asked the Chancellor of the Exchequer what are his Department's assumptions about the rate of growth of the United Kingdom economy until the 1990s.

Working assumptions for the medium-term were given in this year's Financial Statement and Budget Report. For longer-term purposes alternative assumptions have at different times been made for trend growth rates of 2 to 2½ per cent. and ½ to ¾per cent.

I am grateful to the right hon. and learned Gentleman for his reply. Is it not a fact that the Think Tank's report on the demolition of the welfare services and the position of health care was based on an assumption of low growth until the 1990s if the Government remained in power? Will the right hon. and learned Gentleman confirm that that accurately represents the policy upon which the Tory Party intends to fight the next election?

I shall confirm no such thing. At different times analyses are founded on a whole range of different assumptions. There is no central assumption, and it would be quite unwise to have one.

In those assumptions, are there any calculations that show clearly how other manufacturing nations are expected to fare in the same period?

Obviously one of the key components in trying to assess the most plausible outlook for the United Kingdom's economy is the need to assess first the outlook for the world economy. At present the prospect for industrial nations is very much in line with our own.

Given the latest CBI economic and industrial survey, which shows that output is likely to continue to fall, that investment will probably continue to drop and that export orders will also fall, is not talk of a recovery at best deception and at worst a cynical attempt to disguise from our people the catastrophe taking place in the British industrial economy?

The hon. Gentleman has a greater talent for hyperbole than for accuracy. Most independent outside forecasts suggest that the Government's forecast of growth of about 1·5 per cent. next year is in line with their forecasts. That is likely to occur because there is some real growth in the United Kingdom economy. Unfortunately, too great a part is being met from imports. That is why it is important to continue to improve our competitiveness both at home and abroad.

Can the Chancellor of the Exchequer tell us a little more about the Think Tank report, which is obviously of great interest to the whole country? We know that it exists, and public speeches have been made about it by, among others, the Chief Secretary to the Treasury, who is sitting on the Front Bench. I return to the basic question put by my hon. Friend the Member for St. Pancras, North (Mr. Stallard), which is highly relevant. What is the assumed most likely rate of growth upon which the Central Policy Review Staff based its options about expenditure and upon which the Treasury gave its approval in the note accompanying the CPRS paper before the Cabinet?

I shall not discuss the contents of the CPRS report for the benefit of the right hon. Gentleman or anyone else. The Government are often invited to put forward assumptions—most typically in evidence given to public inquiries—upon which such organisations can work. It is the practice never to put forward a central single assumption, because that would be wholly misleading. There can be no confidence or certainty about any such thing in any country, under any Government. That is why I told the House that alternative assumptions have been given on a number of occasions of 2 to 2½ per cent. and ½ to ¾ per cent. If one is looking for the ½ per cent., that was the average rate of growth in this country from 1973 to 1981. It is not our expectation for the future.

asked the Chancellor of the Exchequer if he will estimate the impact upon inflation of a reduction of unemployment of 1 million over a two-year period.

Depending on what causes it, a fall in unemployment may, in the short term, be associated with either a rise or a fall in the rate of inflation. Any numerical estimate would require a number of assumptions and would inevitably be highly uncertain.

Will the right hon. and learned Gentleman explain not only how, but when, unemployment will be brought down by the Government? Does he realise that the suspicion is growing that giving priority and justice to the British unemployed is a matter of election planning? Did not the statement on Monday cynically abandon for many years all hope for Britain's unemployed?

I do not agree with any of the premises behind the hon. Gentleman's three supplementary questions. He knows that his Government did not make predictions for unemployment. This Government do not make them either. He also knows that the measures announced by my right hon. and learned Friend in his statement on Monday, including, principally, the reduction in the national insurance surcharge, will assist British industry and therefore assist employment prospects.

Does my right hon. and learned Friend agree that the biggest impact on inflation and unemployment would take place if more people accepted low wage deals, particularly in the public service?

I do, Sir.

Is the Chief Secretary still forecasting that everything will get better as surely as night follows day?

I have never made such a forecast and I do not make it now.

Is the Chief Secretary aware that each percentage reduction in the retail prices index has been accompanied by an increase of about three-quarters of a million in the number of unemployed? Does he regard that as an acceptable trade-off?

The figure may or may not be right, but I do not believe that there is a causal relationship between the two. The hon. Gentleman knows enough about these matters to realise that because one statistic accompanies another, it does not mean that one causes the other.

Can my right hon. and learned Friend explain what the effect on inflation would be if the Government were now to try to bring down unemployment in the way suggested by the Opposition?

Astronomic.

Does the Chief Secretary realise that it is easy to control inflation by high unemployment, which leads to a reduction in living standards? It is much more difficult to control inflation by getting the agreement of the people to a continued and steady rise in their standards of living. The Chief Secretary and his Government have succeeded in their wretched objective—

Order. With respect, the right hon. Gentleman is advancing an argument, not asking a question.

I was asking whether the Chief Secretary realises that it is easy to achieve the first objective of reducing living standards by high unemployment, and whether he realises that it is much more difficult, but more productive, to improve living standards through agreement with the people.

I do not accept that our objectives are as the right hon. Gentleman describes them. Above all, it is a simplistic fallacy to believe that increased living standards can be achieved by consensus. They have to be achieved by action on the real components of the economy.

asked the Chancellor of the Exchequer what is his forecast of investment in the private sector in 1982–83.

The Industry Act forecast projects an increase in total fixed investment of 3 per cent. in 1982 and 5 per cent. in 1983. This total reflects a recovery in both private sector industrial investment and in private new housing investment.

As the Government set such store by the private sector for the country's economic recovery, is the Chancellor satisfied with that level of increase? Does it imply that the real increase will be in the service sector rather than in the manufacturing sector and that he may yet outdo his predecessor, now Lord Barber, in sucking more imports into the country if and when an economic upturn occurs?

In most economies a great deal of expansion is in the distributive and service sectors, and in the housing sector. If we are to avoid sucking in an undue proportion of imports, we need to improve our competitiveness.

Is the Chancellor of the Exchequer aware that there will be no significant increase in private investment until orders as well as lower interest rates and a lower rate of inflation are forthcoming? What is he prepared to do to stimulate the flow of orders to the private sector?

The hon. Gentleman must appreciate that, world-wide, orders cannot be manufactured out of the air. There is a given level of demand in the world economy and in our economy. We must improve our performance by quality, productivity and price competitiveness to increase our share of that market.

Will my right hon. and learned Friend consider the particular problems of certain areas in the private sector that have had difficulty? I have in mind the need to redevelop within the private sector the Chatham dockyard, and the need to consider private sector investment in motorways and in the Channel tunnel.

All those matters deserve consideration.

Does the fact that manufacturing investment in plant and machinery has fallen by one-third during the right hon. and learned Gentleman's period in office do nothing to prick his complacency? What is the point of constantly lecturing the British work force to restore competitiveness through wage cuts when he cannot persuade British management that his policies should give them the incentive to restore competitiveness through investment?

Improvement in our performance depends upon achieving higher productivity and lower increases in unit labour costs as a result of action by management at least as much as by the work force.

Speak up.

Even during the recession investment by the distributive and service industries has grown, and we expect further growth in 1983.

asked the Chancellor of the Exchequer at what rate he estimates the level of inflation will be running as at 31 December 1982; and how this compares with the level of 31 December 1981.

The increase in the retail prices index in the 12 months to December 1981 was 12 per cent. We expect the increase in the 12 months to December 1982 to be at or below 6½ per cent.

Are not those exceedingly significant figures, particularly, for example, for those living on savings or working for charities who can now plan ahead with the certainty that the value of their money will not drop monthly in the disastrous way that it did in the circumstances that we inherited?

I agree. We must get used to the fact that an era of low inflation is not only beneficial economically, but means the restoration of social stability in a desirable manner.

Stupid man.

How do the Government manage to take all the credit for the reduction in inflation and at the same time convince the British people that they have nothing to do with the disastrous unemployment level, the parlous state of growth and our balance of payments problems? They have got one economic goal right, but have abandoned the other three. What a shocking Government.

The hon. Gentleman said that ours was a shocking Government—[HON. MEMBERS: "It is".]—but he seemed to be saying earlier in his question that the British people took a contrary view.

asked the Chancellor of the Exchequer what has been the increase in the retail prices index over the last year.

Over the 12 months to September 1982 the retail prices index increased by 7·3 per cent.

Is not that information, with the forecast in the autumn statement published on Monday of 5 per cent. inflation in 1983, very good news for the British economy? Will my right hon. and learned Friend try to ensure that interest rates follow the inflation rate down as quickly as possible?

I hope that they will.

What is the difference in the retail prices index for those who pay mortgages and those who pay council house rents? Does the right hon. and learned Gentleman agree that the RPI has increased much more for those in the latter category and that the poorest in our society are being hit again by the Government?

As the hon. Gentleman knows, both those housing costs are included in the RPI.

Does my right hon. and learned Friend recall the October 1974 election campaign and the boast by the right hon. Member for Leeds, East (Mr. Healey) that, taking the three months' figures for the RPI, his Government had brought the rate down to 8·4 per cent? We lived with the 8·4 per cent. boast. Is my right hon. and learned Friend aware that on the basis of the calculations of the then Chancellor of the Exchequer this Government's record for the last three months represents an increase of nil per cent?

Yes, Sir. I well recall that general election and that somewhat misleading boast, because as a result of it I nearly lost my seat.

asked the Chancellor of the Exchequer what role he considers a reduction in the exchange rate can play in restoring the United Kingdom's relative competitiveness.

asked the Chancellor of the Exchequer if he has any plans to increase the competitiveness of the £ sterling against other currencies.

The level of the exchange rate is taken into account in judging monetary conditions, and in interest rate and other policy decisions. Experience shows that the effect of a fall in the exchange rate on competitiveness is soon eroded by inflationary pressures, and that increased productivity and a sensible attitude to pay are the only ways to secure lasting improvements in our competitive position.

Is it not clear to all except the Government that the pound is greatly overvalued and that that is a major reason for the increasing import penetration and diminishing trade and export prospects? As the Government's policies imply at least a wage freeze for a number of years, would it not make a great deal more sense to industry and the unemployed to bring real interest rates down sharply and get the pound into a position where British workers and management can compete?

It is not as simple as that. Even at the CBI conference there was considerable disagreement on whether a reduction in the rate of sterling would assist. A devaluation can be relied upon to improve competitiveness only if it is maintained by stringent pay controls afterwards. It comes ill from the Labour Party to propose that sort of remedy.

Does the Minister agree that if the CBI is still the Tory Party at work, it is the Tory Party at work in the service and importing industries and not in the manufacturing heartland of our country, which my hon. Friend the hon. Member for Batley and Morley (Mr. Woolmer) and I represent? We have the highest capital exports in Britain, but firms are still going out of business with alarming regularity because of the unfair exchange rate?

The way for Britain to become competitive is to bring our labour costs down and improve our productivity. For many years that has been the problem with British industry. In the past year or so there has been some improvement in that position and we want to see it maintained.

To what extent has my hon. Friend considered the point, which was congently made in the Financial Times this morning by Mr. Samuel Brittan, that a more rapid reduction in our short-term interest rates would help to reduce our exchange rate against the German mark and the Japanese yen, which would greatly help to restore our competitiveness in export markets?

I wish that I had the confidence that Mr. Samuel Brittan appears to have. The Government's ability directly to influence the exchange rate is limited.

What would be the benefit to this country of taking steps to increase our already large current surplus and consequently, at the same time, our already large capital deficit?

The issue does not directly arise from the original question. Competitiveness depends upon the costs of production of manufacturing industry.

What is the justification for the present world-wide level of real interest rates? Could we not afford a reduction in real interest rates in the United Kingdom, even if some of that had to be taken up by imposing a strain on the exchange rate?

The Government have consistently pursued policies to get interest rates down and have had considerable success over the past year. We shall continue that policy, because, although interest rates have fallen considerably over the past year, they are still high compared with the level of inflation.

Is it not clear that although a number of companies can surmount the level of 36 per cent., which is the loss of competitiveness that they have suffered—that is obviously so since we would have had no exports at all—a large number of important companies cannot do so? Is it not abundantly clear that those are important companies, whose futures are at risk under this Government?

I do not accept the right hon. Gentleman's figure of 36 per cent. However, it would be idle to pretend that some companies are not having great difficulty as a result of the high value of the pound. That does not mean that we can necessarily pursue the policies advocated by the Opposition.

asked the Chancellor of the Exchequer if he will make a statement on the recent report made by the Institute of Economic Affairs concerning taxes on low pay.

The problems described in the report derive from the policies of successive Governments to provide benefits to alleviate poverty and hardship at a reasonable cost. We are deeply concerned to improve incentives, at all income levels, and for this reason we are determined to reduce the burden of income tax as soon as circumstances permit.

Does the hon. Gentleman agree that it is a disgrace that the lowest paid workers in Britain pay a higher marginal rate of tax on their income than those who are very much better off? Does he not recognise that that problem particularly affects National Health Service workers, who are now being starved into submission by the Government? Is it not outrageous that low-paid workers are treated in that way?

I agree with the hon. Gentleman that it is a real and serious problem, and it is being studied by the Select Committee on the Treasury and Civil Service. It is because of the level of benefits, which we have successively tried to maintain, that tax levels are so high, resulting in the phenomenon known as the poverty trap to which the hon. Gentleman refers.

I welcome my hon. Friend's initial answer, but does he agree that there is now an overwhelming political case for raising thresholds at the earliest opportunity?

The Government have always made it clear that they would like to raise thresholds. Although there is an overwhelming political case for doing so, we must have regard to the economic case as well.

Would not the lower paid in the United Kingdom be able to pay less if the Chancellor and his colleagues pursued the tax dodgers, individual and corporate, who go over to the Channel Islands and the Isle of Man to avoid paying United Kingdom tax? When will the Government take action on that tax evasion?

The Government have done a great deal to improve compliance with tax rules, but it would also help the problem if when arguing and voting in the House the official Opposition would always bear in mind the need to contain expenditure.

Has my hon. Friend studied the proposals that were made when the Conservative Party was in Opposition to institute a tax credit scheme—sometimes called negative income tax—to help to solve the problem of low pay and, at the same time, the problem of the jungle of social security benefits?

Yes, Sir. I am sure my hon. Friend will agree that such resources as are made available for the relief of poverty and hardship should be targeted as closely as possible to ensure that they achieve their objectives, unlike the proposals that were put forward this morning by the SDP, which seeks to replace the carefully targeted benefits with a blanket benefit, at an extra cost of £4½ billion.

Not true.

Is the Minister aware of the parliamentary answer last month which showed that under the present Government the tax burden on the very poor has increased by 17 per cent. while the tax burden on the very rich has fallen by 6 per cent.? Will he explain to the House what social objective is served by his tax policy of making the poor pay more so that the rich need pay less?

The hon. Gentleman knows that the two do not equate. He would be wise to take into account the fact that if one damages the earning capacity of the economy one will make the plight of the less well off worse.

asked the Chancellor of the Exchequer what proposals he has made as to central Government funding of public sector pay settlements in 1983–84.

The public expenditure plans for 1983–84 announced on Monday make provision for sufficient additional cash for average increases in wages and salaries bills of 3½ per cent. from due settlement dates, for those groups, other than the National Health Service, for which the Government are directly responsible. Pay in the nationalised industries will be constrained by the external financing limits, also announced on Monday, and in the local authorities by the rate support grants, for which proposals were made in July.

As there is still some dubiety over the matter will the Minister give a categoric assurance that the Treasury will fund next year's pay settlement during the financial year 1983–84 in full, without insisting that local health authorities make any direct contribution from their existing funds? Does the right hon. and learned Gentleman realise that a 3½ to 4 per cent. settlement in the public sector will mean a further reduction in the living standards of low-paid workers in particular, and further devastation of manufacturing industry, because—

Order. The hon. Gentleman must be fair to other hon. Members.

Negotiations are going on about the Health Service settlement. The provision for the NHS is as announced on Monday in the annual statement. Generally, I do not accept that a settlement within the financial provision would necessarily lead to a fall in living standards. A great deal depends upon other factors.

What influence did the Government have on the recent miners' pay settlement, and what influence do they expect to have next year?

None.

asked the Chancellor of the Exchequer when he now expects to see a substantial improvement in the economy.

asked the Chancellor of the Exchequer what are the prospects for the recovery of the economy.

The weakness in world activity this year has held back recovery at home. But the Industry Act forecast published earlier this week looked to growth of ½ per cent. in the domestic economy in 1982 and 1½ per cent. in 1983. Continued success in bringing down inflation and interest rates will provide a sound basis for sustained recovery.

Is not recovery as far away as ever and will not unemployment continue to rise substantially? As the Leader of the House yesterday disputed my view that unemployment was the Government's deliberate policy, may I ask the Chancellor whether the devastation and mass unemployment have been caused by stupidity and incompetence rather than intent?

Socialism!

The prospects for the economy as a whole remain as I have described them. If the hon. Gentleman chooses to continue to believe that unemployment is the objective of any sensible Government he is less perceptive than I thought.

Is the Chancellor aware that in the Northern region there is no sign of the recovery that he talks about? Whatever his claims about increased productivity, is not British industry over 30 per cent. less competitive now than when the Government came to power? Is he aware that merely by acting on wages alone he could not restore competitiveness before 1987?

It is precisely because wages are not the only component of competitiveness that the position is not as gloomy as the hon. Gentleman foresees. Competitiveness depends on productivity, unit labour costs, quality, delivery, identifying the market and producing for it. I recognise that some companies and industries are still in difficulties in Britain and throughout the world, but others are managing to improve their performance by concentrating on those factors.

What effect will the Government intervening to reduce interest rates have on the money supply? What do they now say is the effect of the money supply on the prospective rate of inflation?

In general terms, and depending on a number of other conditions, lower interest rates will be likely to lead to a faster increase in the rate of growth of the money supply. The Government continue to attach importance, as set out in the medium-term financial strategy, and as I said yesterday, to effective restraint of monetary growth.

The Chancellor has confirmed that the outlook for unemployment is still appalling and that it is very modest indeed for the economy. His view is that the key to the situation is to improve our competitiveness. Will he now tell us what he refused to tell us yesterday: by how much does he believe wages have to he cut to achieve the competitiveness that we had when the Government came to power three years ago?

The right hon. Gentleman tried to make the same point yesterday. As I told the hon. Member for Bishop Auckland (Mr. Foster), competitiveness depends on a large number of factors other than pay levels—productivity, identification of markets, quality and performance in every way. Even today British companies are succeeding in improving their performance. I invite the right hon. Gentleman to cease focusing in that monocular fashion on one component of competitiveness.

Among the components, where do wages and salaries rank in the Chancellor's thinking?

It depends on wide variations between industry and industry and company and company and the performance of different firms, as is evident from the fact that there is wide variation even today in performance in the same industries.

Did not the Minister of State, in reply to an earlier question about textiles and clothing, do a grave disservice to the 600,000-plus employees in the industry when he referred to their level of wages and uncompetitiveness? Will my right hon. and learned Friend accept that unit costs and wages have nothing to do with uncompetitiveness and that the industries are gravely affected by unfair competition? When does he intend to take action about the grotesquely unfair competition, as the Government have promised?

I appreciate that competitive pressures on some industries are much more severe than on others. In many cases they arise from changes in the pattern and balance of world markets for a variety of reasons, so it may or may not be sensible to consider special action. The question is for consideration case by case.

asked the Chancellor of the Exchequer when the Industry Act forecast for the economy will be published.

As the hon. Member will be aware, the Industry Act forecast was published last Monday as part of the autumn statement.

Although the Chancellor has taken the decision to make the pensioners pay for the Falklands war, having heard the advice of the right hon. Member for Sidcup (Mr. Heath) and Lord Gormley, will he change his mind?

I have taken no such decision. Pension levels will be adjusted at the appropriate time to continue to provide compensation for changes in price levels.

Does my right hon. and learned Friend agree that, as a trading nation, it is unlikely that we can achieve sustained and dramatic improvements in our economic position in isolation from the rest of the world? Will he take every opportunity to encourage our Common Market and OECD partners to resist all temptations to retreat into a policy of restriction of world trade and instead ensure that there is adequate liquidity within the international monetary system to allow an increase in world trade?

I agree that it is important to regard this as an international as well as a national question and to see that the international financial institutions are equipped to play their part. I agree, too, as the Leader of the House said last night, that it is important to maintain an open trading system rather than to retreat into competitive protectionism.

Would the Chancellor now care to answer the question put to him by the right hon. Member for Sidcup (Mr. Heath) yesterday as to what is his intellectual case for arguing that his simple policy of reducing the rate of inflation will improve industrial growth and employment prospects?

The reduction of inflation as one component in a sensible economic policy is something to which the right hon. Gentleman frequently attached importance when he spoke form this Dispatch Box. He also argued equally eloquently that it was an important component in achieving improved economic performance.

asked the Chancellor of the Exchequer if he will make a statement concerning the vote cast by the United Kingdom's representative on the International Monetary Fund in connection with the application by South Africa for credit authority to £622 million.

There is no provision within IMF's articles for declaring a member ineligible to use the fund's resources unless it fails to fulfil any of its obligations under the articles. South Africa is not in this position. Accordingly the United Kingdom supported the application on its technical merits.

Is that not a thoroughly disgraceful answer? Does the Chancellor accept that apartheid is not a political doctrine in the civilised sense of the term, but an obscenity that reduces the possibility of South Africa surviving and that it is therefore a material consideration for the IMF? Why do the Government not stop aiding and abetting the oppressive and obscene regime of apartheid?

The fund is effectively prevented under its guidelines from setting specific political conditions. I should have thought the Labour Party would be extremely grateful for that fact and stop knocking it.

Should not the Labour Party recall the munificence of General Smuts? Is it not the case that when this country was in its hour of great peril he made a gold loan equal to £3,200 million at ½ per cent. interest?

I hardly think that I can claim Treasury responsibility for answering that question.

asked the Chancellor of the Exchequer if he is satisfied with public spending in 1982–83 by Government Departments, local authorities and other public bodies.

The outturn is likely to be very close to that anticipated at the time of the Budget. But we are concerned about the high level of local authority current expenditure and the low level of capital expenditure by local authorities and public corporations.

The Minister did not refer to Government Departments. Is he aware that the Government's action in asking for increased capital expenditure has destroyed the base on which it could be made and reduced the Government's building departments by about 25 per cent.? Does he realise that that action prevents local authorities from getting on with the job that they are supposed to do?

I do not accept that the Government have done anything that prevents local authorities from using to the full the provision in the White Paper for capital expenditure. I very much hope that, within the constraints of what can be done in the limited period, they will seek to respond to the initiatives that have been taken by the Government in that respect.

Is my right hon. and learned Friend satisfied with the level of capital spending by nationalised industries?

The level of capital spending by nationalised industries has to reflect, in part, market conditions.

Are the Minister and the Prime Minister saying that increased capital expenditure by local authorities and public bodies is likely to lead to the creation of more jobs? If that is so, why do not the Government try to reduce the 3½ million people on the dole by doing just that?

There has to be a balance between the expenditure that is desirable and necessary and the level of borrowing that can be permitted before inflation starts rising again. That balance was met by the Government in the public expenditure White Paper for this year. All that the Government are seeking to do now is to ensure to the best extent possible that the capital expenditure provisions of that White Paper are met.

asked the Chancellor of the Exchequer if he will make a statement on the control of inflation.

The year-on-year rise in prices is now lower than for a decade, and we expect it to come down further to around 5 per cent. by next spring. But that is still too high, and we must maintain the policies that have successfully brought inflation down so as to create the conditions for a sustainable recovery of output and employment.

Is my right hon. and learned Friend aware that Her Majesty's Government deserve the praise of the whole House for reducing the rate of inflation? Will he continue to maintain close control of public expenditure to make sure that inflation comes down below the 5 per cent. figure that he specified in his answer?

I am grateful to my hon. Friend. It is of some significance that we have secured proper control of public expenditure so that for the first time since 1977 the plans that we have made have not had to be adjusted during the course of the year.

Does the Minister accept that the falling inflation rates are largely due to the comparatively low prices of primary products throughout the world as a result of the depressed world economy? Is it not true that as soon as there is a revival, which is absolutely essential, the policies that the Government have pursued will do nothing to stop a return of inflation through increases in the price of oil and other primary products?

That is not so. The hon. Gentleman has identified only one of a considerable number of components that have led to the satisfactory progress that we have made in reducing inflation.

asked the Chancellor of the Exchequer whether there have been any further signs that the economy is recovering from the recession.

Although output has been flat this year, it remains higher than in the first half of last year. Manufacturing productivity continues to rise strongly and industrial companies' profits are recovering. Bank base rates are now down seven points since last September and inflation is forecast to fall to 5 per cent. next year. The Industry Act forecast shows a rise in United Kingdom output of about 1½ per cent. in 1983.

If my right hon. and learned Friend thinks that there are signs of economic recovery, why is unemployment not falling? Why does my right hon. and learned Friend not expect it to fall in the future?

Because, as the hon. Gentleman knows—

Hon. Friend.

Because, as my hon. Friend knows, a change in the rate of increase of unemployment comes later in the process of recovery rather than earlier.

Does the Chancellor of the Exchequer believe that his economic policies have no effect on the level of demand in the British economy?

Plainly, economic policies have an effect on the level of demand overall, but, as many hon. Members have said, it is not the level of demand that is the key to the improved performance of our economy, but our capacity to supply on competitive terms in a way that is likely to meet that demand.

asked the Prime Minister if she will list her official engagements for Thursday 11 November.

This morning I presided at a meeting of the Cabinet and had meetings with ministerial colleagues and others. In addition to my duties in the House I shall be having further meetings later today. This evening I will be presiding at a dinner for the Royal Academy trust appeal.

Will the Prime Minister find time to congratulate the chairman of the 1922 Committee on his reselection—sorry, re-election? If she does so, will she remember that he is also the chairman of the newly formed and newly licensed Freddie Laker Holidays? Will she take the opportunity, after having booked a one-way winter cruise for the right hon. Member for Sidcup (Mr. Heath), to ask whether the thousands of people who lost money under the old Freddie Laker venture will get their money back from the new one?

I gladly congratulate my right hon. Friend the Member for Taunton (Mr. du Cann) on his re-election. On Conservative Benches we do not have to be reselected. With regard to the second part of the hon. Gentleman's question, the Government naturally regret the fact that many Skytrain passengers are still waiting to be repaid the money that they lost after the failure of Laker Airways. The new package holiday company is properly constituted. The Civil Aviation Authority is obliged to consider any application purely on its own merits. The regulations do not provide for a role for Government either in deciding an application or in handling appeals against a decision.

Has my right hon. Friend noted the sad occasion of the death of Sir Richard Barlas, who was widely regarded as the greatest Clerk of the House in living memory and who was held in the greatest esteem and affection by so many hon. Members?

Yes, Sir. As you know, Mr. Speaker, Sir Richard Barlas served the House with total dedication for 33 years and for three years as our most distinguished Clerk of the House. I believe that the whole House will join in paying tribute to him and in offering our sympathy to his family.

May I join the right hon. Lady in offering our sympathy to Lady Barlas and in expressing our thanks for the service that Sir Richard gave to the House over such a long period with such distinction?

After next November, pensioners will have exactly the amount that they would have had on the basis of protecting them against increased prices. In addition, this year they have received an extra 2 to 2½ per cent. Bearing in mind that 1 per cent. extra on retirement pensions costs £150 million, the extra amount this year will be about £375 million. We are talking not about clawback but about an extra amount provided for this year.

The right hon. Lady has at least now had the courage to produce the figure. Will she confirm that this matter will have to be carried through by legislation? In those circumstances, does she think that she can carry such a mean and miserable measure through the House? The Labour Opposition will certainly fight it all the way, and I imagine that there are still some hon. Members on the Conservative Benches.

The right hon. Gentleman has not understood. The £375 million is the extra amount provided for this year over and above that which would have been required for inflation. That amount has been met by the working population through their contributions. We have given an extra amount this year.

Will my right hon. Friend consider a constructive suggestion on how to confront the new French domestic protectionist campaign and the problems of cars coming in from Spain at an unfair tariff? Will she direct that all these cars and so on should be unloaded at Melton Mowbray, which is just as good a dock as Poitiers?

I am aware of the reported regulation to which my hon. Friend refers. We have discussed with the French Government some of their proposals for restricting imports into their country and pointed out that we cannot continue with an open trading system if other countries put up barriers against trade from this or other countries. We shall vigorously pursue the Spanish issue through the Community. It is totally unfair that we should have an import barrier of 4 per cent. while Spain, for the same cars, has an import barrier of 37 per cent. We must pursue that through the Commission.

For the last couple of weeks there have been reports about the right hon. Lady's intention to set up a Department of her own in Whitehall. When will she make a statement about this and what would be the cost of such a Department?

I am not setting up a Department. I have a Prime Minister's Office. From time to time there have been considerable changes in that office. Under previous Prime Ministers a policy unit was established, and before that a Central Policy Review Staff, which belongs to the Cabinet Office. The CPRS used to have a foreign affairs unit. It does not do so at present, and I feel that we should have some foreign affairs advice in addition to the other advice available in No. 10, but through the Prime Minister's Office, not a non-existent Prime Minister's Department.

asked the Prime Minister if she will list her official engagements for 11 November.

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

Is my right hon. Friend aware that because of the widespread resentment at the high level of water rates there is little public sympathy for the water workers' wage claim? Does she agree that their work is not comparable with that of the miners and, therefore, that any pay increase should be more in line with the pay of NHS and local authority manual workers?

I understand that negotiations with the water industry are taking place today. The Government are not a party to them. I agree entirely with my hon. Friend that there will be no public sympathy at all for those who seek to disrupt essential services purely for their own personal benefit.

Is not the proposed Britoil sale infamous, bearing in mind that two years ago those shares were valued at £2 billion to £2½ billion, whereas today it is estimated that the sale of 51 per cent. of the shares will not produce 51 per cent. of that valuation or anything like it, but something even less than half? Is this not a colossal rip-off at the taxpayers' expense? If the district auditor would see fit to penalise such actions at local level and surcharge councillors, as he would, should not the Secretary of State for Energy be compelled to get the agreement of the Comptroller and Auditor General before proceeding with this act of robbery?

No. The hon. Gentleman is talking nonsense. My right hon. Friend made a full statement yesterday. An offer has been made and full details are available. It is to be made by a tender which is designed to achieve a fair market price for what is being sold.

Does my right hon. Friend agree that the result of the Northfield by-election, and the speeches that we have heard from the Opposition Benches this past week, clearly show that the Labour Party has no credible alternative policies to put before the country and that, of the scurrilous smears and ludicrous claims strewn around the streets by the Liberals and their allies, the only one that has any semblence of truth is that the Liberal Party could stop us winning—in other words, that a vote for the Liberals is a vote for Labour?

I entirely agree with my hon. Friend and cannot improve on one word of what he said.

asked the Prime Minister if she will make it the policy of Her Majesty's Government to equalise the retirement age of men and women.

No, Sir, although a common pension age, coupled with effective and worthwhile provision for flexible retirement, is one of our long-term objectives.

Is it not rather puzzling that many women who are forced to retire at the age of 60 would like to continue working, while at the same time many men who are forced to go on working until the age of 65 would like to be able to retire earlier? Is it not high time that there was a flexible retirement policy that allowed people to retire at a time that suited them and which suited the type of work that they were doing?

The national insurance scheme was very much designed with some flexibility in mind. As the hon. Gentleman knows, 60 is the minimum age at which a women can retire on full retirement pension, but assuming that her employer continues that work, she is free to carry on until the age of 65, thereby gaining extra benefit for each extra year of service. A women's pension becomes automatic at the age of 65. The same is true for a man, except that the relevant ages are 65 and 70. Exactly that flexibility is built into the system.

Is my right hon. Friend aware that many Conservative Members would support the idea of greater flexibility in retirement? In that context, will she lend her full support to the job release scheme and see whether it can be expanded?

As my hon. Friend knows, the job release scheme was designed for men over 60 who have been on the unemployment list for more than a year and have been drawing supplementary benefit. They can become permanently retired. It is an excellent scheme and many people take advantage of it. We constantly consider whether there is any way of expanding it, but we have no proposals to make at present.

Why are the Government still refusing to publish the Think Tank report on the future of the Welfare State? As the British people paid for it, why are they not allowed to read it and make a judgment on it? What is there to hide?

There is no report. A paper put forward some proposals on further work. That paper was not discussed, and the Think Tank is not doing that further work. In any event, the advice offered by the Think Tank is advice within Government and is not automatically published under any Government.

Will my right hon. Friend confirm that, had the Government accepted the Opposition's advice and tied the pension to the pensioners' price index instead of to the RPI, the pension would now be 3 or 4 per cent. lower?

That is true. Had the increase in pensions from November 1978 to date been made in accordance with the pensioners' price index, the pension would be 3 or 4 per cent. below what it is.

What would the level of pensions be now if the law on prices and earnings as it existed in 1979 were in operation? Does the Prime Minister agree that people deserve a decent pension when they retire, irrespective of their age? Does she believe that her prospects of getting a clawback Bill through the House in 1983 have improved since 1981, when the Government did the same thing, the Bill was opposed by only one Conservative Member and was approved of by those on the Conservative Benches, who now say that she should not do this again?

Perhaps the hon. Gentleman has forgotten that during the first year of the present Government we had to make up for the 1·9 to 2 per cent. undershoot by the Labour Government. The Conservative Government succeeded in making it up in the first year. Since then we have agreed to price-protect the pension. The hon. Gentleman and the House must remember that the burden falls not on those who ask for more, but on the working population. The retirement pension is a straightforward transfer between the incomes of the working population and the incomes of pensioners. Already the national insurance contribution of the employee is 9 per cent. and that of the employer is 10·45 per cent., and the reserve in the national insurance fund is going down. We must consider those who draw benefits from the national insurance fund and the level of contributions that are paid by the working population.