asked the Chancellor of the Exchequer, further to his reply to the hon. Member for Ealing, North (Mr. Greenway) on 6 April, if he will make a statement on the steps so far taken by collectors of taxes to help businesses faced by difficulties because repayments of value added tax are being delayed by reason of the Civil Service dispute.

Collectors of taxes appreciate the cash flow difficulties which face businesses as a result of the interruption of VAT repayments. They are taking those into account in considering how far to press for payment of both PAYE and other tax liabilities which are overdue. In addition, the Board of Customs and Excise will on request confirm to a bank that a business is normally in receipt of repayments of VAT.

I am deeply grateful to my right hon. and learned Friend for that reply, which will be of considerable encouragement to the many businesses, particularly small private businesses, which are suffering severely under the restrictions caused by the unnecessary Civil Service strike. Will my right hon. and learned Friend undertake to monitor the situation to ensure that, if it is possible to alleviate the hardship to small businesses, that will be done?

We are keeping an eye on the sitiuation and doing everything we can to help. I underline my hon. Friend's comment about the completely unnecessary nature of the action.

Will the Minister confirm that VAT repayments are being made to some businesses, particularly those which complain enough?

I do not know what information the hon. Gentleman has to suggest that that is so. If he would like to give me such information, I shall consider it.

Does not my right hon. and learned Friend agree that it is wrong that the Inland Revenue should send threatening letters to one-man businesses for the payment of some trivial sum of tax when four-figure sums are due in the repayment of VAT?

As I have said to the House, the Inland Revenue will take into account overdue VAT repayments in considering the collection of other taxes. If there is any case in which it appears that that has not been done, I shall undertake to look into it.

How much revenue has been lost as a result of the action by the civil servants? What instructions have been given by the Inland Revenue to those people who owe the Inland Revenue pay-as-you-earn, but in their turn are also owed VAT repayments? My information is that some pressure is being continued, at least on some people who owe PAYE. What effect is that action having on the money supply and generally on interest rates?

With regard to the first point, the latest available estimate of the revenue which is delayed as a result of the dispute—it is a temporary delay—is about£3¼ billion to £3½ billion. I stress that the loss of revenue is temporary and will be recovered. I said in my original answer what the attitude is towards PAYE.

asked the Chancellor of the Exchequer what are the most recently known rates of growth of the monetary aggregates M1 and PSL2, and whether he is satisfied with these trends.

M1 and PSL2 increased by 4·8 per cent., and1·8 per cent. respectively in banking April. Needless to say, all the monetary aggregates were heavily distorted by the effects of the Civil Service strike. In the six months prior to April, M1 and PSL2 had grown at an annual rate of 7·7 per cent. and11·5 per cent. respectively. Despite the distortions to which I referred a moment ago which will continue so long as the strike lasts, there is no reason whatever to doubt that underlying monetary growth is consistent with the Government's objectives.

Bearing in mind the fact that the distortions are real and that the increases just announced by the Financial Secretary are on top of a high starting base, when does he expect a higher rate of inflation to reflect the increases which he has just revealed?

I am glad to know that the hon. Member accepts that the rate of inflation depends on the rate of growth of the money supply. That, at least, is an advance. However, if he pursues his studies a little further, he will find that month-to-month fluctuations have no effect on the money supply. Certainly nothing which lasted six months or less would have any effect.

Will my right hon. Friend resist any advice to raise interest rates as a result of the temporary fall in the value of the pound?

My hon. Friend is right. We shall judge the appropriate level of interest rates according to the underlying monetary situation and we shall not be affected by these temporary blips. Nevertheless, it is a matter of regret—indeed, something that I thought the whole House would deplore—that a spokesman for the Civil Service unions should have stated a fortnight ago that a deliberate purpose of the strike was to cause interest rates to be higher than they would otherwise be.

Is it not time that the Financial Secretary and his colleagues admitted the truth—that their regulation of the economy, for what it is worth, has completely run out of control? Last year the right hon. Gentleman's excuse was the removal of the corset. This year it is withdrawal of labour symptoms. What will it be next year, assuming that the right hon. Gentleman is still in Government?

Far from the policy being out of control, inflation is moving down very satisfactorily. However, I can assure the hon. Gentleman that the Civil Service strike is not an excuse. It is a reality which is harming millions of people.

asked the Chancellor of the Exchequer which of his Budget measures have proved beneficial to the economy of the Northern region.

asked the Chancellor of the Exchequer when he expects his policies to result in an up- turn in the economy of the Northern region.

Business throughout Britain, including of course the Northern region, has benefited from our success in bringing down inflation and the cut in minimum lending rate announced on Budget day. The benefit of the other measures in the Budget specifically designed to help businesses, such as the stock relief scheme and the proposals relating to small businesses, will be felt before long. The forecast published at Budget time shows some growth in output between the first and second halves of this year, and further recovery in 1982. The Northern region will share in the benefits.

As a Member of Parliament for the Northern region, the right hon. and learned Gentleman will be aware of the great sense of concern and despair in the region about the Budget. Will he consider inflating the economies of the Northern region and the regions of high unemployment by a programme of selective public investment in capital projects in the areas of industrial decline?

I share the hon. Gentleman's concern about the state of the economy in the Northern region. The indications that I see are quite clear. Above all else, that part of the country feels that any recovery which comes must be soundly based and must not consist simply of a cash injection which will rapidly lead to inflation.

Will the Chief Secretary confirm that nowhere else in Western Europe has manufacturing output fallen by 20 per cent. and unemployment risen by 77 per cent? Therefore, will he admit to the 200,000 unemployed in the Northern region and to the 22,000 on short-time working that the Government's policies have caused the severity of the depression in the Northern region? Will he now abandon his obstruction to further investment in British Telecom, British Gas and British Rail?

I do not accept the hon. Gentleman's diagnosis at all. We have done worse than other countries in Western Europe because of the backlog of years in which our productivity did not increase as much as that in competing countries whereas pay levels did, with the result that people have priced themselves out of employment.

Is the Chief Secretary aware that if the Government pigheadedly stick to the policies that they have pursued in the last two years, there will be no industrial base left in the Northern region? Will he acknowledge the sense of seeking to alter those policies to get some public investment moving in the region, particularly to help the construction industry?

Of course public investment has its part to play, but I do not accept that it is only by means of public investment that we shall get things going in the Northern region in the way in which Opposition Members and I want. I believe that a soundly based recovery, based upon a real handling of the inflation which underlies the problem, will lead to growth and to increases in employment over a period of years.

The House has listened to a statement from the Chief Secretary of almost mind-blowing complacency. He ought to visit the Northern region and find out exactly what has gone on there. What evidence is he prepared to give the House that private investment and output or public investment and output are growing or are likely to grow in the Northern region?

I shall not receive any lectures from the right hon. Gentleman about visiting the Northern region. I am a Member of Parliament for the Northern region, not one for the London area. The right hon. Gentleman knows perfectly well that I regularly go to my constituency and I do not need to read about what goes on from learned economic tracts. I shall not take that from the right hon. Gentleman. He knows perfectly well that I have not been complacent and that I have not said that the Northern region or the country as a whole is at present replete with investment plans. I have said that I am perfectly confident that it is only by dealing with the underlying causes of our problems, which I described in answer to the hon. Member for Bishop Auckland (Mr. Foster), that there is any chance whatever of providing a basis for sound investment. That is the case, whether or not the right hon. Gentleman likes it.

asked the Chancellor of the Exchequer what plans he has to reduce levels of taxation.

The burden of taxation will be reduced as soon as economic circumstances allow.

In view of the Tory manifesto pledge at the last election that all levels of income tax would be cut, can the Chancellor explain why a married couple on average earnings with two children are now paying considerably more in income tax as well as in indirect taxation? Why did the manifesto not tell the truth and say simply that it would only be the rich and those on high earnings who would benefit from the Tory tax cuts?

The position is not as the hon. Gentleman has described it—[HON. MEMBERS: "It is."] The recent Budget imposed its largest tax increase on those with the highest incomes. Taking account of other factors since 1979, real after-tax incomes rose by 17 per cent. between1977 and1980, and, even after taking account of the tax burden as it now stands, all households are considerably better off in real terms than they were in1978–79.

Will my right hon. and learned Friend confirm that reducing taxation primarily depends on reducing Government expenditure?

I am only too glad to confirm what my hon. Friend has said. I wish that one were able to look forward to Opposition support for that proposition comparable with that which my hon. Friend has given.

I hope that the Chancellor will be more forthcoming than the Chief Secretary when answering questions. What are the facts about the increased burden of taxation? Is it or is it not the case that it has increased on the great mass of people at work—taking account of national insurance contributions—during the period in which the right hon. and learned Gentleman has been responsible for our affairs? Is that not a flat contradiction of all the pledges which the Chancellor and his colleagues made during the last general election?

The facts are absolutely clear. During a time when national production has not been growing, the percentage burden of tax on income has increased; there is no mystery about that whatever. It has been said thousands of times. But that fact must be viewed in the context of the rise in real personal incomes which has otherwise taken place. When those two things are put alongside each other, it will be seen that real personal disposable income for the great bulk of households is substantially higher this year than it was when the Labour Party was in Government. There is no prospect of getting taxes down unless we have the support of the Labour Party—which I very much doubt—for reductions in public expenditure.

When there is a capacity to reduce taxation, will my right hon. and learned Friend think hard about first acting to reduce the national insurance surcharge which will do most to restore the profitability of industry and hence its capacity to employ more people?

My hon. Friend's point deserves consideration. As I said in the Budget Statement, the purpose of the tax changes being made was to lighten, as far as possible, the burdens on industry, even at the cost of a higher burden on personal taxation. However, other considerations must also be taken into account.

asked the Chancellor of the Exchequer what is his estimate of the total cost of European Economic Community membership for 1981, including imports duties, agricultural levies, value added tax and the cost of net food imports from other Community countries over and above world market prices.

The United Kingdom's net contribution to the 1981 Community budget, including import duties, agricultural levies and value added tax, is estimated to be about £500 million. As for the non-budgetary cost, I regret that the information is not yet available.

When we are in negotiation with our partners in the Community over budget contributions, will my right hon. Friend give equal prominence in future to the massive cost, estimated at some £1,500 million, that our housewife has to bear to pay for continental foodstuffs at up to twice world market prices?

I do not accept my hon. Friend's figure, but he is right that there is a non-budgetary cost which must be taken into account. However, the primary need is to build on the considerable success on the budget contribution achieved by my right hon. Friend the Prime Minister in the 30 May agreement last year. We must build on that, make it permanent and improve it in other ways, as was outlined in the important speech made by my right hon. and learned Friend the Chancellor at The Hague last night.

Out of that £500 million, can the Minister estimate the amount which will be used to supply subsidised food for the Russians, paid for by British taxpayers, including the sick, the disabled and the unemployed, who all pay tax?

I hope as little as possible, and, if possible, nothing.

Whatever may be the significance of the contribution to the Community budget of some 1 per cent. of public expenditure, is it nevertheless true that membership of the Community is of inestimable importance because of the market it offers to our exporters and still more exclusion from the market would be intensely damaging to British industry?

I am sure that my hon. Friend is right that membership of the Community is of great importance to this country, politically and economically.

Does the Financial Secretary recognise that the Government have contributed to the rocketing costs of the Common Market by their surrender to a highly inflationary farm price settlement in April? Does he also recognise that the British people, since the Government took office, have increasingly voiced their opposition to entry to the Common Market and that the number of people expressing support for the Common Market in opinion polls has dropped by 80 per cent. since May 1979? In the negotiations for future financial contributions to the Common Market, will the Financial Secretary make it clear, as the Chancellor failed to do yesterday, that the British Government will veto any increase in the 1 per cent. Ceiling on VAT?

The hon. Gentleman should know that our position is that there will be no increase in the 1 per cent. VAT ceiling and all our negotiations and discussions on the restructuring of the budget and other matters are within that firm context. It ill behoves the Opposition to talk about high Community farm price increases since we took office. The facts are that since the Government took office, farm price increases in the Common Market have averaged 5 per cent. per year, while under the Labour Government such increases averaged 7½ per cent. a year.

asked the Chancellor of the Exchequer when he expects capital investment in the United Kingdom to start rising again.

The latest intentions inquiry by the Department of Industry into fixed investment by manufacturing, distributive and service industries points to a recovery in the volume of investment next year.

Has the Chancellor seen the official publication British News which shows that his Government inherited a record level of manufacturing investment from the Labour Government and that the CBI's latest monthly report shows that investment in manufacturing fell last year, will fall by 15 per cent. this year and again next year? Is that not a disastrous record? When will the Chancellor accept that his policies are causing the destruction of manufacturing investment? Is it not time that he changed his policies, rebuilt investment in industry or resigned?

The hon. Gentleman gives a distorted picture of what is happening. It is true that there has been a reduction in investment last year and this year, but all that must be read subject to the facts that I have given to the House, that there is likely to be a reversal of that and an increase in the following year. If one is looking at surveys of business opinion, it is important to take into account the fact that, since the end of last year, there has been a steady upward movement in business confidence as expressed in surveys carried out by theFinancial Times and the CBI.

When will the Chancellor's change of mind on finance for capital investment by British Telecom be followed by his change of mind on capital investment by British Railways, the National Coal Board, the Post Office and the sewerage authorities?

The hon. Gentleman must understand that there is no question of a change of mind on this matter. The announcement by my hon. Friend the Minister of State, Department of Industry, about the British Telecom investment was of a planned increase in profitable investment within existing programmes. If a nationalised industry's investment is running at broadly the same real level as in 1975 and, over the next three years, will rise from £4½ billion to £5¼ billion, it is important to keep that in mind and to continue considering such investment proposals by the test: is the investment profitable and are the resources available to finance them?

Does my right hon. and learned Friend agree that the level of capital investment will be adversely affected, as a number of firms are claiming, if clause 30 of the Finance Bill, on sickness payments, is enacted?

The link between the point made by my hon. Friend and the question on the Order Paper is so tenuous that I must congratulate him on his ingenuity. A number of people are concerned about clause 30. My right hon. Friend the Financial Secretary has seen a deputation about it. The Standing Committee will be debating that clause tonight.

Does the Chancellor bother to read the publications of the CBI survey section? If he does, how can he reconcile his answer with the conclusion of the survey that over half the firms surveyed will be investing less in the next year than they did last year? How does he expect to achieve the leaner and more competitive industry that he is always promising on the basis of falling investment in manufacturing?

All these changes take place at different times in relation to each other.

What does that mean?

The reality is that there are substantial signs of rising productivity throughout British industry. [HON. MEMBERS: Where?"] I have already given the facts. Reports from companies throughout British industry have disclosed the prospect of an upturn in investment in 1982. The point that should be emphasised by the Opposition and the Government is that the most effective contribution to be made to expansion is continued progress, the reduction of unit labour costs and the achievement of reasonable pay settlements.

rose—

Order. I will call one more hon. Member from each side.

When my right hon. and learned Friend considers the problems of capital investment, will he accept that there is inevitable competition between the claims of the private wealth-producing sector and the public sector? Will he also take account of the fact that some of the propositions being put to him by the public sector may be based on projections and statistics which are highly questionable in terms of productivity and returns?

The points made by my hon. Friend are entirely valid and important. It was accepted by all sides at the NEDC meeting yesterday, for example, that questions of public sector investment should be related to the prospective profitability of that investment and the record of the enterprise seeking the capital. It must be noted that for nationalised industries the real rate of return has for a number of years not exceeded nil per cent. There are many examples of public sector investment that have turned out to be disasters rather than shining successes. All these things have to be taken into account in deciding the realistic size and shape of a public sector investment programme.

In current economic circumstances, does the Chancellor accept that there is a case for allowing a higher PSBR to finance increased capital investment in the public sector?

One of the cases that can be made is the one made by the right hon. Gentleman. But again, it was universally acknowledged—it is widely acknowledged now—that any significant increase in the scale of public sector borrowing is likely to have an upward impact on the level of interest rates. If we are considering that, let us consider its effect on the prospects of investment for the private sector.

asked the Chancellor of the Exchequer what has been the percentage movement of the £ sterling against a basket of currencies, and against the United States dollar, respectively, since the £ sterling reached its highest level against the dollar in the last 12 months; and what impact this movement is expected to have on the domestic inflation rate.

The highest rate of sterling against the dollar in the past 12 months was 2·4565, reached on 4 November 1980. Since then, sterling has fallen against the dollar by around 20 per cent. and against a basket of currencies by about 7 per cent. The effective exchange rate is now roughly speaking back to where it was a year ago. Although these fluctuations in the exchange rate will have some temporary effect, in the long run, the domestic inflation rate is determined by the rate of growth of the money supply.

I am most grateful to my right hon. Friend for that reply, which I shall study with care. Would my right hon. Friend agree that during the period 1979–80, when the exchange rate was rising fastest, so was our share of world exports and manufacture? In the light of the fact that our currency reserves are now at a record high level, would he agree that there might be no harm in encouraging the Governor of the Bank of England to show more enthusiasm for buying sterling, which would also help domestic credit expansion—just as he was enthusiastic to sell it in the past?

My hon. Friend exaggerates the enthusiasm of the Governor of the Bank of England. Whether the rate is rising or falling, the Government's policy is to leave the rate to be determined primarily by market forces. The Bank intervenes from time to time to smooth undue fluctuations and to preserve orderly markets, as it has been doing in the past few days.

What is the right hon. Gentleman's view of today's market judgment on the pound?

I watch it with interest.

Will the Financial Secretary agree that if the repercussions of a fall in the exchange rate on the inflation rate are to be contained, it is vitally important that cash limits should be rigorously imposed? Is he aware that many of us view with concern the suggestion that Civil Service pay next year should be negotiated with no predetermined cash limits? Since the industrial action by the Civil Service is continuing despite that offer, will he withdraw it or arrange for it to be withdrawn if the strike does not cease before the end of the week?

I am aware of my right hon. Friend's views. They are taken very seriously by my right hon. and learned Friend the Chancellor of the Exchequer. Nevertheless, since negotiations are under way at present between the Lord President of the Council and the Civil Service unions, I do not think that it would be helpful if I were to add much to that reply.

The House will have heard the Financial Secretary's response to a very important question. We know that he has expressed the view that the Bank's intervention is merely one of smoothing out the fluctuation in the exchange rate. I should like to press him a little further on that. Can he tell us whether it is the view of the Chancellor of the Exchequer that it is the duty of the Bank of England to intervene to sustain the exchange rate, as his hon. Friend the Member for Knutsford (Mr. BruceGardyne) urged and argued a moment ago, or does he take the view that the loss of competitiveness that this country has suffered so grievously during the past two years is a strong argument for allowing corrective action to take place?

I have never heard such a curious question. During the first half of the question, the principal economic spokesman for the Opposition was asking for the exchange rate to be held up. During the second half of his question he was asking for it to be pushed down. I suppose the conclusion must be that the Government's policy is just about right.

asked the Chancellor of the Exchequer by how much the buying value of the sterling has diminished since 1967.

According to the general index of retail prices, the buying value of the £ sterling in April 1981 was about 21 per cent. of its value in 1967.

Is the Minister aware that outside this House last week the Secretary of State for Social Services announced that the present pathetic death grant of £30, which was fixed in 1967, will be increased? Will he draw his answer to the attention of his right hon. Friend and ask that the increase should be in the region of 79 per cent., to make sure that the backlog is met? Can he give an indication of when and how this is likely to be effected?

These matters are for my right hon. Friend the Secretary of State for Social Services, who will take such note as he thinks appropriate of the answer that I have just given to the hon. and learned Gentleman's question. But in all matters of this kind one of the factors which have to be taken into account is not only what has happened to the value of the pound but how many pounds are available for the Exchequer to spend.

Did my right hon. and learned Friend hear the Financial Secretary to the Treasury say chat domestic inflation is primarily controlled by the money supply? Can he tell the House who or what determines the money supply and who or what controls it? Is it the same person or the same events?

My hon. Friend's questions go very much beyond the question on the Order Paper.

asked the Chancellor of the Exchequer if he will make a statement on the present level of interest rates.

Minimum lending rate has been reduced by 5 per cent. since last summer to its present level of 12 per cent. United Kingdom short term interest rates are now among the lowest in the industrialised countries.

Yes, but do not international pressures, which are at present being manifested by a rise in British interest rates, demonstrate the tendency of monetarism, and competitive monetarist policies pursued by different States, to plunge our economy, which is already depressed, into further depression? Will the Chancellor now give a categoric assurance to the House that he will resist any pressure for a rise in interest rates, whatever may be the messages that he receives from Friedmanite oracles?

It is not my practice to make predictions about interest rate developments or to comment on speculation of any kind, and still less to give pledges of the kind urged upon me by the hon. Gentleman. However, if we were to suffer the imposition of the £5 billion increase in borrowing that would follow from amendments moved by the Labour Party, and to suffer the £10 billion increase in the borrowing requirement urged by the Deputy Leader of the Opposition, each of those things would be a prescription for soaring interest rates.

As interest rates are falling in this country while they rise in most of our industrial competitor countries, and as inflation is falling here while it is rising in most of our competitor countries, has my right hon. Friend any idea what it is about these facts that the Opposition find so objectionable?

I cannot understand it and I share my hon. Friend's sense of mystification.

To be fair to the Chancellor, if the object of his policy has been to reduce production and investment and to increase unemployment and damage British industry, has not he been outstandingly successful?

The right hon. Gentleman's question and his judgment of fairness do less than credit to him.

asked the Chancellor of the Exchequer whether, in his reviews of public spending, he has made assessments of the savings from ceasing to index pensions in line with prices.

In the course of their reviews of public spending, the Government naturally always assess the cost of all their policy commitments, including their clear undertaking to maintain, over the lifetime of this Parliament, the value of retirement pensions and those other long term benefits which are uprated in line with them.

Does the right hon. and learned Gentleman recall the speech by the Chancellor of the Exchequer to the National Association of Pension Funds on 7 May when he took a very pessimistic view of the possibility of this Government or future Governments being able to accept their commitments to index-link pensions, particularly the earnings-related segment of retirement pensions?

I recall the speech very well. My right hon. and learned Friend was saying that the burden placed by commitments of the kind I have described is a factor that those who think seriously about these matters should take into account. Over the last 10 years, social security benefits and pensions have increased in volume terms by over 60 per cent. while gross domestic product has risen by only 15 per cent. The result is that the proportion of the gross domestic product absorbed by those benefits and pensions has gone up from 10 per cent. to nearly 15 per cent. in that period. That is something that we, as a nation, have decided to do. My right hon. and learned Friend was right to point out the serious consequences of doing so.

My right hon. and learned Friend has been reported as calling upon the spending Departments to review the prospects of achieving a reduction of 3 per cent. and 5 per cent. in forward programmes for ensuing years. Can he assure the House that the Treasury intends to stick to this objective, which is obviously essential if we are to achieve the scope for reductions in taxation in the concluding years of this Parliament?

I agree that the extent of our ability to secure those reductions in taxation depends very much on what happens to public spending. No decisions have been taken in relation to this year's survey but the customary options exercise, which has happened for some years, is in train.

Why does the Chief Secretary now seek to play down what the Chancellor of the Exchequer said at the pensions conference on 7 May when the whole burden of his speech was to raise the most serious worries about the Government's commitment on the indexation of pensions? Will the Chief Secretary say whether his commitment to continue the indexation of retirement pensions for the life of this Parliament extends to the earnings-related supplement of the basic pension under the Social Security Pensions Act 1975?

The extent of the commitment was set out at some length in a letter to the hon. Member for Birmingham, Perry Barr (Mr. Rooker) which I shall draw to the hon. Gentleman's attention.

asked the Chancellor of the Exchequer what is his latest estimate of the total revenue yield from the use of derv in the current financial year, taking into account increased usage.

About £900 million.

As a diesel-engined vehicle is recognised as being a much more efficient converter of fuel, will my right hon. and learned Friend investigate a policy of reducing, or at any rate stabilising, the level of revenue that he receives from dery to stimulate increased usage?

That is one factor to be taken into account. My hon. Friend will recollect that, in my first Budget, I removed the differential which at that time operated against derv and in favour of petrol.

asked the Chancellor of the Exchequer what representations he has received concerning possible further increases in duty on beer.

A small number of letters has been received. Most of the letters request no further increase in the beer duty.

Is the Financial Secretary aware that the price of a pint of beer has increased to a greater extent in the United Kingdom than in any EEC country, excluding the Republic of Ireland, over the last two years? The duty on a pint of beer has increased by 70 per cent. in the last two years. Does not he accept that he is pricing a pint of beer out of the reach of the working man's pocket—his only luxury under this Tory Government?

The increase of 70 per cent. in the duty on beer over the first three Budgets of this Government needs to be put in perspective. In the first three spring Budgets of the right hon. Member for Leeds, East (Mr. Healey) the beer duty was increased by 130 per cent. The hon. Gentleman argues that the price of beer has been put beyond the working man's pocket. That can be disproved, I believe, by venturing into any public house in the United Kingdom. If the hon. Gentleman wants figures, the beer duty today, in real terms, is below the level at which it stood in 1976.

I declare an interest as non-executive chairman of Camra Real Ale Investments Ltd. Is my right hon. Friend aware that beer drinking is one of the great traditions of the United Kingdom? Is he aware that by imposing a disproportionately higher increase on beer than on wine in order to soak up the wine lake that has developed in Europe, for which the United Kingdom has no responsibility, many brewery workers are losing their jobs? As the hon. Member for Liverpool, Scotland Exchange (Mr. Parry) says, we are almost pricing beer out of the reach of the ordinary working man and woman in this country

There is no evidence whatever that any jobs lost in the brewing industry over the past year have been the result of the increase in the duty on beer. There have been other reasons. My hon. Friend will be aware that my right hon. and learned Friend also increased the duty on wines and spirits in the Budget.

asked the Prime Minister if she will list her public engagements for 4 June.

This morning I presided at a meeting of the Cabinet and had meetings with ministerial colleagues and others. In addition to my duties in the House I shall be having further meetings later today. This afternoon I shall be leaving for a visit to west Wiltshire and Bristol.

Will the Prime Minister spend some time today considering the views expressed at yesterday's meeting of the National Economic Development Council by the TUC, the CBI, NEDO and the chairmen of the nationalised industries? When will her Government allow the nationalised industries to take advantage of all profitable investment opportunities?

If the nationalised industries were profitable they would find many investment opportunities. The real problem arises because the nationalised industries are not profitable. They do not get a good return on their resources. The vast majority, if they go to the market to borrow money, need a Government guarantee. Without that, they would be hopeless at getting the money.

Will the Prime Minister, in her discussions with Ministers today, consider the situation in the National Health Service whereby a woman registering the birth of a child is exempt from prescription charges, unless she is registering a stillborn birth in which case she loses her entitlement to exemption? Does not the Prime Minister agree that this anomaly should be put right?

I understand that the hon. Gentleman is correct in saying that expectant mothers and mothers with children under the age of 1 are exempt from prescription charges but that the exemption does not apply to the mother of a stillborn child. I shall certainly examine this situation. Without prejudice to the result I do so because I understand fully the traumatic experience that is involved for any family.

Does my right hon. Friend recall the moans and groans of the TUC and the CB;[in November when the pound was at $2·42? Now that the pound has come back to $1·95, has she heard from the CBI and the TUC about the opportunities that this gives them to compete?

The answer to my hon. Friend is "No, Sir". When the pound is high, it means that imports of raw materials are low. When the pound is low, it means that we are competitive in exports.

Can the right hon. Lady assist the House and the country by clearing up the apparent deep confusion, revealed on the front page ofThe Times, between the Foreign Secretary and the Chancellor of the Exchequer on the important question of negotiations, or possible negotiations, with the EEC? Does she agree with the apparent view of the Chancellor of the Exchequer that there is little prospect of fundamental budgetary reform in the EEC? If so, does that not mean that Britain will remain the largest net contributor to the EEC for the foreseeable future and that the burden is likely to increase?

The right hon. Gentleman asks me to clear up the confusion, and I do so immediately. Britain is not the largest net contributor to the EEC. Germany is by far the largest net contributor to the EEC. We are the second largest net contributor—a long way down from the German net contribution. I am glad to be able to clear up that confusion. There is no disagreement between the Treasury and the Foreign Office. I am the First Lord of the Treasury, I do most of the negotiations with Europe and I am not disagreeing with myself.

I well understand the right hon. Lady's determination not to leave the negotiations to her colleagues. Can she tell us whether in these negotiations—if she is indeed in charge of them—she will carry out the resolution unanimously passed by the House of Commons in November 1979, and on other occasions, which underlines the House's view that this country should not be a net contributor, as she has arranged under her negotiations so far?

I do not think that the right hon. Gentleman understands. Negotiations are negotiations. The record shows that the Conservative Party and this Government have done a jolly sight better than his Government.

When will the right hon. Lady carry out the resolution unanimously passed by the House of Commons—a resolution for which she voted?

We have done about £700 million a year better than the party opposite. That is not a bad start.

Does my right hon. Friend expect to have an opportunity today to join the Leader of the Opposition in sending good wishes for a speedy recovery to the right hon. Member for Bristol, South-East (Mr. Benn)?

I am sure that we would all wish to send a message to any right hon. or hon. Member of the House who is not well, and I do it to the "Bennth" degree.

Will the right hon. Lady have the opportunity today to consider whether there is any logical necessity, for the purpose of eliminating inflation, to attempt to reduce the real remuneration of those who are in public, non-commercial employment?

I understand what the right hon. Gentleman is saying. In strict academic logic, disregarding the numbers in the public sector, disregarding the need for capital expenditure, disregarding the need for equipment expenditure, disregarding the levels of taxation and of interest rates, in strict academic logic, the right hon. Gentleman is right. In everything else he is wrong.

asked the Prime Minister if she will list her official engagements for Thursday 4 June.

I refer the hon. Gentleman to the reply which I gave some moments ago.

Will the Prime Minister consider when she can pluck up courage to visit Liverpool to see the unemployment situation? She has not visited Liverpool since she became Prime Minister. Is she aware that my constituency has 40 per cent. unemployment? The right hon. Lady did not have the courtesy to meet a small delegation of young unemployed who marched from Liverpool to London. Are not the Prime Minister and the Tory Government hypocrites who are not concerned about unemployment?

I shall, of course, consider visiting Liverpool as one of the many visits that I make. As the hon. Gentleman knows, the Government have tried to do everything possible to give greater help to Liverpool. There is an urban development corporation, an enterprise zone and a partnership agreement. It is a special development area. When Tate and Lyle closed recently, which I regarded as a tragedy, it gave a considerable grant to enable further development of small businesses. We have to encourage small businesses and the expansion of larger businesses, and to ask the most relevant question: why do so many people in this country reject the products of factories in this country?

Will my right hon. Friend take the opportunity today to point out the beneficial effects which the wise policies of restraint on spending and borrowing are having on our current rates of interest? Will she take the opportunity to confirm that it is her intention that those interest rates shall continue to come down for the benefit of our manufacturers?

If there were tremendous demands for increasing public expenditure and those demands were to be met in any way, that would have a bad effect upon interest rates. So far, interest rates are down from 17 per cent. to 12 per cent. and that has been of great advantage both to agriculture and industry.

asked the Prime Minister if she will list her official engagements for Thursday 4 June.

I refer the hon. Gentleman to the reply which I gave some moments ago.

Does the right hon. Lady realise that the latest unemployment figures reflect a grave and fast deteriorating situation, which means more misery and distress for our people? Will she now consider, as the British people now demand, that she changes course, and embarks on a massive programme of house building, road and railways construction and so on, to bring back confidence and hope to the nation? Will she ally with that the early retirement proposals that she mentioned in a recent letter to me? Will she accord to our people the right to work, because if she does not she will drag the nation deeper and deeper into a morass?

The hon. Gentleman is asking for a substantial programme of increased capital expenditure. To many of us it would be very attractive, but unless it were financed from reduced current expenditure, it would put increasing burdens on public spending and on taxation—about which people are already complaining—and increasing burdens on interest rates. It would have exactly the opposite effect from that which the hon. Gentleman wishes. If there is to be extra public expenditure we need reduced current expenditure. Otherwise there will be a damaging effect on private sector business.

Will my right hon. Friend find time today to arrange for the distribution to her Cabinet colleagues of an account of the budget planning and achievements of the American Administration, so that before the reported Cabinet discussions on the economy—should there be any need for them—her Cabinet colleagues may be convinced that public spending cuts are both possible and highly beneficial to the economy?

I am grateful to my hon. Friend. I do not conceal my envy of the way in which the President of the United States has been able to get proposals for public expenditure reductions through his parliament.

I think that the right hon. Lady said that she was going to Bristol. Is that to console her supporters who did so badly in the Avon county council election?

I expect to have an interesting visit to Bristol. If the hon. Gentlemen does not wish me to go, perhaps he will let me know.

asked the Prime Minister if she will list her official engagements for 4 June.

I refer my hon. Friend to the reply which I gave some moments ago.

In view of the strife and difficulty that have been caused by the Civil Service dispute and the fact that the economic situation has changed greatly since the original offer was made, and as there is a steady downward trend in the cost of living, will my right hon. Friend have a chance today to consider whether the offer to the Civil Service unions should now be withdrawn for reappraisal by Government sources?

The Government have made an offer to the Civil Service which they believe is fair—indeed, it is a great deal more than people in the private sector are receiving. The Government hope that the vast majority of people in the Civil Service will consider it fair, accept it and return to normal working.

Will the Prime Minister reconsider her reply to my hon. Friend the Member for Leigh (Mr. Cunliffe) about a programme of public works? Does she recall that in the period between the wars President Roosevelt produced an imaginative scheme of public works, including the Tennessee Valley Authority scheme? Will she explain why that cannot be done here? Is it because of her political philosophy or a change in economic conditions?

No, Sir. It is a change in the regular level of public spending. Even through boom periods the level of public spending in Britain has been a high proportion of the national income. That is totally contrary to Keynesianism.