asked the Chancellor of the Exchequer if he has any plans to meet the Governor of the Bank of England to discuss affairs relating to the regulation of the City of London.

asked the Chancellor of the Exchequer when he next expects to meet the Governor of the Bank of England.

I have frequent discussions with the Governor of the Bank of England on a variety of matters.

Has the Chancellor held any discussions with the chairman of Lloyd's? Will he also have discussions with Mr. Ian Hay Davison, who was the chief executive of the Lloyd's Council? Does he believe that the inquiry into Lloyd's set up by his right hon. and learned Friend the Secretary of State for Trade and Industry will restore confidence in a tainted City? If the inquiry produces an adverse report, what steps will be taken to implement its proposals as quickly as possible to put matters right?

The hon. Gentleman is a day late. Trade and Industry Question Time was yesterday, and Lloyd's is the responsibility of my right hon. and learned Friend.

As this week the Government have yet again been forced to raise interest rates, and as the highest real level in interest rates ever has come about during their period in office, when the Chancellor next meets the Governor of the Bank of England will he accede to his request to join the European monetary system and so help to stabilise the pound without having to impose such high and penal rates of interest?

There are arguments both for and against joining the EMS. However, if the hon. Gentleman imagines that joining will mean that it will never again be necessary to raise interest rates, he is misinformed.

Next time my right hon. Friend speaks to the Governor of the Bank of England about the City of London, will he, on behalf of the thousands of my constituents who earn an honest living in the square mile, tell him that there is a considerable amount of irritation at the imputations by Opposition Members and others that the reputation of the City has been hopelessly besmirched? Will my right hon. Friend take that opportunity to underline the fact that that is not the case over a very wide area of activity? Will he remind the Governor, if any reminding is necessary, of the major contributions to the economy of this country made by invisible exports from the City?

My hon. Friend is right. The City is pre-eminent among the financial markets of the world and makes a substantial contribution to the British economy in many different respects. Whatever may be said by Opposition Members below the Gangway, I am sure that the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) would not wish to denigrate the City in the way that many of his hon. Friend's have done.

Does not the Chancellor have a cheek to suggest that my hon. Friend the Member for Warrington, North (Mr. Hoyle) was wrong to criticise the City and say that it is tainted? Did not the Attorney-General, some nine or 10 months ago, in reply to a letter from a Tory Member, say that he found the level of City fraud unacceptable? Why did he say that? It was simply because at that time the PCW syndicate, whose two principals were Peter Cameron-Webb and Peter Dixon, had managed to get rid of about £130 million from Lloyd's—money that they had pocketed themselves. They have never been brought to book by the fraud squad. Why are the Government not doing something about it? Of course there is a scandal in the City, but this Government are not doing anything because most of them— —

Order. This is not an Adjournment debate.

That accusation, which you may not have been able to hear Mr. Speaker, was a particularly scandalous one.

Is my right hon. Friend concerned at the level of investment and penetration of our markets by Japanese banks and financial institutions in the City, especially as they are not subject to the Bank of England prudential lending limits? Has he discussed that matter with the Governor of the Bank of England, bearing in mind the steps taken by the Japanese to prevent our banks from competing in their markets on similar terms? What steps does he propose to take?

My hon. Friend has raised an important matter. In general terms I think that the City of London and the United Kingdom have benefited from the existence of overseas banks and financial institutions in the City and the country. However, there has been a lack of reciprocity. We are increasingly making it clear that reciprocity is the name of the game. If Japanese financial institutions want to have an increasing presence in the City of London, then what is sauce for the goose is sauce for the gander. I am glad to say that there have been many recent instances of British financial institutions obtaining licences to operate in Japan as a result of the strong line that the Government have taken.

When does the Chancellor propose to announce the membership of the new board of banking supervision? Can we be assured that it will include members from outside the self-protected charmed circle of the City itself?

The membership will be chosen on the basis of the ability and experience of the individuals concerned. I shall bear the comments of the right hon. Gentleman in mind. I deprecate his implication that anybody who comes from what he calls the "charmed circle of the City" must be in some way tainted.

May I ask for brief questions, and that will lead to brief answers.

asked the Chancellor of the Exchequer if he will estimate the number of people holding shares, savings or any other kind of investment in 1978 and 1984; and if he will make a statement.

The number who own shares directly has at least doubled since 1978 to over 3 million people, and recent market research suggests that the figure may now be much higher.

I welcome that magnificent spread of wealth in the country. May I ask how many people who have been saving for old age with pension and insurance companies would lose if privatised companies were renationalised on the discriminatory basis so rashly announced by the Leader of the Labour party in his new year interview? What would those people do?

The number involved would be affected according to which shares were held by which institutions. However, 13 million electors hold occupational pensions, and if there were privatised shares in those institutions they would all be mulcted of the improvements in the price since they were served.

Will the Minister admit that in the case of all the privatised companies, shortly after privatisation the number of small shareholders has decreased dramatically? In the case of British Aerospace, recently in the news, within 12 months the number of shareholders holding fewer than 500 shares went down to almost 10 per cent. of those who had bought them at the point of privatisation. Will the Minister tell the House the truth—that privatisation is not about wider share ownership, but is about the hands of some of his hon. Friends going into the jam pots to make money for themselves and their backers?

Individual decisions about individual shares will be taken differently, according to the company, by individual investors. The fact remains that 80 per cent. of the new shareholders in British Telecom still hold those shares.

Does my hon. Friend's Department look favourably at ways, such as minor tax changes, that might encourage people to invest not only in equities but in debentures and other forms of investment?

The Government are supportive of sales of debentures in the same way as they are of equities.

asked the Chancellor of the Exchequer what is the effective marginal tax rate on earnings of those in the lowest tax band; and how this compares with other major industrial countries.

asked the Chancellor of the Exchequer what is the effective marginal tax rate on earnings of those in the lowest tax band; and how this compares with other major industrial countries.

The marginal income tax rate on earnings for those in the lowest tax band in this country is 30 per cent. This is the second highest national rate among the OECD countries.

I thank my right hon. Friend for that reply. Does he agree that our marginal tax rate is far too high, particularly for those on low earnings, when compared with 10 per cent. in France and 11 per cent. in the United States? Does he also agree that the high marginal rate is contributing to the increase in the black economy?

There is no question but that the high marginal rate, as well as the problem of regulation, has an impact on the black economy. That is one of the factors in the burden of taxation. I concur with my hon. Friend's two specific points: the United States rate is 11 per cent. and the French initial rate is 10 per cent.

Does my right hon. Friend agree that these are startling comparisons? Does he know of any of our competitors with such a high rate?

The only nation with a rate above us in the OECD is Ireland. To give some illustrations, the United States rate is 11 per cent., Japan 11 per cent., West Germany 22 per cent. and France 10 per cent. All our industrial competitors have an initial rate substantially below ours.

Is it correct that other countries have a different starting level at which one begins to pay tax, that virtually every PAYE taxpayer pays only the standard rate, and that therefore the tax system is hardly progressive for higher earners?

It is right that the initial rate starts at a different point. In the United States, for example, the average production worker has a threshold that starts at about 17 per cent. of his overall initial wage against the United Kingdom comparison of 27 per cent. The hon. Gentleman is right to say that on thresholds we are approximately in the middle of the OECD ranking.

Has the Financial Secretary noticed that the question refers to the effective marginal tax rate, which is usually taken to include national insurance and other surcharges? Will he confirm that the new family credit scheme and the proposed changes in housing benefit suggested in the Fowler review mean that the number of people facing an effective marginal tax rate of more than 70 per cent. will be doubled from 250,000 to 500,000?

I reconfirm that the question relates to the effective marginal tax rate as opposed to the national insurance rate. I draw to the attention of the House the fact that the proposals of my right hon. Friend the Secretary of State for Social Services reduce below 100 per cent. for the first time all the effective marginal rates.

If my right hon. Friend has occasion, with his colleagues, to reflect on the respective merits of lowering the basic rate of income tax or increasing the threshold at which it is paid, will he bear in mind that there are important economic and indeed constitutional arguments in favour of making the Government, in their public expenditure, accountable to a larger rather than a smaller number of taxpayers?

That point has beeen made in public debate. I shall draw it to the attention of my right hon. Friend the Chancellor of the Exchequer if there is scope to reduce taxes—one cannot say at this time—when he considers his Budget.

asked the Chancellor of the Exchequer if he will estimate the amount of new finance available for the northern region as a consequence of his autumn statement.

It is not practicable to estimate the incidence of new finance over the whole range of Government expenditure on a regional basis.

Is the Minister aware that I have asked a similar question on every Budget statement made since the Government came to office in 1979 and that each time I have received a similar reply? I expected something different for a change—that there will be an improvement in the northern region. What is different about this answer? If the Minister and the Government genuinely wish to make an impact upon the 230,000 unemployed people in the northern region, may I suggest that he takes the initiative and seeks to establish a northern development agency and—this is important—makes the same sums of money and resources available to it as are available to the Scottish and Welsh Development Agencies.

I do not know whether the reply that I shall give is the same as the one that the hon. Gentleman has received in the past.

I hope not.

It is not possible to estimate the amount of new finance, because a great deal of public expenditure is demanded or comes from procurement policies which depend upon decisions about competitive tenders by firms in different parts of the country. There are many good reasons why it is not possible to estimate the range of new finance.

I congratulate my right hon. Friend on the consistency of his approach to this matter, as illustrated by his answer to the last question. Does he recognise that if there are to be any bids from regions for assistance, the west midlands region must also be considered because, regrettably, unemployment is still distressingly high there? He should not be allowed to get away with the idea that the problems exist only in the north or in the other fringe areas of the United Kingdom. The heart of England equally needs recognition of its problems.

I well understand that the problems of restructuring regional industrial areas, many of which are dependent upon traditional industries, are not confined to the northern region.

Is the Minister aware that there has been a 57 per cent. cut in regional aid to the northern region since the Government came to office and that further cuts are forecast in the public expenditure White Paper published yesterday? In addition, a £2·6 billion cut in public capital expenditure is forecast in the White Paper. Will that not be further devastating to the northern region? Is not the truth of the matter that the Government have given up hope of ever helping the northern region?

Not at all, because substantial sums have been poured into the northern region. One of the key elements is the new jobs in the new industries coming to the northern region—some 21,000 in the electronics and pharmaceutical industries. It takes a long time to restructure an economy, but those things are happening. We have altered the course of regional development aid because there was no clear evidence that some of the money being spent was cost-effective. Since the northern region still has a high proportion of its area covered by assisted area status, proportionately it will benefit a good deal more from the new policy.

Is the Minister aware that the consistency to which he referred means that the north-east is continually going downhill? Whereas the Government say that 55,000 people are unemployed in the county of Cleveland, the figures released by the county council planning department show that there are 71,300 people unemployed. Is he aware of the study last year which found that £350 million needs to be invested in the northern region to cover the revamping of houses, roads and schools? Where is there provision for that?

If we are to maintain the downward pressure on inflation, which is important for northern region industries and those everywhere else, and if we are to contain the cost of public expenditure as a proportion of GNP, which is also important for those industries, there are inevitably constraints on the total level of public spending. In this White Paper we have increased public expenditure on housing renovation and roads compared with last year's White Paper.

Is it not true that the Government intend to make a further 40 per cent. cut in environmental and industrial expenditure in the northern region by the time of the next general election? Is it not equally true that at a time when those cuts are taking place in the northern region, Northern Ireland, for some reason, is being insulated from public expenditure cuts? Why is Northern Ireland insulated in this way? Why is it intended that Northern Ireland should get an increase by 1988? Is it that violence in Ulster is paying? Is it that the Government are refusing to admit that the higher the level of violence in Northern Ireland, the more money the Government are willing to sink in? Is that not a disgrace?

The way in which public expenditure in Northern Ireland is calculated in the areas to which the hon. Gentleman refers is the same under this Government as it was under the Labour Government. It is done by a block formula arrangement which reflects the same trends in expenditure and income.

Is my right hon. Friend aware that any money spent on trying to create jobs in the northern region almost invariably means fewer jobs in other hard-hit areas like the east midlands, which have received virtually no Government aid?

It is important that we can at least say that any regional aid has some possibility of being cost effective in creating jobs. That is what we have done in our regional policy.

asked the Chancellor of the Exchequer what recent representations he has received on tax relief on mortgage interest.

My right hon. Friend has received a number of representations on the subject.

Do the Government accept that mortgage interest relief, especially to young home buyers, is vital and must continue? Is not the £30,000 mortgage limit now rather on the low side in areas where an ordinary family house now costs £50,000 to £80,000?

The £30,000 limit is a matter for decision in each Finance Bill. My hon. Friend would not expect me to make a statement about that today. The Government have made it clear on many occasions that they have no intention of abolishing mortgage interest relief, for the very reason given by my hon. Friend. We are still awaiting similar clear and categorical assurances from the Opposition.

Is the Chief Secretary aware that if Government policy to preserve broadly the present level of exchange rate remains, the prospect in the medium term is of increasing, not falling, interest rates?

I shall not make any comments about interest rates. The hon. Gentleman will have noticed that the question is about tax relief.

Will my right hon. Friend remind the House what the level for tax relief on mortgage interest would be if the initial figure of £25,000 were to be updated to take account both of inflation and of the increase in house prices?

Off the cuff, I cannot recall the answer to that question, although I used to take a close interest in the matter. I shall write to my hon. Friend.

On the rhetorical question which the Chief Secretary so carefully prepared, may I offer him a spontaneous but categorical answer? There is no question of the next Labour Government, whom he clearly anticipates, abolishing mortgage interest tax relief. May I ask the Chief Secretary, on the subject of the question rather than on the subject of his slightly inappropriate question to me, how many representations he has received from owner-occupiers about the hardship they are now suffering through having to endure the highest real mortgage interest rate in the history of this country?

We have received no such representations. It is interesting to note that over the period of this Government the number of people who have moved into home-ownership has expanded enormously. That trend is continuing, and there remains a high demand for mortgage funds and owner-occupied housing.

I am sure that there will be general pleasure at hearing that mortgage interest relief will be retained, regardless of the colour of the Government. However, whatever the logic of the current situation, can the Minister explain why, if somebody succeeds in increasing his income, while he is in possession of a mortgage, from £10,000 to £100,000 a year, that great increase in his personal income should be accommodated by a double subsidy from the Government towards his interest payments?

I did not fully catch the hon. Gentleman's question, but if he is referring to the range of income and mortgage interest relief he will know that the fact that mortgage interest relief applies to the tax rates reflects the fact that some people are paying much higher rates of tax.

asked the Chancellor of the Exchequer what representations he has received advocating the abolition of car tax.

A number of such representations have been received.

Is my hon. Friend aware that only the motor industry is discriminated against by having imposed upon it a separate and additional tax? Does he agree that if it were abolished it would benefit both the consumer and the motor industry and would lead to a substantial number of additional jobs?

My hon. Friend knows that the car tax was introduced in 1973 mainly to compensate for the revenue lost from cars when the purchase tax rate of 25 per cent. was replaced by the standard rate of VAT. If car tax were abolished, a significant proportion of any increased demand would probably be met by imports, which currently represent about 58 per cent. of new car sales.

Having regard to the number of industries which serve the British motor industry, would not the abolition of the car tax have a significant effect upon employment in the motor industry?

Taxation is only one of the factors that affects the demand for cars. Per capita income, manufacturers' unit production costs and pricing policies also affect demand. However, I take my hon. Friend's point.

I appreciate the Minister's explanation of how the tax came to be introduced in the first place. Is he aware that if he were to remove this unique tax it would be more than compensated for by the increase in car sales? Austin-Rover, having been asked, is confident that it would be able to gain a full proportion of the increase in sales if the tax were abolished.

A useful rationalisation has taken place within the United Kingdom motor industry, but excess capacity in western Europe and elsewhere remains. Imports, therefore, remain a considerable risk. However, I am delighted to say that the optimistic climate created by the Government has led to expansion at Vauxhall, Lotus, Jaguar and Peugeot.

Does the Minister accept that this tax is a unique imposition upon the British volume car manufacturer and that it is yet another example of this Government shooting British industry in the foot, to the benefit of its foreign competitors?

This car tax applies to all manufacturers, whether they are foreign or British manufacturers.

Should not any mitigation of the car tax take second place to doing something about the fact that a constituent of mine can earn £91 a week as a nurse and then find that she has a take-home pay of only £68? Is not that the kind of thing that ought to take pride of place as regards any mitigation of tax?

Order. That is ingenious, but it is a bit wide of the question.

That seems to me to be a Budget question and it would he inappropriate for me to anticipate my right hon. Friend the Chancellor of the Exchequer.

asked the Chancellor of the Exchequer if he is satisfied with the progress of the United Kingdom's real economy in terms of manufacturing output and overall growth since the beginning of 1985.

Manufacturing output and GDP are expected to have grown by 2½ and 3½ per cent. respectively.

Both the real and the money figures since 1984 and 1981—the low point—look quite good in certain manufacturing sectors, but the real, ominous truth remains that in the leading manufacturing sectors the figures in unit, quantity or volume terms are well clown both on 1979 and on 1973. Can my right hon. Friend say, to reassure all of us, that there are other manufacturing sectors—in volume, quantity and unit of output terms, not in money terms—where there has been a big growth since 1984 and 1981? Can he reassure us once again about the miracle of the monetarist counter-revolution?

If my hon. Friend is looking for miracles he will not find them anywhere, least of all in the policy changes that he would like to see.

We can discount the Minister's optimism, because he is so desperate for signs of good cheer that he would greet the quickening of rigor mortis as a healthy symptom. If he really wants to get the economy going, why does he not bring the pound down from its artifically high level and stop subsidising imports and penalising exports? He could do that by reducing interest rates, which crucify everyone?

The hon. Member imagines that devaluation is a cure for everything. No doubt he would also recommend it as a cure for rigor mortis.

Does my right hon. Friend agree that as regards manufacturing industry there are two important points? One is the improvement in productivity by a reduction of overmanning, as many companies now find that they can produce the same amount with two thirds of the original labour force. Secondly, profitability in manufacturing industry is probably higher now than in the past decade.

My right hon. Friend is right. One of the most encouraging signs has been the increase in productivity to which he referred, both in the whole economy and in manufacturing in particular. Manufacturing productivity, for example, during the life of this Parliament—taking the same period as I took earlier—is up by almost 10 per cent. It is necessary, however, as the CBI fully recognises, if we want to see more of our people in work, for industry to have a tighter grip of wage increases.

Could the Chancellor tell the House his current thinking about the impact on British manufacturing output of the highest interest rates ever, higher than those of all the other major industrial countries?

I indicated at the time of the autumn statement that the outlook was promising for output, and it has not changed since then. It is striking that, unlike the recovery under the Labour Government, in the recovery during the lifetime of this Government we have seen a rate of growth of capital investment, including investment in manufacturing, of 4 per cent. a year compared with 1¼ per cent. a year for investment under Labour.

asked the Chancellor of the Exchequer whether he will make a statement on the consequences for United Kingdom revenue of the change in oil prices.

I have nothing to add to what I said in the debate on the autumn statement.

In what circumstances would changes in the sterling price of oil justify changes in the Government's borrowing requirement targets?

Changes in the sterling price of oil, if there were such changes—which would have an effect on oil revenues—would certainly be one of the things that I would take into account in deciding the appropriate PSBR at the time of the Budget. But it would be only one of a number of factors.

Will my right hon. Friend tell us whether it is correct that Ministers are proposing to talk, or are already talking, to Saudi Arabia about oil prices? Whilst, in the interest of world stability, it would be better to prevent a huge collapse in oil prices, will my right hon. Friend assure us that it remains the policy of the Government to let oil prices settle themselves in the market? Will he accept that, providing there is no large collapse, it should not over-influence him in his decisions about tax cuts in the forthcoming Budget?

I am happy to reassure my right hon. Friend that policy in these matters is exactly the same as it was when he was at the Department of Energy and when I was at that same Department.

asked the Chancellor of the Exchequer what increase in take-home pay would be received by a person earning £140 per week if the basic rate of income tax was reduced from 30 to 28 per cent.

The increase would be £90 per week for a single person or working wife, and £39 for a married man in 1986–87, based on the illustrative allowances shown in the autumn statement.

Is my right hon. Friend aware that if we are really serious about trying to help the lower paid by means of any tax cuts that we make in the forthcoming Budget, the best way of going about it would be to raise thresholds and reduce national insurance contributions for those on lower pay, when the take-home pay would be much greater than that which he has just announced?

I know that my right hon. Friend the Chancellor of the Exchequer will be interested in the views of my hon. Friend and others. I know that my hon. Friend wrote to my right hon. Friend on 10 December expressing some of those views in detail. Regarding the reductions in the basic rate of £1·90 a week for a single person, if the same amount were applied on thresholds for a single person, the amount would be £1·44, or 50p less.

asked the Chancellor of the Exchequer when he next plans to meet Finance Ministers of the Group of Five nations to discuss international monetary affairs.

The Finance Ministers of the Group of Five nations meet from time to time for this purpose.

Does my right hon. Friend agree that since the Finance Ministers of the Group of Five last met in New York four months ago, their plan to reduce the value of the dollar has worked, the dollar has weakened against sterling by about 5 per cent., and the rate with the deutschmark has changed by about 10 per cent. to a rate of approximately DM 3·50 to the pound? Does that give him confidence for his forthcoming meeting with the Group of Five Ministers?

My hon. Friend makes a good point. Certainly before the G5 meeting the general view of those in industry was that, whereas the dollar was too high and could well come down, the mark could go up a little against sterling. Since the Plaza meeting sterling has risen 5 per cent. against the dollar and fallen by 9 per cent. against the deutschmark.

Is it not clear that Western countries depend on the present buoyant economy of the United States? Should not Germany and Japan, let alone ourselves, do more to stimulate our economies, and so play our part in a continued resurgence of activity in western Europe, America and Japan?

It is possible to exaggerate considerably both the extent to which growth in the world economy is dependent on growth in the United States, and the extent to which that has slowed down. That growth has slowed down from an unsustainable rate, but it is continuing in the United States and quickening in the Federal Republic of Germany. One would certainly like to see the Japanese pursue a more generous policy than at present.

Does my right hon. Friend accept that the international economy is being severely hurt by an international trade war, which this time is being carried on by competitive devaluations of currencies? Does he further accept that such a trade war could be stopped if we were to move towards fixed exchange rates and honest international money, that is, if there were some restoration of gold convertibility on a gold exhange standard? When he meets his G5 friends, will he please undertake to consider the restoration of stability in world monetary and financial affairs, in the hope that that will reflect on the world economy in terms of genuine trade growth?

I certainly take note of what my hon. Friend said. He will not expect me to answer all his points. I am sure that the strength and durability of the world recovery since the world recession in the early 1980s, and the growth of world trade that has accompanied it, depend on the fact that all the countries involved are pursuing anti-inflationary, sound money policies.

Does the Chancellor of the Exchequer agree that now is the last time to be complacent about the international economy? Does he not realise that it still faces the terrible, pressing problems of world debt and a potential decline in economic growth? Will he assure us that when he meets the Group of Five he will be at the forefront of calls for a co-ordinated cut in interest rates and policies of expansion, and will not indulge in absurd notions of leaving those matters to market forces?

I can assure the hon. Gentleman that the Finance Ministers of the Group of Five are fully seized of the problem of international debt and of the need to maintain sound anti-inflationary polices, both for their own sake and to ensure a continuation of world recovery.

asked the Chancellor of the Exchequer when he next intends to meet the National Economic Development Council to discuss the level of wage increases.

The impact of wage increases on jobs was discussed at a meeting of the council on 8 January.

When the Chancellor of the Exchequer next meets the NEDC to discuss the question of wages, will he bear in mind that many lower paid workers do not even pay income tax because of their circumstances? If he reduces income tax in the coming Budget, he will not help them very much. While he is having a go at the workers, will he have a go at his hon. Friends in the very high income bracket who have been receiving massive increases every year since he came into office?

May I make it absolutely clear that it would be wrong for me to say anything about what the Chancellor might do in the forthcoming Budget.

asked the Prime Minister if she will list her official engagements for Thursday 16 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. This evening I shall be giving a dinner for his Majesty King Hussein of Jordan.

Will my right hon. Friend join me in welcoming the initiative taken by ACAS in securing a meeting next Tuesday between the employers and the majority—one hopes all—of the teachers' unions to discuss negotiations on their pay claim? Will she share with me the hope that the National Union of Teachers will at last recognise that, if we are to have discussions about the amount that teachers should be paid, we should also have discussions about what they are supposed to do for the money?

We hope that ACAS is able to help the two sides to reach a satisfactory conclusion. The Government, like parents, want to see an early end to this damaging dispute, but I agree with my hon. Friend that it is our objective to have a statement that clearly defines teachers' duties and to have a pay structure that gives better pay to better teachers. That remains our objective.

asked the Prime Minister if she will list her official engagements for Thursday 16 January.

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

When did the Prime Minister first learn of the letter sent by the Solicitor-General to the former Secretary of State for Defence?

I do not have the precise dates with me—[Interruption.] If the hon. Member will repeat the question, I will see whether from my recollection I can give him an answer. Will he repeat his question? I am sorry, but I did not quite get it.

Will the Prime Minister tell the House when she first learnt of the letter sent by the Solicitor-General to the former Secretary of State for Defence? That is the second time.

Fairly soon after it was written, when it was sent to the Department—[Interruption.] I cannot give the hon. Gentleman the precise time or day, for obvious reasons.

May I ask my right hon. Friend, in between her other meetings, whether she can answer for me a question arising out of yesterday's debate, at column 1167, where the Secretary of State for Trade and Industry quoted from the records of the meetings that took place on 4 and 17 October? Would it now be in order, as he has quoted from those documents, for me to add a few words to the quotations?

As my right hon. Friend knows, matters of order are not for me. I am not quite certain whether my right hon. and learned Friend quoted direct from the documents. As I heard him, he was giving the gist of the information. I am not sure whether he quoted direct. The precise point of order my right hon. Friend would clear with other people.

asked the Prime Minister if she will list her official engagements for Thursday 16 January.

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

Is the Prime Minister aware of how appalled the country is at the succession of half-truths and naked, political ambition of recent days alongside the total disregard for the future of the jobs of Westland workers? Is she not appalled at the sharks of the City picking over the bones of Westland shares—the same people whose hands are bloody over recent redundancies in Coventry, South-East? Is the Prime Minister further aware that neither bid guarantees jobs at Westland, and that the only way to a secure, long-term future for the helicopter industry is public ownership and an expanded civilian programme?

I do not believe that the future for Westland lies in public ownership. We have great regard for the people who work there and for their future. I hope that for that reason the matter will be speedily resolved.

My right hon. Friend will be aware of my interest in British Aerospace, as declared in the Members' Register. Specifically on the question of the meeting between my right hon. and learned Friend the Secretary of State for Trade and Industry and Sir Raymond Lygo on Wednesday 8 January, does my right hon. Friend accept that a close reading of the documents now available, together with other evidence, suggests a case of genuine misunderstanding, which I hope will help us to understand some of the problems?

Yes, I think that that is correct. I am glad that those accounts have been fully published.

Given the extent, the closeness and the frequency of the contract between Sir Raymond Lygo and United States Government aerospace interests, does the Prime Minister agree that he is the last man who would need to be advised by the Secretary of State for Trade and Industry? Does that not make the excuse offered by the Secretary of State for the meeting on 8 January somewhat thin? Was not the real purpose of that meeting, not to advise, but to menace?

No one would ever accuse Sir Raymond Lygo of being anti-American in any way whatsoever. My right hon. and learned Friend the Secretary of State gave his own account of the meeting and why he thought it was advisable to have it at the time. I have nothing to add to that.

Will the Prime Minister then answer the question, which she evaded yesterday and which her right hon. and learned Friend did not answer? Can she think of any plausible reason whatsoever why Sir Raymond Lygo should falsify either the words or the meaning of the meeting on 8 January? Is there any feasible reason why Sir Raymond should say that the Secretary of State had said to him

"what you are doing could be extremely damaging to you and your business."

No. No one on this side of the House is accusing anyone of falsifying any document—[Interruption.] My hon. Friend the Member for Arundel (Mr. Marshall), who asked me a question a moment ago, has the right explanation.

I know that the Government's stock in trade is to suggest that there has been a misunderstanding. May I suggest that the quotations from Sir Raymond are so extensive, so detailed and so particular as to forbid the idea that any of the difficulty arises from misunderstanding? Sir Raymond was within minutes of his departure from the Secretary of State for Trade and Industry when he retold the story in full detail.

The accounts are out. I fully accept that my right hon. and learned Friend's account is the correct version of the meeting—[Interruption.] It is not impossible for there to be different, genuine recollections, genuinely held.

Is my right hon. Friend aware of the serious fire raging underground in a coal seam in a village in my constituency? Is she prepared to give an undertaking to assist the local authority financially in putting that fire out?

We shall obviously do all that we can, because the matter is serious.

In view of the widely publicised Libyan involvement in the affairs of Fiat, has the Prime Minister been given clear assurances that President Reagan's ban on economic and business links with Libya will not apply to Westland if the Fiat-Sikorsky rescue bid succeeds? Can she guarantee that the President's sanctions against Libya will not affect technology transfer from the United States to Westland?

I can guarantee none of those things without looking into them a good deal further.

Does my right hon. Friend agree that what happened yesterday, when we saw the Opposition querying the veracity of notes taken by civil servants, is unprecedented? Does she perhaps feel that those who started saying that are basically those who have never held office and never should?

I thought that they were unwarranted attacks on civil servants, who serve all Governments supremely well.

As the notorious letter sent by the Solicitor-General to the former Defence Secretary seems to involve the pursuit of a most vicious vendetta, will the right hon. Lady give an absolute undertaking that she will make the report to the House herself when she discovers the culprit?

The inquiry announced in my reply to the hon. Member for Great Grimsby (Mr. Mitchell) on 14 January is still in progress. The right hon. Gentleman knows the custom with regard to leak inquiries—their outcome is not announced. That has been the traditional custom.

In the light of the serious terrorist attacks on Rome and Vienna international airports during the recess, which left many innocent people murdered or maimed, and as it was quite clear that the godfather of terrorism, Colonel Gaddafi, was behind the attacks, will my right hon. Friend say what action the Government intend to take against Libya?

My hon. Friend is aware that we took action against Libya after Yvonne Fletcher was murdered by guns fired through windows in the Libyan embassy. We cut off diplomatic relations, cut any defence equipment and severely restricted immigration and ECGD credit. There is very little at present that we can add to that action, which has not been diminished in any way.

asked the Prime Minister if she will list her official engagements for Thursday 16 January.

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

Does the Prime Minister recall that the right hon. Member for Henley (Mr. Heseltine) has claimed that a further meeting on Westland was fixed for 3 pm on Friday 13 December? Does she recall that, yesterday, she said that, as no meeting was agreed, no meeting could be cancelled? Did she hear the Secretary of State for Transport say on the Radio 4 "Today" programme this morning that he was glad that the meeting had been cancelled? However inadvertently, he confirmed which side was telling the truth on this issue.

As I said yesterday, no meeting was needed and no meeting was agreed—[Interruption.] No meeting was needed and no meeting was agreed. I made that clear yesterday.

Is it not to the eternal discredit of the Labour party—[Interruption.]

Order. I hope that the hon. Gentleman will ask a question on the Prime Minister's responsibilities.

Does my right hon. Friend agree that it is to the eternal discredit of the Labour party that it separated, when in government some 20 years ago, discussions on teachers' pay from discussions on conditions of service? Is it not that which has led to the damage to children's education today? Does my right hon. Friend agree that those circumstances must be reversed as soon as possible?

There have been several attempts to negotiate pay and conditions of service together. So far, all have failed. I agree that this has been to the detriment of the education system. We must make strenuous efforts this time to see that conditions of service and a pay structure that gives better teachers more pay are agreed.

asked the Prime Minister if she will list her official engagements for Thursday 16 january.

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

Turning from Britain to Wales, to the £200 million cut in education forecast in yesterday's expenditure White Paper and the 13 primary schools in Powys that are doomed to close, will the Prime Minister instruct the Secretary of State for Wales—[HON MEMBERS: "Reading."]—to increase the proposed rate support grant in Powys—[HON MEMBERS: "Reading."]—to the Welsh average from its present totally inadequate level for 1986–87?

I know that the hon. Gentleman feels strongly about education and about primary schools in his constituency. He knows full well that it is for local education authorities to determine the pattern for the provision of education. May I point out that his constituency, Powys, is favourably treated by the Welsh rate support grant. The block grant per head in Powys is 70 per cent. of expenditure compared with an average for the Welsh counties of 59 per cent. of expenditure. The disbursement of the amount is, of course, left to the local authority.