To ask the Chancellor of the Exchequer whether it is the policy of Her Majesty's Government to resist a devaluation of the pound sterling.

The Government are determined not to allow the firmness of their monetary stance to be undermined by a depreciation of the exchange rate.

May I remind the right hon. Gentleman that since he became Chancellor the pound has been devalued by 25 per cent. against the deutschmark? Whatever the Government's policy, is it not now obvious that with the balance of payments deficit likely to be horrendous for some considerable time, with foreigners now depositing £25 billion in very short-term money in the City of London—a figure which exceeds the Government's foreign currency reserves—and with the Government having vetoed entry to the European monetary system, which could have stabilised those reserves, the stage is now set for a major run on the value of sterling? Is the Chancellor aware of that?

Well, in the first place I would like to thank the right hon. Gentleman who is, of course, a former Treasury Minister, for supporting the policy of the Government when he said last month:

"Mr. Lawson has got no option to what he is doing. The Labour Party idea that you should have credit controls is rubbish. There is no way you can control credit except by controlling the price of credit, and the price of credit is Bank Rate.

The Opposition Front Bench, in short, is all over the place."

Does my right hon. Friend agree that it is important to ensure that the pound finds its own true value? Does he further agree that, in the end, the most important factor for Britain will be its export potential? Is it not true that with the pound at present levels British industry, at long last, has a chance to compete? If the pound is too high, there is difficulty with imports and exports. My right hon. Friend's policy of allowing the pound to find its own level is right, as long as he stops interfering.

I have noted, of course, a certain asymmetry in my hon. Friend's views. He is very anxious that the pound should find its own level when he thinks the pound is likely to go down; he is very anxious that everything should be done to prevent any movement when he thinks the pound is likely to go up. I have noticed that there are a number of hon. Members on the other side of the House and also some outside this House who take that rather asymmetrical view. [Interruption.] What I do tell my hon. Friend is that he is absolutely right that the present climate is one in which British exporters have every chance of doing very well in world markets, and indeed I am glad to say that they are doing well. Exports are well up, and that was shown particularly in the most recent trade figures.

Does the Chancellor agree that the balance of payments problem shows that the pound is over valued? I thought that he believe in market forces. Why does not he stop intervening, allow the pound to drop and then join the EMS? Is not that the answer to our problems?

I am interested to hear the hon. Lady, who does not normally support her Front-Bench spokesmen, on this occasion supports the inflationary policies that they are putting forward, including a substantial devaluation of the pound. That would not be helpful to the British economy; least of all would it be helpful to the struggle against inflation. The Government have no intention of following that policy.

To ask the Chancellor of the Exchequer what representations he has received about zero rating of value added tax for hospital radio broadcasting equipment.

My right hon. Friend has received one letter since the reply I gave to my hon. Friend on 6 April this year.

Will my hon. Friend join me in congratulating the national associations of hospital broadcasting organisations on their magnificent work throughout Britain in broadcasting to people who are unwell? Will my hon. Friend consider giving them further help by zero-rating VAT on hospital radio broadcasting equipment, treating it in the same way as talking books for the blind?

I am sure that the House will want to join me in paying tribute to the marvellous work done by hospital broadcasting in many of our constituencies, not least my own, and in paying tribute to my hon. Friend the Member for Basildon (Mr. Amess) for his consistent support for hospital broadcasting. As he knows, under EC law we are constrained in our ability to introduce new zero rates. We got away with extending the zero rates on printed matter to newspapers for the blind because of the analogy between the two, but that would not work in the case of hospital broadcasting equipment, which is not specialised and is not provided for hospitals alone. I hope that the hospital broadcasting movement will benefit from the many other moves that we have made to encourage increased support for charities.

I welcome the Minister's response in paying tribute, but bearing in mind that in the scriptures tributes are the same as taxes, will he keep pressing to give them the benefit of that tribute?

We shall continue our efforts to encourage charities in every way that we can, and we believe that the primary way in which to do that through the fiscal system is to encourage people to give more and to increase support. In that we have been successful, and charitable giving has more than doubled in real terms.

I appreciate what my hon. Friend says about the work of hospital broadcasting, but will he recognise the difficulties of many of those stations, particularly when they move to magnificent new hospital premises and have to re-equip completely, as my hospital radio station has had to do? What words of encouragement can he give to enable them to face the massive VAT bills that they will undoubtedly have to pay?

As I have said, there is no prospect of our altering the VAT treatment of hospital radio equipment, but I hope that the great support that the movement has in the House will be reflected in the support that everybody gives such organisations in our constituencies so as to ensure that they are properly funded to carry on the great work that they do for patients.

To ask the Chancellor of the Exchequer what representations he has received from institutions in the City of London about United Kingdom economic policy.

To ask the Chancellor of the Exchequer what representations he has received from institutions in the City of London about United Kingdom economic policy.

My right hon. Friend often receives advice from the City, most of it unsolicited.

From that reply I take it that the Chancellor may not have seen the Chase Investment bank report which stated that inflation was likely to peak at over 9 per cent. this year and that 18 per cent. interest rates would be needed to bring inflation down to 4 or 5 per cent. by 1992. Bearing in mind that the report was based on the Chancellor's Treasury model, will the Chancellor confirm that his young friends in the City are correct and that he would be prepared to put interest rates up to 18 per cent. by 1992?

If my right hon. Friend had seen that report —I am not sure whether he has—he would certainly not hale agreed with it.

Has the Minister received any representations from the City about how to deal with the problem of directors' huge pay increases? He may have seen the report that five of the top 100 company directors had increases of 50 per cent. and 91 had on average a 28 per cent. increase in their pay? Bearing in mind the Chancellor's views on pay and inflation, has he proffered them any advice on how to bring those increases down to a reasonable level, or does he believe in allowing wages to go up and keeping interest rates high?

I do not support unjustified pay increases from any source, including directors—and neither does my right hon. Friend. While I have no intention of defending them, they are not under our control.

Does my right hon. Friend agree with the remarks made yesterday by the Governor of the Bank of England, when he commented that aggressive advertising by the banks to persuade people to borrow more so that they can spend more makes him feel uncomfortable?

I share the governor's instincts, but what action he takes is a matter for him. I certainly do not believe that credit controls would be the answer.

Is it not imperative for the City and for industry alike that my right hon. Friend's chief and abiding priority continues to be controlling inflation—even though, in the short term, that remedy may be painful to borrowers—because inflation threatens competitiveness, erodes savings, and threatens jobs?

My hon. Friend is entirely right. That is the central proposition before the Government at present, and my right hon. Friend has put in place the policies to bring down inflation.

Is it not widely recognised in the City that London would be the obvious centre for a central European bank, and that Britain should be in the European monetary union of which that central bank would be a part? From a counter-inflationary point of view, would it not be better if that central bank had more of the independence enjoyed by the Bundesbank, rather than the relationship that the Bank of England has with the Government?

These are matters that will have to be addressed in the future, but I am bound to say that others may hold views that differ from the premise of the hon. Gentleman's question.

Before my right hon. Friend throws the unsolicited junk mail that he receives from the City into the wastepaper basket, will he ask some of the teenage scribblers to send him a table showing their predictions of economic outcome in the last five years compared with the actual outturns?

I shall be very happy to study those projections and the eventual outcome. It is undoubtedly true that over a run of years, Treasury forecasts have been the most accurate.

As the Chancellor spent yesterday attacking the railmen, will the Chief Secretary take the opportunity that I am giving him today to condemn the pay increases which have given Sir Jeffrey Sterling a rise of £1 60,000 in one year alone, Lord King of British Airways £100,000 in one year alone, and the head of Warburg £350,000—on top of the top-rate tax cuts awarded to them last year? Will the Chief Secretary explicitly comdemn such pay rises—yes or no?

Yesterday, my right hon. Friend condemned the strike, not individual railmen. If the hon. Gentleman had listened, he would have heard what I said earlier about unjustifiable pay demands. They are unjustifiable whether they are made by directors or by workers.

To ask the Chancellor of the Exchequer what is his estimate of the extra yield of income tax if the basic rate were raised to 33 per cent.

An 8 per cent. increase in the basic rate of income tax to 33 per cent. would yield about £13·5 billion extra in a full year at 1989–90 income levels, assuming that there were no behavioural effects.

Will my right hon. Friend confirm that it is no part of Government policy to increase the burden of income tax, whereas, so far as anyone can tell, that is precisely the policy of the Labour party?

As my hon. Friend knows very well, we have reduced the burden of taxation and shall continue to do so. Judging by the expenditure plans put forward by the Labour party, if the Opposition ever came to power they would be well on the way to putting tax up to the level it was when they were last in office, which was 33p. Every day we hear of Labour policies such as a pensions increase equal to 1p on income tax, an increase in overseas aid equal to 1p on income tax, increased child benefit, a carer's allowance, renationalisation of the water industry and of British Telecom, and the introduction of a minimum wage. They would all have only one result, which would be to increase the basic rate of income tax to all taxpayers.

Why do the Government put so much effort into boosting the nanny welfare state for taxpayers? Will the right hon. Gentleman confirm that if the Government phased out all tax benefits we could have a standard rate of tax of between 12p and 15p in the pound? Would that not be a radical tax policy and, if so, why do the Government not introduce it?

As the hon. Gentleman knows, in the Budgets this year and last year the Government blocked a significant number of loopholes. In last year's Budget, some £800 million was raised by the blocking of loopholes. We have taxed the use of company cars and blocked the forestry loophole. I agree that we should get marginal rates down and get average rates up.

Does my right hon. Friend agree that, historically, a reduction in taxation has meant that there has been a greater take for the Chancellor of the Exchequer? Does my right hon. Friend agree that if taxation were increased, revenue to the Exchequer would decrease?

That, of course, was the point to which I referred when I spoke of behavioural effects. There must be some tax maximising rate. It cannot be true for ever that, however much taxes are cut, more revenue will be raised. What we have done, especially at the top end, has increased the tax take.

To ask the Chancellor of the Exchequer what is the latest figure that he has for the rate of inflation in the United Kingdom; and what is the average inflation rate for countries who are full members of the European monetary system.

Excluding owner-occupier housing costs in order to put the figures on a more comparable basis, United Kingdom inflation currently stands at 6 per cent. compared with an average of 44 per cent. for the countries which are full members of the European monetary system.

Given that the other inflation figure is 8·3 per cent. and not 6 per cent., when will the Chancellor say that our inflation will be low enough to allow us to join the exchange rate mechanism? What figure does he put on that inflation rate to allow us to join, given the conditions that he laid down before the Treasury and Civil Service Select Committee and that the Prime Minister laid down in Madrid?

On the first point that the hon. Gentleman has made, I have to tell him that he is mistaken. Of the other countries that he mentiooned, only one has mortgage interest payments in its index, and a great many of them—in fact, about a half of them—have nothing at all for owner-occupier housing costs, nothing at all. Therefore, the only way to have a truly comparable figure is to take owner-occupier housing out, which is what I did, and that is a very different comparison between the 6 per cent. and the 4¼ per cent. As for the second question that the hon. Gentleman put to me, the answer is: lower than it is today.

Does not the impressive experience of the EMS and the ERM show that it makes the vulnerable currencies in the system stronger rather than weaker? Are there not good lessons to be learnt for the pound sterling?

Certainly, it is true that all those countries that are members of the exchange rate mechanism of the EMS to my knowledge believe that this has been beneficial to them, but it is a mistake to infer from that that all one has to do to run a successful economic policy is to join the exchange rate mechanism of the EMS. That is very much not the case. The same hard choices that have to be taken outside the exchange rate mechanism have to be taken inside it as well.

As it was obviously a major event in the control of our economic policy and inflationary policy, would the right hon. Gentleman care to tell us the exact terms of the apology that he received from the Prime Minister?

I have no wish to comment at all on private conversations that may or may not have taken place between my right hon. Friend the Prime Minister and myself. We are at one on the subject of economic policy.

To ask the Chancellor of the Exchequer what is his estimate of the number of people who would face a higher marginal rate of tax and national insurance if the top rate of income tax were raised to 50 per cent. and the employees' national insurance limit were abolished.

To ask the Chancellor of the Exchequer what is his estimate of the number of people who would face a higher marginal rate of tax and national insurance if the top rate of income tax were raised to 50 per cent. and the employees' national insurance limit were abolished.

If the higher rate of income tax were raised to 50 per cent. and the employees' upper earnings limit for national insurance contributions were abolished, about 3·4 million single people and married couples, about 15 per cent. of the total, would face higher marginal rates of income tax or national insurance.

I am grateful to my right hon. Friend for that answer. Does he agree that this would raise the marginal rate to 59 per cent. and that such a calamitous rate would encourage another exodus of the skilled and the entrepreneurial? Would it not provide fuel for that pernicious industry of creative personal accounting which was so prevalent when the Labour party was in power?

My hon. Friend is, of course, right. That is not the only way in which the Labour party is proposing to increase taxes. As my hon. Friend said, it would put up the marginal rate for nearly 3½ million people, of whom 2 million are basic rate taxpayers, and another 1 million people, half of them pensioners, would lose as a result of the reintroduction of investment income surcharge. Another 24 million people in 12 million couples would also lose as a result of freezing the married couples' allowance and on top of all that, Labour would introduce a local income tax. That would take us straight back to the policies which destroyed incentives and crippled our economy in the 1970s.

What advice would my right hon. Friend give to the 2 million people who currently have a marginal tax rate of 25 per cent. and who would, nevertheless, be penalised by an extension of national insurance contribution? Is it not significant that 2 million families would be hit in that way if we had a Labour Chancellor of the Exchequer?

My hon. Friend is right. I am sure that thanks to him and to my hon. Friend the Member for Gillingham (Mr. Couchman) raising these matters, the warnings will be heeded and people will think carefully before voting Labour.

To keep the level of hyprocrisy to a minimum, will the Financial Secretary confirm that the percentage of gross domestic product consumed by taxation has increased since his Government came to power?

The percentage has increased, but the percentage taken by income tax has decreased. What we have done—and what the previous Government should have done—is to replace borrowing by sound finance.

Surely, it is the people at the top who live in the biggest and poshest houses—[Interruption]—who will also benefit most from the poll tax. Why should they have cuts at both ends of the scale—from the poll tax and income tax?

I am sorry that I did not hear much of the hon. Gentleman's question, except that I understand from the grin on his face that he is obsessed with people who live in the biggest and poshest houses.

If the purpose of taxation is to raise revenue rather than to punish people, is it not the case that since the Government have reduced the higher rates of taxation they have raised more revenue?

My hon. Friend is right. As I have observed before, the Conservative Government have found a new way of soaking and clobbering the rich.

Following the point made by my hon. Friend the Member for Sunderland, South (Mr. Mullin), can the Financial Secretary confirm that under this Government the proportion of national income paid in taxation has increased from 34·25 per cent. to 37·5 per cent.—a substantial increase? Will he explain what sense of equity there is in imposing on a person on £100,000 a year exactly the same liability in total national insurance as a person on £16,900 a year? In the case of the lower salary, that is 8 per cent. of income whereas in the case of the higher it is 1 per cent. of income. Is that not standing fairness on its head?

I have already answered the question from the hon. Member for Sunderland, South (Mr. Mullin). On the upper earnings limit for national insurance contributions, we have always adhered to the principle that it is important that the contributory principle should be recognised. If the right hon. and learned Gentleman wants to put up taxes, let him do so and not call it national insurance.

To ask the Chancellor of the Exchequer what representations he has received on the basic rate of corporation tax.

A number.

I thank my hon. Friend for that very full reply. Will he confirm that over the past five years, in spite of cutting the rate of corporation tax from 53 per cent. to 35 per cent. for big companies and from 42 per cent. to 25 per cent. for small companies, the revenue actually received by the Exchequer from corporation tax has more than doubled? Although capital allowances have been reduced, investment in manufacturing industry is running at an all-time high. As the patient has responded so well to the treatment, why can we not have a bit more of the same tax-cutting medicine?

I note my hon. Friend's early Budget representation and I am sure that my right hon. Friend has done so as well. As my hon. Friend says, the United Kingdom has led the world in cutting corporation tax rates. We have reduced those rates by 17 points and, as my hon. Friend has said, the yield has soared. Of couse, that is largely because of the sound economy and the great upsurge in profits that we have experienced. We shall certainly keep the matter under review as my hon. Friend suggests. It is also true that investment has in no way suffered. Indeed, investment has boomed since we removed capital allowances and reduced the rate.

Can the Minister give a clue about whether the number of representations that he has received is nearer to the real level of inflation or to the fiddled figure that is used by his right hon. Friend the Chancellor, which does not include housing costs?

It was an extremely small number.

To ask the Chancellor of the Exchequer what effect the entry of Spain has had on her Majesty's Government's policy on membership of the European monetary system.

None, though we will watch Spain's progress with interest.

In our mutual enthusiasm for joining the exchange rate mechanism, does my right hon. Friend agree that Spain has an inflation rate of nearly 7 per cent. at present and will he confirm that those countries that are within the exchange rate mechanism and have not yet abolished capital controls will possibly face major pressures on their interest rates when they finally do so?

Of course, it is very important that all membr countries of the European Community abolish exchange controls in line with the directive which was agreed last year, and as my hon. Friend will know, most of the countries have to do that by 1 July 1990, including in particular France and Italy. It will be certainly a matter—as I told the Select Committee when I appeared before it on this subject—of very great interest to see how EMS fares after this abolition of exchange controls has taken place. I believe—and the Governor of the Bank of England stated when he gave evidence his belief—that the EMS would successfully survive that. It may be that some modifications will be required, but the EMS will successfully survive the removal of exchange controls by France, Italy and others. We shall have to see. The proof of the pudding will be in the eating.

Whatever fears we may justifiably have about the future economic policy of this country in the event of our joining the exchange rate mechanism, is the Chancellor aware that the greatest fear is that we may enter at too high a rate?

I realise that the Opposition are always in favour of devaluation. I know that they have a policy which is in some way similar to ours, concerning the exchange rate mechanism, but in one particular respect, totally different. They too wish to join the exchange rate mechanism of the EMS and they too believe that there are one or two conditions precedent, but their conditions are to secure the most inflationary environment they can, by devaluation of sterling first, and a change in the arrangements of the EMS to ensure that there is an inflationary climate throughout Europe. That is something which we wholly reject.

Does my right hon. Friend agree that to suggest that we should have to have a withholding tax as the price for the abolition of exchange controls displays an extraordinary lack of confidence in the operation of a free market? Will he confirm that he will resist that ridiculous proposal?

I can confirm not only that I will resist this proposal, which would be totally harmful, I can confirm that I have been resisting it, and so successfully that there are now a large number of other countries that are resisting it. I am absolutely confident that no such European Community withholding tax will ever come into place.

To ask the Chancellor of the Exchequer, what proportion of gross earnings a one-earner family on average earnings with two children paid in value-added tax in (a) 1979 and (b) 1989.

A married man on average male earnings with two children would have paid approximately 2·7 per cent. of his earnings in VAT in 1978–79 and 5 per cent. in 1988–89.

Does the Minister agree that the £5·76 per week that the average family would have had if VAT was still at the same proportion of earnings would be welcome to those families and would help them a little to offset the extra costs that they have to pay in massive mortgage repayments because of the Chancellor's policies?

The significant fact is that over that period, which coincides with the lifetime of this Government, the average married man has had an increase in his real take-home pay—after taking account of prices and VAT —of more than 30 per cent. I do not think that people would have been prepared to trade that for the fiscal regime left behind by the Labour Government.

Does my hon. Friend accept that spending and income must be considered together? Will he remind the House by how much the starting figure at which a comparable family pays income tax has increased in the same period?

My hon. Friend is absolutely right and makes a valid point. We have increased the threshold by about a quarter in real terms, thus taking a considerable number of lower paid people out of the income tax regime altogether.

The Economic Secretary will have heard the Financial Secretary say a few moments ago that the burden of taxation as a proportion of gross domestic product has increased under this Government. Will he take the next step and admit that that means that the British people have been taxed more heavily in the past 10 years under this Government than they were taxed under the previous Labour Administration?

We inherited public finances that were largely financed by borrowing. Initially, we had to finance part of that by increased taxation but more recently the burden of taxation as a proportion of GDP has been coming down. My right hon. Friend the Chancellor has made it absolutely clear that if ever a Government were elected—which they will not be—with the policies that appeared in the recent Labour policy review, taxes would go up and up and up.

To ask the Chancellor of the Exchequer what representations he has received from small businesses on the current level of interest rates.

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

Have the Government studied the recent survey by the Forum of Private Business, which shows that small firms are rapidly becoming the victims of high interest rate policies? Are the Government aware of the CBI's industrial survey showing the weakness of small firms' export orders? What advice are the Government now giving to small firms?

I have seen those reports. There is no doubt that interest rates are uncomfortable. But inflation would be more uncomfortable, would last longer and would be far more damaging. Monetary policy is specifically geared to bear down on inflation and so bring it down. That is in the interests of all business, particularly small business.

Is it not the case that excessive monetary growth caused, and diminished monetary growth will cure, the monetary evil of inflation? Will my right hon. Friend confirm that he will maintain interest rates at such a level as to persevere in the abatement of inflation until we achieve his declared target of stable prices?

I can certainly assure my hon. Friend that we have no intention of relaxing on monetary policy until it begins to bear fruit.

When the Prime Minister comes in to the Chamber in a moment or two, will Treasury Ministers have a word with her and tell her to get rid of the Chancellor and farm him off back to the beautiful green fields of Blaby, because he has been a complete failure? He promised that the Government would help small businesses because that was where the jobs would come from and said that that would sort out the problems of the economy.

I disagree with what I could hear of what the hon. Gentleman said. We cherish the Chancellor and hope to keep him for a long time.

Is the Chief Secretary aware that in west Norfolk unemployment has come down from a peak of 18 per cent. to less than 6 per cent.? The main reason for that is the success of the small firms sector, which has prospered under the Chancellor's policies. However, is my right hon. Friend aware that that sector is worried about the increase in inflation and supports policies that will bring inflation down?

I entirely agree. Unemployment has fallen in each and every region of the United Kingdom—without exception—and that has been happening for a considerable period of time. That is a direct result of the policies that my right hon. Friend has been following.

Is the Chief Secretary aware that bankruptcies among self-employed sole traders in London and the south-east have risen by 28 per cent. in the past year, as a direct result of the Government's high interest rate policy? Does he show no concern for the small businesses throughout the country that are being forced to abandon re-equipping and investment decisions and, in many cases, being forced to lay off staff? Has he heard the verdict of the small business man in Gosport, who said that high interest rates were squeezing his business to choking point? Why does he not change his policy before it is too late?

The hon. Gentleman can rattle his chains all he likes, but the creation of new businesses is now running at an unprecedented rate of 1,300 new businesses every week. The hon. Gentleman can never tell us when that happened under any Labour Government.

Does my right hon. Friend agree that the effect of high interest rates on business is substantially mitigated because long-term rates are several points below the level of short-term rates? In addition, does he agree that the long-term interests of all business, the economy and the people of Britain are best served by having high interest rates now, rather than allowing problems to build up for the future, as other Governments would have allowed?

That is right. It is also pertinent that the profitability of small businesses is at the highest level for 20 years. That means that firms are much less reliant on borrowing and therefore much less sensitive to short-term interest rate changes.

To ask the Chancellor of the Exchequer if he will list his economic advisers at the Treasury.

To ask the Chancellor of the Exchequer if he will list his economic advisers at the Treasury.

I shall arrange for a list of the numbers in each grade to he published in the Official Report.

Have the Chancellor's economic advisers concluded whether Sir Alan Walters, the Prime Minister's economic adviser, is correct in saying that the current high and rising rate of inflation is due to the Chancellor's decision to peg the pound to the deutschmark?

I understand why the hon. Gentleman is seeking to cause trouble, but I have no intention of accommodating him.

Have the Chancellor's advisers yet reached the conclusion that his over-reliance on the rate of interest as an instrument of economic policy is the key to understanding his current mismanagement of the British economy?

The Chancellor's advice from his advisers is for him. The decisions that are taken are for the Chancellor. I have no intention of referring to the advice that is received.

Will the Minister accept advice from me, that the current interest rates are biting quite well enough and that the Government's policy must be given time before we take any other action that may or may not be necessary? It is essential that the economy is given proper time in which to respond to current levels.

As I said earlier, my right hon. Friend will certainly use monetary policy to bear down on inflation. I give my hon. Friend that categorical assurance.

Does my right hon. Friend agree that a sensible person should take advice from as many sources as possible, and that he will be judged not by the noises that come from his advisers but by the quality of the judgments that he makes based upon that advice?

My hon Friend makes an extremely good point. It is not that long ago that we had some advice from 364 distinguished economists who were entirely wrong. I can certainly offer my hon. Friend the assurance that none of them work for the Treasury.

Is it not clear that the Chancellor is in need of some good advice, in particular not to make foolish interventions in rail disputes and not to threaten even further cuts in investment in our railway system, which is already inadequate because of years of underinvestment by the Government?

Even by the standards of the Opposition Front Bench, that is a remarkably misguided statement. The growth in investment in British Rail has been 75 per cent., and we now have the largest investment programme in British Rail since the advent of steam. That is a reality that the right hon. and learned Gentleman and his hon. Friends might do well to understand.

To ask the Chancellor of the Exchequer what was the percentage increase in the real take-home pay of a married man on male average earnings with two children between 1978–79 and 1989–90

Take-home pay for a married man with two children on average male earnings is 32 per cent. higher in real terms in 1989–90 than in 1978–79.

Is it not clear that the ordinary working family has benefited most from a policy of high economic growth and a reduction in taxation? Therefore, are not the Government acting in the interests of the ordinary working family in making their counter-inflation strategy the centrepiece of their economic policy, even when it involves difficult decisions such as keeping down pay in the public sector?

My hon. Friend is right. The increase in earnings in real terms, after prices and after VAT, to the average person is worth about £53 a week more at today's prices than in 1978–79. The same is true also for the person on half average earnings. His real earnings are now about 25 per cent. higher. That is an increase in the past seven years of 3·2 per cent. per annum, which compares with a total increase of about 4 per cent. during the period when the Labour party was in office.

To ask the Chancellor of the Exchequer if he will make a statement on what deutschmark/sterling exchange rate he would treat as appropriate to join the exchange rate mechanism of the European monetary system and as to what other considerations would affect his decision.

I refer the hon. Member to the statement by the Prime Minister to the House on 29 June on the outcome of last week's European Council in Madrid.

That statement showed that the Prime Minister took the view that we should not join the exchange rate mechanism until the completion of the single market, which is likely to be well after 1992. Does that mean that business and industry must wait another 10 years before the time is right?

The hon. Gentleman will have to wait and see. My right hon. Friend reaffirmed our commitment to join the exchange rate mechanism of the EMS but said that first inflation would have to come down and that there would have to be satisfactory progress on other measures involved in stage one of the Delors programme, including in particular the abolition of exchange controls. We in this country have been working for that for a long time, and got an agreed directive last year.

To ask the Prime Minister if she will list her official engagements for Thursday 6 July.

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

Has my right hon. Friend read the report in the Scottish Sunday Express about the crisis of confidence throughout Scottish business— [HON. MEMBERS: "Reading."] and the risk of job losses and a reduction of investment in Scotland—[HON. MEMBERS: "Reading."]—which is the direct result of the Opposition and the Scottish media supporting the—[HON. MEMBERS: "Reading."]—flawed, fraudulent and unworkable proposals for an assembly or parliament in Scotland, leading to—[HON. MEMBERS: "Reading."]—increased risk of separation of the kind that we expect from the Socialists —[Interruption.]

Order. The hon. Member must make his question brief.

Has my right hon. Friend realised that the benefits of the best financial climate that Scotland has enjoyed since 1945, due to her policies and leadership, is now at risk? What can she do to help the Scots?

I saw the report to which my hon. Friend refers, which said that half the Scottish companies interviewed would either cut local investment or move their headquarters south if devolution or independence came to pass. Scotland has done well on inward investment and during the period of Conservative Government, more jobs have been created and it has the second highest rate of earnings in the whole of the United Kingdom. I hope that Scotland will see fit to keep this prosperity and good prospects for the future.

Will the Prime Minister update the House on all the constructive efforts she has made since Tuesday to resolve the rail dispute?

As I told the right hon. Gentleman, the rail dispute is a matter between the board of British Rail—[Interruption.]—and the unions. As he knows, the national tribunal is meeting today to hear and consider the matter referred to it by the Transport Salaried Staffs Association. Alas, it is not also considering the NUR and ASLEF issues because they have not referred their matter to that arbitration panel.

I think that the words the Prime Minister was searching for when answering my question were, "None, Sir." If the Prime Minister ever used the railways or the tubes, she would know that travellers constantly suffer dirt, delays and discomfort because of under-investment. How does she think that yesterday's threat to cut investment will help to resolve the current dispute or help to improve services for those travellers?

Has not the right hon. Gentleman forgotten one fundamental thing, which is that the unions are driving the customers away—[Interruption.]—because they are not operating the railways? The right hon. Gentleman will have heard the Chief Secretary in Treasury questions pointing out that investment in British Rail has increased under Conservative rule, particularly in the electrification of lines—the investment of the last two years is the biggest programme we have ever had and the prospects for the next four years are good. It is the unions which are driving their customers away, both passengers and freight. It is a tragedy that railway men will lose their jobs if they go on like this.

There was not a single word of truth in the Prime Minister's answer. [Interruption.]

Order.

Will the Prime Minister confirm, for the sake of honesty, that under her Government investment in railways has been 25 per cent. lower in real terms than under the last Labour Government, that the best level of investment ever achieved by her Government was lower than the worst level of investment ever achieved in real terms under a Labour Government, and that the claims made yesterday by the Chancellor of a 50 per cent. increase is an increase from the lowest level of investment in railways in post-war history?

I do not know how the right hon. Gentleman can believe that people or freight can travel on railways—[Interruption.]—when the railways are on strike. Of course they cannot. Railway men are depriving themselves of jobs.

Does my right hon. Friend agree that even the average reader of "Thomas the Tank Engine" understands that it is not possible, on the one hand, to call on the Government to defeat inflation and, on the other to call on the Government to give in to the rail strikers' pay demands without stoking up inflation? Will my right hon. Friend recommend a serious economic policy to the Leader of the Opposition or send Mr. Controller to have a word with him?

I agree with my hon. Friend that the Labour party will complain about the level of inflation and then support every strike to get increased wages.

To ask the Prime Minister if she will list her official engagements for Thursday 6 July.

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

Has the Prime Minister yet had time to study the findings of the British Medical Association-commissioned Gallup poll on the National Health Service which shows that the vast majority of the British public, including many members of the Conservative party, are opposed to and will not accept the far-reaching structural changes to the NHS that the Prime Minister is suggesting in "Working for Patients" and in the new general practitioners' contract? Would it not be wiser to stand back and abandon the big bang approach to changing the NHS in favour of a much more considered evolutionary process which seeks to build on the very many strengths of the existing National Health Service?

No. I never know whether we are being accused of not running a good enough Health Service so that it needs reform or whether we are being accused of running such a good Health Service that no reform is needed. Hon. Members ask for one course of action one day and ask a different question on another. We are running a very good Health Service—the best that we have ever had. We are hoping to improve it still further. Many of the improvements that we have introduced have been opposed at the time, but they have resulted in releasing increased resources for the patient and better patient care. This reform will be no exception. It will result in great improvements for the patient.

To ask the Prime Minister if she will list her official engagements for Thursday 6 July.

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

Has my right hon. Friend had an opportunity today to read the report in The Daily Telegraph which says that the Governor of the Bank of England feels very uncomfortable with the aggressive advertising techniques of the financial institutions? Does she agree that the use of aggressive advertising to persuade people to borrow money to spend is of grave concern?

I am grateful to my hon. Friend. I tend to share the governor's concern and I dislike seeing so many temptations for people to spend more than they can really afford. I hope that they will resist such temptations. It is not wise to spend more than one can really afford.

Can the right hon. Lady give us any explanation—maybe it must be a psychoanalytical one —of why she should always be at her most dogmatic or strident on subjects such as the railways, football or the National Health Service about which she knows least?

Having been opposite the right hon. Gentleman for many years I would not say that he was the person who knew mostest about anything.

To ask the Prime Minister if she will list her official engagements for Thursday 6 July.

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

Will my right hon. Friend find time to consider the merits of the rents into mortgages scheme recently propounded by the Scottish Minister responsible for housing? Does she agree that such a scheme would find a welcome in other parts of the United Kingdom, including the south-west?

Yes. I greatly welcome the rents into mortgages trial scheme that is being run in Scotland because there are a number of houses there where the Government are the landlord and we thought that it was a good way in which to try out such a scheme. I hope that many people will take advantage of it to purchase their houses and that the percentage of owner-occupation in that country will go up. Credit on housing is a very good investment indeed.

Is the Prime Minister aware of the growing concern in Fermanagh about the recent decision to open the Lackie bridge, which has been closed for some time to protect the citizens there? At a time of growing bombing in the Province, will she provide the security that the people need?

As the hon. Gentleman knows, there was a decision some time ago to close certain checkpoints because we thought that the soldiers involved at those checkpoints could be better deployed in the area to give greater protection to the people. That decision has now been implemented because we believe that it represents a better use of the armed forces for the protection of the people.

To ask the Prime Minister if she will list her official engagements for Thursday 6 July.

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

Does my right hon. Friend agree that the recent accord between the MPLA and UNITA in Angola is a most welcome step towards peace in that country after a civil war that has lasted 14 years? Will she assure the House of the Government's persisting aim to achieve stability and prosperity in that region, not least by holding the next South African President to his pledge to hold to sensible progress towards democracy in his country?

I join with my hon. Friend in hoping very much that the recent accord in Angola will be implemented and that it will lead to free elections. That will be the crucial test of whether it is working. If it is, that, together with independence for Namibia, will augur very well for the future of southern Africa. We have yet to see if that particular accord will result in free elections.

To ask the Prime Minister if she will list her official engagements for Thursday 6 July.

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

What advice could the Prime Minister give to my constituents and hon. Members about elderly people who, without asessment of any kind, enter private nursing homes and then find that their families cannot afford to pick up the bill for the difference between what the DSS pays for keeping that person in the home and the price charged by the home?

As the hon. Gentleman is aware, under the income support scheme, there is provision for people to enter private nursing homes. A maximum amount is payable and homes are available which fall within that amount so that people may enjoy those facilities. Of course, people should inquire about the price before they go in, and it is impossible for the DSS to pick up every single bill for every residential home, no matter how expensive. That could not be done under any Government. There are more people in residential homes now than there have been for a long time. Therefore, more people are enjoying a standard of comfort which was previously not available to them.

To ask the Prime Minister if she will list her official engagements for Thursday 6 July.

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

Will my right hon. Friend find time to consider the remarks made by Mr. Russell Hopkins, the general manager of University hospital of Wales, Cardiff when speaking at the BMA conference at Swansea? He accused the BMA of spreading fear, apprehension and uncertainty among the chronically sick, elderly and infirm through its disgraceful publicity campaign. Will my right hon. Friend denounce such behaviour?

Yes, I am glad that some doctors and managers have the courage to speak out against the scare tactics which are frighening a number of patients totally unnecessarily. This year the Government have spent three times the amount of money that was spent 10 years ago. In our 10 years in power we have also increased the number of nurses and doctors. The reforms are intended to bring about even better patient care. When we put them into operation, they will do just that.