asked the Chancellor of the Exchequer if, in the light of the recent falls in the level of the pound sterling, he intends to revise his forecast for inflation this year.

Inflation in the fourth quarter 1984 was 4¾ per cent., as forecast in the Autumn Statement. A forecast for inflation in 1985 will be given in the Budget.

Will that forecast of inflation include the effects of the recently published White Paper on public expenditure, which will put up rents, rates, bus and rail fares, prescription charges, school meal prices and gas and electricity prices? Is the right hon. Gentleman aware that those increases are worrying the people whom the Prime Minister and Chancellor never seem to meet?

There is no solution to the problem of inflation by providing subsidies for any of the items to which the hon. Gentleman referred. Gas and electricity prices are scheduled to rise broadly in line with inflation, and not any higher—in other words, there will be no increase in real terms—in the coming year. The White Paper on public expenditure will be fully incorporated in any forecast figure that is given.

Will my right hon. Friend confirm that not only his forecast of inflation but his best hopes for unemployment coming down are critically dependent on real pay restraint?

My hon. Friend is absolutely right in pointing to the importance of real pay restraint. Its importance lies not so much in the sphere of inflation, but in reducing the level of unemployment, which we all want to see.

Will the right hon. Gentleman confirm that a fall in the rate of exchange of the pound cannot by itself cause inflation?

The right hon. Gentleman is right in the main. Indeed, it is striking that the fall in the sterling-dollar exchange rate through the surge in the dollar against all currencies in the last year has been accompanied by a fall, not a rise, in inflation. However, it affects monetary conditions, and those conditions as a whole must be taken firmly into account in pursuing a sound anti-inflationary policy, to which we are committed.

Does my right hon. Friend agree that we would be talking, not about a one dollar pound, but about a 50 cent pound if, in the last five years, we had experienced the debts and inflation that Britain suffered under the last Labour Government?

My hon. Friend is absolutely right. As I said, we have been seeing in the last year, and even further back, an extraordinary surge in the dollar, to a grossly over-valued level, against all other currencies. However, if one looks at the pound in terms of the weighted index of non-dollar currencies, one sees that under the Conservatives, since 1979, the pound has fallen by 7 per cent., whereas during the last Labour Administration it fell by 23 per cent.

The Chancellor's policy used to be that the market should decide the level of the pound, even when it went as high as $2·40. As he has intervened in the most direct manner possible through the minimum lending rate and the setting of that rate, may I ask him to explain just what is his policy, because, heaven knows, none of us understands it?

The Government's policy is to maintain firm downward pressure on inflation, and it was in that context that the rate of interest was increased recently. As for letting the markets decide, the markets do decide, but the decision taken at the meeting of Finance Ministers and central bank governors of the five leading industrialised countries in Washington last week was that perhaps occasionally it was time for us to be in the market as well.

Is it not true that even if inflation remains at 5 per cent, prices will still double every 14 years and that that is unacceptable for a country which seeks stability, so we must try to reduce the rate of inflation further?

My hon. Friend is right. We are determined to pursue the policy of getting inflation down still further. I am sure that we shall succeed in doing so by the same policies that have got inflation down from the rising and double figures that we inherited from the Opposition to the 5 per cent, that it is today—indeed, it is rather below 5 per cent.

Why does the Chancellor of the Exchequer persist in the ludicrous dogma that Government intervention is always wrong and market forces are always right, which he does not believe himself? It was not market forces that intervened to put up interest rates; it was not market forces that set the oil price above the market rate to increase Government oil revenues; and it was not market forces that propped up Johnson Matthey Bankers Ltd. When will the Government intervene positively in the economy to create jobs, and not just to mop up the consequences of their own incompetence?

Nobody is always right, not even the hon. Gentleman. I have to tell him two things. Experience shows that, on the whole, it is easier for markets to correct mistakes, even though they make them, than it is for interventionist Governments to do so. The level of employment in this country over the past 12 months has been rising, whereas in our main European competitor countries it has been falling.

asked the Chancellor of the Exchequer what is the annual cost of collecting value added tax, as a percentage of revenue received, from registered traders with a taxable turnover of less than £50,000.

I regret that no reliable estimate is available.

Does my hon. Friend agree that smaller businesses have a particularly large potential for job creation and that for them the administrative and financial burden of VAT is particularly onerous? In view of that, a very cost-effective form of relief might be to exempt from VAT businesses with a turnover of less than £50,000.

I agree with my hon. Friend about the importance of small businesses in job creation and about the importance of the Government reducing the bureaucratic loads that are placed upon them, but it would be misleading to say that the change that my hon. Friend proposes would be universally welcomed, and, anyway, it would be in breach of our European Community undertakings.

Is it not true that newspaper organisations will be faced with substantial additional charges by the imposition of VAT? Has the Minister seen the Price Waterhouse and Co. report, which suggests that 7,000 jobs will be lost in the industry if VAT is imposed, and that 10 dailies and 100 weeklies will close? Will the hon. Gentleman do something to ensure that VAT is not imposed in the way that is suggested?

I do not think that the papers, certainly the nationals, would welcome being described as small traders with a turnover of less than £50,000, which is what the question is about. More generally, the hon. Gentleman will know that it would be wholly improper to seek to anticipate in any way the Budget of my right hon. Friend the Chancellor.

asked the Chancellor of the Exchequer how many representations he has received regarding the level of public expenditure on the infrastructure.

Several.

Bearing that reply in mind, what possible justification can the Government have for slashing almost £1 billion from capital expenditure next year when every objective report has suggested that our infrastructure is crumbling? Has the right hon. and learned Gentleman seen the latest report by the committee chaired by the Duke of Edinburgh, which suggests that we should spend £50 billion to put our housing stock in order?

Perhaps the hon. Gentleman overlooks the fact that public and private sector investment is running at a record level of £55 billion this year. If we are to bandy about reports, I should like to remind the House of the OECD survey of the United Kingdom, which said, that the

"main problem for the United Kingdom is unlikely to stem from an insufficient quantity of investment but rather from the inefficient use of capital or poor quality of investment."

Does my right hon. and learned Friend believe that the modest proposals of the Henley Centre for Forecasting on selective investment in the infrastructure, based on the Treasury model, are in conflict with Government policy? They suggest that £1 billion invested per year over a five-year period would create between 70,000 and 100,000 jobs in construction, would cost £8,000 a job, would have an input content of 7 per cent. and, most important of all, would increase the money stock per year by less than 0·5 per cent.

In the long term, we feel that the efficiency and prosperity of the economy, and therefore sustainable jobs, would be better created by cuts in income tax.

Will the Chief Secretary tell the House to what degree Government spending on the infrastructure falls short of the annual depreciation and obsolescence of it?

No, I cannot, because we are dealing with a myriad of assets. However, I can tell the House that expenditure on national roads, for example, has increased since 1979–80 by 16 per cent., which is £104 million.

Will my right hon. and learned Friend accept that in the past there have been numerous capital projects in the public sector which have made no adequate return on investment; in particular, tower blocks of flats which are now being pulled down, and projects which have overrun costs, such as the Humber bridge and the Isle of Grain power station?

My hon. Friend makes a sound point. Not all capital projects necessarily show a good rate of return. Each project has to be assessed on its merits.

If we are right to assume from the Chief Secretary's answer that he accepts the judgment of those independent inquiries that something needs to be done about Britain's infrastructure, how does he justify tables 2.9 and 2.10 of the White Paper, which makes it clear that the Government are to cut capital expenditure in these sectors?

The right hon. Gentleman overlooks the fact that there is a private sector, an error into which his party frequently falls. The main thrust of our policy is to give more scope for manoeuvre in the private sector, which is increasing its investment every year.

asked the Chancellor of the Exchequer whether he will estimate the potential cost to Her Majesty's Government of the Johnson Matthey resuce operation.

None, Sir. Any cost will be met by the banking department of the Bank of England.

Is it not true that the rescuing banks can offset any of their losses on the guarantee against tax? Is that not a potential cost to the Exchequer, and why did the Chancellor of the Exchequer not admit that when he made a statement on 14 December, when he deliberately misled the House by denying it?

Order. The hon. Gentleman must not say "deliberately misled". He may use the word "inadvertently".

My right hon. Friend did not mislead the House on that point. Any call under a guarantee of indemnity in commercial practices is always allowable as a charge against tax and this case is no different. The question of any call under such an indemnity does not yet arise.

Is the hon. Gentleman aware that this is the second occasion when the Government have allowed banks to take part in tax indemnities on a large scale— thereby putting the burden on every other taxpayer— when taking part in rescuing banks? The first occasion was when it was suggested that they could rescue the central American banks in respect of Argentina and other countries, which resulted in a £200 million loss to the taxpayers of Britain. Now, to save Johnson Matthey, the Government have given a nod and a wink to all those banks which refuse to contribute to the rescue so that they will not have to pay a penny piece themselves. That is hoodwinking the British electorate, and does it not mean that there is one law for the banks and another for the British people, many of whom are up to their necks in debt as a result of this Government's policies?

Order. It does not help to have long supplementary questions, as they keep out other hon. Members.

It is interesting to hear the hon. Gentleman's comments on the lifeboat and rescue operations, similar operations to which were conducted by the Labour Government in the 1970s. I do not recall him making the same comments then. The operation relating to the rescue of Johnson Matthey was conducted because the Bank of England Act 1946, also introduced by a Labour Government, gives the Bank of England freedom to use its own resources.

asked the Chancellor of the Exchequer what is the current real value of the pound sterling expressed as a percentage of its real value as at January 1979.

The domestic purchasing power of the pound is 58 per cent. of what it was in January 1979.

Is that not a disgraceful answer? Will the Minister recognise that since the Conservatives came to power in 1979 there has been a relentless reduction in the purchasing power of the pound? If he will not listen to Her Majesty's Opposition, will he pay attention to Lord Stockton, who yesterday advised the Government to depart from their monetarist policy? If they do not, then, like the Belgrano, they will be sunk.

I am surprised that the hon. Gentleman, if he wants to comment on the purchasing power of the pound under this Government, did not choose May 1979 as the starting date for his question. Under this Government during the last five years the purchasing power of the pound has fallen by about 40 per cent. It fell by well over 50 per cent. under the Labour Government whom he supported. The last Conservative Government was the first since the 1950s to have an inflation rate lower than that of the preceding Government. This Government will achieve the same.

As the question referred to a comparison with 1979, will my hon. Friend say to what extent the decline in the value of the pound was due to the highly inflationary wage settlements which had been agreed at that time? Does he agree that the decline in the value of the pound was, therefore, a hangover from the Labour Government?

My right hon. Friend is absolutely right to point out that the bulk of inflation under the Conservative Government which took office in 1979 took place in the very early years when we had to clear up the mess that had been left behind by the Labour Government.

Will the Economic Secretary accept that the strength of the dollar makes it extremely attractive to American galleries and collectors to purchase British works of art? Will he consider raising the allocation of money available for acceptances in lieu of tax?

I do not have responsibility for that, but, of course, the exchange rate between sterling and the dollar also makes it attractive for British companies to sell into the American market, and I hope that they will do so.

asked the Chancellor of the Exchequer how he measures the impact of tax cuts on the creation of new jobs.

New jobs are created by successful companies and eager workers. Lower taxes encourage enterprise and effort and so help to secure that success.

I do not suppose that it has gone unnoticed by the man in the Banbury market place that those countries which have thriving economies—[HON. MEMBERS: "Question."]—and which are creating jobs, such as Taiwan, Singapore and South Korea, which were referred to yesterday by Lord Stockton, are exactly the countries that have low tax thresholds. What seems to be causing concern to some commentators—

Order. May I ask the hon. Gentleman to ask a question and not to give a preamble of his own views?

Is my right hon. Friend aware that what is of concern to some commentators is that as soon as people get more money in their pockets they will spend it on imports? Does he agree that that matter is subject to objective test? Will he tell us what inquiries the Treasury is making?

My hon. Friend is right in saying that a proportion of any increase in disposable income, whether it is achieved through an increase in pay or through a reduction in taxes, will be spent on imports. Of course, we do a thriving trade both ways and our balance of payments is likely to be in balance, or even in surplus, this year, despite the effects of the coal strike. These matters are taken into account when the Treasury starts to make its forecast.

Will the Chancellor of the Exchequer tell us how many jobs will be created by means of tax cuts? More important, will he tell us how many more jobs will be destroyed by public spending cuts in housing and all the other areas of public provision? Will he say how many more jobs will be lost because of expenditure cuts than will be gained by giving tax cuts to his rich friends?

The Government propose that public expenditure should remain steady in real terms over a period of years and should not be reduced. That is what the Government's plans clearly show. It is significant that we have had steady growth at about 3 per cent. a year since the trough of the recession in 1981. The number of those who are employed or self-employed in Britain is growing, whereas it is falling in many of the countries of our European competitors.

Does my right hon. Friend agree that it is untrue to suggest that there is no academic opinion in support of his view that tax cuts help employment prospects? Is he aware of the work done by the employment research institute of Warwick university, which concluded that tax cuts were among the most effective way of promoting proper employment prospects and reducing inflation? It concluded that tax cuts constituted a substantially more effective way of achieving that end than public sector expenditure?

My hon. Friend is correct. The conclusion to which he refers has been shown by Warwick university's model and study and by Liverpool university's model and study. Of course, different computer models produce different results. I regard all computer simulations with a considerable pinch of salt. These models tend to concentrate on the demand side of the economy rather than on the supply side. Secondly, we cannot buy jobs. If that were possible, it would be a simple matter for every country with unemployment to buy its way out. We shall create jobs and reduce unemployment by having a more dynamic economy, by improving the supply side and especially by reducing rigidities in the labour market.

Is the right hon. Gentleman aware that the results of the study of the London Business School show unequivocally on a pound-for-pound basis that public spending creates more jobs than do tax cuts? Will he send the Government's chief economic adviser back to the London Business School so that he can catch up with its latest economic thinking, and will the right hon. Gentleman then take his advice?

The London Business School's simulation examined Government employment, not Government spending. It found that by spending more money on recruiting more civil servants we should get more people in jobs, which is obvious. If the hon. Lady thinks that that is the best way of creating a strong economy, I must tell her that she is mistaken.

asked the Chancellor of the Exchequer if he has made specific calculations of the effects on unemployment and demand from the operation of the multiplier in (a) direct tax reductions and (b) additional public expenditure.

Tax cuts encourage growth of employment by helping to improve the performance of the economy. Permanent new jobs cannot be bought by injecting additional demand into the economy.

As the net figures for capital formation in the public and private sectors are not the same as the gross figures that the Government keep using, and as they show that we are seriously under-investing, why do my right hon. and learned Friend and my right hon. Friend the Chancellor of the Exchequer continue to indulge in fantasy notions of mass entrepreneurship on a grand scale rather than accept that every pound of additional capital spending in the public and private sectors is bound to produce six or more new jobs than would every extra pound of reduced taxation?

I do not think that there will be universal acceptance of my hon. Friend's statistic. As he is concerned with public investment, or investment generally, I remind him that total fixed investment has risen by about 8 per cent. since last year.

Despite all the rhetoric, why does the right hon. and learned Gentleman not admit that the curse and misery of mass unemployment will not be ended until the Government leave office?

I am tempted to borrow the expression that the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) uses on these occasions: fatuous questions are likely only to elicit fatuous answers.

asked the Chancellor of the Exchequer whether he will estimate the effect on jobs of the changes in corporation tax arising out of his 1984 Budget.

Precise estimates are not possible, but removing distortions against the employment of labour is bound to be helpful to jobs.

Will my hon. Friend confirm that these changes have been applauded by British industry? Will he take further steps to ensure that investment decisions by industry are increasingly taken on commercial and not fiscal grounds?

My hon. Friend is correct. The changes in the 1984 Budget in corporation tax, including the reduction in the cost of employing labour and the abolition of the national insurance surcharge, have made the balance between the choice of employing labour or using machinery much more even and have removed major distortions in the system. The corporation tax and capital allowances changes are designed to induce the best allocation of resources in the economy. That is their main objective.

Is the Economic Secretary aware that, unless the Government quickly upgrade their new system of annual capital allowances for depreciation, many firms will simply not have the necessary resources after tax to provide the jobs they could otherwise provide? Will the hon. Gentleman take steps, therefore, to bring these allowances a little closer to the reality of industrial obsolescence?

I believe that the new allowance system that we have introduced has been widely welcomed by industry because it has been coupled with a sharp reduction in the rates of corporation tax. The hon. Gentleman referred to a lack of resources for investment, but I believe that profitable and successful companies will find that, at a lower tax rate, they will have an even greater incentive to invest for the future.

asked the Chancellor of the Exchequer if he is satisfied with the present level of growth in the economy.

Gross domestic product rose by about 1½ per cent. in the year to the third quarter of 1984.

Is my right hon. Friend aware that, because of this year's excellent growth rate, there has been a record net increase in the number of new firms? Does he agree that, if it were not for the highly damaging and totally unjustified miners' strike, there would be even better growth and less unemployment?

My hon. Friend is correct. The coal strike temporarily dragged down our rate of growth during 1984. Had it not been for the strike, the growth rate in the year to the third quarter of 1984 would have been not 1½ per cent., but about 3 per cent.—equal to the highest increase in Europe. The coal strike is damaging jobs, investment and the economy. Fortunately, it looks as though it will not be too long before this damaging strike is over.

Will the Chancellor explain to the country why, if he has such faith in his own economic policies, his public expenditure White paper does not predict a decrease in the unemployment level, but predicts that during the next few years unemployment will remain over the 3 million figure?

The unemployment figures in the White Paper are not a prediction. The figures cited in White papers produced by previous Governments were also not predictions. The figures are a conventional assumption for the purpose of calculating benefits and other elements.

Does my right hon. Friend accept that, although he may be satisfied with the present level of growth in the economy as a whole, that faith is not sustained on a national basis? What is my right hon. Friend doing for the north of England, compared with the south of England, to ensure that there is a greater stimulation of growth in the area?

I would, of course, be happy to see a higher rate of growth. I hope that that will be possible. I believe that it certainly will be possible as soon as the coal strike is over. It is especially important that we sustain the rate of growth, as we have done for more than four years. I shall continue to do that. I am conscious of the feeling in some parts of the north that people there have been left out, but I am convinced that the policies that are right for the United Kingdom as a whole are right for the north of England.

When the Chancellor was in America explaining the growth of the economy, was he able to explain to the Americans that the miners' strike costs him between £90 million and £100 million a week, and did he say why he thought that was a worthwhile economic exercise?

The Americans to whom I have spoken, and many other people overseas, are astonished that any trade union anywhere in the free world would maintain the proposition that uneconomic pits should be kept open, however large their losses.

Does my right hon. Friend agree that no economic indicator is a replacement for a pro-business culture? Does he agree that we really need a much more vigorous and enterprising economy?

That is correct. That is the secret of success. It is what the Americans have found, and that is the direction in which we in this country are going.

The Chancellor has said much about uneconomic pits. How can he justify an uneconomic Government? Is it simply a matter of class rule, is it simply the bankers' ethic, or is it something special that he can explain to us? We listen to the right hon. Gentleman's diatribes week in and week out.

I suspect that the hon. Gentleman is referring to Johnson Matthey Bankers. My hon. Friend the Economic Secretary has already answered a question on that matter. It is certainly not the policy of the Bank of England to bail out any bank irrespective of the circumstances.

asked the Chancellor of the Exchequer if he will make a statement regarding the reports presented to the meeting of the National Economic Development Council on 9 January.

The council had a lengthy and useful discussion on three reports, all of which have been made publicly available.

Does the Chancellor accept the accuracy of the reports that our infrastructure is in need of urgent repair?

I certainly do not accept the accuracy of the figures bandied about in the NEDO report. However, the Government are taking a new look at the whole of the public estate so as to be able to form a better assessment of the state of what is known as the built infrastructure. Of the two elements of the infrastructure most frequently alluded to, road building will increase substantially next year in real terms, and so will investment in the water industry.

How did my right hon. Friend react to the excellent housekeeping point made in one of those reports that the longer one leaves basic maintenance work on the infrastructure, the more it will cost?

I share my hon. Friend's belief in good housekeeping. My hon. Friend has mentioned one aspect of good housekeeping; another aspect is balancing the Government's books.

Will the right hon. Gentleman explain to the NEDC whether he has changed his mind about the mining dispute being a good investment?

I never said that the mining dispute was a good investment. [HON. MEMBERS: "Oh."] I said that the money spent in resisting the strike was a good investment, as indeed it is. The sooner the strike—which is none of our making—is over, the better.

Does my right hon. Friend agree that recent events on the exchange markets remind us of the underlying fragility of the recovery in this country and of the fact that injections of public expenditure, however worthy, may impede that recovery still further?

My hon. Friend makes a very important point. One of the factors behind the recent turbulence in the foreign exchange market was the fear in the markets that the Government might be about to relax their grip on inflation by indulging in excessive public expenditure.

As the Chancellor has just repeated for a second time his comment that the Government still think that the miners' strike is a worthwhile investment for the Government, can he tell how much has been invested?

It would be helpful if the hon. Gentleman listened to what I said before asking a question.

asked the Chancellor of the Exchequer if he will estimate what sum would be lost to his Department if the liability to value added tax of some adult education courses were ended for the financial year 1985–86; and if he will make a statement.

I regret that this information is not available.

I cannot thank the hon. Gentleman for that reply. With the minimal income that he receives from VAT on adult education, with its selective imposition, is there not a strong incentive for him to reconsider the matter and abolish it, so that adult education may flourish, as was promised in his party's manifesto?

The law on this matter has not changed, and the vast majority of adult education is outside the scope of VAT.

Will my hon. Friend bear in mind the value of adult education as a medium for retraining people for jobs and as a means of giving self-dignity to unemployed and elderly people? Will he see whether the whole of adult education can be exempted from VAT?

There are problems. Recreational and sports courses are subject to VAT when provided by the private sector. It would therefore be unfair not to impose VAT on local government when it is in direct competition with the private sector. Such courses have been subject to VAT since the beginning.

Does the Minister agree that it is disgraceful that the Department has not monitored the effects of its decision on adult education, especially as local authorities have already assessed the effect of VAT on adult education courses?

There has been no change in the law or in the practice of Customs and Excise in implementing it. What has changed is that some local education authorities have increased their prices and are competing directly with similar courses in the private sector. There should be a similar tax regime for both.

asked the Chancellor of the Exchequer what further action he is taking to control the total running costs of his Department.

The Treasury's plans were set out in the White Papers on financial management, which were published in September 1983 and July 1984. Their objective is to keep running costs to the minimum to do the work effectively.

Will my hon. Friend confirm that he is doing all in his power to achieve savings through the privatisation of public sector operations?

Yes, I can give my hon. Friend that assurance. In the Treasury, domestic cleaning services and some other supporting services such as laundry and press cuttings are already contracted out. The central computer and telecommunications agency and the Chessington computer centre use the services of computer consultants and software houses.

As the hon. Gentleman is the same Minister who used to come to the Dispatch Box bragging about laying off civil servants, will he say whether the reduction in numbers means more people going on the dole because they have lost their jobs in his Department and others?

No, it means increased effectiveness and efficiency in the public service and better value for the taxpayers' money. I should have thought that that would be supported in all parts of the House.

asked the Chancellor of the Exchequer what is his assessment of the effect of the recent fall in the pound sterling exchange rate on employment and inflation.

The Government have taken firm action to keep inflation under control. This will help the growth of employment, though moderation of wage settlements remains vital if new jobs are to be generated on the scale that we should all like to see.

Is not the truth that, despite the Chancellor's assertions, the link between a low rate of inflation and any improvement in the horrific level of unemployment is so tenuous as to be virtually nonexistent? Is not the truth that the Chancellor is setting his sights on the level of inflation and disregarding entirely the consequences for the level of employment and the exchange rate?

As I have said more than once, the level of employment in Britain in the past year has risen steadily whereas in most of our major competitor countries in western Europe it has been falling. That shows the success of our policies at a difficult time. I readily concede that the hon. Gentleman and his right hon. and hon. Friends have no interest in bringing inflation down, as is seen whenever we have the misfortune to have them in office.

Does my right hon. Friend agree that a fluctuating exchange rate is a serious disincentive to investment in export-orientated activity? Does he agree also that the cause of job creation would be well served by a Government policy designed to increase the stability of the exchange rate? Would it not be in our interests, in pursuit of that policy, to enter into negotiations with our Common Market colleagues to widen the scope of the European monetary system?

The main turbulence in the foreign exchange markets recently, and for some time past, has been the exchange rate against the dollar. Joining the EMS would not make any difference to that.

asked the Chancellor of the Exchequer how many representations he has received about possible new taxation proposals for the 1985 Budget.

Several.

Is the Minister aware of the widespread opposition to the imposition of VAT on books, which would be a tax on learning, and of the widespread opposition to the taxation of pensions, which would be retrospective if people who had already made contributions found out afterwards that they were to be taxed? If the economy is in such a mess that the Treasury needs more revenue, why should not a wealth tax be introduced, or is this Tory Government afraid to ask their supporters to pay for their discredited policies?

As to a wealth tax, I would refer the hon. Member to the report of the Select Committee that was set up under the last Labour Government. As to the hon. Member's other points, I cannot anticipate the Budget of my right hon. Friend, except that I would remind the House of the statement that was made before Christmas by my right hon. Friend about retrospective legislation concerning pensions.

rose—

Order. Before we proceed with Prime Minister's questions today, may I say to the House that I believe that the noise and the interruptions during Prime Minister's questions last Tuesday was worse than I have ever heard it before. It is part of our democratic tradition that we should hear each other with respect. I hope that that will happen today.

asked the Prime Minister if she will list her official engagements for Thursday 24 January.

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 take time today publicly to announce changes in the policies of her Government that will offer a ray of hope to the unemployed in the northern region, in particular in Newcastle and Gateshead in my constituency, where there are pockets of unemployment as high as 40 per cent., with the prospect of more to come as the policies of her Government decimate the shipbuilding and heavy engineering industries? [HON. MEMBERS: "TOO long."] The only thing that is too long is the dole queue. Is the honest answer of the Prime Minister to the questions I have posed that under her Government there is no hope for the unemployed?

The answer to the hon. Member's problem and to similar problems relating to unemployment is to win orders. The answer to winning orders is to keep inflation low and to have good designs and competitive products that will sell both at home and on world markets.

Does my right hon. Friend agree that, just as unemployment and the need to create more wealth-producing jobs is rightly recognised as an urgent priority, it is also worth reflecting upon the sombre thought that the world does not owe a living to the more than 23·5 million people in this country who are in work? Does my right hon. Friend agree that unless a sense of realism prevails in the 1985 wage round so that pay increases are, at the very least, matched by an improvement in productivity, more of those who are in work will be at risk? [Interruption.]

Order. I think that I can help the House. Will the hon. Member please make his question brief?

Yes, I agree with my hon. Friend. What is important is that unit wage costs should be as low as those of our competitors. We have done better recently, but so have our competitors. It is vital that our unit wage costs should match theirs and that, therefore, we should keep wages down and productivity up.

Has the Prime Minister seen today's statement by the national executive committee of the National Union of Mine workers, which makes it clear that the union wants negotiations to take place without preconditions and wants them to begin early next week? As somebody who told me last Tuesday that she really wants an end to this dispute, will the Prime Minister tell the House whether she welcomes this constructive approach by the union?

As I told the right hon. Gentleman, I am anxious for there to be a clear settlement. As we have already been through seven rounds of negotiations, it is very important that we — [HON. MEMBERS: "We?"] The country has already seen seven rounds of negotiations—[HON. MEMBERS: "Ah."] How very childish.

"If, following the meeting of the NUM National Executive Committee, the National Coal Board receives written indication that they are prepared to help resolve the problem of dealing with uneconomic capacity, the National Coal Board will be prepared to re-enter negotiations with a view to resolving the current dispute. The proposals must establish that the NUM recognise that management must deal with the problems of uneconomic capacity and that the NUM will co-operate in this essential task, recognising the other commitments that the Board are prepared to make on the future of their employees and the industry."

Will the Prime Minister tell us exactly who has demanded the new precondition of a written undertaking from the NUM, especially when, late last night, neither Mr. Ned Smith nor the union nor ACAS was aware that any such stipulation was to be made? Can the Prime Minister tell us whether it is the Government who have made that demand? Frankly, her dirty fingerprints are all over that kind of request. Does the Prime Minister really want to encourage negotiation, or is she still obsessed with securing humiliation, no matter what the cost or how long it takes?

I think that the right hon. Gentleman forgets the statement that was made on Tuesday, part of which I read out to him on Tuesday, which said:

"In seven rounds of negotiations lasting 175 hours"—

Answer the question.

I intend to answer the question in my own way.

"In seven rounds of negotiations lasting 175 hours the NUM have refused to move from their demand that every uneconomic pit should be kept going until the last tonne is exhausted. The Coal Board cannot meet this impossible demand that would undermine the Coal industry's future and provide no security for miners or for the children of miners in the years to come … The Board want to achieve a settlement of this dispute but we do not want another round of talks in which the NUM yet again persist with their one impossible demand leading yet again to failure."

The NUM has made its position clear — much too clear for the convenience of the Prime Minister — because it was the NUM which said that there would be no preconditions. With answers or evasions such as the Prime Minister offers, it is no wonder that the Earl of Stockton calls her policies futile.

No, Mr. Speaker. The NUM has not made its position clear. Indeed, the right hon. Gentleman is already arguing about it. The NUM — [Interruption.]—should do what the Coal Board has done. It should put its exact position in writing. Why is the right hon. Gentleman so reluctant — [HON. MEMBERS: "Answer the question."]

Order. I must say to the House that it was precisely for this reason that I made my comment at the beginning of Question Time. The Prime Minister is trying to answer the question.

Why is the right hon. Gentleman so reluctant to put his and the NUM's position on the closure of uneconomic pits into writing, when the previous Labour Government not only put it into writing but into legislation, when they provided for grants that would

"further assist in the re-deployment of the manpower resources of the Board and the elimination of uneconomic … capacity."

Does my right hon. Friend accept that those miners who have already returned to work, often in the face of the most serious intimidation, are fighting for the future of the British mining industry? Will she take this opportunity to affirm her Government's determination to protect them from intimidation, in the shape of both present attempts and any future attempts by the National Union of Mineworkers' leadership when the strike is over?

Yes, every possible step will be taken. My hon. Friend is right to remind us that the strike got under way without a ballot, and was pursued with violence and intimidation. It is because of the bravery of the 77,000 members of the NUM who are back at work that the industry has a chance to flourish in future.

Is the Prime Minister aware that the country will test the acceptability of any negotiation by whether it is acceptable to those who have worked during the -dispute? Does she agree that they have been deserted by the Trades Union Congress and the Labour party, and that the country does not expect the Government to desert them?

I recognise, and agree with the right hon. Gentleman, that the country owes a great deal to the 77,000 working miners and that they must not be let down. I also recognise that any result must make it absolutely clear that uneconomic pits must close and that the final decision must rest with the management of the NCB after the proper processes of consultation have been gone through. It is totally cynical to try to enter into negotiations without the NUM making its position clear on those matters.

Does my right hon. Friend accept that the depressed level of sterling now represents an outstanding opportunity for British exporters to increase their share of overseas markets? Will she urge them to take advantage of that by pricing competitively at the new levels, rather than leaving their overseas prices at historic levels in the hope of a short-term foreign exchange windfall gain?

Yes, those companies that are in the best position to take advantage of the present price of sterling are already competitive. It is totally and utterly wrong to rely on the lower value of sterling to make goods competitive. By virtue of management, goods should be competitive. A double benefit can be gained by taking advantage of what, I hope, is a temporary lower value of sterling, which is far too low at present.

asked the Prime Minister if she will list her official engagements for Thursday 24 January.

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

In view of the sincere, objective and earnest proposals put forward yesterday by Welsh church leaders in an attempt to bring the miners' dispute to an end, will the Prime Minister give a categorical assurance to the House this afternoon that she will desist from using hardship as a weapon of vindictiveness to get her political way?

If there has been any vindictiveness during the strike, it has been on the part of the leadership of the NUM which has deliberately put its members through privations when, since 6 March, they have had on the table the best offer since nationalisation began. The leadership of the NUM has been vindictive and has nearly split its own union.

Has my right hon. Friend had an opportunity to consider the implications of the suggestion made in last week's debate on unemployment by the leader of the Social Democratic party that VAT should be extended to everything but food? Will she do what she can to urge the Chancellor of the Exchequer to resist the insatiable demands of the right hon. Gentleman for a massive extension of that tax?

I am grateful to my hon. and learned Friend for that information. I seem to have missed that speech, but I now see that I must read it carefully.

asked the Prime Minister if she will list her official engagements for Thursday 24 January.

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

How can the Prime Minister justify her decision not to give thousands of pensioners and poor people in Scotland the same treatment as those in the rest of Britain with regard to the allocation of exceptional heating allowances? How much more must they suffer before she shows them any mercy? Is her "hard-hearted Hannah" attitude to the people of Scotland to continue because they have twice decisively rejected her at the polls? Will she tell the House now that she will give them that allowance?

All pensioners are treated very much more generously now under the Conservative Government than they ever were under a Labour Government, and people know it. The £400 million that the taxpayer finds for heating allowances is about 40 per cent. more than was provided by the Labour Government, so Labour Members are in no position to criticise anyone.

Will the Prime Minister note, as we move towards the celebration of freedom and peace on VE day, that the latest act of the Government of East Germany is to demolish a Christian church so that the prisoners of their tyranny can be more easily executed if they try to escape?

As my hon. and learned Friend is aware, we have said that we wish to give thanks to our dead on VE day, and we wish to commemorate 40 years of peace, which we hope will continue. That is the right spirit with which to enter the activities of VE day.