reasonable nor acceptable to deduct income tax and national insurance contributions from low-paid workers in such a way that they are little better off—in some cases they are worse off—than they would be if they relied entirely on State benefits?

That clearly is a factor in Government thinking and one of the reasons why my right hon. and learned Friend was so anxious to increase the tax thresholds in his recent Budget.

asked the Prime Minister if she will list her official engagements for 22 May.

This morning I presided at a meeting of the Cabinet. In addition to my duties in this House, I shall be having further meetings with ministerial colleagues and others. This evening I shall leave for a visit to the North-East of England.

Will my right hon. Friend find time today to remind trade union leaders that pay has risen by 12 per cent. more than prices in the last three years while output has risen by a mere 5 per cent.? In expressing the hope that we are about to enter the post-Clegg era may I ask my right hon. Friend whether she agrees that a closer link between increases in wages and efficiency may, of necessity, mean an acceptance of pay increases less than the current rate of inflation?

I agree with my hon. Friend that it is vital to achieve a closer link between increased pay and increased efficiency. For that purpose it may be necessary, for a time, for some firms to accept a rate of increase below the level of inflation. After all, the rate of increase that one is entitled to have is the rate of increase that is earned. Otherwise the extra goes into increased prices.

In the light of that reply will the right hon. Lady, either today or very soon, make arrangements to meet representatives of the nurses? Does the Prime Minister regard herself as being bound by the commitment which she herself made to the nurses just over a year ago? Will she tell the House and the country how she proposes to carry out that promise?

If the right hon. Gentleman looks at the increases afforded to the nurses he will find that they have been of the same order—about 65 per cent. or 66 per cent.—as have been afforded to doctors, in view of the latest award of the review body, since 1978.

Does the right hon. Lady think that that is a fulfilment of the pledge she gave to the nurses? Is she aware that the nurses do not think that it is a fulfilment of that pledge? Will the Prime Minister have an early meeting with the nurses to discuss the matter before she puts into operation the arrangements for the doctors, the dentists or the nurses?

I hope that the nurses would go to see my right hon. Friend the Secretary of State for Social Services. As the right hon. Gentleman will remember, we are pledged to put into effect the report of the review body on the doctors. It is the third stage, begun by the previous Labour Government, which we have honoured and will continue to honour. It is a good thing that we have taken over that pledge. When the doctors have received that amount they will have had the same as nurses will have had since 1978 assuming that the nurses take the 14 per cent. increase this year.

Will the Prime Minister tell the House whether the Chancellor of the Exchequer's invitation to the trade unions to discuss pay is the first step towards recognising the need for a pay policy? If it is not, will the Prime Minister explain how she expects the Scottish teachers, for example, to accept a pay rise of 14 per cent. which is 8 per cent. below the going rate of inflation unless that is to become a general rule fairly applied to everybody?

There is no general rule that can be applied to everyone, because circumstances are very different. The right hon. Gentleman would perhaps accept that a policy that tried to close the gap between increased pay and increased efficiency could in some ways be called a pay policy—the only sound pay policy that there is.

Yesterday, when, despite her assurance last week, the Prime Minister had secret talks about Northern Ireland with the Prime Minister of the Irish Republic, a former gun-runner, whose brazen and hostile claim to the territory of Ulster acts as an incentive to the Provisional IRA, did the right hon. Lady make it absolutely clear to Mr. Haughey that the Ulster people, despite Provisional IRA atrocities, and whether or not the British guarantee remains, will never capitulate and be swallowed up by the most theocratic country in Western Europe, which still refuses to extradite IRA terrorists from the Republic and which still allows IRA Provisionals to operate from the Republic?

If the hon. Gentleman reads the communique, he will find what he seeks, in that I made it perfectly clear that the pledge that we have always given to Northern Ireland stands, that there will be no change in Northern Ireland's constitutional status unless a majority of the people of Northern Ireland wish it; and until they do Northern Ireland stays firmly within the United Kingdom.

asked the Prime Minister if she will make a statement on the steps being taken or proposed to deal with the "Why work?" syndrome.

The Government have sympathy with the views expressed by my hon. Friend. Policies which en courage effort and improve the balance between income in work and out of work are central to our approach. The measures announced in my right hon. and learned Friend's Budget to bring short-term benefits into tax, and meanwhile to increase the uprating of these benefits by less than the rate of inflation, to improve substantially the family income supplement for lower-income families in work, and to withdraw the earnings-related supplement are examples of this policy in action.

I thank my right hon. Friend for that reply. Whilst I appreciate the great efforts that the Government have made to remedy the "Why work?" problem, does she not agree that incentives will be restored only when tax thresholds are raised considerably and the basic rate is considerably reduced?

I agree that we should like to do both those things, and that both would go quite a long way to deal with the problem on which my hon. Friend has taken such an excellent lead. But to raise the thresholds for single and married people would cost more than £700 million for each £100 by which they were raised. To reduce the standard rate of tax by 1p also costs about £700 million, so it is a very expensive policy.

Will the right hon. Lady get her priorities right? Rather than worrying about the "Why work?" syndrome, why does she not worry about the "Right to work demand"? With 1½ million unemployed and massive redundancies in the steel and coal industries, why do not the Government change their economic policies?

I entirely agree with the hon. Gentleman in that I look forward to the day when everyone can have a good job. I hope that he also put that point cogently to his own Front Bench when they were in government and had even more people out of work than we have now.

asked the Prime Minister whether she will list her official engagements for 22 May.

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

Is my right hon. Friend aware that today is Professor Clegg's sixtieth birthday? Will she be wishing him many happy returns, or does she think that both his age and his recent decisions eminently qualify him and his commission for early retirement?

It so happens that Professor Clegg let me know a few weeks ago that it was his intention to retire in September. My hon. Friend will also have heard that the terms of reference of the Clegg Commission are such that they have never been carried into operation. They were to study the feasibility of comparability, but in fact most of the referencesto the commission have asked it to make a recommendation. There is a question about whether one can establish genuine comparability between certain jobs.

I revert to the Prime Minister's reply earlier to the hon. Member for Down, North (Mr. Kilfedder). Does she agree that if the continuing disturbances in Northern Ireland [HON. MEMBERS: "Disturbances?"]—indeed, the murder in Northern Ireland—place a great strain upon the economy of the Republic of Ireland, and enormous pressures upon its internal cohesion, the Prime Minister and people of the Republic have an interest in the settlement that is made within the Six Counties and have a right to be consulted about it as well?

Of course, the situation in Northern Ireland and the terrorism put a great burden upon that country and upon the people of Northern Ireland, not only in economic terms but in very human terms. But I must stress that we are getting very good co-operation on security matters across the border. Any change in the constitutional status of Northern Ireland is a matter for the people of Northern Ireland, this Government and this House.

Will my right hon. Friend take time, despite her busy schedule today, to say a word of reassurance to our fishermen, because hers is a word that they know they can trust?

I shall gladly respond to my hon. Friend's invitation. The Government made a grant of £3 million to the fishing industry because of the serious and grave conditions that it faced. We keep constantly in touch with fishermen. I understand that my right hon. Friend the Secretary of State for Scotland expects to visit my hon. Friend's constituency a week on Saturday, when he will doubtless have a chance to talk with local skippers and hear their views firsthand.

May I revert to the meeting that the Prime Minister had yesterday afternoon with the Taioseach of the Irish Republic. Did she find any significant or specific difference of approach to the problems of Northern Ireland between the present Taioseach and that of his immediate predecessor? Was one more militant that the other—the present one or his predecessor?

The hon. Gentleman is inviting me to stray into dangerous paths. I must reject his invitation.

asked the Prime Minister if she will list her official engagements on Thursday 22 May.

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

Does my right hon. Friend welcome the speech made earlier this week by Mr. Frank Chappie, emphasising the failure of trade union militancy in recent years and condemning sectionalism, selfishness and intimidation as well as unfair and undemocratic processes within the trade union movement?

I thought that it was an extremely interesting speech. Any selfishness on pay claims means that other people suffer through increased prices. We all know of the difficulties of intimidation and the problems it causes when people want to exercise their right to go to work. I thought that it was a speech to which we might all, including those in the trade union movement, give close attention.

Has the Prime Minister had a look at the latest unemployment figures, published two days ago? Is she aware that the present unemployment level in the West Midlands is now higher than the national average and that GKN Sankey is about to sack hundreds of workers in Wolverhampton, Telford and elsewhere? What does the right hon. Lady intend to do to reverse this trend, to give those who want to work a chance to have a job?

I am afraid that levels of unemployment will continue to rise over the coming months, as there are some necessary rationalisations and reductions in over-manning to be made. We must go through with them in order to increase productivity and to get the rest of our industries into an efficient condition in which they can compete in the real world.

I accept what my right hon. Friend said to my hon. Friend the Member for Banff (Mr. Myles), but does she realise that in spite of the injection of £3 million into the fishing industry—which I welcome—there has been a serious deterioration in the industry? Can the Prime Minister find time urgently to meet the Secretary of State for Scotland and the Minister of Agriculture, Fisheries and Food to try to assist the fishermen? Does she accept that because time is not on their side they will go under unless something is done urgently?

I meet the Minister of Agriculture, Fisheries and Food and the Secretary of State for Scotland comparatively frequently. We consider and discuss the problems in the Common Market of trying to achieve a suitable fisheries policy. We recognise the urgency. My right hon. Friends are in constant touch with the fishing industry.

On a point of order, Mr. Speaker. I wish to raise the question of the special control units which were devised under the previous Conservative Government to provide a regime of psychological and social deprivation—

Order. Is the hon. Gentleman making an application under Standing Order No. 9?

No, Mr. Speaker. The special control units were devised under the last Conservative Government to pro vide a regime of deprivation for intractable prisoners. Documents relating to that experiment which show clearly that the House and the public were deliberately kept in the dark were recently handed over in court to the National Council for Civil Liberties. They have been impounded by a gagging writ served on the NCCL legal officer—

Order. I am afraid that I am not able to help the hon. Gentleman. It is clear that he is not referring to anything which breaks our Standing Orders. This is not a point of order. The hon. Member should pursue the matter in some other way.

Further to that point of order, Mr. Speaker——

Order. Very exceptionally, when there is no point of order, I accept the phrase "further to that point of order"—but only for a brief time.

I am grateful to you, Mr. Speaker. I have already written to the Prime Minister on this matter—

Order. That settles the matter.

Will the Leader of the House state the business for the week after we return from the recess?

The business for the first week after recess will be as follows:

MONDAY 2 JUNE, TUESDAY 3 JUNE and WEDNESDAY 4 JUNE—Finance (No. 2) Bill, consideration in Committee.

THURSDAY 5 June—Supply [17th Alloted Day]: Until about 7 o'clock there will be a debate on the unfair and arbitrary decision to charge "full cost" fees to overseas students, and afterwards on the offence of loitering with intent under the Vagrancy Act 1824. Both will arise on Opposition motions.

FRIDAY 6 JUNE—Remaining stages of the Films Bill and of the New Towns Bill.

MONDAY 9 JUNE—Completion of remaining stages of the Health Services Bill.

In view of the assistance which the Opposition have given to the Government in the choice of two urgent subjects in Supply time, will the right hon. Gentleman note that the time left for debate on the Brandt Commission, which he has promised, is becoming short? Will he say when we shall have that debate? I trust that he will make an announcement in his next Business Statement.

I also attach great importance to the report of the Brandt Commission. I can give an undertaking that we shall have a debate on the subject before the Venice summit.

Several Hon. Members rose —

I remind the House that questions on the Business Statement will take time from the debates on the Housing Bill which, under the timetable motion, must be concluded at 7 o'clock. Therefore, I propose to take considerably fewer questions today in order to be fair to the House.

Will my right hon. Friend find time soon after the House returns from the recess for a debate on the Government's policy on public sector pay? Will the Government take the opportunity of such an occasion to set out how they propose to deal with that serious problem, which is such an engine to inflation?

As my right hon. Friend the Prime Minister made clear, public sector pay policy, indeed all pay policies, must rest on a connection between pay and efficiency, pay and productivity. I shall certainly bear in mind the request for a debate in due course.

Is the Leader of the House aware that during questions to Treasury Ministers a request was made for information about the consortium that was set up under the guidance and approval of Treasury Ministers to bail out Stone-Piatt Industries? Because the House has been refused further information on a matter which is a direct contravention of Government policy on intervention, will the right hon. Gentleman make it clear to Treasury Ministers that a statement must be made on the full details of what took place a few weeks ago?

I shall pass that message to the Chancellor of the Exchequer. If the matter was raised during questions to the Treasury, I should imagine that there is nothing to add.

Are the Government discussing the question of the amount of legislation with which the House will have to deal when it returns after the Summer Recess? Will my right hon. Friend bear in mind the promise that in the next Session there will be much less legislation than there has been in this Session?

I cannot anticipate the Gracious Speech that will open the next Session. I can assure my hon. Friend that I share his sentiments to the full. I trust that, having implemented much of our manifesto commitment in record time, we shall have a lighter legislative Session next year.

Will the Leader of the House give further consideration to the possibility of a debate on the Flowers report on the future of medical education, and, in particular, the future of Westminster hospital, which causes great consternation throughout the House? Is he aware that in a previous reply he said that it would be best if the House debated the matter after the University of London had taken its decision? Does he realise that the House is becoming more and more reluctant to debate issues after decisions have been taken?

I share the right hon. Gentleman's anxiety about the future of Westminster hospital and related matters. However, the responsibility is for the University of London and the London area health authority. We must wait until they have given an indication of their views.

Several Hon. Members rose —

Order. I propose to take three more questions from each side. That will take us to about 3.45 and will leave only 3¼ hours for consideration of the Bill under the timetable motion.

Can my right hon. Friend comment on the unhappy situation in relation to the Social Security (No. 2) Bill? Is he aware that under present plans we shall not have a chance to debate clause 2, which refers to pensioners' rights and the earnings rule? In view of our commitment during the general election campaign to abolish the earnings rule, is there a chance of the House debating that matter?

I am afraid that the Bill is subject to the guillotine motion, which was introduced as a last resort. I would have much preferred a voluntary timetable, but, unfortunately, it could not be agreed.

Is the Leader of the House aware that it is now almost four weeks since 146 British holiday-makers lost their lives in the tragic air disaster in Tenerife? Does he recall that the Secretary of State for Trade was commendably quick in making a statement to the House about it? We have now waited four weeks for a statement about why it happened. Will he bear in mind that thousands of British holidaymakers have booked charter flights that will land at Los Rodeos airport? Will he give an undertaking that the Secretary of State for Trade will make an early and urgent statement about that tragic event?

The right hon. Gentleman is quite right to say that it was a most tragic event. It has caused great anxiety among thousands of holiday-makers and potential holidaymakers. I shall urgently convey the right hon. Gentleman's remarks to my right hon. Friend the Secretary of State.

Since there will not be an opportunity to ask my right hon. Friend a question about the conditions of service for Members of Parliament until a bare week before adjustments in remuneration are due on 13 June, will he make an announcement about giving effect to resolutions that the House has already passed in respect of secretarial and research allowances, secretarial pensions, travel for Members of Parliament, and the updating that Lord Boyle has undertaken on remuneration for Members of Parliament? I dare say that I express the view of the House in saying that I hope that that information will be available well before 13 June.

With regard to the various resolutions passed by the House on secretarial pay and research allowances, my right hon. Friend knows that I have made arrangements for such allowances to be paid to hon. Members. In respect of the arrangements for extended travel, secretarial pensions and other matters, I have been in continual conversation with hon. Members and with officials. I hope to be in a position to put forward any decision on those matters shortly after we return from the Whitsun Recess.

With regard to the report of Lord Boyle on the second instalment of Members' pay, I entirely share my right hon. Friend's wish that we obtain that report in good time for 13 June. I have not yet received it, and I am investigating the question when we are likely to receive it. Of course, the report will be made not to myself but to my right hon. Friend the Prime Minister.

Does the Leader of the House know that Ministers at the Department of Health and Social Security insult and abuse hon. Members who seek improvements in the scheme for the safety of medical drugs, although they admit that those improvements are desirable? May we have an opportunity for a full discussion on that subject so that we may expose the insolence, arrogance and hypocrisy of the Ministers concerned?

I am surprised to hear such strong language coming from the right hon. Gentleman. That has certainly not been my experience when dealing with the Secretary of State or other Ministers in the Department of Health and Social Security. They have always treated myself and, as far as I know, other hon. Members with the utmost consideration and courtesy. I know of the right hon. Gentleman's concern about the drugs to which he referred. I shall approach my right hon. Friend the Secretary of State and ask him to look into the matter.

Will my right hon. Friend allow time in the near future for hon. Members who are members of the European Parliament to give an account of what they have been doing over the past year, and to say what they believe their role to be?

I am sure that there will be an opportunity for what, I imagine, would be a fairly short debate.

When the House resumes after the recess, will the Leader of the House arrange, as a matter of urgency, a debate on the location of the first Inmos production unit in Britain? Ministers could then give an explanation about the present prolonged and dangerous delay.

That is a most important subject. I shall convey the concern of the hon. Gentleman to my right hon. Friend the Secretary of State for Industry.

On a point of order, Mr. Speaker. I am concerned that you should seek to terminate early one of the most important events that takes place in the parliamentary week, namely, the determination by the House of what can be discussed in the coming week. One of the disadvantages of the House is that we work from week to week and not from month to month, or longer. I know that you, Mr. Speaker, are rightly concerned with the progress of business in the House, if not with the business itself—that is the business of the Government Front Bench. I am concerned that you should terminate the rights of Back Benchers to raise matters with the Government—

Order. The hon. Gentleman knows of the discretion that has been given to me by the House. I shall not sit here and listen to criticism of the way in which I exercise that discretion. If the hon. Gentleman disagrees with what I have done, he knows what to do.

Further to that point of order, Mr. Speaker. There is some inconvenience caused to the House if, on a Thursday when the business statement is made, the time for asking questions is abbreviated. We are not criticising your judgment, Mr. Speaker, but there is, by implication, a severe criticism of the Government for putting down on a Thursday Bills subject to guillotine motions which may eat into the time allowed for business questions. May we hope that, in the light of the matter having been raised, the Government will not on any future occasion put down such business on a Thursday, which curtails the rights of hon. Members? [ Interruption .]

Order. Let us reduce the temperature. The right hon. Gentleman's point was directed elsewhere than at me. I am much obliged to him for not directing it at this quarter.