asked the Chancellor of the Exchequer if he is yet in a position to announce the introduction of the new coins into the United Kingdom currency.

I refer the hon. Member to the answer given on 31 July to my hon. Friend the Member for Romford (Mr. Neubert) when it was announced that the 20p coin would be issued for general circulation in June 1982, and the £1 coin in April 1983.

As the value of the pound is falling rapidly day by day, what does the Minister expect to be the value of the pound coin by the time that it is issued and by the Christmas after that?

I hope that I can draw from that question the conclusion that the hon. and learned Gentleman will support the Government in their determination to bring inflation under better control.

Has my hon. Friend received any representations from the Automatic Vending Association of Britain, especially about the possibility of counterfeiting of the new coin?

I understand that the design of the new coin has been discussed with the manufacturers of vending machinery, who are satisfied with it at present. If my hon. Friend has any problems about that I hope that he will let me know.

Would it not be better to bring forward the introduction of the £1 coin as members of the public will need several of them when they pay their new Underground fares following the House of Lords decision?

I regret to have to tell the hon. Gentleman that the Royal Mint cannot introduce the coins any more swiftly than at present planned. They will be a convenience to the public when they come into circulation.

On a point of order, Mr. Speaker. Should not the custom of the House be preserved that Ministers answer questions from the Dispatch Box?

That is our custom, and no doubt it will be followed.

asked the Chancellor of the Exchequer what is his estimate of the present annual cost of reducing employers' national insurance surcharge by two percentage points.

On the basis of the economic assumptions recently published in the report of the Government Actuary on the Social Security (Contributions) Bill 1981, the full year cost of reducing the rate of national insurance surcharge by two percentage points would be about £2·3 billion.

Is the Chancellor of the Exchequer aware that that reduction in revenue would be dwarfed by the increased buoyancy of the revenue following such a reduction, because the removal of that handicap to British industry has been estimated to produce, after two years, at least 200,000 more jobs, about a 1½ per cent. increase in the gross domestic product and a reduction of the retail price index by about 1 per cent.?

The arithmetic is by no means as easy or as encouraging as the hon. Gentleman suggests. I recognise why so many in business would like to see the surcharge reduced, but I must bear in mind the total revenue yield, which is now £3·8 billion. The case for any reduction would have to be weighed in the light of the circumstances in which I consider it.

Will my right hon. and learned Friend confirm that a reduction in the surcharge would be the single most effective way of assisting industry? Will he confirm also that industry is in need of assistance?

My hon. Friend will need no reminding of the extent to which we recognise the case for assisting industry by the reduction as far as is possible of the costs, burdens and charges that fall upon it. I have received many representations to that effect concerning the national insurance surcharge, but not all of them point in that direction. The representations will have to be considered in the light of the total revenue when the time comes to do that.

I am not confirming the arithmetic of the hon. Member for Colne Valley (Mr. Wainwright), but the Chancellor must be aware that British competitive costs have declined by about 40 per cent. since the national insurance surcharge was last increased. In the interests of the competitiveness of the economy and the increase in demand that would undoubtedly follow from a reduction of the order of magnitude that has been indicated, does not the right hon. and learned Gentleman agree that he should give further and more urgent consideration to such a modest proposal?

The right hon. Gentleman should be well aware that by far the largest cause of the reduction of the competitiveness of British industry since 1975 has been the doubling of unit labour costs.

indicated dissent.

The exchange rate of the pound, about which the right hon. Gentleman is gesticulating, stands close to the level at which it stood when the Government took office. Overwhelmingly the dominant cause was the substantial rise in unit labour costs. If the right hon. Gentleman feels so strongly about this issue, what a pity it was that his Government, who introduced the surcharge, increased it and increased national insurance contributions, adding to the burden of British industry by no less than 5 per cent.

Will my right hon. and learned Friend care to say, if the national insurance surcharge were reduced, how much of that would go into reducing industry's costs and how much of that would go into increasing wages?

That factor is one of the reasons why not all the representations that I receive are to the effect that tax relief should take the form of reductions in the surcharge. Whatever is done to the tax burden, it is crucial that those on both sides of industry should continue to reduce the costs that are imposed by rising unit labour costs.

asked the Chancellor of the Exchequer what would be the cost to the Exchequer of allowing the first £5,000 of investment income of people over 65 years to be treated for taxation purposes as if it were a pension.

The first £5,500 of anybody's investment income, regardless of age, is already treated in the same way as a pension or any other kind of earned income. The cost of adding an extra £5,000, for those over 65, to the existing investment income surcharge threshold of £5,500 would be about £110 million in a full year.

I am grateful to my right hon. and learned Friend for that reply. Will he continue to bear in mind the needs of those whose income, when they are over 65, comes not from inheritance or from pensions, but from their savings? Will he acknowledge that there is a special need to index the rate of taxation?

The investment income surcharge requires consideration constantly. For that reason, for the reason given by my hon. Friend, and for many other reasons, the threshold for the elderly was doubled in 1979 from £2,500 to £5,000.

asked the Chancellor of the Exchequer if he is satisfied with the level of incentives provided by his economic policy; and to what extent the incentives policies outlined in his Budget of June 1979 have been modified.

The Government remain committed to continue the improvement of incentives that began in the 1979 Budget. Further progress must depend upon the likely balance between tax revenue and public expenditure.

Does the right hon. and learned Gentleman recall that he assured us that his original incentive Budget would release the energies of what I believe were called entrepreneurs? I am indebted to the Library for the information that current output of British manufacturing industry is 16 per cent. less than it was in May 1979. Is that intentional? Does it mean that his policy is a success, or a failure?

Marginal rates of tax, especially for entrepreneurs, were reduced substantially in my first Budget. Had that not been so, people would have been contemplating a dispiriting prospect now. The hon. Gentleman might care to remember that industrial and manufacturing output have been rising for the past four months. The output of manufacturing industry in the third quarter was 2½ per cent. up on the second quarter. Industrial production in the past three months has been up by 1½ per cent. on the previous quarter. All those factors are pointing in the direction of the continued growth of national output.

Does my right hon. and learned Friend agree that the greatest incentive that could be given to British industry would be to bring down interest rates? Does he accept that that is the best way of controlling public expenditure and not running up large Government borrowing?

I am certain that my hon. Friend is right to draw attention to that fact. The reduction of interest rates is something to which industry attaches importance. In considering the size of the borrowing requirement that is likely to produce such a reduction, one has to take account of revenue and expenditure.

The Chancellor is correct to say that the tax burden for the very rich has lessened. The man on £595 a week is now £25 a week better off because of the right hon. and learned Gentleman's tax changes. However, does he agree that for the majority of the British people on average or below average earnings the income tax burden has risen, and that for the lowest paid families on half average earnings the burden has almost doubled under this Government? Will the right hon. and learned Gentleman say where that increased burden was contained in his election manifesto?

Once again the hon. Gentleman overlooks, as his right hon. and hon. Friends so often do, the increase in earnings that has taken place alongside every other change. Earnings, on average, rose by 57½ per cent. over the past three years, while the rise in prices was just over 50 per cent. In most types of household disposable income after payment of income tax and national insurance contributions has kept ahead of prices. Even for a household on 50 per cent. of average earnings, with two children, the fall has been only 0·3 per cent. in real disposable personal income after taking account of child benefit and family income supplement.

Were the economic consequences of the 1979 Budget the ones that the Chancellor intended?

Had we not taken the action that was embodied in the 1979 Budget to reduce the massively accelerating growth of public expenditure and to reverse the heightening burden of income tax on the earnings of the British people, we would not have begun the recovery that is now taking place.

asked the Chancellor of the Exchequer what representations he has received on his statement of 2 December.

As is usual on these occasions, I have received comments and representations from a variety of sources.

Has the Chancellor noted the CBI's view in its reaction to his mini-Budget, in which it points out that the result of it will be an extremely sluggish growth in output next year with no fall in the underlying trend of unemployment until the next general election? In these circumstances why does the right hon. and learned Gentleman continue to resist providing some help for industry, especially when capacity utilisation is still extremely low and when the PSBR, in real terms, is low for a recession?

As I have said on a number of occasions, there was no mini-Budget on which industry could pass such a judgment. The House received a presentation of the public expenditure plans for next year, and we shall have to come to a judgment when we consider the Budget as a whole.

Will my right hon. and learned Friend confirm that unemployment is likely to fall as a result of people being employed in small businesses that are not members of the CBI?

My hon. Friend is right to draw attention to the importance of small businesses as the generators of additional employment. That is why my right hon. Friends and I have introduced no fewer than 72 different measures for the encouragement of small businesses.

In the light of continuing representations on public expenditure, will the right hon. and learned Gentleman give some new and special consideration to the effect on the elderly of this unusually severe winter weather, which will inevitably impose upon them extremely high fuel costs? He will know that the special heating allowance scheme is available only to pensioners over 70 years of age. Will he give urgent consideration to making a special increase in heating allowances for all categories of need during this winter? Will he consider again the Christmas bonus as one possibility—or a post-Christmas bonus—of assisting many who are being seriously affected by this appalling winter?

The whole House shares the right hon. Gentleman's concern for old people—

The Government have a funny way of showing it.

However, on the experience of only the first few weeks of the winter it is difficult to conclude, statistically or otherwise, that it is likely to be different from any other winter. The right hon. Gentleman should take account of the fact that the Government are maintaining the Christmas bonus and that the previous Government suspended it for two years.

asked the Chancellor of the Exchequer whether he will take into account in formulating proposals for corporate taxation the level of spare capacity at which British industry is currently operating.

In formulating the forthcoming Budget my right hon. and learned Friend the Chancellor of the Exchequer will take full account of the position of British industry.

As, in view of the level of unemployment, industrial capacity and consumer demand are clearly not satisfactorily balanced, will my right hon. and learned Friend endeavour, in preparing his Budget, to make further progress towards honouring Conservative promises about lower taxation?

The Government would like to make further progress towards lowering taxation in next years's Budget, but it depends on progress in controlling expenditure and the problem of financing the borrowing requirement which will emerge from that Budget.

Is not the main reason why the Chancellor cannot fulfill Conservative pledges to cut taxation and give pensioners more simply that the Government's unemployment policy is costing them well over £12 billion, according to the Manpower Services Commission, which is a greater sum than the PSBR? Would it not make good business sense to cut the number on the scrap-heap and thus have more money to take the measures that we should like the Government to take for pensioners and so on?

The Government are as keen as anyone to see unemployment reduced, but it will come not from so-called reflation but only from the restoration of the competitiveness of British industry, with which we are making great progress.

When formulating the Budget proposals, will my hon. Friend consider that the service sector, at least as much as the manufacturing sector, is capable of playing its part to reduce unemployment? Therefore, will he consider extending the industrial buildings allowance facility not only to the manufacturing but to the service sector?

My right hon. and learned Friend would entirely agree that the service sector has a vital role to play in economic recovery, but I ask my hon. Friend to await his Budget Statement.

Does the Minister agree that one way in which our capacity is being reduced is by firms closing and selling machinery to others in more successful countries? Is he aware that in Tameside, an area of small manufacturing companies, in the past two years one in four firms has closed, which shows that the Government have done more damage to industry than any other force, internal or external?

I am afraid that what did most damage to industry was the enormous growth in earnings that took place during the period when the right hon. Gentleman had a hand in our affairs and which was quite unconnected with improvements in output and had to be taken out of profits. That is what we are paying for today. I remind the right hon. Gentleman that we have provided small and start-up businesses with the most generous tax package available anywhere in the world.

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

asked the Chancellor of the Exchequer, further to his statement of 2 December, when he expects inflation to be reduced to single figures.

The latest figures for the annual rate of increase in the RPI are for the 12 months to October 1981, when the increase was 11·7 per cent. The figures will worsen slightly over the next couple of months, mainly because of the effect of the lower exchange rate on the price of imported raw materials and fuel, but we can expect further progress in reducing the rate of inflation during next year.

As an advocate of monetarism, how does my right hon. and learned Friend square his forecast of an inflation rate of 10 per cent. over the next 12 months with the very much faster increase in sterling M3 over the past 16 months, especially as he does not envisage a substantial increase in output over the next 12 months?

As my hon. Friend knows, sterling M3 is not the only monetary aggregate to which we pay attention. If I guess rightly, my hon. Friend would be among those more likely to complain about the tightness than the laxity of monetary policy, which is likely itself to produce a continuing fall in inflation.

In view of the Chancellor's disastrous record over the past two and a half years and his miserable reputation as a Scrooge, will he do us a favour by resigning before Christmas?

I have no intention of doing any such thing. I intend instead to remind the hon. Gentleman that, by comparison with the record of the previous Government, the rate of growth in prices in our first three years in office has in each year been significantly lower.

As the Chancellor always insists on the key importance of the public's inflationary expectations, why did he take measures in his recent public expenditure statement to aggravate the already disappointingly high rate of inflation?

I have taken the action necessary to ensure that the proper resources are available in the national insurance fund to meet the liabilities—largely the increase in pensions—that the fund will have to meet and to ensure that those who can are paying a reasonable contribution to the cost of their housing.

Can my right hon. and learned Friend estimate the effect on the rate of inflation of the economic panaceas being peddled by those who do not have the responsibility for dealing with the hard economic realities?

I believe that all those who peddle such panaceas acknowledge that they are likely to have an adverse effect on inflation, but in almost every case they seriously underestimate it.

Leaving aside monetarist claptrap, is not inflation being controlled by high unemployment, which results in low pay settlements? If unemployment falls, as sure as night follows day, pay settlements will increase. How will the Chancellor control inflation then?

In Opposition, as in office, I hope that the right hon. Gentleman will continue to insist on the importance of moderate and sensible pay settlements, instead of looking forward apparently to the development of the opposite. I pay little attention to the rest of his observations. He talks of monetarist claptrap, but throughout his time in office he stressed the importance of a monetary policy, so that indicates the extent to which he cast aside his reputation.

asked the Chancellor of the Exchequer whether he expects, in any future year, to reduce Government spending in real terms against the previous year's spending.

Our plans for public expenditure in 1982–83 are at approximately the same level in real terms as the 1981–82 plans. I must ask my hon. Friend to await the White Paper, which will show our plans for the whole of the survey period up to 1984–85.

Will my right hon. and learned Friend tell the House that, whatever the outcome of the pay negotiations in the coal industry, the real level of Government expenditure in the industry this year will not be increased? Will he confirm that that which is down for revenue expenditure will be for revenue expenditure, and that for capital for capital expenditure, and that there will be no mish-mash between the two? Will he assure the House that if wages are so increased the Government will not bring forward any more money, and if the price of coal increases they will facilitate the import of cheap coal?

The external financing limits for the NCB have been set, published and announced in every possible way to all concerned. If the developments that my hon. Friend fears occur the consequences will be serious, but I hope that moderation and good sense will prevail, as they so often do.

How can the Chief Secretary do anything about public expenditure in real terms when his officials and the Chancellor have just been telling the Treasury Select Committee that public expenditure planning is now in cash terms? What are the implications of the unpredictability of prices for real spending for the employment of teachers and public sector workers generally?

I hear from behind me an hon. Friend saying that the hon. Gentleman is getting into a muddle. I am inclined to agree. It is perfectly possible to plan in cash, as, indeed, we have done, which is an extremely salutory and important reform, but at the same time, if the hon. Gentlemen are concerned to know the level in real terms, it is a simple calculation to answer the question.

Do my right hon. and learned Friend and the Treasury differentiate between public expenditure on the nation's infrastructure and public expenditure on, for instance, manufacturing industry, where on the one hand there is nobody else to pick up the money or the market, and on the other there would be people who could do so?

Clearly, there is a distinction. This shows that merely making the distinction between capital and current expenditure does not necessarily provide a uniquely useful tool for determining priorities.

If the Chief Secretary cannot give the assurance sought by his hon. Friend that in any future year he expects to reduce public expenditure, does riot that mean that the whole medium-term financial strategy and the policy of cutting and reducing public spending and the public sector has been abandoned? If that is so, have not the Government been attacking main public expenditure programmes but constantly finding, as the recession increases, that any gains on that front are lost through the payment of unemployment and other slump benefits?

As the right hon. Gentleman's premise is false, it is not surprising that his conclusion is also false. With the renewal of growth in the economy, there is a real prospect that public expenditure will begin to fall again as a percentage of gross domestic product, and that may well happen next year.

asked the Chancellor of the Exchequer what duty is payable on each heart valve used in open heart surgery imported into the United Kingdom; and under what circumstances this duty is paid.

The Customs duties chargeable in the United Kingdom are those established in the Customs tariff of the European Communities. Heart: valves are currently liable at either 8 per cent. or 9·1 per cent. according to their type, and this duty is payable on importation from most countries outside the European Community. An application for suspension of duty has recently been approved by the Council of Ministers and some heart valves will become free of duty from 1 January 1982.

Does my hon. Friend appreciate that his answer is only partially satisfactory? Will he confirm that the amount of duty payable is £50 per heart valve and that that is a tax on life itself? Does he accept that this is not a commodity in the normal sense of the word as it is useful only to surgeons and their patients? Will he confirm that the valves come from specially reared pigs in the United States and that if they could be produced in the EEC or in Britain no duty would be payable?

I understand that the suspension which has been announced will apply to bioprosthetic heart valves, which I believe have caused anxiety in my hon. Friend's area. Duty on those will be suspended from the beginning of next year.

asked the Chancellor of the Exchequer to what extent the disposal of assets by British Leyland will affect the public expenditure borrowing requirement.

That would depend on the circumstances of any particular case. The recently announced decision of the BL board to dispose of assets in Leyland Vehicles Ltd. was part of its plans to return the BL group to profitability. It results in no additional transfer of funds from the Government to BL or vice versa.

What instructions has the Chancellor given to senior Treasury officials about co-operating with the Comptroller and Auditor General in his inquiries into the sale of the assets o the Leyland tractor lane at Bathgate?

The Comptroller and Auditor General has access to all the files relating to the Government's dealings with BL, and it is right that he should have it.

Does my right hon. and learned Friend agree that it is a great tragedy that there is not a far more widespread disposal of assets in BL and that it 'would be a good thing if the whole group were broken up into more manageable units? Does he further agree that it is a tragedy that such an idiotic conglomerate was stuck together in the first place?

It is difficut to jog back and say what might have happened if a different course had been followed in the first place.

What proportion of the money paid for capital assets sold off reflected public investment by previous Governments in BL?

It is not possible to make such a calculation.

asked the Chancellor of the Exchequer whether, for planning purposes, he draws a distinction between public expenditure on infrastructure projects and on public holdings in manufacturing industry.

Yes, Sir.

Does my right hon. and learned Friend accept that if taxpayers stopped funding BL it would stop building cars but somebody else would fill the market share, whereas if they stopped funding British Rail the railways could not be run and nobody else would pick up the tab? Does he recall using the phrase "a uniquely useful tool" in reply to me on question No. 9? Does he agree that British Rail fits precisely that description? Does he further agree that, for political and social reasons, we need a modern and efficient railway and that failure to invest therein is abject folly?

I seem to recall using the phrase "a uniquely useful tool", but, so far as I remember, I said that whatever we were then discussing was not such a tool.

An increase in manufacturing investment would clearly be most welcome and would be given an enormous boost by an increase in demand for our products, but will the Chief Secretary consider the disastrously low level of public house building in this country? In view of the hundreds of thousands of unemployed construction workers, the millions of unsold bricks and growing council house waiting lists, how can he justify holding down public expenditure on housing?

One must consider housing as a whole, not just public housing. This year, private sector housing starts have increased by 40 per cent. compared with the second half of last year.

Will my right hon. and learned Friend confirm that infrastructure expenditure allocated to the coal industry this year and next year will not be spent on miners' pay?

I cannot give confirmation in quite that form. As my hon. Friend knows, the constraint operating on the National Coal Board is the external financing limit, which was recently announced for 1982–83.

Does the Chief Secretary agree that a proper activity for him and his colleagues and Treasury officials, and one which we should expect them to undertake, is to keep a close eye on assets being sold, for instance by BL, to ensure that the best possible deal is made so that public money can come back and be re-invested elsewhere?

I certainly agree that if public money is put into BL or any other concern, we, as custodians of that money, have a real and proper interest in what happens to it and whether it is used for re-invesment where there is a subsequent sale. We should certainly look carefully at what happens to the substantial proceeds of any such sale.

asked the Chancellor of the Exchequer when the draft legislation arising from his consultative document on tax havens and company residence will be published.

The draft legislation was published on 8 December. Copies have been placed in the Library of the House.

Is the Minister aware that there is increasing concern and annoyance that money is lost to United Kingdom revenue as a result of increased tax dodging by individuals and companies in both the Channel Islands and the Isle of Man? What action will the Government take to stop, or at least limit, such tax dodging?

We shall listen to the representations that we receive in the light of the draft legislation that has now been placed in the Library. If we proceed along the lines of that legislation, it will cover companies based in the Channel Islands and the Isle of Man which carry on their main operations for tax purposes in this country.

asked the Chancellor of the Exchequer if he has studied the precise mechanism necessary to bring about an upturn in the economy; and whether, in this connection, he now regards it as necessary to intervene deliberately in the economy to ensure that the process leading towards growth is both started and adequately funded, or whether he remains of the view that the mechanism will be self-starting.

The Government's policies are designed to produce a more competitive and flexible economy. There are now signs that they are beginning to succeed.

May we assume from that answer that the Chancellor remains a free-market non-interventionist? Is he aware that the latest analysis of new orders being fed into manufacturing industries suggests that the total number of new orders and contracts in manufacturing for next year amounts to less than the total required to sustain even the low level of output for this year? Therefore, does the Chancellor accept that, contrary to all the optimistic predictions, it now appears that manufacturing output will drop during next year? If so, what does he intend to do about it?

That characteristically gloomy forecast is out of line with expectations. The hon. Gentleman should take account of and be content with the fact that manufacturing output in the third quarter of this year was up by 2½ per cent. on the second quarter; construction industry activity in the third quarter was up by 2½ per cent. on the second quarter; engineering orders this year are up by 20 per cent. on the second half of last year; and engineering export orders this year are up by 22 per cent. on last year. Those figures represent a prospect for increased growth, rather than the reverse.

If the mechanism is self-starting, will it operate at a sufficiently fast rate to achieve the Government's objective of lower taxation? If not, will my right hon. and learned Friend give it a fiscal shove in the spring?

My hon. Friend knows that everyone in our party is anxious to secure reductions, rather than increases, in taxation. The precise decisions will depend upon the balance between expenditure and revenue.

asked the Chancellor of the Exchequer what further use he intends to make of the tax and price index.

The Central Statistical Office will continue to publish the tax and price index each month. It provides a useful supplement to the information contained in the retail price index.

Would it not now be better either to change the inputs or to abolish the index altogether?

I do not think so.

The Chief Secretary said that the TPI was a "useful supplement". Has he forgotten that the former Financial Secretary said that if we wanted a general guide to the changes in total costs facing taxpayers we should look at the TPI, not the RPI, because it is a truer guide? Since the TPI has increased by 15·2 per cent. in the last year, while the RPI has risen by only 11·7 per cent., do the Government still remain of the view that the TPI is the truer guide?

The hon. Gentleman has given a characteristically selective quotation from what my right hon. Friend the former Financial Secretary said. That selective quotation has been refuted at least half a dozen times. It is important for wage bargainers to concentrate not on cost of living increases, but on what employers have the ability to pay.

What shall I tell the nurses in my constituency and other constituencies who ask why they should be held to a 4 per cent. increase when local authority manual workers have achieved an increase of double that amount and the miners appear to be going on strike to get more than three times that amount?

Some of those matters are still to be seen. As my right hon. Friend the Prime Minister pointed out, the consequence of any excessive increase in pay for local authority employees will be an increase in the rates, from which everyone will suffer. That cannot be sensible.

Do the Government hope that the percentage increase in income next year will be below the percentage increase in prices?

It is not possible to give an answer to that question in that form now.

Is the Chief Secretary aware that, whatever index he uses, the irrefutable fact is that everyone earning more than £20,000 a year has been provided with incentives by the Government and everyone on average or below-average earnings has had a massive kick in the teeth?

That is a classic over-simplification, which fails to take account of the impact of current tax rates on the marginal rates of increase in earnings across the board at a perfectly normal level.

asked the Prime Minister if she is prepared to meet a representative group of nurses in respect of their current wage claim; and if she will make a statement.

Current wage claims are not negotiated through my office. I understand the nurses want to talk about the long-term machinery for settling their pay. At a meeting last week with my right hon. Friend the Secretary of State for Social Services the staff side of the Nurses and Midwives Whitley Council again asked if I would see it. I have therefore agreed to see it tomorrow.

When the Prime Minister meets the nurses, will she give them a clear unequivocal commitment that their pay increase for next year will be no less than 15·2 per cent., as measured by the Government's tax and price index? Is it not a scandal that, at a time when the Government are forcing up rents to the tune of £2·50 a week, when there are many other price increases in the pipeline and when there is now the apparent conspiracy of the Law Lords and a Tory council to push up fares, nurses and other workers should be treated in that fashion?

I have already said that I do not negotiate current wage claims. The Government have made clear the high esteem in which they hold the nurses. In the last three years there has been a 76 per cent. increase in the nurses' pay bill.

Does the Prime Minister agree that there is a real danger that responsible groups in our society, such as the nurses, who do not resort to strike action, will find themselves increasingly penalised until we develop a fair and comprehensive incomes policy?

I do not believe that there is any practicable possibility of achieving a comprehensive incomes policy. I do not believe that such a possibility exists in our society. It exists only in societies where there is the direction of labour and the extinction of freedom.

Does my right hon. Friend recollect that the nurses felt badly let down by the Labour Government and that they are now hoping for better things following their meeting with her tomorrow? Would it not be easier to get a good settlement for the nurses if everyone in the health services followed the good example of the Royal College of Nursing and outlawed strike action against patients?

I wholly agree with my hon. Friend. It would also make it easier if there were more pay for certain groups of people whom we especially value in society, and if other people did not take it out for themselves.

asked the Prime Minister if she will list her official engagements for Thursday 17 December.

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.

Has my right hon. Friend had a chance today to check the reports that some people in Poland have been injured in clashes with the militia? Does not the Polish crisis demonstrate to people in this country and in the West the significant difference between Western democracies and the Eastern bloc countries? Should it not make those tempted by the Campaign for Nuclear Disarmament argument realise that neutralism and unilateralism could lead us into the sort of pressures that we see in Poland?

We have seen reports that two people have been killed. It is difficult to get accurate news out of Poland, especially outside Warsaw. Therefore, I cannot confirm those reports at the moment.

Has the Prime Minister today had a chance to study the House of Lords judgment on the GLC appeal on London fares? That judgment must now be carried out because the law must be observed, but does she agree that, if the law is observed in these terms, it will have serious consequences for travellers in London? Therefore, will the right hon. Lady take urgent steps to introduce legislation to restore the law to what many people thought it was previously—including herself as a Conservative spokes-man when the legislation passed through the House?

I shall deal with the latter part of the right hon. Gentleman's question in a moment, because I think that he has either misunderstood the judgment or what I said, or both. I welcome the clear and unanimous judgment from the House of Lords and congratulate Bromley on having taken steps that have clarified the position for London's ratepayers. The judgment runs to about 100 pages. We shall need time carefully to consider what it says, but it is already clear that the GLC's action was a breach of the duty that it owed to ratepayers and wrong in law.

I appreciate that the right hon. Lady has not had time fully to study the debate in which she took part several years ago when the legislation was passing through the House. The whole question of what was economic and uneconomic was considered then, and she made no objection to the terms of the legislation that went through the House. I ask the Prime Minister urgently to consider the possibility of legislation to make this matter absolutely clear so that the House may again have the chance to pronounce on what it thinks should be a proper and fair fares policy for London.

One must first look in detail at the House of Lords judgment before rushing into any instant solutions or action. On such an important matter a period of reflection is clearly called for. This was a judgment on the law. As I understand it, the judgment does not preclude subsidies. That was the point that I was making. The judgment was concerned not with

"the fairness of the GLC's decision to reduce by 25 per cent. the fares charged in Greater London by the London Transport Executive",

"the legality of that decision"

"within the limited powers that Parliament has conferred by statute upon the GLC"

It is right that we should have time to consider the matter, but will the Prime Minister undertake to give the House a chance to pronounce on legislation before chaos is caused to London fares?

If one is considering the matter, it is as well for the consideration to precede the conclusion.

Then why congratulate Bromley?

Has my right hon. Friend yet had formal notification of the change in the deputy leadership of the Labour Party?

No, but I do not think that it makes much difference.

asked the Prime Minister if she will list her public engagements for Thursday 17 December.

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

Has my right hon. Friend had a chance to read the debate of 30 November on the first report of the Public Accounts Committee on the role of the Comptroller and Auditor General and to see early-day motion 132? If so, will she now rethink the Government's response to that important report of the PAC and reflect that it is right for hon. Members to have the final scrutiny of all public expenditure?

I am aware of early-day motion 132 and of the point to which my hon. Friend has referred. My right hon. and learned Friend the Chancellor of the Exchequer is carefully considering the important issues raised in the debate. We shall let the House know our conclusions as soon as possible after the recess.

What conclusions has the Prime Minister drawn from the behaviour of Irish and other representatives at yesterday's sitting of the European Assembly?

There was an attempt to make a speech in the Assembly that was not relevant to the matters at issue. I was there not as Head of a national Government but as President of the European Council. In any event, I wholly disagree with the comments made during that debate.

As a former leader of the council of the London borough of Bromley—[HON. MEMBERS: "Hear, hear".]—may I offer my right hon. Friend another opportunity to congratulate my former colleagues on the council who, by their successful court action against the GLC, have brought relief to millions of hard-pressed ratepayers throughout London? Is she aware that if commitments allowed her to contribute to the debate on my Private Member's motion tomorrow on communications in London, when we shall have five hours to examine the implications of this historic decision, she would be very welcome?

I congratulate my hon. Friend on having been a leader of Bromley council and on having the powers of prophecy to have secured a debate on communications in London tomorrow on a Private Member's motion. I am sure that it will be an interesting debate. My constituents will be just as interested in it as other London constituents, but I hope that my hon. Friend will understand if tomorrow I do not attempt to catch Mr. Speaker's eye.

As a Londoner and a member of the Select Committee on Transport, may I tell the Prime Minister that her references to breaking even are out of line with the running of public transport in any major Western European city? Is she aware that this judgment will be greeted with widespread dismay by thousands of ordinary London folk?

The House of Lords clear and unanimous decision was that the GLC had acted outside the rule of law that protects citizens against the arbitrary exercise of power.

Will my right hon. Friend today take an opportunity to read the main article in the Daily Mail, which lists all the many encouraging signs that the economy is picking up? Does she not think it better that we should advertise our successes than continue to talk gloom and doom?

Yes. I wholly agree with my hon. Friend. I note that improvements in the economy are not welcome to the Opposition. Clearly, they prefer the gloom and doom to continue. Things are improving considerably. I heard my right hon. and learned Friend the Chancellor of the Exchequer give some figures. More recent figures show that overtime working in manufacturing is considerably up; hours lost through short-time working are considerably down; industrial production is up; manufacturing production is up; and the latest cyclical indicators released today provide increasingly strong evidence that a turning point occurred in the economic cycle in the second quarter.[interruption.]Unemployment for the last two months has been slightly down. I should have thought that Opposition Members would welcome a reduction in the last two months. Hon. Members will also be aware that it has been usual, for all the last years of the decade, for there to be a sharp increase in unemployment between December and January, because of the weather.