asked the Chancellor of the Exchequer what effects the recent fall in oil prices will have on the Chancellor's forecasts for the balance of payments in 1986 and 1987.

My right hon. Friend the Chancellor has asked me to apologise for his absence today as he is attending the annual OECD meeting in Paris.

Does the Chief Secretary agree that not only will the fall in revenue from oil prices seriously affect our balance of payments, but so will the fall in oil products? Will that not mean a rapidly growing crisis in our balance of payments? What do the Government intend to do to rectify the present imbalance in our trade in manufactured goods, with which the Budget failed to deal adequately?

I do not think that there will be those consequences. In no previous five-year period in recent history has manufacturing output been so successful in holding its market share and keeping pace with world output. The hon. Gentleman will know from the Budget that the buoyancy in the non-oil part of our economy is showing through substantially.

Is not the fact that the pound has remained reasonably strong during the past couple of months a tribute to the sound management of the economy by this Government?

My hon. Friend's remarks are absolutely right.

Is it not clear that not only has the drop in oil prices affected the amount that we are likely to obtain in foreign exchange, but that our competitive position vis-a-vis France, Germany and especially Japan has worsened considerably because those countries have been paying substantial sums for their oil? In view of that, will the right hon. Gentleman consider at least starting talks with OPEC to ensure that we obtain a reasonable price for the very important asset that we own?

I hope that the right hon. Gentleman is not suggesting that we should have talks with OPEC about keeping up oil prices. He will surely agree that the United Kingdom economy is benefiting considerably from the fall in oil prices, although perhaps not as much as other economies. He must be aware of the beneficial position of the exchange rate in relation to the countries to which he referred.

Is not the United Kingdom doing the whole world a great favour by refusing to talk to OPEC or to put up oil prices to an unnecessary level?

I have not the slightest doubt that the fall in oil prices is helping the growth of the world economy, from which we must benefit.

asked the Chancellor of the Exchequer what is his estimate of the cost of unemployment in 1986–87; and what proportion of the yield of income taxation this represents.

The overall cost to the Exchequer of unemployment and supplementary benefit paid to the unemployed is estimated to be about £5·6 billion in 1986–87. In addition, about £1·5 billion is paid in housing benefit—a benefit which can continue to be paid if the recipient finds employment. This in total is 17½ per cent. of forecast income tax revenue for 1986–87.

Does not that answer, which touches on part of the cost of unemployment, illustrate the sheer scale of the failure of the Government's economic policies? For how much longer does the Minister think the country can tolerate that?

The answer certainly illustrates the problems and costs of unemployment. However, as the hon. Gentleman will notice from the employment and unemployment data published yesterday, alongside the tragic levels of unemployment there has been a rise in employment of 1 million new jobs since June 1983.

Does my right hon. Friend agree that if we added to the benefits paid to the unemployed the tax revenue lost as a result of their not being in work the total cost would be considerably greater? For a married man on average earnings, it could be as high as £8,000 a year. Does that not provide an excellent justification for the various job subsidy schemes introduced by the Government? Will my right hon. Friend consider extending the principle of job subsidies more generally?

My hon. Friend knows the difficulty of trying to extrapolate the potential additional tax and other revenues from people whom we obviously want to see in full employment. I am sure that he welcomes the additions to the programmes to help the long-term unemployed, which were added to in the Budget.

Is it not real that the true economic cost of unemployment could well be less, not more, than the total of transfer payments made to unemployed persons?

Clearly, that is correct.

Does my right hon. Friend agree that the unemployment figures are grossly overstated, especially in the south of England, due to the expanding black economy? How much would the Exchequer save if 500,000 people were forced out of the black economy into the legitimate economy?

Without notice I cannot give my hon. Friend the specific cost, but anything that we can do to lower taxes and further deregulate the economy to reduce the attraction for people to go into what we would all deplore—the black economy—will be of benefit to all.

In view of the sharp rise of 37,000 in the underlying jobless trend last month, will the Government now consider using the money spent on unemployment benefit and the tax revenue forgone through unemployment on job creation instead of on maintaining the ever-growing army of unemployed?

The hon. Lady would want the House to be reminded of the happy increase in the long-term employed as well as the tragic increase in those who are unemployed. I am sure that she will never begin to grasp the fact that real long-term jobs come not from state expenditure but from the underlying success of enterprise in the economy.

asked the Chancellor of the Exchequer what recent discussions he has had with the Governor of the Bank of England and others regarding rescheduling of world debt; and if he will make a statement.

The Governor of the Bank of England and my right hon. Friend the Chancellor of the Exchequer discussed the question of debt at last week's IMF and World Bank interim and development committee meetings in Washington. The meetings welcomed the progress that is being achieved in strengthening the current debt strategy tailored to individual cases and aimed at promoting durable growth in debtor countries.

Is it not true that the strategy about which the Minister talks has resulted in the debts of Third world countries getting higher and higher as each year passes? Is he aware, for instance, that the debt is about $900 billion? Is it not also true, as the "War on Want" publication issued today asserts, and as hon. Members have done in the House, that Western, Latin American and Nigerian bankers have been living like fat cats while the people in their countries are getting poorer. Is it not time that we changed a system that allows British banks to write off their bad debts against tax while those poor people are getting poorer?

The hon. Gentleman has overlooked the fact that the fall in the dollar interest rate in particular, and in interest rates generally round the world during the past year, and especially in recent months, has had a beneficial effect on the problems of debtor countries. I do not deny that there is a heavy burden of debt and that it is difficult for many countries to service it, but the fall in oil prices will have benefits other than the reduction in interest rates. Many oil importers, such as Brazil, which is the largest debtor in the world, will benefit substantially from that change.

My hon. Friend referred to the effect of the decline in the oil price. Does he accept that that shows that it is universally to be welcomed and that it will help the Third world as well as ourselves?

Yes, I endorse what my hon. Friend has said. Indeed, the communiqué of the interim and development committee referred to the improved outlook for sustainable growth in the world. Of course, that applies to developing as well as industrial countries.

What has the Chancellor of the Exchequer done to fulfil the high hopes raised by the Baker-Darman plan, to which, incidentally, his right hon. Friend was party at last September's World Bank and IMF meeting? The House wants to know what are the realistic prospects for that growth-oriented adjustment, about which Mr. Baker had so much to say all winter long.

The prospects for the Baker plan are good, contrary to much of the public comment about it after the meetings, which, as the hon. Gentleman said, I attended last year, and the recent meeting in Washington. The World Bank has approved higher lending limits. It has decided to increase the amount of structural adjustment lending and policy-oriented lending, and there is already greater co-ordination between the IMF and the World Bank. There has also been agreement in those committees that lending by export credit agencies should follow much more closely upon agreement of a programme with the IMF. That initiative was proposed by my right hon. Friend the Chancellor at the 1984 meeting. I am glad to say that the agreement on the multilateral investment guarantee agency, which was initiated—[Interruption.] I am trying to give a comprehensive answer to the question. The United Kingdom was the first of the G5 countries—the Group of Five—to be signatory to that agreement. That is a welcome development.

Does my hon. Friend accept that although the fall in inflation is good news for Third-world countries, the most important single achievement would be to nudge the Bank of England to get interest rates down more quickly? A little risk at home on interest rates would benefit us a little, but would it not benefit even more those who need to have their world debt rescheduled?

The decline in interest rates around the world has been extremely helpful for debtor as well as industrial countries, such as the United Kingdom. However, significant reductions in interest rates have already taken place over the past few weeks, not only here, but in the United States, Japan, Germany, and, this week, in France. I welcome that development. So long as the inflationary pressures generated by high oil prices continue to abate, that prospect can continue.

I congratulate the Government on embracing so heartily in Washington last week the principle of Government intervention in the economy to stimulate growth. However, the hon. Gentleman is ludicrously complacent about the Baker plan and the position of Thirdworld debtors. Debtors hit by falling commodity prices and by the need to adjust to the United States budget deficit have no prospect at all of increased living standards for their people unless the European and Japanese Governments adopt policies of greatly increased growth—in other words, practise at home what they preach abroad.

The prospects in Europe and Japan for increased economic growth are encouraging. Indeed, they are part of the basis on which the countries exporting primary products will need to base their plans.

asked the Chancellor of the Exchequer what plans he has to improve prevention of importation of dangerous drugs through regional airports.

Customs and Excise is well aware of the risk of drug smuggling through regional airports. It is making increasing use of risk assessment, intelligence and information in identifying potential drug smugglers and drug trafficking routes. Technical aids are also being increasingly used. Although the prevention of drug smuggling is not simply a matter of numbers, additional staff have been allocated to certain provincial airports where the risk is greatest to deal specifically with drugs.

Is my right hon. Friend aware that the north-west has a major drug problem and that Manchester airport is probably one of the major channels for the importation of heroin into this country? Will he guarantee that whatever resources are made available at Heathrow and Gatwick in terms of Customs manning levels, sniffer dogs, thermal imaging and technology are also made available at Manchester?

I am well aware of and share my hon. Friend's concern about this matter. In the three years from 1985 to 1987, 560 new posts were allocated, and the great majority of the new officers were engaged on the prevention of drug smuggling. We are also increasing the number of technical aids and the money spent on their development and introduction. Decisions on manpower at Manchester this year depend on the advice of local managers.

Most hard drugs come from Pakistan, especially through Pakistan International Airways. Will the Minister make an effort to control that situation? Will he ban PIA aircraft from entering Britain and thereby make much easier the job of the Customs and Excise staff, who are under great pressure at present because of cuts?

The banning of airlines is not a matter for me. We have increased not only the Customs and Excise staff, but the effort to deal with the problem of drug smuggling at the source.

In view of the seriousness of the problem, does my right hon. Friend agree that prevention is cheaper than cure? Despite the resources that he has just announced to the House, will he give an undertaking that the resources made available for the prevention of drug smuggling is demand-led, riot cash limited?

We look at this matter each year in the public expenditure round. I hope my hon. Friend will agree that my concern is shown by the fact that we have considerably increased the sums and posts this year. As he rightly recognises, prevention is most important, and it is having an effect, as Customs and Excise is increasingly seizing more heroin and cocaine each year.

asked the Chancellor of the Exchequer if he has yet quantified the expected effect of his Budget on unemployment.

The purpose of the Government's economic policy is to encourage a vigorous and enterprising economy, generating sustained growth of output and employment. The Budget proposals include a considerable number of measures directed to the problems of unemployment.

Despite the way in which the unemployment figures have been fiddled yet again, is it not clear that the true level of unemployment is now more than 4 million? Why does the Minister not state clearly that the Budget will do nothing to end the misery of mass unemployment? That is certainly a reason why the Government will be rejected at the general election. Fulham is just the start.

I disagree with all parts of the hon. Gentleman's question. The dependence of the economy on growth and output for improving employment has been well demonstrated by the figures published yesterday, which show that 1 million new jobs have been created during the past three years. We now have the lowest corporation tax, at 35 per cent., since the war, and the small companies rate is 29 per cent. That is how the private sector can generate the jobs that we need.

The Budget obviously contains some sensible measures designed to alleviate unemployment, but is not the more important factor about which the Treasury must be concerned the rise of 5·7 per cent. in unit labour costs last year and of 4·5 per cent. tbhe preceding year? Therefore, we must see some improvement during the coming period.

I absolutely support what my hon. Friend has said. Nothing would do so much to improve the prospects for the expansion of British industry, and the creation of further additional jobs than if our unit costs were to rise at a rate not greater than that of our major competitors.

Why does the Minister not tell the House that the Budget will do nothing for unemployment? Does he agree that if we are to have a recovery, it must be through industry? Will it not be a great disappointment to industry that interest rates have not decreased today? Is that not a direct result of the free market economy?

The Budget was well received in the financial market, and I am sure that the sound, responsible economic policies that my right hon. Friend the Chancellor of the Exchequer introduced in his Budget are a direct reason why interest rates have been able to fall by 1·5 points since that day.

In reflecting on the Budget and unemployment, does my hon. Friend accept that at least one hon. Member is bitterly disappointed? The Treasury did not take up my suggestion to introduce measures to assist with the relocation of labour by taking account of the figure of £8,000, referred to by my hon. Friend the Member for Lewisham, West (Mr. Maples), which if given to an unemployed person in the north to help him relocate in the south, where house prices are out of his reach, would have done much to help unemployment.

The measures in the Budget which apply to the economy as a whole are a better way of devoting limited resources to encourage the expansion of the economy, which is the best way to maintain jobs throughout the country.

Is the Minister aware that, among those who did not welcome the Budget, were manufacturers in the north of England and elsewhere, who for six years have faced real problems, created by the Government, in increasing production, investment and ultimately employment? What in the Budget will increase output and employment in the manufacturing industries?

The most important factor for manufacturing areas, whether in the north of England or anywhere else, is a reduction in inflation. The reduction in interest rates has already taken place and there is a low rate of corporation tax, so industries can reinvest the profits in additional growth in the future.

Does my right hon. Friend agree that many other factors affect the levels of employment and unemployment, besides the welcome measures that were introduced in the Budget? In particular, does he agree that measures such as restrictive practices in commerce and industry, and the introduction of new technology, can affect the level of unemployment? Is it not just as important to pay attention to those measures as to the welcome the measures that were introduced in the Budget?

I note the point that my hon. Friend has made. Several factors inhibit the working of the labour market, and we have done our best to try to reduce them. We have also tailored the specific employment measures in the Budget particularly to deal with the most difficult areas—the young, the long-term unemployed and those who need training. I am sure that they are the right areas on which to concentrate.

As the original question refers to the effect of the Budget on unemployment, and as the Treasury must have calculated the effects of the Budget on employment, will the Economic Secretary at least admit that he is simply too ashamed to publish that Treasury forecast? As he referred to the Department of Employment figures published yesterday, will he confirm that those same figures show that unemployment has increased by more than 100,000 during the past year, and that the Department of Employment yesterday—only one month after the Budget—announced a resumption in the upward trend of unemployment?

The hon. Gentleman may have overlooked the fact that the announcement yesterday demonstrated that jobs are rapidly being created in the economy. I should have thought he would welcome that.

What is the Treasury's estimate of the effect on unemployment of 1p off the standard rate of tax, compared with a 10 per cent. reduction in the employers' national insurance contribution, the cost being identical?

The reduction in taxation, whether for individuals or for companies, will improve the level of efficiency and incentives in the economy and therefore lead to a continuation of the very satisfactory expansion in the number of jobs in the economy. I remind the hon. Gentleman that the substantial restructuring of national insurance contributions, which was announced in the Budget last year, has come into force only this winter, so the major effect of that restructuring is still to be felt.

asked the Chancellor of the Exchequer what will be the combined income tax and national insurance contribution liability, when the Budget resolutions take effect, of a single person earning (a) £50, (b) £75 and (c) £100 per week.

The figures are £3·98, £13·98, and £24·98, respectively.

I welcome and appreciate the significantly reduced income tax and national insurance liability of the low-paid over the past two Budgets, as instanced by the fact that a single person earning £50 a week has had that liability halved, but if it is correct that a person now earning only half average earnings still has to pay about 25 per cent. in income tax and national insurance contributions, must it not remain a top priority for the Chancellor in future Budgets to reduce that tax liability further?

I thank my hon. Friend for his support for what we have been able to do. He is absolutely right. I would not want to be precise on the figures, but for those on half average earnings about 25 per cent. would go in national insurance and income tax. I welcome his support and that of all hon. Members for anything further that the Government can do, within a sound economic performance, to reduce further the actual rates of income tax.

Will the Minister confirm that if the £100 to which he referred had been unearned and a sole income, the Government's take would have been less? Can the Minister say what is logical about that?

What the Minister can say quite clearly, as my hon. Friend the Economic Secretary said a few moments ago, is that the attempt to reduce national insurance contributions at the bottom, and this time the combination on top of that, has given us a much better opportunity to add to employment.

asked the Chancellor of the Exchequer what increase would be needed in the standard rate of income tax in order to raise an additional £24 billion of revenue by this means alone; and if he will make a statement.

About 20p, bringing the basic rate to 49p in the pound.

Does my right hon. Friend agree that electors opting for the 41 per cent. VAT rate and the 49p in the pound standard rate of tax, currently on offer by the Labour party, and rising like a cash register all the time, must be practising masochists? The Liberal and Social Democratic parties are not much better. Would it not be much better for the electors to stay with the tax-cutting policies and sound economic growth policies of the Conservative party?

I entirely agree with my hon. Friend's last comment, but to be fair to the Opposition I must make it clear that under their policies the electorate has a choice—either 49p in the pound on income tax, or 41 per cent. VAT. To be fair, it is not both, but either.

Do not the figures that the right hon. Gentleman has just given show that to finance the £18 billion a year defence budget is costing on income tax alone about 14p in the pound? If that is so, why was it necessary for the Prime Minister to emphasise time and time again that we need hundreds of thousands of American troops in Europe to protect our freedom? How much extra would it cost in income tax if we were able to protect our freedom without American troops?

The hon. Gentleman is not making a fair point with regard to income tax, because Labour party spokesmen have made it clear that they would not reduce the overall proportionate cost of defence on GDP. Therefore, there is no implication of a reduction in tax from any change in defence policy by the Labour party.

Does my right hon. Friend agree that if £24 billion was added to public expenditure, a married man would be able to retain only 44p from every £1 that he earned over £70 a week for himself and his family?

I agree with my hon. Friend. The proposals which are still being put forward, and which have not been denied, would have a devastating effect on the overall tax burden and, therefore, on jobs in the economy.

If unemployment were reduced by half, would not the savings to the Treasury and the contributions of those employed, certainly if they were on anything like half average earnings, equal the amount of money that the hon. Member for Ealing, North (Mr. Greenway) mentioned in his rather extravagant, if obedient, question?

It is certainly not extravagant, because the figures that I have put forward have still have not been denied. The hon. Gentleman will know that his right hon. Friends on the Opposition Front Bench, even with their high levels of expenditure, are not predicting anything like a drop to half in the level of unemployment. They are expecting a comparatively small drop over two years, but are completely ignoring the devastating effect on existing jobs of those high expenditure programmes.

asked the Chancellor of the Exchequer when he expects to commence discussions on public expenditure programmes for 1987–88; and if he will make a statement.

Spending plans for 1987–88 will be reviewed during the summer and autumn as part of the 1986 public expenditure survey.

I recognise the continuing need to restrain Government expenditure and the important role that my right hon. Friend will play in that procedure, but will he nevertheless take note that there is a good deal of pressure for greater resources to be introduced, particularly into health and education, and will he confirm that, as the new round of expenditure control begins, he will try to keep a balanced view between desirable tax cuts, to which we all look forward, and essential Government expenditure, for which there is considerable public support?

My hon. Friend will agree that the desirable tax cuts are beneficial to economic growth Not only do we receive desirable tax cuts from a prudent control of Government spending but we get policies which can produce lower interest rates, which are equally beneficial. But of course my hon. Friend is right. We must keep a balanced approach to these matters. In particular, we must keep a clear view of priorities within the overall public expenditure programme. I have noted his priorities and he will know that we have devoted great priority to health and, after allowing for inflation, there has been real growth of over 20 per cent. in the health programme since 1979.

When the Chancellor is considering expenditure programmes for 1987–88, will he take into consideration the fact that today's lower oil prices—and no doubt they will continue for some time—are making it extremely difficult for the coal industry? Will he make sure that the coal industry is not totally emasculated because it is unable to compete with oil?

Obviously many of these points are matters for the coal industry, and it will have to look. I or example, at its investment programmes and everything else, both in relation to falling oil prices and the negotiation that it has with its customers.

When these discussions begin, will my right hon. Friend continue to explain to those representing local authorities that substantial savings can be made if they seek to privatise many of the services that they currently carry out?

Certainly I believe that the Audit Commission has shown that there are still very considerable efficiency savings to be achieved by local authorities. My hon. Friend is right in saying that contracting out and that sort of thing still have some way to go in contributing to those substantial savings.

As the final figures for the public sector borrowing requirement for last year have now turned out to be £2 billion less than anticipated, surely it will make some difference to the right hon. Gentleman's expectation of public expenditure over the forthcoming year?

I am sure that the right hon. Gentleman, who follows these matters very carefully, will know that we have an expectation of oil prices over the year. Obviously we cannot predict exactly what the future course of oil prices will be, so we must have a prudent approach in that respect. The PSBR, of course, is always within a margin of error, and it is roughly the same margin of error as in recent years, but in a beneficial direction. I think that that illustrates the buoyancy of the non-oil sector of our economy. That has contributed substantially to this favourable outcome on the PSBR, and I would have thought that the right hon. Gentleman would welcome that.

Is it not time, before these decisions are made, for a comprehensive review to be made of one form of public expenditure as against another? Is my right hon. Friend aware of the growing concern at the consistent over-runs in defence expenditure on new, untried equipment, which nobody else appears to want to buy, and the continued underfunding of other programmes, such as the education programme?

I agree that the overall look at public expenditure is a very important aspect of each year's public expenditure round. I am making some technical changes in the sequence of putting together the material for collective ministerial discussion and decision this year and I hope that that will contribute further to that process.

asked the Chancellor of the Exchequer how much direct support for research and development was contained in the Budget measures.

The scientific research allowance has been kept at 100 per cent. despite the reduction of other investment allowances to 25 per cent. this year. The proposal in the Budget to allow companies to make one-off gifts to charities will benefit institutions which sponsor research and have charitable status.

As Government support for research and development compares unfavourably with that of some other industrial countries, how can Britain be competitive in world markets?

This country devotes a bigger proportion of GDP to research and development than the United States, Germany or Japan. There is, indeed, a substantial contribution to defence research and development. With regard to expenditure on civil research and development, companies with higher profits and a lower tax rate will have plenty of room to increase their expenditure on R and D, as they need to in their investments for the future.

Nevertheless, is my hon. Friend aware that there is evidence of a scientific brain drain, particularly in Cambridge? Will he therefore look rather more favourably upon requests for money for research to be allocated in the next review than was the case in the last one?

I must remind my hon. Friend that increases in both the science and the research budgets, through the University Grants Committee, were made in the autumn statement.

Is the Economic Secretary not aware that the fall in the price of oil will increase the balance of payments deficit by about f2·5 billion this year? In the light of that deterioration in the current account of the balance of payments, is not his reply to the question totally inadequate? Do not the Government need to invest a great deal more in civil research and development?

The evidence certainly does not suggest that the balance of payments surplus this year will be affected on anything like the scale that the hon. Gentleman suggests. We are expecting a further substantial surplus this year. Set against the decline in oil revenues, one must have regard to the fact that the costs of industry and commerce will be very substantially reduced, with the result that they should become very much more competitive.

asked the Chancellor of the Exchequer what recent representations he has received calling for the abolition of mortgage income tax relief.

My right hon. Friend has received a few such representations.

Is my right hon. Friend able to confirm that some of those representations must have come from the leaders of the alliance party? Does he recall that in a recent article in The Times the right hon. Gentleman the leader of the Social Democratic party approved of the New Zealand Government's action in removing income tax relief? Bearing in mind that the Liberal party's environmental spokesman has also called for the abolition of mortgage income tax relief, should not house owners in this country realise what a threat the alliance is to their homes?

I have not received a representation from the leader of the SDP. However, my hon. Friend will be aware that all hon. Members are equally confused. I noticed that article in The Times, in which the leader of the alliance seemed to approve of New Zealand's policy of abolishing mortgage interest relief. I noticed also the comments of the hon. Member for Truro (Mr. Penhaligon), who seemed to be arguing a different set of policies. The alliance policies on this matter seem to depend upon the audiences that it addresses and the spokesman who address those audiences.

asked the Chancellor of the Exchequer what is the latest estimate for the rate of inflation over the next 12 months.

The latest forecast for inflation was given in the Budget statement. I expect the rate to fall to 3½ per cent. by the fourth quarter of this year.

Does my right hon. Friend agree that we need lower interest rates if investment and the creation of jobs are to be helped, and that we need to control inflation if interest rates are to fall? Does he also agree that confidence is needed that low inflation will be sustained in future years? What are the prospects for this?

The best prospects for maintaining low inflation are to keep a Conservative party in power. My hon. Friend knows that the lowest inflation rate during the whole period of the last Labour Government was above the highest inflation rate under this Government since the last general election. As my hon. Friend the Economic Secretary to the Treasury said earlier, interest rates have been reduced by 1·5 percentage points since the Budget because of prudent economic management and a prudent Budget. The continuation of low inflation helps with that trend.

Would inflation be higher if unemployment were lower?

Inflation has come down because of the prudent economic policies that we have pursued. I believe that there is agreement between both Front Benches that one of the greatest contributions to employment is low inflation. The difference between us is that we are achieving the low inflation.

asked the Chancellor of the Exchequer how much revenue he anticipates arising from the imposition of a 5 per cent. duty chargeable when United Kingdom shares are converted into depository receipts.

The measure is intended to compensate for the fact that when shares are bought and sold through the market in the usual way stamp duty is payable on each occasion, but no duty is payable on purchases and sales of depository receipts after shares have been converted into them. The purpose of the charge is therefore to safeguard the £600 million revenue from stamp duty on shares generally.

I thank my hon. Friend for his reply. However, is he aware that there is a widespread belief that this will put major British companies at a disadvantage when they want to raise capital on the international market? In the light of the fact that there is no reference to it in the Finance Bill, is there some hope that the Chancellor of the Exchequer has accepted the criticisms and that he will scrap the tax?

I am aware of the comments of a number of American and British companies, but we have done nothing in the Budget to prevent foreigners buying shares direct in London. We have made it proper to do so by cutting the stamp duty rate with effect from later this year. We will carefully consider representations on the matter of ADR, as we always do on all Budget measures. Those provisions were not included in the print of the Finance Bill, published yesterday, for the technical reasons that I announced on 21 March.

When my hon. Friend tables amendments to the Finance Bill, will he bear in mind the key principle that we should not be deterring foreign investment in United Kingdom shares?

There is nothing in the Budget, nor will there be in the Finance Bill, to deter foreign investment in United Kingdom shares through London, and we are reducing the rate for doing so.