asked the Chancellor of the Exchequer whether, in order to achieve lower interest rates, he will now reintroduce exchange control.

No, Sir. Exchange controls were an unnecessary administrative burden on the economy and we have no intention of reintroducing them.

Is it not now perfectly clear that the abandonment of exchange control was a reckless blunder that destroyed the chance of lower interest rates and is doing further major damage to British industry?

No, Sir. This was a highly considered move and it has been generally beneficial in its effects. It has only a marginal, if any, effect on interest rates.

Is there not a better way of achieving lower interest rates? If so, what is it?

Containment of the public sector borrowing requirement.

Does my hon. and learned Friend agree that this country enjoys some of the lowest interest rates in Europe, and certainly below those prevailing in the United States? Does he further agree that if the Government were to indulge in massive reflation, albeit uncosted, this would mean a possible doubling, if not more, of the public sector borrowing requirement, which would lead to higher interest rates, burdens on industry, higher unemployment and higher mortgage payments?

I accept entirely my hon. Friend's perceptive analysis of the situation.

Was not the whole rationale behind the Budget to bring down interest rates and, in order to achieve it, was not a large fiscal deflation announced? What is the hon. and learned Gentleman's response now that interest rates are moving up? Can we look forward to further cuts in public expenditure and to increased taxation in order to keep interest rates at their present 12 per cent. level?

The right hon. Gentleman should await my right hon. and learned Friend's next Budget, which will be next spring.

asked the Chancellor of the Exchequer what he considers to be the main benefits so far achieved by his policies.

Inflation has been substantially reduced. This is an essential prerequisite to sustainable recovery. There are now indications that productivity is increasing.

Does the right hon. and learned Gentleman recall the right hon. Member for Sidcup (Mr. Heath) saying only a short time ago that no discernible benefits were to be seen from the Government's incomprehensible policies? If the Government's policies are so successful, will the right hon. and learned Gentleman explain why it was necessary to introduce £500 million worth of crisis economic measures last Monday?

I am astonished that the hon. Gentleman should describe the measures announced last Monday by my right hon. Friend the Prime Minister as crisis economic measures. They were directed to the needs of the situation within the context of the Government's economic policy. I would expect the hon. Gentleman to pay more attention to the results of the CBI survey on business outlook published this morning. That shows greater optimism about the business situation generally, the volume of new orders, the volume of output, export prospects, export orders and export deliveries. Every relevant indicator in the survey is now positive and, in each case, the improvement has been sustained for the last 12 months.

Is not my right hon. and learned Friend being unduly modest in assessing the benefits of his economic policies? Does he agree that one of the principal benefits is the greater sense of realism prevailing in British industry which has led to higher productivity, lower wage settlements and fewer strikes?

It has led to all those benefits, as well as to those which I have just listed. Moreover, the number of firms expecting to destock has fallen, as has the number of firms working below capacity. I repeat that greater optimism is reflected in all the relevant indicators and is recorded as having taken place and improved throughout the past 12 months.

Has the right hon. and learned Gentleman seen the "CBI Industrial Trends Survey"? If so, has he not noted that every one of the indicators to which he referred has fallen since the last quarter and that the only way in which he can detect some improvement is in the fact that they have not fallen as much as they did in the record drop of last quarter? Is he aware that this is the eighth consecutive "CBI Industrial Trends Survey" since he took office and the eighth consecutive survey to show a further fall in output since the last one? When will he recognise the evidence from the real world that the economic consequences of his policies have been disastrous?

The hon. Gentleman must be looking at a totally distorted picture of what is happening. Taking the CBI figures, one finds, for example, that optimism about export prospects was at an all-time negative high in July 1980 and that in each quarter since then the figure has been moving in the right direction, so that this quarter there is a substantial positive balance recording optimism on export prospects, orders and deliveries. Those are the facts as recorded in the survey. They are consistent with the fact that we are now at the end of the recession.

Is my right hon. and learned Friend aware that all the economic forecasts show that the public sector borrowing requirement in the current financial year is likely to be significantly smaller than it was in the last financial year and that, welcome as that is, given that output is hardly rising strongly at the moment, it does not support the case for a further round of fiscal deflation?

No more does it support the case for a further round of fiscal reflation. As my hon. and learned Friend the Minister of State pointed out, the size of the PSBR is one of the main determinants of the level of interest rates. It is important to have that influence working in the right direction.

During the recess, will the right hon. and learned Gentleman assess the consequences of his economic policies? He has increased direct taxation and indirect taxation and made massive cuts in public expenditure. Living standards have come down. Yet the right hon. and learned Gentleman's policies are leading to more than 3 million unemployed. That is the result of his policies.

One important feature for people to understand, which is not implicit in what the hon. Gentleman says, is that throughout the past three years there has been a substantial increase in personal living standards at the same time as there has been a significant fall in the income and profitability of companies. We need to see a sustained reduction in the share of national output going to inflation and a sustained growth in the share of national output going to real growth in output, to real profitability and to more investment.

asked the Chancellor of the Exchequer what reassessment of economic prospects he has made since his last Budget.

The economic situation and prospects are kept under continuous review. In line with previous practice, an economic forecast will be published in the autumn.

Do not Treasury estimates indicate that an upturn is months and months away into 1982 and that unemployment will increase for many more months yet? Is not this even worse than was expected at the time of the formulation of the Budget? In the light of this week's £500 million package, which is a very modest measure, can the right hon. and learned Gentleman assure us that he has no intention of clawing that back through higher taxes?

The next forecast will be published, as is customary, in the autumn, and it will be the second forecast of the year. The rate at which unemployment is growing is falling sharply, and that has been the pattern for some time. No one has sought to conceal the fact that unemployment is likely to be on a rising trend for some time to come. The worst possible way to deal with that would be to embark now on an outburst of reflation. It is crucial to maintain the budgetary balance in a sensible fashion so that borrowing can be controlled effectively if interest rates and, thus, inflation are to come down.

Looking back at the Financial Statement published in the Red Book with the right hon. and learned Gentleman's last Budget, may I ask whether he still stands by the implied scope for tax reductions for next year and the year after published in table 8 of that booklet? Is the degree of funding of Government borrowing in recent months in line with the financial strategy at the time of the Budget?

The Red Book published at the time of the Budget indicated the likely scope for tax changes in the years beyond that with which it was dealing. We shall be able to address ourselves to the tax prospects in the next financial year when we come to the next Budget, which will be in the spring of 1982.

Does my right hon. and learned Friend agree that however much we want his policies to succeed—and we believe that they are moving in the right direction—industry must be prepared to accept that it will take much longer for the unemployment level to be reduced because of the present lead time of only 70 per cent. industrial production for most companies, and that the public, too, must begin to accept this situation? The sooner that we get that across, the better it will be for everyone.

The central point to which my hon. Friend draws attention is that the rate at which recovery proceeds depends to a great extent on the reaction of people within the economy. The most effective way to secure an improvement in the prospects for employment as well as in the prospects for inflation is to have continued moderation and realism in pay settlements and management arid industrial practice generally. It is significant that there has been a reduction not only in the number of firms expecting to destock but in the number of fims working below capacity.

How does the right hon. and learned Gentleman square his extraordinary, wild claim that the end of the recession is in sight with the bleak message for the Government in today's Financial Times showing that 22 forecasts of the economy predict an even steeper decline this year than the Treasury was predicting only a short time ago and with the "CBI Industrial Trends Survey" which says:

"There is no evidence of any substantial recovery"?

Before dealing with the less than wholly enthusiastic question put to me by the hon. Member for Blackburn (Mr. Straw), may I welcome him back to the House after his period of illness and say that we are all glad to see him in good order again?

Given the importance of the financial targets to my right hon. and learned Friend's economic policies and bearing in mind a recent Treasury statement that since 1972 the nationalised industries' return on capital has never significantly exceeded zero, will he comment on reports in today's press that the Treasury is preparing to be more flexible about nationalised industry borrowing? Is it not likely that the resources involved would be used to better effect in the private sector?

In general, resources are more likely to be used successfully if they are directed to profitable activities, and the private sector has the characteristic of allocating resources by reference to the outlook for profits. My hon. Friend is right to make that central point. One other factor is that if we have nationalised industry prospects in line with, for example, London Transport, where it is proposed to reduce fares dramatically and to increase pay substantially, that must diminish the prospects for sensible capital investment, which is what the House wants. We can achieve better capital investment programmes by more sensible management of the pattern of pay and prices in nationalised industries.

asked the Chancellor of the Exchequer what assessment he has made of the likely trends on inflation and interest rates over the next year.

We do not publish forecasts of interest rates. With regard to inflation, the Financial Statement and Budget Report contained a forecast of 10 per cent. for the fourth quarter of 1981 and 8 per cent. for the second quarter of 1982. There is no reason to offer a new assessment at this stage.

Does my right hon. and learned Friend agree that the best service that we can give the unemployed is to ensure that inflation and interest rates are as low as possible when the recovery comes? Does he also agree that the best service that we can give our children and grandchildren is to ensure that as low a proportion as possible of the PSBR is funded by index-linked bonds or savings certificates?

I agree with my hon. Friend's first proposition, but I cannot entirely agree with the second.

Is the right hon. and learned Gentleman confident that the Government will resist the pressures that are afoot for a rise in interest rates, bearing in mind the tremendous damage that it would do not only to industry but to home owners and many others? Does he believe that that can be done without further cuts in public expenditure? What prospects does he see for a reduction in interest rates, which everyone accepts is essential for real recovery?

As I have already said, we cannot predict interest rates. Our desire and policy to have lower interest rates have been made clear many times, and the action that we have taken to lower interest rates speaks louder than any words that we can utter. At the same time, however, it would be foolish to pretend that we can totally insulate ourselves from all the influences that may be brought to bear.

Is my right hon. and learned Friend aware that the decision to allow everyone to buy inflation-proofed bonds will be regretted in many quarters? In that it diminishes the pain of inflation, will it not also diminish the popular will to fight inflation and make borrowing more expensive and difficult for private borrowers who cannot offer the same advantages as the State offers when it lends?

My hon. Friend may be under a slight misapprehension because of the nature of the announcement. We are talking about national savings certificates, not bonds. Therefore, some of what my hon. Friend said may not apply.

May I come back to the trend in interest rates since the time of the Budget? We were informed at that time that MLR was 12 per cent. and that there would be further falls. Has the Chief Secretary noticed that the three-month interbank rate and other indicators are already over 14 per cent.? Effectively, therefore, interest rates are going up. Surely, the Bank of England has intervened to guide the market in that direction. How does that square with the forecast that was given at the time of the Budget, and what is the Government's attitude to the rise in interest rates?

The right hon. Gentleman knows perfectly well that it is not the practice to comment on the day-to-day operations of the Bank of England. He also knows that the level of interest rates in this country compares extremely favourably with those in other countries. He knows, too, that it does not lie in his mouth to make criticisms about interest rates, because the policies that he has consistently put forward to the House would lead either to a massive increase in interest rates or to a massive growth in inflation, or probably both.

asked the Chancellor of the Exchequer what criteria he uses to measure any recovery in manufacturing and total output in the economy.

A wide variety and range of indicators and assessments, both official and independent, are regularly published. These include the index of manufacturing production, CBI surveys and the Central Statistical Office's cyclical indicators. Collectively, these indicate that the worst of the recession is behind us.

We all hope for an upturn in the economy as soon as possible. However, if that does not happen in the foreseeable future, does my right hon. and learned Friend know of any measures that could be taken to revive the economy in a non-inflationary way?

It is not possible to answer a hypothetical question of that nature. If the outcome of events is less favourable than we anticipate—the reasons for and the circumstances in which that could happen are infinitely various—the appropriate reaction would depend on why the circumstances had changed.

Is the Chief Secretary aware that in the real world of continuous redundancies, closures and bankruptcies resulting from Government policies, once prosperous industrial areas, such as the West Midlands, are becoming industrial wastelands? Why does the Chief Secretary not face the real world instead of living in a world which simply does not exist?

If the hon. Gentleman is as interested in the real world as he purports to be, he should have a word with the West Midlands county council about the effect on industry of the rate increases that it has just introduced.

asked the Chancellor of the Exchequer what was the total figure for sales of public sector assets in 1980 and in 1979.

Special sales of assets totalled £999 million in 1979–80, and £356 million in 1980–81.

The latter figure is most welcome, but is it not a low figure, bearing in mind that we promised that when we came to power we would privatise much of the public sector? Bearing in mind the part that the private sector plays in wealth creation, and in view of the fact that the Government have handed out huge sums to the public sector which creates little or no wealth, will my hon. and learned Friend speed up privatisation and hand over to the people who claim that the Government owe them a living the responsibility for making that living by making them buy a stake in their industries?

The Government recognise the crucial role of the private sector. I understand my hon. Friend's impatience, but the timing of sales must inevitably depend on market conditions, and the special asset sales are part of a continuing programme that the Government will continue to implement.

Is it the Government's policy that when a public corporation has been outstandingly successful, both financially and technologically, as with British Gas, the assets are to be thieved and sold off to private interests?

That matter was adequately canvassed in the debate that we had a few nights ago. The hon. Gentleman will recognise that deeper considerations are involved. The sale of public sector assets will contribute to reducing the PSBR and, therefore, to keeping down interest rates, which is clearly a concern of the Opposition.

asked the Chancellor of the Exchequer what was the rate of inflation on 1 July.

Movements in the retail prices index are calculated from the middle of each month. The latest figure available is that for mid-June, when the increase over the previous 12 months was 11·3 per cent.

I note what the right hon. and learned Gentleman says. Is he aware that we are again on the prices increase spiral? Why should working people accept lower wage increases when all round them they see the prices of the essential commodities of life—gas, electricity and rents—being increased and the Government doing nothing to impose any control? When will the standard of living of working people be increased under this Government?

The rate of inflation has fallen substantially from what it was 12 months ago. It is true that the reduction has taken place more dramatically in those areas where prices compete in the high street than in those provided by the nationalised industries. The hon. Gentleman cannot expect this Government—indeed, any Government—to guarantee rising living standards for people generally until we improve our economic performance, and a crucial part of that performance depends on lower pay settlements if employment is to increase again.

Is it not essential that the economic revival, when it comes, should be based on much lower rates of inflation? Is it not equally essential that those lower rates of inflation should be achieved by some sort of pay policy? Will my right hon. and learned Friend look again at the possibility of a six-month wages freeze from this autumn?

I confess that having been directly responsible for the implementation of the six-month wages freeze by the previous Conservative Government, and having observed the experience of the Labour Government when they tried a similar policy, I have no confidence that an institutionalised incomes policy is the right answer to our problems. That does not mean that I underestimate the importance of continued progress towards more sensible, lower, general average pay settlements. Nothing could do more to reduce the danger of unemployment and improve the economy's general prospects than more sense in that respect. In that sense I welcome my hon. Friend's comments, but in no other.

Based on the Treasury forecast, the Secretary of State for Social Services estimated that there would be a 10 per cent. inflation rate in November. That is the basis of the uprating. Does the Chancellor of the Exchequer believe that, with all the signs that the inflation rate will go up, there can be a 10 per cent. inflation rate, based either on the RPI or on the retail and taxes index, by November this year?

That forecast still stands. It is far too early to conclude that it will be impossible to achieve it. The right hon. Gentleman might remember that the inflation forecast last year was significantly too gloomy. I see no reason to make any change at this stage.

Does my right hon. and learned Friend agree that the Government's policy for reducing inflation has been highly successful? Does he further agree that private and public sector prices make up the 11.3 per cent. inflation rate but that in the private sector the increase is about 6 per cent. whereas in the public sector it is about 18 per cent? Does that not mean that we should try to accelerate privatisation? Must we wait for market conditions to be right? Why can we not issue convertible loan stock?

That concerns a much wider range of possibilities. I agree that probably the central, single most important problem for our economy is the extent to which its performance is inhibited by the dominance of publicly owned monopolies face to face in many cases with monopolistic trade unions. That makes every possible case for proceeding with privatisation as far and as fast as we sensibly can, as my hon. Friend suggests.

asked the Chancellor of the Exchequer whether a woman aged between 60 and 64 years who, as a result of receiving a State pension and a graduated pension of 33 pence per week or over, becomes liable for tax at a rate over 33 pence per week need not draw the graduated pension and will not then be taxed.

Any part of a pension that a pensioner has voluntarily relinquished does not form part of her total income for tax purposes. Because of the Inland Revenue's assessing tolerance, no assessment will be made for 1981–82 where, following any relinquishment, the total income for tax purposes of a woman aged between 60 and 64 whose only income is a State pension including any graduated pension does not exceed £1,475.

Is the Minister aware of the increasing hardship caused to the low paid as a result of not increasing the tax threshold, and of the total chaos that he has caused to people between the ages of 60 and 65 on pensions? Will he rethink his policy inmediately and at least raise the tax threshold for such groups, with pensioners by perhaps extending the age allowance to those between the ages of 60 and 65?

I am sure that in general terms the hon. Gentleman, in making those points, will support the Government in their move to open the way to future tax reductions in subsequent Budgets. As to the question of an age allowance for women between the ages of 60 and 64, the suggestion has been considered and rejected by successive Governments of both parties. Age allowance is given in recognition of the reduced taxable capacity that comes in old age. It is not in any true sense an allowance for retirement.

If we are to have one nation in benefit, should not everybody be encouraged to draw the benefit to which they are entitled by right of citizenship? And, if we are to have one nation in taxation, should we not encourage everybody to make his contribution even if it is only two mites?

I am certainly not encouraging pensioners in that situation to relinquish their pension. I am merely directing my remarks to the question put to me by the hon. Member for Stockport, North (Mr. Bennett). Of course, it is not just a question of pensions, but of a pensioner who has any alternative source of income, as I am sure my hon. Friend recognises.

Will the Minister clarify how he reconciles the taxation of this group of pensioners with the election pledge of his Prime Minister that her income tax proposals would result in those pensioners who had another little pension of their own paying less in tax? Is 33p a week too much pension to come within the scope of that pledge? Does not the Minister appreciate the insanity of an arrangement by which we bring into the tax net 50,000 pensioners who are each so poor that they will all be entitled to go to the DHSS and claim supplementary pension to pay the tax bill that he is about to send them?

Of course, we regret that we were unable to valorise the threshold this year. The House will recall the considerable increase in the threshold in the first year of this Administration's life. The increases did not receive the full-hearted support of the party of which the hon. Gentleman is a member.

asked the Chancellor of the Exchequer what is his estimate of the total administrative costs in the current financial year of the Inland Revenue and Her Majesty's Customs and Excise Department, respectively; and how those figures compare with the financial year 1976–77.

The total administrative costs of the Inland Revenue and the Customs and Excise for 1981–82 are estimated at £792 million and £339 million, respectively. These compare with £452 million and £191 million for 1976–77.

Have the cost-yield ratios of collecting taxes changed significantly in any way in the last five years? To be more specific, is the average cost of collecting taxes by the Inland Revenue still under 2 per cent.? Is the average cost for collection by the Customs and Excise still under 1½ per cent.?

The Inland Revenue cost of collection remains in the range of 1·9 per cent. to 2 per cent. I am happy to tell my hon. Friend that the cost for the Customs and Excise has fallen from 1·76 per cent. to 1·3 per cent., which demonstrates that both Departments are using their resources more effectively.

Will my hon. and learned Friend consider the fact that administrative costs might be reduced by the adoption of the American practice of self-assessment?

That is an interesting development which, naturally, this Government have considered and will continue to consider. It is not a simple matter, as my hon. and learned Friend will recognise. It would demand a considerable recasting of the tax system. It might also demand rather more prompt payment of tax by taxpayers. If the American system were adopted, it might also involve stiffer penalties.

asked the Chancellor of the Exchequer whether he will alter the system of tax allowance in favour of families with children where one parent only is in work.

This is one of the possibilities considered in the Green Paper on the taxation of husband and wife, which was published last year.

As the only reason why we have a higher rate of unemployment than other Western countries is that a far larger proportion of our womenfolk are in the labour market, and as the main reason why we have more violence on our streets and football hooligans is that mum has a tendency, much greater in this country than other countries, to go out to work, would it not be sensible to convert our taxation system in such a way as to encourage at least one parent to stay at home and look after their young children?

My hon. Friend will be able to develop that point forcefully when the Government consider the various representations on the Green Paper.

Is my hon. and learned Friend aware that the majority of women who go out to work do so out of economic necessity or to repay society for taking some form of professional education?

That is one of the factors that must be balanced against the point made so forcefully by my hon. Friend the Member for Northampton, North (Mr. Marlow). It demonstrates clearly that the solution to our fiscal problems involves a whole range of social and economic factors that cannot be readily or quickly resolved without a full-scale examination of the Green Paper and the representations about it.

Does the Minister agree that the suggestion by the hon. Member for Northampton, North (Mr. Marlow) that rioting is due to mothers going out to work is a slur on dedicated mothers who need to go out to work to help the family? Is not the truth behind the rioting the Government's rotten economic policies that are causing deprivation and unemployment in our inner cities?

I do not think that the tendency for mothers to go out to work started with this Administration. The hon. Gentleman is opening a debate on social trends that goes far wider than the Green Paper which is the subject of the original question.

asked the Chancellor of the Exchequer what is his current estimate of the total cost in 1981–82 of unemployment benefit, special schemes for jobless boys and girls, employment subsidies in industry and other related expenditure, in the light of the rising trend of unemployment.

The current estimate for the cost in 1981–82 of unemployment benefit is £2,004 million. The total cost in 1981–82 of all special employment and training measures is estimated at £1,100 million. Of this total, some £490 million is for schemes specially designed for young people.

Would not it be more sensible to employ that money in expanding the housing programme, on capital expenditure in the public sector generally, by giving a boost to the National Enterprise Board and on investment in public industry? Does the right hon. and learned Gentleman agree that that would have the effect of not simply reducing unemployment benefit but of both providing a greater revenue for the Chancellor of the Exchequer and reducing the public sector borrowing requirement?

I do not agree with the hon. Gentleman. If he is referring to a direct effect on the unemployment figures, there is no doubt that the special measures have a more direct and substantial effect on the number of jobs in relation to the amount of money spent. If he is talking about a general reflation of the sort that appears to be foreshadowed, the objections are that that would fuel inflation and lead to higher interest rates. It would not achieve the results that the hon. Gentleman favours.

In view of the vast figure for unemployment benefit that the Chief Secretary has given to the House, are the Government reconsidering the present system whereby the whole increase in the cost of unemployment benefit is borne by even higher contributions from those still in employment and their hard-pressed employers?

I am not quite sure whether behind that question the hon. Gentleman has some alternative that he wishes the Government to consider. If he does, I shall be happy to consider it.

Does not my right hon. and learned Friend admit that the amount of money spent on unemployment benefit and the special schemes announced by the Government is wasteful? Would not it be better to pump that money, one way or another, into capital projects that would provide meaningful work, which in turn would create genuine wealth? Will he give some consideration to the concern felt by industry about the rapid rise in energy prices, especially oil prices, that will have a further adverse effect on unemployment?

My hon. Friend must decide whether he is asking that the same amount of money be spent on his proposal or that more public money should be spent. If he is asking that the same amount should be spent for different purposes, he must accept that fewer jobs would be produced. If he is asking for a higher total of public money to be spent, he must accept the consequences on interest rates and inflation.

I am sure that the Chief Secretary does not wish to mislead the House. Was not he asked what was the total cost of unemployment benefits and other matters? He gave the House the figure for unemployment benefit but not for supplementary benefit paid to the unemployed, which is an equal sum. It is another £2,000 million.

The right hon. Gentleman was incorrect to suggest that there has been any misleading of the House. If he cares to look at the question and answer later, he will find that he was wrong. He is operating under a fallacy in suggesting that employment can be switched on and off like a tap and that the money that is currently spent on the sort of measures that I have described can be simply diverted instantly into productive employment without any consequences on inflation and interest rates. If it were as easy as that, the right hon. Gentleman knows perfectly well that any Government would have resorted to that simple solution. The problems are very much monk: complex than he is prepared to admit.

asked the Chancellor of the Exchequer what is the present purchasing power of £ sterling compared with May 1979.

The purchasing power of the £ sterling was 73p in June 1981 compared with 100p in May 1979.

Is not that figure an appalling indictment of the Government's economic policies? Have not they consistently said that the main aim of their economic policy was to reduce the rate of inflation? Given that there is no sign that inflation will fall during the next two years, coupled with an increase in unemployment, is it not time that the Government changed the course of their economic policies?

I do not accept the hon. Gentleman's interpretation of those figures. As he knows perfectly well, the rate of inflation during the past year has been halved. A figure that is not often quoted, but which provides a fair comparison of the Government's record with that of their predecessors, is that, whereas during the past year inflation has been halved, in the year up to May 1979 inflation rose by 37 per cent.

asked the Prime Minister if she will list her official engagements for Thursday 30 July.

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 meetings later today with the Prime Ministers of Australia and Guyana. This evening I am giving a dinner for a number of visiting Heads of State and Government.

When my right hon. Friend considers what legislation should be introduced during the next Session of Parliament, will she confirm that she will give top priority to improving the efficiency of the nationalised industries by limiting their monopoly powers and by the introduction of private capital? Will she confirm that we are looking forward to the privatisation of BNOC and the National Bus Company? Will she further confirm that British Gas will have its monopoly right of gas purchase removed and that it will play only a limited part in the gas-gathering pipeline?

As my hon. Friend knows, I share his view that it is important to go as far as we can and as soon as possible in de-monopolising the powers of nationalised industries and introducing competition. A number of Bills are jostling for a place in the next Session. I confirm that it has already been announced that there will be a Bill enabling there to be an equity stake in BNOC. I hope that we shall introduce some legislation for gas appliances. I am afraid that I cannot go further than that without anticipating the Gracious Speech.

When the Prime Minister put forward her scheme for subsidising the employment of youngsters, did she consider the fact that in many wages council industries many 17-year-olds are paid slightly more than £40 a week, and also the possibility that the scheme might fall foul of the European Community? Does she really intend to go ahead with the scheme for subsidising low wages?

The scheme will go ahead. The hon. Gentleman may recollect that that point was brought up during the debate. I said that wages councils would have to take that into account in their future bargaining procedures. If their wages for 16 and 17-year-olds are higher than the £40 minimum, it is painfully clear that those youngsters will not be able to take advantage of the scheme. We must decide whether we want more youngsters to have jobs with lower wages or fewer youngsters to have jobs with higher wages.

Does the Prime Minister accept the claim made by the Chancellor of the Exchequer that his policies have, to date, been an unqualified success? If so, does she expect him to retain his job for the next 12 months, or is the Minister of Agriculture, Fisheries and Food the next person for the chop?

The policies of my right hon. and learned Friend the Chancellor of the Exchequer have succeeded in introducing an air of competitiveness into British industry and also an increase in productivity, from which the hon. Gentleman's Government flinched. Had that been done during the past 20 years, and had overmanning been reduced, Britain would be in a stronger position now.

Will my right hon. Friend try to dig out from the Opposition some support for pay settlements during the forthcoming year that are below those accepted by the nurses and ambulance men? Will she add to the acceptability of far lower and more realistic pay settlements through an increase in child benefit so that those on low pay will have more money in their pockets, which would help the inflationary trends in the economy?

I would very much like to do what my hon. Friend suggests. It is important to keep pay settlements low for next year, unless increased pay is earned by increased productivity. That is always the way to achieve increased pay. That path is perpetually open.

Will the right hon. Lady take time off today to study the recent remarks of the director-general of the Federation of Building Trade Employers? He said that 360,000 people in the building trade are unemployed and that the situation in the industry is continuing to deteriorate rather than levelling out. Does not the right hon. Lady think that the time is opportune to announce a substantial building programmme and to increase the building programme in the public sector, including the building of more council houses, to help the industry out of its present severe recession?

This question came up at our last Question Time on Tuesday afternoon. I said on that occasion that the Government had taken certain measures to try to increase building. We have increased the tax allowance that is available for commercial and industrial buildings. That was meant directly to help the building industry. We have reduced the development land tax. That is another measure directed towards helping the building industry. Many of us would very much like to allocate a greater proportion of Government expenditure to capital spending. That would mean allocating a smaller proportion to current spending. Unless we have that side of the equation, we shall not be able to do what the hon. Gentleman wishes.

asked the Prime Minister if she will list her official engagements for Thursday 30 July.

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

As having property of one's own is one of the great stabilising factors of our democratic society and needs to be encouraged, especially in the urban areas that have suffered civil disturbances, will my right hon. Friend confirm that the Government will press on with their programme of encouraging council tenants to buy their own homes and resist any obstruction by Labour councils to try to prevent tenants exercising their legal rights?

I agree that we want as many people as possible to have personal property of their own. The first step towards that is the ownership of one's home. About 250,000 people have applied under our legislation to purchase their own council houses. Some of the authorities that were not making very rapid progress are making much faster progress following the inquiries of my right hon. Friend the Secretary of State for the Environment. I can confirm that we shall not allow tenants to be denied their legal rights in purchasing their own homes.

When is the Secretary of State for the Environment likely to make a statement on his visit to Liverpool? I understand that he will not be able to make a statement to the House before the recess. Will the right hon. Lady say whether we shall hear some positive proposals from the right hon. Gentleman in the near future? We need a programme that will get youngsters to work, that will clear the sites and provide training in the area, a programme that will lead to better housing and education facilities and that will help local authorities, not by rate support grant cuts but by providing greater financial aid to enable them to assist areas such as Toxteth.

I cannot say when such a report will be ready. I am convinced that it will be a thorough document when my right hon. Friend presents it to the House. The hon. Gentleman referred to a number of problems, such as education expenditure. He will know that a considerable sum has been spent on education in Liverpool. Money has been spent on new schools, and some of them are not full and will not be full because the demographic pattern has changed. The hon. Gentleman will remember that we used to put extra money into providing extra teachers in deprived areas. That was done in my time. I understand that about 190 of the 330 schools in Liverpool are benefiting from that legislation. We provided extra teachers in deprived areas and gave them extra pay. We have put a good deal of money into Liverpool. I am not certain whether it has ever been properly applied or properly co-ordinated. I agree with the hon. Gentleman that it is appalling how much dereliction has been allowed to stay in Liverpool without being cleared.

Will my right hon. Friend dissociate herself from the outrageous remarks of the chairman of the Merseyside police committee, who, by justifying the continued rioting, is undermining the morale of the Merseyside police force, the members of which are trying to do their job of maintaining law and order in spite of the sniping by the chairman of their own police committee?

I read the reports to which my hon. Friend refers. There can be no excuse for the violence that we have seen, and those who suggest otherwise from positions of authority bear a terrible responsibility for their remarks.

On a point of order, Mr. Speaker. I understand the courtesies of the House but I cannot allow the slur of the hon. Member for Liverpool, Wavertree (Mr. Steen) to pass. Lady Simey—

Order. That is not a point of order. That is part of the debate.

On a further point of order, Mr. Speaker.

It is not a point of order that the hon. Gentleman seeks to raise. The Prime Minister is responsible for her statements as everybody else is responsible for theirs. It is not a point of order for me to deal with.

On a point of order, Mr. Speaker.

I hope that the hon. Member, who is experienced, will not try to pursue an argument about a reply that was given. If he has a point of order connected with Standing Orders or the customs of the House, I shall take it. However, I shall look poorly on something that is not a point of order.

I believe that there is a custom in this privileged place that if a person is attacked there should be at least one simple sentence in defence—

Order. Not in my time in the House.

On a point of order, Mr. Speaker. In view of the statement that you have made, Mr. Speaker, could you explain how someone such as Lady Simey, a respected member of the Labour Party, who has been a member of the Labour Party since she was a young girl, who is now 75 years of age, is experienced and whose record on Merseyside is well known, could have some right of replying to the points that were made to her? [HON. MEMBERS: "Cheating."]

I do not like that word to be used, because it is not fair. The hon. Member was trying to put in a point of order something to which I listened with great care, but the hon. Gentleman will know that this is not the first time that a person outside the House has been criticised, and that is part of the privilege of speech in this House.

On a point of order, Mr. Speaker. You asked me to refer myself to the customs of Parliament, Mr. Speaker. Is it not true that hitherto attacks on Members of the other House, their wives or their widows have not been permitted, unless formally?

The hon. Member is right about attacks upon Members of another place. Until the hon. Member for Liverpool, Walton (Mr. Heffer) spoke, I did not know who was the person involved. I deal with everyone on the same basis. If the person is a member of another place— [HON. MEMBERS: "She is not."] I suggest that we move on.

asked the Prime Minister if she will list her public engagements for 30 July.

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

Is the package of employment measures announced by the right hon. Lady a few days ago to be regarded as a sign of the success or failure of the Government's policies?

Had the hon. Gentleman listened to the debate, he would have heard the argument that overmanning has gone on in British industry for years. It is essential to have demanning to get industries competitive. That inevitably means that in the shorter run we shall have some increase in unemployment. We cannot leave the position as it is. Therefore, we are taking steps to try to relieve the worst of the hardship. That seems an excellent strategy and a humane way in which to tackle the problem.

In view of the distress in Poland, will my right hon. Friend consider today what more could be done to bring the surpluses of free enterprise agriculture to the relief of the victims of Socialism?

The countries of the European Community, both separately and jointly, have been doing all that they can to make food available to Poland by sending food there and by extending credit facilities. It is important that we continue to do so. The time must come when improved production in Poland takes over.

As the right hon. Lady is taking credit for her achievements, will she tell us which of her achievements gives her the greatest source of satisfaction? Is it the record 7 per cent. fall in output, or the record 20 per cent. fall in manufacturing production? Is it the achievement of a record level of unemployment of 2·85 million? Is it the record rate of increase in unemployment or is it the record loss of international competitiveness of 35 per cent. in two years, something quite unprecedented over previous years? Is it the rise in prices of 35 per cent. over two years of inflation, is it the increase in the tax burden of 10 per cent. in two years, or is it the rise in the income tax burden for everyone except the very rich?

rose—

Order. The Leader of the Opposition is asking a question.

Will the right hon. Lady state her priority? Does she wish to take credit for the record number of bankruptcies? Will she tell us which achievement she puts in position No. 1?

The guts to tackle the problems from which the right hon. Gentleman has flinched.

I shall seek to send away the right hon. Lady in a good mood. All of us were gratified about the event yesterday, but all of us know that the Government had nothing to do with it. No doubt that is the reason for its success. We wish that our finances could be run in the same way. We should like this information to be broadcast throughout the world. The Government had nothing to do with it, and, therefore, it was a great success.

If that is all that the right hon. Gentleman has to say, why does he say it?

rose—

Order. Business Questions.

On a point of order, Mr. Speaker. There were interruptions during Prime Minister's Questions regarding a point of order. Should you not have allowed a certain time after Prime Minister's Questions?

I am sorry for the hon. Member, but only seconds were taken up by that point of order.

On a point of order, Mr. Speaker. I know that it is the custom in this House to let the Leader of the Opposition have a certain amount of licence, but I am sure that today every Back Bencher and possibly many Front Benchers have felt that that privilege has been highly abused. I am convinced that if an ordinary Back Bencher had attempted to do a similar thing, he would soon have been stopped.

The hon. Member is probably correct in his last comment, but, as I have said many times, the Leader of the Opposition is allowed extra latitude. The Leader of the Opposition, whoever it may be, always bears that in mind.