asked the Chancellor of the Exchequer what is his latest estimate of the likely proceeds to the Exchequer of the privatisation of water authorities in England and Wales.

While the Government regularly publish plans for total privatisation proceeds over the next three years, they never reveal estimates for individual privatisations.

Given the inevitable collapse of share prices, thus prefacing the third world economic recession, what guarantees can the Minister give that the water industry will not go the same way as British Petroleum —undervalued and underpriced—and lead to a second massive flop in the Government's attempt at electoral bribery?

My right hon. Friend the Chancellor recently described an Opposition Member as "the surviving dinosaur". I can see that that hon. Gentleman was not alone.

Just answer the question.

I will answer the question. Water is not due to be privatised for several years. I am confident that when that moment arrives we will obtain good value for the taxpayer. We intend to press ahead with our privatisation programme, especially with regard to the water industry. [Interruption.]

Order. We have some very important questions on the Order Paper. We are not helped by interruptions from sedentary positions.

Will my right hon. Friend confirm that the Severn-Trent water authority, which includes Coventry, is one of the authorities most excitedly in favour of privatisation?

My hon. Friend is quite right. It has been made clear that the management of the water authorities strongly support the Government's plans.

Does the Minister have a reserve price valuation for the water industry? Does he agree that if in his estimation that price is not reached it would be in the best interests of the nation to withdraw from the sale of water?

As yet, the main legislation with regard to the water industry has not gone through the House. It is due in the 1988–89 Session. In asking questions about the precise price of the flotation of the water indusdry the hon. Gentleman is, perhaps for the first time, being a little quick.

Does not the prospect of water privatisation offer the chance to millions of investors of share ownership which market uncertainty may have denied them in British Petroleum? Is this not an excellent prospect for the British people?

My hon. Friend is quite right. There are good industrial arguments for its privatisation. It is abundantly clear that there is ample room for improvements in efficiency in the water industry.

Will the Minister exempt Wales? The measure has no friends in Wales. It will be unpopular and it will not work. Will he understand that we need Wales to be exempted and that we need major investment for the creation of manufacturing jobs, not this charter for speculation?

The answer is no. There has been a substantial increase in investment in the water industry. Under this Government it has gone up by over 30 per cent., whereas under the Labour Government it fell by 35 per cent.

asked the Chancellor of the Exchequer what has been the growth in real personal disposable incomes over the past year.

In the year to the second quarter of 1987, real personal disposable incomes rose by 3½ per cent.

I thank my hon. Friend for that encouraging answer. Will he compare the recent growth in disposable incomes with that under the previous Labour Government?

My hon. Friend raises an interesting point. The real take-home pay of a man on average earnings with a family of two children has risen by 22 per cent. under this Government. Under the previous Labour Government it rose by just½ per cent.

Is the Minister aware that in 1979 an average of 45 per cent. of real disposable income was payable in debt? By 1986 that had risen to 73 per cent. and this year is hitting 80 per cent.? Is that not one of the main contributory factors to the crash on Wall street, the stock exchange and everywhere else?

I advise the hon. Gentleman to read Tribune more closely and he will see that the hon. Member for Islington, South and Finsbury (Mr. Smith) said:

"There is a lot of evidence to show that most of the borrowing is being done not by individuals but by companies."

asked the Chancellor of the Exchequer if he will give the latest figures on the extent of private shareholding in the United Kingdom.

At the beginning of this year the number of shareholders in the United Kingdom stood at 8½ million, almost three times the 1979 figure.

Is my right hon. Friend in a position to announce whether the sale of BP will proceed?

No, Sir. Most of the procedures that I described to the House on Tuesday have now been completed, but I have yet to receive the Bank of England's assessment in response to the joint approach to the Bank this morning by the Treasury and Rothschild on behalf of the underwriters. I hope to make my decision later today and I will, of course, be glad to inform the House of that decision in whatever way is convenient.

Will the Chancellor give the House details of the blazing row which took place yesterday between the Treasury and the Americans over the BP flotation? Will he say whether he expects repercussions on Wall street? If the flotation is not 100 per cent. successful, who will be to blame?

There was no blazing row. The causation flows in the opposite direction to that indicated by the hon. Gentleman. It was not the BP flotation that caused the crash of Wall street; it was the slide on Wall street that led to the gross under-subscription of the BP flotation.

Does my right hon. Friend agree that instead of opposing wider share ownership, we should set about—[HON. MEMBERS: "Reading".]

Order. The hon. Gentleman should not read.

Will my right hon. Friend note the wise words of the hon. Member for Dagenham (Mr. Gould), one of the Opposition spokesmen on the subject—

Order. Do not quote either, please. The hon. Gentleman should paraphrase.

To paraphrase, the hon. Gentleman said that the country should come to terms with share ownership and regard it as a good thing. Perhaps Labour Members should take his advice on the subject.

Although my hon. Friend is unable to quote the hon. Member for Dagenham (Mr. Gould), I am able to do so. It is one of the few privileges afforded to Ministers. Among other things, he said:

"We should take share ownership seriously as a means of spreading economic power and giving people a stake in the enterprise they work for."

Is it not clear that the BP share sale has been a total flop and that, in addition, it will be deeply damaging to the interests of BP? Will not BP now be saddled with the most unwilling shareholders in financial history? Should not the Government take an opportunity to announce that the sale is to be abandoned permanently, not to excuse underwriters but to protect the interests of Britain's greatest company? Will the Chancellor take this opportunity to confirm—he denied it on Tuesday—that he has to pay for the rights issue from BP at 330p and that he will have to hand over the money tomorrow?

The right hon. and learned Gentleman raised the last point on Tuesday and, as he knows, he is wrong. On the other matters concerning BP, I think that it would be right for me to make no further comment until I have decided whether or not the sale should go ahead.

Bearing in mind the traditional links between the Labour party and the trade union movement, will my right hon. Friend take this opportunity to welcome the concern shown by Opposition Members about the state of the stock market? Surely that is living proof—if it were required—that there are now more shareholders than trade union members in this country.

I do, indeed, welcome the interest in the stock market shown by Opposition Members. I hope that as time goes by it will become a more educated interest.

asked the Chancellor of the Exchequer that proportion of total Exchequer revenue in each of the past three years has been attributable to the proceeds of privatisation.

Privatisation proceeds have risen from 2·1 per cent. of total Consolidated Fund revenues in 1984–85 to 3·9 per cent. in 1986–87.

Do not those figures reveal the dilemma in which the country has been placed by the Government's stupidity? On one hand, the Chancellor depends on privatisation to fund public expenditure. On the other, with the Americans breathing down his neck and threatening not to fund further privatisations, the Chancellor knows very well that the BP issue will create real difficulties for the Government in future privatisations. The Government's incompetence has led them into great difficulties.

Privatisation has made a useful contribution to revenues. The Government's estimates will be published in the usual way in the autumn statement. On BP, it would be extremely unwise if I added anything to what my right hon. Friend has said.

Does my right hon. Friend agree that if the BP share offer goes ahead—as Conservative Members confidently expect it to, and as the vast majority of hon. Members believe it should—the taxpayer will have got an extremely good deal? Has my right hon. friend heard any criticisms from Opposition Members in the past few weeks to the effect that all that we are trying to achieve with this privatisation is to line the pockets of our friends in the City?

I have noted my hon. Friend's remarks, as, I am sure, have Opposition Members. It is, of course, true that if the sale proceeds, the proceeds of £7 billion will be fully realised.

Is not that fact weighing too heavily with the Chancellor? Is it not rather profligate to treat capital asset sales as a means of funding current expenditure? For the rest of the day, will the right hon. Gentleman take care to attach more priority to the need to encourage wider share ownership, rather than discouraging it by his treatment of investors who applied early for BP shares?

The hon. Gentleman seems to want to have it both ways. On one hand he says that we should not privatise, while on the other he says that we should pursue a policy of wider share ownership.

No.

I am sorry, but that is how it appears to me and to most of my hon. Friends.

Will my right hon. Friend tell us which Administration was the first to consider it right to sell shares in BP, whether the shares were underwritten and at what price they were sold?

My hon. Friend is revealing a closely guarded secret, which is that in 1977 the Labour Government decided to dispose of BP shares at a price equivalent today to 100p per share. The great difference is that whereas we want to pursue an objective of wider share ownership, Labour did not. The Labour Government did it purely and simply because they wanted to raise money.

asked the Chancellor of the Exchequer if he will estimate the annual cost to the Exchequer of unemployment in Yorkshire and Humberside region.

I regret that the information is not available.

Even taking into account the minimal drop in unemployment figures in areas such as mine, is the Chancellor not prepared to accept that, if lost taxes are added to benefits paid in areas such as Yorkshire and Humberside, the cost of unemployment to the Exchequer is more than £6,000 per person? Is he not prepared to accept that that works out at nearly £900 per household and that —[Interruption] —if the total for the whole country is worked out —

Order. The hon. Member must ask a question.

It cannot be heard because of the interruptions. Is the Chancellor not prepared to accept that the total cost to Britain is £19 billion, which is more than the Government are prepared to spend on the Health Service and that both the unemployed and the—

Order. I think that that is enough.

During the hon. Gentleman's question unemployment undoubtedly fell rather more, for he will be aware that, both nationally and in his constituency, unemployment is now falling quite rapidly.

Does my right hon. Friend agree that growth and investment in manufacturing in Yorkshire and Humberside are contributing significantly to a reduction in unemployment?

I entirely agree with my hon. Friend. The growth in the economy generally, including manufacturing, has been startling this year. It has made a material contribution to jobs.

asked the Chancellor of the Exchequer when he next proposes to have discussions with the European Community Council of Ministers about European monetary matters.

These matters were discussed at the informal meeting of the Community Finance Ministers which I attended in Denmark last month.

Does my right hon. Friend agree that the European monetary system is a powerful factor in monetary stability in these uncertain times?

My hon. Friend is right. He has made that point on a number of occasions. The EMS has contributed greatly to exchange rate stability among the countries that are members of that grouping. We are now engaged in a more ambitious attempt at a wider degree of exchange rate stability, involving not merely European currencies but sterling the dollar and the yen, within the context of the Louvre agreement.

Will the Chancellor confirm that he will not enter into discussions calling for the United Kingdom to join the European monetary system at this critical time, because such membership would restrict the United Kingdom's right to vary its interest rates?

I do not think that the right hon. Gentleman is correct on his last point. He will see that member countries of the European monetary system vary their interest rates from time to time and have a considerable ability so to do.

asked the Chancellor of the Exchequer if he will make a statement on the present level of interest rates.

ased the Chancellor of the Exchequer if he will make a statement on the current level of interest rates.

Bank base rates are 9½ per cent.

The Chancellor continually states that this country has a strong, sound economy. Does he agree that that is also true of West Germany and Japan? Why are our interest rates 3·5 per cent. and 6 per cent. higher than theirs? Does the right hon. Gentleman agree that lower interest rates would give our industry and economy a much needed boost? Will he therefore substantially reduce interest rates now?

As the hon. Gentleman is aware, I reduced interest rates only last week. As for comparisons with Germany and Japan, I would make two points. First, although the rate of inflation is low in this country, in Germany and Japan it is pretty close to zero. That, of course, enables them to have lower interest rates. Secondly, the strength of the British economy is indicated by matters which I should have thought were important to the hon. Gentleman: we have the fastest rate of economic growth and the fastest decline in unemployment of all the major nations.

Further to that reply, when British industry is faced with historically and comparatively high interest rates in real terms, why has the Chancellor not taken the advice of British industry — the CBI, for instance—and reduced interest rates? If he did so, he would protect the real economy and jobs in British industry.

I assure the hon. Gentleman that the CBI is content with the conduct of British economic policy under this Government. At the time of the election it was scared stiff that there might be a change of Government, leading to the disastrous economic policies of the Labour party.

Although my right hon. Friend will prudently decide the matter, will he confirm that the conditions which required a rise in interest rates in August no longer obtain?

Yes, Sir.

Does my right hon. Friend the courageous Chancellor of the Exchequer agree that, although it may be helpful for interest rates to be reduced, British industry is more bullish and optimistic than it has been for 15 years?

My hon. Friend is clearly correct. The point that he raised was shown in a series of surveys by the CBI, the most recent of which was published only this week. Of course, one of the things about which British industry is confident, quite apart from the Government's general economic policies, is the fact that we now have a period of much greater stability in exchange rates than we had in the past. It is true that, in recent days, as a result of the financial problems in the United States, there has been some pressure on the dollar, but I believe that, despite that, we can secure a greater degree of stability in exchange rates—we must seek to do that—than we have had for many years.

The Chancellor will know that, despite last week's 0·5 per cent. cut in base rates, interest rates have been at an unprecedentedly high level throughout the lifetime of the Government. Now that the Government have abandoned monetarism, which was the supposed reason for that level, why does he not take this opportunity to stop dithering, cut interest rates, help industry, business and mortgage holders by doing so, and also help to calm the markets?

I shall see to it that interest rates are at whatever level is appropriate in the conditions. As for this Government's record compared with that of the last Labour Government, I have to tell the House that bank base rates, which are now 9½ per cent., were 12 per cent. when we inherited the conduct of this country's government from the Labour party.

If, as now seems likely, we are heading for a reduction in interest rates—welcome though that may be in many ways — is my right hon. Friend concerned that, in turn, it may also lead to an increase in the availability of credit? As some commentators believe that that is already at a particularly high level, has he any steps in mind to control it?

My hon. Friend is right to point to the general buoyancy of financial conditions some little while back. That was one of the main reasons why I thought it right to increase interest rates by a point on 6 August. However, since then, particularly in the events of the past fortnight, I think that it is clear that the rather frothy state of the financial markets has come to an end. There is now likely to be a dampening effect on economic activity, including credit activity. Therefore, it was appropriate to reduce interest rates by ½ per cent. last week. The conditions to which my hon. Friend referred are indeed different from what they were earlier.

asked the Chancellor of the Exchequer if he will estimate the public spending planning total for 1987–88 and 1988–89.

asked the Chancellor of the Exchequer if he will estimate the public spending planning total for 1987–88 and 1988–89.

Following the decisions taken by the Cabinet this morning, my right hon. Friend the Chancellor will be presenting his autumn statement to the House next Tuesday.

If the Government's revenue is rising so fast, will the Minister explain why the Disabled Persons (Services, Consultation and Representation) Act 1986 cannot be implemented because of a lack of funds?

The Act of 1986 was originally passed upon the premise that it would be brought into action over a period. A part of that Act was brought into operation earlier this year.

Does the Minister agree with the advice that the CBI gave recently, which was, and I want to quote accurately—

Order. Unfortunately the hon. Lady cannot do that.

The advice of the CBI was that, if business is to have the infrastructure that it needs to reduce its costs, cuts in public expenditure should be reversed. Does the Minister agree with that?

With great respect to the hon. Lady, that is not the advice of the CBI. I suggest that she reads what the CBI had to say about the economy just a few days ago. It was very confident.

Will my right hon. Friend confirm —[HON. MEMBERS: "Reading".] I am not.

I entirely agree with my hon. Friend.

Does my right hon. Friend agree that prudent control of public expenditure in recent years by the Government, and proper management of the Government debt, has led to the country being in a strong economic position? Will he confirm that he is able to give some help to the American President in his tackling of the American public sector borrowing requirement?

I can certainly confirm that, first, strong control of public expenditure has been a significant feature of the Government's economic policy. The strength of our economy over recent years shows how wise that has been, and I think that that may be particularly so at present. As for the second part of the hon. Gentleman's question, I think that the American President can do without advice from me.

Will the Minister give an assurance that when he and the Chancellor are preparing the autumn statement they will consult their counterparts abroad? This is because, if President Reagan manages to cut the federal deficit by $23 billion next year, this will have a powerful deflationary effect on the world economy. It could reduce the United States rate of growth by 1993 by 10 per cent. below its trend rate and raise European unemployment to 24 million by that year. Why does the Chancellor not admit that the real budget needed is a budget to expand the European economy, and that himself, Chancellor Kohl and M. Chirac should be doing that, thereby increasing United States export trade and sustaining the dollar?

I think I might usefully remind the hon. Gentleman that we have the fastest rate of growth in the industrialised world. He might just care to bear that in mind. As for the remainder of his remarks, I am not entirely sure that that arises on the subject of public expenditure in this country.

When the Chancellor publishes his statement, will he draw the attention of the House and the country to public expenditure levels in 1978 compared with those today, bearing in mind that that was the time of the Lib-Lab pact? Does my right hon. Friend agree that we are able to spend as much as we do on the public services because of the way in which the economy has been run by the Conservative Government?

My hon. Friend makes a valuable point. In recent years there has been a very substantial increase in resources for the Health Service, the education service and law and order, and a substantial increase in capital spending compared with the substantial cuts into which the Labour Government led us between 1974 and 1979.

asked the Chancellor of the Exchequer what is his latest estimate of the proceeds from privatisation sales in 1987–88.

An estimate of the proceeds of privatisation will be published as usual in the autumn statement on Tuesday.

In launching the BP offer the Minister said that it was yet another step on the road to popular capitalism. Given that more than 8 million prospectuses have been issued but only 200,000 people have applied for shares, does he agree that that road is a dead end?

As my right hon. Friend the Chancellor is to make a statement later, and as the matter is still being considered, it would not be appropriate for me to say anything at this stage.

Following the great success of privatisation, cleaner emissions from power stations and lead-free petrol, is not my right hon. Friend missing a rare opportunity to privatise fresh air?

My hon. Friend always wishes to push our programme further forward, but I think that that matter would require a little consideration.

Will the Financial Secretary explain, first, why he has wasted £20 million of public money advertising the sale of BP shares which no one wants to buy? Will he confirm that the estimated cost of the advertising is £100 per successful applicant? Does he recall his statement on 25 September that he expected the sale to make a further major contribution to extending share ownership, and his statement of 15 October that the sale would be another step on the road to mass popular capitalism in this country? Given that no one wants the BP shares, and that 40 per cent. of shareholders have already got out of the privatised companies, what is left of popular capitalism now?

A full statement of the cost of the sale will be laid before the House in the usual way. Clearly, some of the costs are not known at this stage. That will be fully explained to the House.

asked the Chancellor of the Exchequer if he will make a statement on the net real rate of return in the company sector.

The net real rate of return of non-North sea industrial and commercial companies in 1986 is estimated to have been 8·9 per cent. This is the highest level of prifitability recorded since 1973.

Does my hon. Friend agree that that excellent result shows the fallacy of criticism of our economic policies by the Labour Benches and the validity of the recent CBI report on the economy? Does he further agree that the key to those good results is the retention of profits within companies, occasioned by the Government's successive reductions in corporation tax?

My hon. Friend is right to highlight the importance of profit, which is the lifeblood of industry and stimulates its pulse and fuels its investment. He is also right to point to the fact that investment is rising along with profitability, and the DTI survey shows investment intentions up 8 per cent. this year and next.

Does the Minister agree that, despite the good figures that he gives for manufacturing industry, there is 7 per cent. less investment in manufacturing industry now than there was in 1979, and that areas such as the one that I represent still have enormous problems in building up industry? Despite all the wonders of which the Minister tells us, there is still less investment in manufacturing now, and the prospect of even less in the future.

I am glad that the hon. Lady welcomes the improvement in profitability. Unfortunately, she is not unanimously joined in that by other members of her party. She will be pleased to know that profitability in manufacturing has also increased substantially, and that is the pre-condition for growing investment. Profitability in manufacturing is also at a record figure, only previously achieved in 1973.

asked the Chancellor of the Exchequer what is the current level of invisible earnings in the United Kingdom; and how it compares with the levels five and 10 years ago.

The United Kingdom's invisibles surplus, which was £2·1 billion in 1977 and £.1·7 billion in 1982, is estimated to have been 0·7 billion in the year to mid-1987. That is the largest invisibles surplus of any country in the world.

What surprisingly good figures the Financial Secretary has produced. Does he agree that those figures show that the service industries are important generators of jobs, wealth and income, and that they are an important part of industrial recovery, because strong services help industries?

My hon. Friend is entirely right. As regards his point about employment, 2 million people are now employed in financial services and 1½ million in hotels and catering — an important part of the invisible earnings industry. That amounts to 15 per cent. of total employment, demonstrating that, exactly as my hon. Friend says, the invisibles are making an enormous contribution to recovery in this country.

Are not profits from insider dealing a form of invisible earning? Why did the stock exchange surveillance department refuse to give me the names of the 30 people who speculated in Matthew Brown shares on the day before the S and N bid was announced? Why cannot those names be made public so that the general public will know who were the criminals who broke the law?

I suggest that the hon. Gentleman gives me the details that he wants and I shall investigate them. I do not know to what he is referring.

asked the Chancellor of the Exchequer if he will make a statement on the outcome of the recent International Monetary Fund meeting in Washington.

Considerable progress was made on a wide range of issues. The Louvre agreement was reaffirmed, and I set out ways in which a more orderly system of managed floating of exchange rates could be developed. There was continued emphasis on the special needs of the poorest and most heavily indebted countries, including further discussion of both my initiative to ease the burden of their bilateral official debts and the parallel proposal by the IMF to enlarge the concessional structural adjustment facility. There was also full support for an early and substantial increase in the capital of the World Bank.

I thank my right hon. Friend for that answer. Will he also confirm that it displays a significant contrast between the craven position that existed under the Labour Government in 1978, when they had to go cap in hand to the International Monetary Fund, and the position now, when the fund seeks and takes advice from the Government — from the Prime Minister and the Chancellor of the Exchequer?

In answer to the remarks that my hon. Friend makes, I am glad to say that one of the benefits of the strong economy that we now have and the wide respect in which we now stand throughout the world is that we are able to play a major part in the international financial discussions that go on, both as between the industrialised countries and in helping the poorest and most heavily indebted countries. That is indeed a striking contrast to the Labour Government, when it was they who had to go for assistance.

Is the Chancellor of the Exchequer aware that if he presses ahead with his proposals for debt relief for the poorest African countries, including interest relief for those that are not large debtors, he will have our support?

I am grateful for the hon. Gentleman's support and that of his party. I am glad to say that I have also secured much more substantial support from other quarters as well.

I asked the Prime Minister what has been the total Government contract expenditure committed to Westland since January 1986.

The work of Westland Helicopters Ltd. for the Ministry of Defence in support of the existing helicopter fleet is worth some £60 million per annum. Negotiations are nearing completion for eight new Sea Kings, worth over £25 million. My right hon. Friend the Secretary of State for Defence announced on 9 April that orders worth over £300 million are planned for an initial batch of 25 utility version EH101 and 16 Lynx helicopters.

On 27 January, at column 657, the right hon. Lady assured my. hon. Friend the Member for Bolsover (Mr. Skinner) that she did not know about the role of the then Secretary of State for Trade and Industry over the disclosure until after the inquiry had reported. Will she confirm that Mr. Charles Powell did his duty as a civil servant and kept the Prime Minister fully informed about the disclosure?

The question that the hon. Gentleman has put on the Order Paper is about Government contract expenditure committed to Westland since January 1986. On the other matters, I have answered in detail and stand by what I have said.

Is it not the case that the first flight of the prototype of the Anglo-Italian EH101 augurs well for that aeroplane, as was the case with the collaborative Puma, Lynx and Gazelle before it? For the future of Westland, is it not also important that we should take part in expanding European participation in space, as Westland Aerospace has an important contribution to make in that area, which is of great significance for British industry?

We hope that the development of the EH 101 will proceed satisfactorily so that the orders can be fully and properly negotiated. With regard to work on space, I have nothing to add to what I said previously. As my hon. Friend is aware, we give a subscription of about £100 million to the European Space Agency. At present we simply could not do any more than that because the amount of taxpayers' money that goes to research and development is very considerable. At present, further money is coming from the private sector. [Interruption.]

Order. Can we concentrate on these questions and not on those who are wearing fancy dress?

asked the Prime Minister if she will list her official engagements for Thursday 29 October.

This morning I presided at a meeting of the Cabinet and had meetings with ministerial colleagues and others. I attended the memorial service for Lord Soames at Westminster abbey. In addition to my duties in the House, I shall be having further meetings later today.

Does the Prime Minister recall that during her visit to Scotland last month she made the absurd claim that there was little if any popular demand for a devolved Scottish Parliament or Assembly. If the right hon. Lady is still stubbornly refusing to accept the fact that at the general election she was resoundingly rejected by 76 per cent. of Scottish voters who all voted for parties committed to some form of Scottish Assembly, will she now consider putting her claim to the test by, for example, having a referendum on the constitutional future of Scotland?

The hon. Gentleman will remember the occasion of a previous referendum on the constitutional future of Scotland. Many of us on both sides of the House believe that an Assembly such as the hon. Gentleman and others propose would be the first step towards separatism, which would not be popular in many quarters.

Will my right hon. Friend confirm that she upholds the principle of free speech, and that that principle is not restricted to those with Marxist views, but applies also to those opposed to such views?

Yes, indeed. We see a great deal of free speech during Prime Minister's Question Time.

When the financial markets at home and abroad are unstable, and when Britain has one of the highest real interest rates of all the developed countries, why do the Government not use their power to secure significant cuts in interest rates, rather than an inconsequential 0·5 per cent.?

That is a matter for judgment, which has to be made at the time. I think that the right hon. Gentleman would be the first to understand that several factors are necessary in combination to deal with the present position. First, we need a decision on the United States budget deficit. That is perhaps the most important single factor, and I welcome the talks that President Reagan is holding with Congrees about cutting the deficit, because early and decisive action on that is vital. Measures beyond anything previously envisaged, in both scale and content, would do more than anything else to bring back confidence.

It is those very three matters that argue so strongly for a substantial cut in interest rates, especially when such a cut would aid President Reagan's efforts to stabilise his external deficit. They would also ease the downward pressure on markets, increase our international competitiveness and cut costs for British industry and British households. British real interest rates are now 53 per cent. higher than those in Japan, and 25 per cent. higher than those in Germany. As the Prime Minister says, this is a time for judgment, and that judgment should be a big cut in interest rates.

My right hon. Friend the Chancellor has already made a reduction in interest rates of 0·5 per cent, as the right hon. Gentleman knows. I have said what I believe to be the most important factor for the return of confidence in the markets, but I feel that it will be more effective if we make our decisions in accordance with it and achieve as much co-operation internationally as possible.

No one will quarrel with the argument for international co-operation, but does what the Prime Minister has just said mean that we must wait for what she calls a return of confidence before we get the cut in interest rates that the economy truly needs?

It means that I expect the right hon. Gentleman to know that decisions on interest rates cannot be announced to the House of Commons during Prime Minister's questions.

Will my right hon. Friend remind the House what fee the underwriters of the BP issue agreed to accept in payment for the risk that they agreed to take?

My hon. Friend has made his own point. As he knows, I cannot say anything further about the BP issue. The procedures that my right hon. Friend the Chancellor set before the House on Tuesday are well under way, but they are not yet completed. My right hon. Friend hopes to be in a position to announce his decision today.

With regard to the response of the international finance markets to the United States deficit problems—[Interruption]

Order.

—is the Prime Minister prepared to encourage the German and Japanese Finance Ministers urgently to relax their fiscal policies to assist the United States in the process of reducing its budget deficit?

I have said already that I think that co-operation is important. My right hon. Friend the Chancellor of the Exchequer is in regular touch with his opposite numbers in both the United States and Germany, and in Europe in general.

Amid all this talk of international co-operation, will my right hon. Friend remind all Governments of her renowned scepticism of the European monetary system and of her view that attempts by Governments to control exchange rates are extremely expensive and in the end impossible?

My hon. Friend reminds the House very effectively of the view that we have taken about the European monetary system. That view has not changed. I believe, however, that the Louvre accord has been of very considerable value, especially in recent weeks.

asked the Prime Minister if she will list her official engagements for Thursday 29 October.

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

Following the Prime Minister's exchanges with my right hon. Friend, is she aware that we have been waiting for at least three years for Washington to correct its budgetary deficit? Does she not think that the best earnest on behalf of international confidence would be for someone to promote initiatives, and preferably leadership, on behalf of international financial stability and an easing of credit? Is the Prime Minister prepared to take such a step, or is she content to see Thatcherism eventually equated with Reaganomics?

May I remind the hon. Gentleman —[HON. MEMBERS: "Oh"] Yes, we have free speech in this House, too. May I remind the hon. Gentleman that Opposition Members have been urging us to follow the deficit policy of the United States and to increase it? They have urged us to do that, both in this House and in speeches outside. Only now are they beginning to realise that the policy of sound money that we have followed is the one that has kept sterling strong throughout this crisis.

My right hon. Friend the Prime Minister is well aware that the parks and farms of Kent are now covered in very heavy fallen trees. Will she consider using her prestige to call together the many organisations that use the countryside to consider the possibility of creating a properly organised voluntary programme to help to clear up the beleaguered south-east of England?

I am aware that the part of the country that my hon. Friend represents was particularly badly hit by the storm and that many trees were damaged and lost. I know of his interest in voluntary work. I understand that the British Trust for Conservation Volunteers is already looking at what volunteers can do, with local authorities, to help. It is in close touch with the Countryside Commission's Task Force Trees. I am sure that we shall be able to get some very useful work done, both in clearing and in replanting trees.

asked the Prime Minister if she will list her official engagements for Thursday 29 October.

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

In view of the Government's obsession with internal trade union matters, why is there not to be a postal ballot of all Conservative members in the country to decide who should be party chairman? In view of the difficulty of finding someone to do the job, is the right hon. Lady aware that her old mate, the right hon. Member for Henley (Mr. Heseltine), is very keen and very anxious to carry out that job? Is he on the short-list?

I do not know whether I am answerable from the Dispatch Box for Conservative party matters. I assure the hon. Gentleman that the chairman of a voluntary party is elected, but I shall not follow the example of the Labour party by taking on the office of chairman of Conservative Central Office myself.

Is the Prime Minister aware that an isolated rural school in South Armagh —Cladymore primary school — has been closed by the Minister responsible for education in Northern Ireland, not only against the wishes of the parents, but against the unanimous decision of the regional education authority? Is she aware that that regional education authority is controlled, not by elected persons, but by the nominees of her Minister? Does she understand that such decisions alienate the people of Northern Ireland from the present dictatorial system of Government by the Northern Ireland Office, and will she at least consider the introduction of some democratic control and answerability in matters of local government such as education, health and social services?

The strict answer to the right hon. Gentleman's question is, no, I was not aware, but, of course, I will inquire. He cast doubt on direct rule, but I do not think that the overwhelming majority of people in Northern Ireland would agree. They welcome it as the best possible thing in the circumstances. A major Education Bill will be brought before the House, and the right hon. Gentleman may wish to table some amendments to it.