asked the Chancellor of the Exchequer what representations he has received in respect of the recent raid by Her Majesty's Customs and Excise on Gay's the Word bookshop in Marchmont street.

asked the Chancellor of the Exchequer on what date the decision was taken to issue the seizure notice served on Gay's the Word bookshop by the Customs and Excise on 6 June.

The decision to issue the seizure notice was taken on 6 June. Eighty letters of protest have been received, of which 26 were forwarded by hon. Members. There have also been nine written questions on the matter.

Will the Minister tell the House why the decision was taken to use the customs procedures against an entirely non-commercial organisation which provides a much valued service? Will he also tell the House why the bookshop and its directors are still suffering harassment by officers of the Customs and Excise, and whether any political impetus was placed behind the original decision?

I am surprised to hear the hon. Gentleman describe the import of obscene and indecent articles as a "much valued service". I should have thought that most hon. Members would think that the Customs and Excise ought properly to enforce the Customs Consolidation Act 1876, which charges it with prohibiting the import of obscene and indecent articles, and that the Customs and Excise needs to take whatever steps are necessary to prevent that taking place.

Does the Minister realise that by his answer he has prejudged an important issue? No decision has yet been taken on whether the literature is obscene or indecent. Will the Minister assure the House that he and his right hon. Friend the Chancellor of the Exchequer will look into the crucial matter of the workings of the Customs and Excise, which deal by one standard with one set of literature because it is imported, and by another with literature that is produced here, and selectively against one outlet of that literature when it is readily available in many other places?

I certainly have not prejudged the issue. However, in many judgments the courts have said that the Customs and Excise must rely on the normal meaning of the words "obscene and indecent", and if it judges the articles to be such it should apprehend them. The matter will no doubt be resolved in due course through the courts, and I hope that the hon. Gentleman will at least accept that that is an entirely impartial way of dealing with it.

Why is my hon. Friend surprised that Labour Members support the import of obscene and indecent material?

I am surprised that anyone should believe that there should be discrimination in favour of importing obscene and indecent articles. I should have thought that the whole House would support what has been done.

The bookshop is in my constituency. Will the Minister confirm that none of my constituents has complained about it, but that many parents in the area are worried about the massive increase in heroin addiction? Does he think that the Customs and Excise should give priority to stopping the import of heroin, rather than playing the fool with a bookshop?

Increased numbers of Customs and Excise staff are devoted to dealing with the drug problem. However, I hope that the hon. Gentleman is not suggesting that they should not also deal with the import of obscene and indecent articles.

asked the Chancellor of the Exchequer if he will consider the scope for reductions in personal taxation in the forthcoming year, taking into account the conflicting demands made by the social services allocation.

The Cabinet has reaffirmed the need to keep public spending at broadly constant levels in real terms. On this basis, there is a reasonable prospect of further cuts in personal taxation in next year's Budget.

Will my right hon. Friend accept that his achievement and that of his predecessor in reducing rates of income tax while fully protecting retirement pensions against inflation reflects great credit upon him? Does he agree that in our desire to achieve further cuts in income tax we should keep in the forefront of our minds the need to protect those pensions?

I am grateful to my hon. Friend for his comments. Of course the Government are committed to maintaining the purchasing power of the old-age pension, and I am glad to say that since we have been in office we have done a little better than that.

If the Chancellor has any spare resources to give away, will he consider child benefit as a cost-effective way of giving help to the most needy families in the country? Will he especially ask his Department to recalculate his recent memorandum for the Select Committee on the Treasury and Civil Service and use a much broader base than the 100,000 acute cases?

I think that the memorandum produced by the Treasury for the Select Committee on the Treasury and Civil Service, and published by that Committee, is a considerable help in elucidating the problems of the poverty trap and the unemployment trap, which are misunderstood by many hon. Members. Child benefit is at its highest level in real terms. But we must decide whether to give priority to increases in child benefit over revalorisation or increases in tax thresholds, because clearly the same pound cannot be spent twice. The priority decided by me and my hon. Friends hitherto— and I think that we should adhere to it—is that it is more important to use the resources available to increase tax thresholds.

Before he gives out money, will my right hon. Friend remember, as I am sure he does constantly, that he is giving out taxpayers' money? Does he agree that before we listen to demands from the Opposition to increase pensions, social services and public expenditure, we should remember that those increases would increase the borrowing requirement, lead to inflation and affect the value of the pound, and that money has to be earned before the Government can give it out?

My hon. Friend is right. His strictures would be more properly addressed to the Opposition, who have never understood them. We have succeeded in getting the borrowing requirement down, and—as I said when I answered the original question—provided that we succeed in keeping public expenditure constant in real terms the growth in the economy can be applied to reductions in taxation, which it is the Government's firm commitment to achieve.

He will be asking Argentina to bail him out.

Order. I must tell the hon. Member for Bolsover (Mr. Skinner) that it bores the House to death to hear his constant interruptions from a sedentary position. I must ask him to desist, please.

I was only making the point——

Order. Mr. Hattersley.

Referring to the social services allocation as mentioned in the original question, will the Chancellor now tell us when he proposes to announce the cuts in public expenditure which the Treasury has told various newspapers will be part of the right hon. Gentleman's response to the depreciating pound?

The Treasury has said nothing of the sort.

asked the Chancellor of the Exchequer if there are now any estimated reductions to the estimated running costs of Government Departments listed in his answer of 9 April to the hon. Member for Bolton, North-East, Official Report, column 90.

Yes. Provisional outturn for 1983–84 is nearly £70 million less than the estimate published on 9 April.

I thank my right hon. and learned Friend for his encouraging reply. Has he any further initiatives in mind?

Yes, indeed. Various efficiency studies are being carried out by the efficiency unit under Sir Robin Ibbs. The financial management initiative has also been launched, which aims to secure tighter control of running costs, and there is, of course, continuing pressure on Civil Service numbers.

asked the Chancellor of the Exchequer if he will define the relationship between money supply and the rate of inflation.

Experience throughout the world has shown there can be no reduction in inflation without a reduction in the rate of growth of the money supply.

If money supply reflects the level of demand and both the Chancellor and the Treasury are now saying that inflation is not demand led, but is indeed wage pushed, is not money supply, in the opinion of the Chancellor, merely a barometer? Surely the Chancellor himself does not believe that by adjusting the barometer he can change the weather.

If, as I understand it, the hon. Gentleman is treasurer of the Labour party, I am not surprised that that party has gone bust.

As my right hon. Friend said that one of the indicators that give him an idea of the monetary conditions in the economy is the foreign exchange rate, does he not think that the fluctuations of recent days in the foreign exchange market reinforce the case for Britain joining the European monetary system?

There are always likely to be fluctuations in the foreign exchange market. The biggest fluctuation in recent weeks and months—indeed over a little longer—has been between the dollar on the one hand and other currencies, European currencies in particular, on the other. That would in no way be affected by joining the EMS.

Does the Chancellor remember claiming that the low interest rates that obtained were a result of his successful economic policies in keeping the public sector borrowing requirement down and stopping crowding out? Will he now accept responsibility for the increase in interest rates, or will he accept that he got it wrong before and that factors other than those of which the Government tried to convince the country affect interest rates?

I have always made it clear that there are a number of factors. It behoves us to control those factors that are within our control. But there has still been a considerable change. When the Government of which the hon. Gentleman was then a supporter left office, British interest rates were 4 per cent. above American rates, and, indeed, that sort of difference has been the historical norm. Today, despite the recent rise in British interest rates, which I regret, they are still marginally below American rates as against the 4 per cent. above when the Labour party left office.

Will my right hon. Friend make it clear that the one thing that is under the control of this Government is the relative level of interest rates against international rates, and particularly North American rates? Does he agree that, without responsible control of the monetary aggregates of this country, interest rates would be much higher than they are in the United States? Does he further agree that if we were to follow the spendthrift policies advocated by the Labour party and the Alliance, we would face interest rates of close to 20 per cent.?

My hon. Friend is right. If the Labour party's policies were put into operation they would cause us to suffer much higher interest rates than those that we have today. That is not to say that I welcome the present level; I do not. It is higher than is justified by monetary conditions in this country, and I hope that it will not last long.

Is not the Chancellor's optimism a little misplaced here, given that the earlier exchange rate and interest rate crises under this Government took place against a background of rising North Sea oil output and rising demand for oil and this crisis is taking place against a background of prospective falling North Sea output and falling North Sea oil demand?

This is in no sense a crisis. While I regret the present level of interest rates, which incidentally are still lower than they were for a large part of the Labour Government's period in office, there has been one important development. In the past a level of this sort presented a severe burden to business and industry. Today, however, there has been such a substantial improvement in company liquidity and profitability that, although this is a disappointment to British industry, it will not affect it anything like as much.

asked the Chancellor of the Exchequer what items subjected to value added tax in other European Economic Community countries are exempted from that tax in the United Kingdom; and if he will make a statement.

The position varies somewhat between one member state and another, but the proportion of consumer spending subject to a positive rate of VAT in the United Kingdom is one of the smallest in the European Community.

Is my hon. Friend aware that, although before and during the recent Euro-elections my right hon. Friends the Chancellor and the Prime Minister and several others in the House and outside made it c fear that VAT would not be extended to food, the Labour party leadership continued to say in a mendacious way, during and after the elections, that it would be? Will my hon. Friend confirm that the Labour party was completely misleading the electorate in saying that and that there is no question whatever of VAT being extended to food in this country under this Government?

My hon. Friend is absolutely right, both about VAT on food and about the disgraceful and irresponsible behaviour of the Labour party during the European elections, when it constantly tried to assert that the position was not as stated.

In that case, will the Minister confirm that the present VAT regime will be maintained until the next general election?

I am not prepared—[HON. MEMBERS: "Ah."] I am not prepared to give any assurance about future taxation under VAT, income tax or any other form of taxation. We finished the Report stage of this year's Finance Bill only a few hours ago, and I do not propose to speculate on what may be contained in future Bills.

asked the Chancellor of the Exchequer what representations he has received since he last answered oral questions from employer organisations and trades unions in the construction industry concerning his Budget proposals.

My right hon. Friend has received a number of representations from bodies representing the construction industry in recent weeks.

The Chief Secretary and the Chancellor will be aware of the concern expressed both by building employers and trade unions in the construction industry. They will also be aware of the massive unemployment rate in the industry. Does he not agree that, in this critical period, the Government should assist the industry rather than attack it?

I think that the hon. Gentleman has overlooked the fact that, by abolishing the national insurance surcharge, we shall probably have contributed £20 million in cash to the construction industry in 1984–85, and £60 million in 1985–86.

Does my right hon. and learned Friend agree that there is widespread concern in the construction industry about rumours of a moratorium on capital spending? Will he take this opportunity to deny that rumour?

My hon. Friend is right to the extent that preliminary indications suggest a danger of overspending, but the appropriate response has not yet been determined.

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

I expect inflation to decline further from its present low level of 5 per cent. As my hon. Friend knows, the Government's ultimate objective is stable prices.

In view of the recent unwelcome rise in interest rates, which is particularly unwelcome to house buyers and sections of British industry, does my right hon. Friend recognise that it is now even more important to achieve stability in prices, and that the sooner that is achieved the better it will be for our economy?

I agree with my hon. Friend. It will, of course, take some years to achieve that stability in prices, but we are determined to get there.

Is the right hon. Gentleman aware that commentators and others now agree that there is a serious risk of a rise in the inflation rate this autumn, and that earnings are rising at virtually double the current rate of inflation? Is not the only way of reducing unemployment to start a selective reflation, protected by a decentralised incomes policy?

I know that the hon. Gentleman's view is deeply cherished by the Liberal party, but it is a recipe for inflation, and for industrial distortions and inefficiencies. The plain fact is that inflation is well on track, although in the short run the RPI will unfortunately be affected by the increase in mortgage rates, which I regret. I hope, however, that the present high interest rates and the increase in mortgage rates will be relatively short-lived.

Does my right hon. Friend agree that the plight of sterling has nothing to do with internal factors, and that that is why the 3 per cent. increase in interest rates is an unwelcome response? Does he not agree that it would have been better to encourage the exchange rate to bear the burden and the risk, instead of endeavouring to change a policy that has been so successful on the inflationary front at home

My hon. Friend is, unaccustomedly, slightly mistaken. The pressure was not on sterling. Indeed, as I mentioned earlier, the rate of exchange against the deutschmark has moved only slightly. The pressure was on domestic money market interest rates at home, and it was to that pressure that the clearing banks were forced to respond.

The Chancellor said that inflation was well on track. Can he also say that unemployment is well on track? Having manoeuvred himself into the position of having to choose between inflation and recovery, will he tell us whether he regards mass unemployment as a greater evil than gentle inflation?

Inflation is seldom gentle. I assume that the previous Labour Government sought to achieve the right hon. Gentleman's objective of gentle inflation; but, while they were in office, inflation rose to 26 per cent.—which is anything but gentle—and we have had the task of struggling to bring it down. Not only did the Labour Government see inflation running at that level, but they saw unemployment double. That was not because they wished it to do so, but because they were suffering from the delusion that inflation and unemployment are alternatives to each other, whereas in fact they go hand in hand. One of the key reasons for bringing down inflation is the achievement of conditions in which unemployment can also fall.

Let me bring the Chancellor back to what is happening under his stewardship. If he is so confident that the rate of inflation will fall, despite higher interest rates and higher import prices, will he tell us which factors will be involved?

Import prices have not been rising. They have been falling in sterling terms because of the decline in commodity prices. There is also every sign that seasonal food prices, which weigh heavily in the index, will fall. Furthermore, the Government will persist in their firm grip on the money supply, which has brought inflation down to its present level of 5 per cent. and will continue to bring it down.

asked the Chancellor of the Exchequer if he will estimate the decline in manufacturing output since 1979.

Output in the economy as a whole is at an all-time high. In the three months to April manufacturing output is estimated to have been 10¾ per cent. below its average level in 1979. But this is more than compensated by the fact that output in the rest of the economy is well above its 1979 level.

Will the Financial Secretary admit that a disastrous consequence of his Goverment's policies since 1979 is that manufacturing output in Britain is still below its 1979 level, and that there can be no real recovery in the British economy without a recovery in manufacturing industry? Does the hon. Gentleman agree that the levels of investment and of imports and exports of manufactures show that the decline is continuing?

I am sure that the hon. Lady will recognise that a relative decline in manufacturing is nothing new in the United Kingdom or in the OECD as a whole. I am sure that, in fairness, she would accept that manufacturing employment as a percentage of employment in the United Kingdom was 35 per cent. in 1974 as against 31 per cent. in 1979 and 27 per cent. today. The relative decline in output and employment has continued over a long period.

Is my hon. Friend aware that the decline in manufacturing industry is in part due to strikes—of which there are some at present—which are invariably supported by Opposition Members?

My hon. Friend is right to remind the House of one of our basic competitive weaknesses. The tragedy is that since 1975 United Kingdom unit labour costs have risen more than twice as fast as those of our competitors.

asked the Chancellor of the Exchequer whether any recent payments have been made from the Contingencies Fund in connection with the construction of the airport in the Falklands.

No.

In that case, who is paying the unforeseen costs of lugging thousands of tonnes of tillite and quarzite rock 8,000 miles from Bristol and Oxford to the Falklands—from the northern hemisphere to the southern hemisphere—for the Margaret Thatcher international airport? Does the Treasury accept The Sunday Times figure of £3 million a day for the Falklands? Where does expenditure on the Falklands come in the Government's list of priorities for this week? Is it sacrosanct?

I can reassure the hon. Gentleman that Falklands expenditure is not sacrosanct. The items to which he refers are carried by the Ministry of Defence budget.

Will not the outlay on the enlargement of the airfield enable military expenditure on the Falklands to be greatly reduced and the islands' economy to be improved?

That is indeed our hope.

Having accepted and answered—I believe uniquely—a question about the use of the Contingencies Fund, will the Chief Secretary publish in the Official Report how much of the fund has already been used because of the miners' strike, spending by local authorities, an estimated error in the unemployment figures, and other Government over-expenditure?

I believe that the right hon. Gentleman is confusing what used to be called the Contingencies Reserve and is now called the Reserve with the Contingencies Fund. The two are quite different.

rose——

Order. We often get answers that we do not like.

asked the Chancellor of the Exchequer if he will make a statement on the availability of Government guarantees for major construction projects funded by the private sector in so far as they affect the public sector borrowing requirement.

No genuinely viable projects in the United Kingdom should require a Government guarantee.

Is that not a slightly optimistic answer from my right hon. and learned Friend? Does he agree that, for example, the Channel tunnel project, on which I shall not ask him to comment specifically, can be funded by the private sector, but that it requires political guarantees against cancellation by either the French or British Government now or in the future? Is there not a difference between political and financial guarantees, and does the Treasury recognise that?

Yes, we do. My hon. Friend will have noticed that in my reply I specifically said

"projects in the United Kingdom"

In that connection, will the Treasury now abandon the superstitious practice that anything that has the faintest hint of a Government guarantee is automatically added to the public sector borrowing requirement, and adopt the realistic policy of other developed nations?

I hesitate to comment on what other developed nations may do in this regard, but it is, of course, only if the guarantee is called that it becomes a charge on public expenditure.

asked the Chancellor of the Exchequer what has been the extent of over-funding, defined as the extent to which the rate of gilts has exceeded the levels necessary to finance the Government's borrowing requirement over the last three months for which figures are available.

None, Sir.

Does the failure to fund the borrowing requirement during the past three months signify a welcome conversion of the Treasury to a more relaxed monetary policy, or is it yet another instance of the Chancellor and the money markets being at cross purposes? If the latter, when must we expect the inevitable emergence of another Budget, which will impose further cuts on public expenditure?

It is neither of those two things. I am sure that the hon. Gentleman, who is a student of these matters, will know that the PSBR is very heavily front-end loaded this year for normal seasonal reasons, but more particularly because of the withdrawal of postponed accounting for VAT on imports in the autumn. Were the Government to overfund the full extent of the PSBR in the early months of this year, it would produce very heavy distortions in money markets.

Will the Economic Secretary take the opportunity—if not now, later—to correct two statements made by his right hon. Friend the Chancellor of the Exchequer when he misled the House earlier during Question Time?

Order. The question must relate to this particular question, not to previous ones.

asked the Chancellor of the Exchequer whether he now proposes to bring forward legislation reforming the married man's tax allowance.

My right hon. Friend has no immediate plans to bring forward legislation.

Does my hon. Friend accept, in line with the now aging Green Paper, that this allowance is a relic of a bygone age when the majority of women did not work outside the home? Will he, as a special birthday treat for me today, announce that the £3·25 billion should, instead of its present location, be diverted to assisting the relief of family poverty through increasing child allowance?

I am tempted to wish my hon. Friend "Happy birthday" and then to sit down, but I notice from the papers this morning that today is also the anniversary of the birthday of Julius Caesar. I am not sure of the connection with my hon. Friend, but in this context I have to tell him that the Green Paper made it clear that the far-reaching distributive effects of any changes merit serious study. I know that my hon. Friend would want us to take considerable care over this recommendation, however aging he may believe the Green Paper to be.

Would the Government prefer couples to marry or to live in sin? If the former, will my hon. Friend produce a taxation policy that fits the priorities?

There is obviously no question as to one's personal preference. There is no evidence that, in practice, many couples choose not to marry, or to get a divorce, to take advantage of the tax rules. However, I recognise the point that my hon. Friend has made and I accept that the present position is open to criticism in a number of respects. That is one of the aspects being studied.

asked the Chancellor of the Exchequer what recent discussions he has had with other Finance Ministers regarding international debt and the banking crisis; and if he will make a statement.

The problem of international debt was thoroughly discussed at the London economic summit and is kept under close review.

In view of the tidy mess that the Chancellor of the Exchequer and his colleagues on the Treasury Bench have made of this country's economy, does he really think that he is a fit and proper person to tell the Finance Ministers of Brazil, Argentina and Mexico, with their begging bowls, how to run their countries and get out of difficulties? Will he take my advice and send MacGregor, that financial whizz kid, out there; and if he has any difficulties getting him out of the country, will he shove him in one of those diplomaic bags and get in with him?

The hon. Gentleman will not be surprised to learn that, not for the first time, I do not propose to take his advice.

asked the Chancellor of the Exchequer when he expects investment in manufacturing industry to return to the level of 1979.

Investment in manufacturing industry is recovering strongly. The June DTI investment intentions survey suggests that total non-North sea industrial investment will run close to the 1979 level this year and will set a new record in 1985.

As opposed to the Tory backwoodsman's comments earlier in Question Time, is not the real reason for the decline of the British manufacturing economy that manufacturing investment is less than 80 per cent. of what is necessary merely to cover the depreciation of the machinery that is being worn out? It is not workers who are to blame for the lack of competitiveness with Europe, Japan or America, but the Chancellor's friends in industry and in the banks who refuse to invest in Britain.

I know that the hon. Gentleman will not need to be reminded of the wise words of the Wilson committee, that lack of profitable opportunities is the main obstacle to investment. I know that the hon. Gentleman, revelling in good news, will be happy to know that manufacturing investment is strongly rising and is up by 11 per cent. in the six months to March.

Will my hon. Friend confirm that, though there may be disadvantages for other sectors of the economy, manufacturing industry, particularly in the west midlands, will benefit from a lower sterling exchange rate and also from lower oil prices?

My hon. Friend is right to draw attention to the reality of the way in which currencies reflect markets and, to the extent that they do and are properly recorded, benefits may accrue to our manufacturing industry.

Does the Minister agree that the increase in bank rate must perforce affect the amount that industry can invest in new machinery and thus increase investment? Has not the time come for the Government to consider whether there should be differential interest rates, especially where investment is involved?

The hon. Gentleman should remember what my right hon. Friend the Chancellor said about the appalling levels of profitability when the Labour Government were in office. The increase in profitability of industry, combined with the increase in liquidity, ensures that the manufacturing sector, as well as other sectors of the economy, can bear the strain of the current higher interest rates.

asked the Chancellor of the Exchequer whether he has received any representations concerning the extension of income tax relief for investment in corporate trades to individuals purchasing shares in a small firm investment company operating with the approval of the Inland Revenue.

We have had representations on this from time to time. We have considered these carefully, but we remain unpersuaded of the case for extending the business expansion scheme in this way.

Is my hon. Friend aware of the strong support on the Government Benches for the great success of the business expansion scheme, compared with the almost total indifference on the Opposition Benches to the level and state of private sector capital investment? Will my hon. Friend assure the House that he will consider the CBI proposals for a sensible extension to and change in the business expansion scheme?

My hon. Friend is right to remind the House of the success of the business expansion scheme. All hon. Members should welcome the fact that preliminary figures indicate that in 1983–84 approximately £55 million was invested in individual target companies, and approximately 8,000 to 10,000 individual investors were investing in 300 target companies. That shows the success of the scheme already. I shall certainly consider the points made by the CBI in terms of its potential extension.

asked the Prime Minister if she will list her official engagements for Thursday 12 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 further meetings later today.

Will the Prime Minister tell the House how much further she expects interest rates to rise before the pound becomes stabilised against the dollar? Will she also tell us what advice she would give to those in business whose investment plans have been scuppered by the stark collapse of her economic strategy?

My right hon. Friend the Chancellor of the Exchequer has already said something about interest rates. It is very disappointing that they have had to go up. How long they will stay up depends on the industrial strikes that we are now experiencing. For the 17 weeks of the coal strike we managed to withstand increases in interest rates and hold them well below those of the United States, but, because of the industrial strikes, they have now had to go up.

Will my right hon. Friend take the opportunity, when Mr. Robert Mugabe visits Edinburgh shortly to receive an honorary degree of doctor of law, to remind him of the civilised characteristic of the law, of Scotland that no man may be detained without trial for more than 110 days? If he accepts the degree, should he not apply that doctrine in his own country?

My hon. and learned Friend makes his point extremely well. I am sure that it will be heard in the appropriate quarters.

Does the Prime Minister realise that the Chancellor of the Exchequer told the nation on television last night that nothing has gone wrong? Does she know that people in the money markets, the banks and the mortgage companies do not believe that? Does she believe it?

I think that if the right hon. Gentleman had listened to my previous reply he would have had the answer to that question. Perhaps he was not listening.

I was listening, and I have heard the right hon. Lady before. Despite the circumstances, she did today what she always does—blame everybody but herself. Is that not what is wrong with this Government and the reason for the rise in unemployment, the mortgage rate increases that are coming, the rises in interest rates, the falling pound and the personal difficulties which people face? When will the Prime Minister pay the price with her own job?

If the right hon. Gentleman cares to examine some of the figures about which I have often spoken to him across this Box, he will see that gross domestic product is up 3 per cent. from a year ago, industrial output is up 3.5 per cent., investment is up 10 per cent., productivity per head is up 6 per cent., and profits are up about 25 per cent. I am sure that he will have been delighted to see a very good report this morning about how the steel industry is withstanding its problems. Those are the figures of an economy which basically is in good shape.

Interest rates have gone up 2 per cent., with no beneficial effect for the British economy.

I am well aware of what the right hon. Gentleman says. I remind him that it was the Labour Government who took Britain to the IMF and reduced it to the level of a debtor country. This Government have been paying back the debts incurred by the Labour Government, and we have nearly halved them.

Was not Sir Terence Beckett correct in saying last night that the chief cause of the latest increase in interest rates was external and that the country's underlying position is one of good, steady growth and low inflation? Is it not also somewhat sickening to witness the way in which the Labour party gloats whenever Britain runs into difficulty?

Yes. When interest rates go up, it is bad news for Britain and bitterly disappointing. What is even more disappointing is that bad news for Britain is good news for the Labour party—or, at least, that is how it seems.

How can the Prime Minister come to the House on Tuesday, claim that the economy is in good shape and, perhaps even more important, that inflation is under control, and, two days later, brazenly defend a situation in which interest rates have risen, the pound has collapsed and we face the prospect of higher mortgage rates? Can the right hon. Lady tell us exactly when she thinks the economy is going to be in bad shape and what is likely to happen to inflation in nine months' time?

If the right hon. Gentleman had listened, he would have heard why I said the economy is in good shape. I will repeat it. Compared with a year ago, GDP is up 3 per cent., industrial output is up 3·5 per cent., investment is up 10 per cent., inflation is steady, productivity per head is up 6 per cent., profits are up, and liquidity is good. The right hon. Gentleman was a member of a Labour Government who took this country to the IMF and made it a debtor country and doubled Britain's international debt. I am a member of the Government who have had to pay it back, and we have halved it.

asked the Prime Minister if she will list her official engagements for 12 July.

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

At some time during her busy day, will my right hon. Friend study the manifestos of the Labour and alliance parties? I note that the Labour party pledged to abolish a tier of local government and to set up unitory authorities and that the alliance pledged to destroy the metropolitan county councils and the Greater London council. Does my right hon. Friend not think it nauseating that those parties should try to make cheap political propaganda out of something that they pledged to do?

Yes. I am aware of the two manifestos. The GLC is now responsible for only 9 per cent. of services in London and, under this Government, education will, for the first time, have a directly elected authority.

What will the Prime Minister do to protect the construction industry from the devastating effect of an increase in mortgage interest rates, which is likely to come about tomorrow, putting those rates about 8 per cent. above the level of inflation?

I agree with the hon. Gentleman that it is disappointing that interest rates have risen, and it is particularly disappointing that mortgage rates may go up. The Labour Government suffered from a similar phenomenon. The sooner industrial strikes are over, the quicker the interest rate will go down. I hope, therefore, that the Labour party will start supporting the 23·5 million people who are in work and working well, not the 200,000 who are on strike.

asked the Prime Minister if she will list her official engagements for 12 July.

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

Does my right hon. Friend not feel that it is unfortunate, to say the least, that certain Left-wing Labour-controlled authorities are irresponsibly squandering ratepayers' money by funding striking miners, especially when it takes taxpayers' money to protect those miners who wish to exercise their right in a free society to go to work?

We pay for the coal industry in many ways. The taxpayer pays in heavy subsidies when the coal industry is running, but the taxpayer and the ratepayer pay when the coal industry is on strike.

Will the Prime Minister explain to people outside the House the justification for the legislation brought in by the Government which means that the dependants of the Yorkshire Ripper, who is in gaol for the protection of society, are cared for better by the Government than the dependants of a Yorkshire miner who is on strike in defence of his community? Will she also explain to the public why the wives and children of murderers are cared for better by the Government than the wives and children of strikers?

I have heard the answer given many times. The miner who is on strike has a very good job, should he choose to return to it.

asked the Prime Minister if she will list her official engagements for Thursday 12 July.

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

Is not the inexorable outcome of the recent trend in inflation exacerbated by yesterday's increase in interest rates? There is bound to be a rate of inflation of 7 per cent. by December. Given that the stated objective of the Government is a reduction in inflation, what credibility will they then have?

I should point out to the hon. Gentleman that inflation is at its lowest rate on an annual average for 15 years. That is far lower than the rate current during the life of the Labour Government, who his party supported and attempted to keep in office. The effect upon inflation will depend on how long interest rates have to stay up. I hope that that will not be for too long, but it will depend to some extent on how quickly industrial strikes are ended and people return to work. There are good jobs waiting. The irony is that workers who are among the most highly paid in Britain are on strike and damaging the prospects of the 23·5 million of those who are in work.

Will my right hon. Friend take a moment in the course of her day to remind Labour-controlled local authorities that, in the settlement arrived at in Liverpool this week, there is naught for their comfort in continuing to overspend?

Yes. I note that the Liverpool city council decided to reduce its expenditure substantially by about £38 million, which is a reduction of 15 per cent. I note that that has been held up as a tremendous victory by the Opposition. I wonder what they would say if the Government brought in a reduction of 15 per cent. in public expenditure. Perhaps for the first time they would support us.

Is the Prime Minister aware that over three quarters of the 1983 school leavers in the Rotherham metropolitan area are still without work and that those now leaving school face an even worse prospect? How can she tell those young people that the economy is in good shape?

Because of the figures that I have given. As the hon. Gentleman will be aware, the numbers in work are going up, but I am afraid that that is not having a great effect on reducing the numbers on the unemployment register. For reasons which the hon. Gentleman will knows, over the past six years the working population has risen by 1 million and it will continue to rise because of the number of school leavers until about 1989. In the meantime, I point out to the hon. Gentleman that every school leaver is guaranteed a place on the youth training service. Indeed, there was a surplus of youth training service places over the numbers who were demanding them last year.

asked the Prime Minister if she will list her official engagements for Thursday 12 July.

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

Will my right hon. Friend assure law-abiding trade unionists that it is the law of Parliament which prevails, not that of comtemptuous kangaroo union courts?

Yes. The law is made by a democratically elected Parliament, administered by a totally independent judiciary, and it should be upheld.

Does the Prime Minister recall her rather anti-American outburst at the Dispatch Box on 8 December last year when she said that American financial policy was extremely damaging to our economy and that in future great danger would arise from it? Is this the point at which our economy has been extremely damaged and is this the great danger about which she was speaking?

As the hon. Gentleman is well aware, we have managed for some time to keep our own interest rates well below those in the American markets. Right now they are just about the same. If the hon. Gentleman thinks that it is damaging to raise interest rates, he himself has made the point.

asked the Prime Minister if she will list her official engagements for 12 July.

I refer the hon. Gentleman to the reply that I gave earlier.

Are there any circumstances in which the Prime Minister foresees herself authorising further public expenditure cuts in the autumn?

We are at the time of the year when we look at public expenditure for the coming year. As I had hoped the hon. Gentleman would know, a statement was made when we last considered the matter. We intend to hold to the public expenditure totals already published.

asked the Prime Minister if she will list her official engagements for Thursday 12 July.

I refer the hon. Gentleman to the reply that I gave earlier.

I invite the Prime Minister to answer the question that was asked earlier and to tell the House why the families of striking miners have £15 a week deducted from any supplementary benefit that may be available to them when the families of people in gaol do not have that sum deducted.

That is the law that was passed through this House by a democratically elected Government.

On a point of order, Mr. Speaker. In reply to a question I asked earlier, a Treasury Minister seemed to many hon. Members to give a response which prejudged a decision that the courts might be called upon to make about the nature of material held by Customs and Excise. Will the Minister read in the Official Report the text of what he said and perhaps seek your indulgence, Mr. Speaker, to correct it in the House tomorrow if he wishes to do so?

I was also listening carefully, as I always do to matters that may be sub judice. I did not hear anything in the Minister's reply that was sub judice.

Further to that point of order, Mr. Speaker. The hon. Member for Christchurch (Mr. Adley) used the word "obscene" to describe certain items seized by Customs and Excise from a book shop. Will you look at the Official Report, Mr. Speaker, and ask the hon. Gentleman to withdraw the word "obscene"?

Order. I think that the word is frequently used—but not, I hope, too frequently. I shall look to ensure that all is well.

I know that during Question Time and when calling people generally, Mr. Speaker, you attempt to ensure that the people who are called are many and varied and represent all sections of the House. On this important day, when there is crisis all around us, I wonder why you did not manage to catch the eye of the right hon. Member for Cambridgeshire, South-East (Mr. Pym), the leader of the faction that is trying to——

Order. I thank the hon. Gentleman for the compliment which he seeks to pay me. I can call only those who rise.