To ask the Chancellor of the Exchequer when he expects inflation to fall below 5 per cent.

The all-items RPI inflation is expected to fall to 5½ per cent. by the fourth quarter of 1991. The Government's firm financial framework will ensure that inflation continues on a downward path.

I congratulate the right hon. Gentleman on having been elevated to one of the highest offices in the land and I suppose that we must hope that his economic forecasts will prove more successful than those of his two predecessors, who generally got it wrong. More seriously, does the Chancellor agree that if he succeeds in reducing the rate of inflation, he will do so through a policy of punishing interest rates which will deepen the current recession and create further unemployment? Will he give my constituents an assurance that unemployment will not rise above 2 million next year?

I thank the hon. Gentleman for the first part of that supplementary question. The answer to the second part is that there is no painless or easy way to reduce inflation, although that is an illusion peddled by the Labour party. The costs and pain of reducing inflation now will be as nothing compared with the pain and costs that we had in reducing the inflation that we inherited in 1980–81.

Is my right hon. Friend aware that Conservative Members join in congratulating him on his promotion to Chancellor of the Exchequer and we are absolutely certain that he will continue with the same economic policy as his predecessor? If public expenditure were increased to implement the various promises that Labour Members are putting forward, what effect does he think that that would have not only on the inflation rate but on the budget deficit?

I thank my right hon. Friend for his kind remarks and I assure him that economic policy continues to be the same. I also assure him that I shall take no risks either with inflation or with the exchange rate. Bearing down on inflation is, and will remain, the Government's top priority. My right hon. Friend is right to point to the extravagant plans for public expenditure put forward by the Labour party, which could have only two consequences—even higher interest rates and accelerating inflation.

May I add my congratulations to the right hon. Gentleman on his appointment as Chancellor of the Exchequer? Will he now answer the question put to him by my hon. Friend the Member for St. Helens, North (Mr. Evans) about unemployment? If the recession continues, as it is clearly doing, causing a downturn in economic activity, the collapse of companies and a rise in unemployment, what action will the Government take to combat those deplorable results?

I thank the right hon. and learned Gentleman for his first remarks. There are many pleasures in holding my present office, one of which is having the right hon. and learned Gentleman opposite me. We intend to make the reduction of inflation our top priority. We do not intend to boost output by adjusting fiscal policy. In the past that has been a counter-productive policy and has brought no benefits in terms of reducing inflation. The benefits to output will come when inflation is reduced. The experience of previous cycles has been that once we make marked progress in reducing inflation, output begins to recover.

Does my right hon. Friend agree that our present predicament stems largely from the mistaken decision to relax monetary policy at the end of 1987? That is clear with the benefit of hindsight. Will my right hon. Friend confirm, however, that Labour Members were urging us to go still further and that what they advocate today shows that they have learnt nothing since then?

My hon. Friend is absolutely right. I am confident that we shall make progress in lowering inflation as a result of the tough and difficult decisions taken by my predecessor. The success that we shall have owes nothing to any encouragement from Labour Members, who have done nothing but oppose every policy designed to lower inflation.

To ask the Chancellor of the Exchequer if he will make a statement on the balance of payment figures.

In the latest three months, the current account deficit was £3·1 billion—roughly half the peak recorded in the third quarter of 1989. It is likely to continue to fall as domestic demand pressures ease further.

Does the Treasury team think that the former Chancellor of the Exchequer, the right hon. Member for Blaby (Mr. Lawson) was, and is, correct in believing that the deficit is self-correcting and not a matter for Government action, or do they agree with the new Prime Minister that the deficit is a problem and, if so, what do they intend to do to reduce it further?

I do not think that there is any great divide between my two right hon. Friends. On the contrary, it has been a commonplace of Government policy for a long time, and continues to be, that the deficit must be reduced, which it is being. We are confident that we shall meet the targets that we set.

I congratulate my right hon. and learned Friend on his promotion and I trust that he will bring his undoubted enthusiasm to keeping Government expenditure under control. What effect do Britain's contributions to the EC, overseas aid and the cost of the Rhine Army have on the balance of payments, and what plans do the Government have to reduce that burden on the British taxpayer and reduce the balance of payments deficit?

I am most grateful to my hon. Friend for his kind remarks. The three policy issues that he identifies are ones to which the Government have commitments, which will be honoured.

Will the Chief Secretary confirm that a large chunk of Britain's trade deficit is made up of imported textiles and clothing? Does he appreciate that there will be an explosion of anger from the men and women whose livelihoods depend on the British textile and clothing industry if today, in a desperate effort to salvage the general agreement on tariffs and trade talks, their jobs are traded off and British industry is sold down the river?

I understand what the hon. Gentleman says. A balance has to be struck between the interests of industry and those of the consumer. I see no reason why the livelihoods of the people about whom the hon. Gentleman is quite properly concerned should be put at risk by the discussions. There are some encouraging signs that the level of imports is no greater now than 12 months ago and exports, particularly manufacturing exports, have been keeping up well, with an increase of about 7·5 per cent. this year. That suggests that there is no reason for doom and gloom in the textile and clothing industry or any other.

Would my right hon. and learned Friend be kind enough to explain what is meant by the "balancing item." Apparently, the published balance of trade figures are nothing like so bad as they were set out to be because of this thing called the balancing item. What is the reality?

The balancing item is where the figures cannot be reconciled—[Interruption.] That is what they tell me. If I may be permitted to do so, I was about to display further erudition. The balancing item probably reflects the problems of monitoring capital inflows when, in today's world, capital inflows flow in and out without the regulations of yesterday. That is almost certainly the case, but the right hon. and learned Member for Monklands, East (Mr. Smith) will correct me if I am wrong.

To ask the Chancellor of the Exchequer which Departments are planned to have less money in real terms in 1993–94 than their planned expenditure for 1991–92

I refer the hon. Gentleman to table 1A.10 of the 1990 autumn statement.

Does the Chief Secretary agree that the Government plan to spend less in real terms on education in 1983–84 than in the previous year? If so, was not it a hollow promise for the Prime Minister to claim that he was interested in education and attached priority to it? Will the right hon. and learned Gentleman ensure that extra resources are put into the education budget, if only to save the face of the Prime Minister?

I think that the hon. Gentleman meant 1993–94——

indicated assent.

I say that just to show that I was listening.

Does my right hon. and learned Friend agree that the two Departments that have done well out of the autumn statement are the Department of Health and the Department of Education and Science, and that that shows the Government's commitment to helping people in the community who most need assistance when inflation is running at current levels? Is not that a sign of a caring Government?

My hon. Friend is right. I have already made the point about education and I should like to add that the budget for health for next year was increased in the autumn statement by about £3 billion, which means an increase over two years of £6 billion. I am not sure what the right hon. and learned Member for Monklands, East (Mr. Smith) and his colleagues will find to complain about in that.

I, too, congratulate the new Chief Secretary on his appointment. We were also pleased to learn that the new Chancellor told the Treasury and Civil Service Select Committee that he thinks that the Government should look after manufacturing industry. How do the Government reconcile that with the fact that their spending plans show that over the planning period, as my hon. Friend the Member for City of Durham (Mr. Steinberg) said, the Government intend to cut spending in real terms not only on education but on the work of the Department of Trade and Industry, on research and development, and even on training to reduce the skill shortages that are feeding inflation? Or is it just that there is no relationship between what the Government say and what they do?

I think that the hon. Lady's problem is more fundamental. She seems to think that the only way to assist manufacturers is to spend Government money on them, when it is the framework in which manufacturing industry has to operate which is the key. It was the improvement in that framework which led to massive increases in productivity and manufacturing output in the 1980s, and the same improvement will ensure that manufacturing comes through the present difficult period and goes on to further success.

I thank my right hon. and learned Friend for the massive increases proposed for transport, particularly for London Regional Transport. May I look forward to the day when that beneficence expands to include improving the Northern line?

I am grateful to my hon. Friend. He recognises that about £700 million has been made available for rail and underground improvements to benefit major parts of London's network. I will ensure that his views on the Northern line are passed on to London Regional Transport. It is a great myth that there is under-investment, as British Rail and London Underground will be spending about £750 million in the next three years on safety alone. That shows just how much investment is going into public transport.

To ask the Chancellor of the Exchequer what measures were announced in the autumn statement to help improve the supply side of the United Kingdom economy.

The Government's supply side policies are designed to improve the performance of the economy by removing barriers and creating incentives.

Given that unemployment is rising rapidly, that we continue to have a horrific deficit in trade in manufactured goods and that industrial investment is still only at the same level as it was in 1979, are not those measures wholly inadequate to enable us to produce from our own resources the things that people in this country need?

That is absolutely wrong. It completely ignores the fact that during the 1980s the United Kingdom was top of the league for productivity, top of the league for growth, top of the league for investment and created 2½ million more jobs, so we must have been doing something right.

Does my hon. Friend agree that the improvements in the supply side of the economy have been most satisfactory under the Government? Does he further agree that the low rates of direct taxation have contributed towards making sure that the labour market has settled down and fewer strikes have helped to free productivity and improve the supply side of the economy?

My hon. Friend is quite right. Our supply side policies have been designed to improve competition, remove barriers and improve incentives. We have done that by cutting tax, deregulating the economy, improving competition and reforming the labour market. To me, and to many of my hon. Friends, it is laughable to suggest that there is such a thing as supply side socialism.

As the latest figures show a serious financial deficit among large companies in Britain and it is therefore plain that those companies will reduce investment, will the Minister further consider an increase in capital allowances, possibly a short-term one, to encourage continued investment?

On the first part of the right hon. Gentleman's question, many companies have substantial debts because they have been investing on an unprecedented scale in the past few years. The right hon. Gentleman also asked about depreciation and capital allowances. As he knows, we reformed corporation tax in 1984. There is now a generous system for depreciation and capital allowances and the accumulation of those 25 per cent. allowances over the past few years has meant that many companies are protected from a large amount of what would otherwise be corporation tax liability.

Will my hon. Friend confirm the Government's commitment to encouraging further savings so that investment in industry can expand in the 1990s in the same way as it expanded in the 1980s under the Government's policies?

I can assure my hon. Friend of that. Both of the last two Budgets have contained measures designed to encourage savings. They have been very successful, and we hope that they will enable industry to continue to fund the kind of investment programmes that it has funded for the past few years when, as I have said, we saw record growth in business investment.

To ask the Chancellor of the Exchequer what proportion of gross earnings a married couple with one earner on 75 per cent. of average earnings, with two children, paid in all taxes and national insurance, including local taxes and treating child benefit as negative income tax, in 1978–79 and 1989–90.

Approximately 31 per cent. and 33 per cent., respectively; over the same period, measured at 1990 prices, the same family has enjoyed an increase in real net income of nearly £43 per week.

I welcome the hon. Lady to her new job. We have crossed swords before in Select Committees and in various other places, and I am sure that we shall do so again. I am glad that she has confirmed the figures. Will she confirm that the net result of the Government's taxation policy over the past 11 years has been to reduce taxes for the rich and to increase them for the poor?

What counts for families are real earnings. The total tax burden in all cases is now lower than it would have been if Labour's tax regime had simply been indexed for inflation. That same family which has enjoyed a rise of £43 per week under this Government would have had a measly £3·20 under Labour.

Is not one of the most pernicious barriers—the trade barrier—equally damaging to the rich and to the poor? Does my hon. Friend agree that even if we get a 30 per cent. cut in food subsidies under the GATT round, every family in Britain will pay more in increased food prices as a result of trade barriers than they pay in the poll tax? [Interruption.] My hon. Friend should also bear in mind the extra costs caused by trade barriers in relation to cars and consumer electronics. Is it not time that the Government started to take those issues seriously?

It was a touch difficult to hear the whole of my hon. Friend's question, but I assure him that the issues that he raises about the GATT round are taken very seriously by the Government.

I welcome the hon. Lady to her new job and invite her to win the support of the House by repudiating the policy adopted by her predecessor of refusing to give the House the figures for the distributional effect of the poll tax on the tax burden. Does the hon. Lady understand that such a refusal completely undermines the initiative taken by the Secretary of State for the Environment yesterday? The Treasury team can take campaigning against that right hon. Gentleman a little too far. Is not the truth of the matter that the Treasury has the figures and is concealing them because their effect is deeply embarrassing to the Government?

I thank both the hon. Gentleman and the hon. Member for Kirkcaldy (Dr. Moonie) for their kind welcome. I remind the hon. Gentleman that nothing is ruled out and nothing is ruled in. The figures are not available. The increased burden on families from the community charge has been the result of Labour-controlled local authorities spending well in excess of appropriate levels. I remind him that at least 10 million people get help through community charge benefit.

It is delightful to see my hon. Friend at the Dispatch Box today in that capacity. She is there because of her ability and not because of her gender. [Interruption.] Labour Members should listen to this—they might enjoy it. Is not it the case that four out of five families with children of school age pay direct taxation? Does my hon. Friend think that they would be happier to have the high spending plans and taxation policies of the Labour party?

I am not sure whether to thank my hon. Friend for his obviously well-intentioned welcome to the Dispatch Box. I will make no comment on the gender-oriented remark. Of course people prefer to have a cut in direct taxation.

To ask the Chancellor of the Exchequer whether he has any plans to modify his hard ecu scheme.

The United Kingdom proposals for a hard ecu have been widely welcomed as a positive contribution to the ongoing debate on EMU. The ideas first put forward by my right hon. Friend the Prime Minister will continue to be developed and discussed with European Community colleagues.

I congratulate the Chancellor on his appointment and remind him that one of his first tasks will be to convince the Rome conference that there is still life in the hard ecu scheme. Does he agree that he will have to satisfy two conditions to do that? He will have to demonstrate, first, that the scheme can lead directly to single currency and then that the institution running the currency will not be subject to political interference in its responsibility for price stability. Are those conditions acceptable to the Chancellor and to the Prime Minister?

On the hon. Gentleman's point about how independent a European monetary institution should be, he is not correct. There are a variety of views and not all countries are in favour of fully independent institutions. For example, the French take a different view from the Germans. A number of countries have expressed interest in the hard ecu and the hon. Gentleman may have noticed that the French Finance Minister, Mr. Bérégovoy has said that he thinks that the full potential of the hard ecu should be explored as a contribution towards stage 2. We have said that the hard ecu could, in time and if people and markets wish it, evolve towards a single currency, but only on that basis—that individuals chose so to do.

I add my congratulations to my right hon. Friend on his first appearance as Chancellor. Will he confirm that the hard ecu proposals can fit felicitously into the longer-term EMU objectives? Will he remind the House that the European central bank proposals being worked out also include the full involvement of all the national central banks?

My hon. Friend is right on the last point. On Sunday, I discussed those very issues both with other Finance Ministers and with the governors of the banks of Europe. On the first point, I have made the position clear. We see that it could evolve, but this is an approach that is market driven and involves individuals choosing how the monetary system of Europe should develop.

Does the Chancellor share the view of his Financial Secretary, who told the House of Lords Select Committee on 9 October that in his view the hard ecu could lead to a single currency even more quickly than the Delors programme, or the view of the Prime Minister, who told the House on 30 October that the hard ecu would not be widely used in any case and therefore could not lead to a single currency? Does the Chancellor back his Minister, or the back-seat driver? What is his view?

In putting that question, the hon. Gentleman shows that he does not understand the hard ecu proposal at all. We have repeatedly made it clear that what the hard ecu would ultimately lead to would depend on what individuals and markets decide. My right hon. Friend the Prime Minister and my hon. Friend the Financial Secretary have expressed their views about the speed at which any change might happen and it is perfectly in keeping with the theme of letting people choose the hard ecu that those different views should be expressed.

Is my right hon. Friend aware that yesterday the French Finance Minister, whom he has just mentioned, said that the move towards economic and monetary union can be achieved only by the simultaneous erection of an economic Government? Does my right hon. Friend agree?

We have always feared that an imposed single currency and an early imposition of monetary union must lead to a degree of political integration for which I do not believe the people on the continent of Europe are ready.

To ask the Chancellor of the Exchequer what work he is undertaking in preparing for the intergovernmental conference in December.

My right hon. Friend the Prime Minister put forward proposals for a hard ecu and European Monetary Fund, for which I shall be arguing at the intergovernmental conference on EMU. My right hon. Friend the Foreign Secretary has put forward suggestions for improving the efficiency and effectiveness of the Community in the context of the intergovernmental conference on institutional reform and he is working up those ideas in preparation for that conference.

I ask the Chancellor again: does he intend to reaffirm the support that he gave just two weeks ago to the Bruges group of anti-European Tory Members of Parliament or, having no further use for their votes, does he intend to repudiate their views at the intergovernmental conference? Bearing in mind the fact that his Financial Secretary now says that we can move speedily towards the creation of a single European currency through the hard ecu, what will happen to notes in circulation when he abolishes the pound?

I am grateful to the hon. Gentleman for his close study of the speech that I made two weeks ago. He has asked me about it not just today but four times yesterday at the Select Committee. My answer today is no different from my answer yesterday, and that is that the speech that I gave then was in accordance with Government policy and remains so today.

I, too, congratulate my right hon. Friend on his assumption of the high office of Chancellor. He has our very warm support. Is not the point about the hard ecu that it is, unlike the present ecu, a currency that has to be managed and will be managed by a new institution, the European Monetary Fund? Is not it the case, therefore, that once the processes of management develops, it will give markets, customers, individuals and Governments the opportunity to choose whether, in the years ahead, we wish to move to a single currency, enlarging our choice and making it more important?

I am grateful to my right hon. Friend. He is right and expresses the point well. The hard ecu is not a single currency—it is a common currency and it differs, as he says, from the existing ecu in that it is not just a basket currency; it will be a hard counter-inflationary currency, and it will be up to individuals and markets to choose. In that way, the development of monetary union would, if it happened, be entirely evolutionary and in accordance with people's choice.

I congratulate the Chancellor on behalf of my right hon. and hon. Friends on this Bench. Now that most of the 11 have started to wriggle out of the commitment to a single currency, will the Chancellor undertake to uphold the freedom and the decision-making power of the Treasury, over which he now presides?

That is very much our objective.

Will my right hon. Friend, far from repudiating his excellent speech to the Bruges group two weeks ago, take note that the European institutions seem to have read it carefully and moved in his direction—particularly in respect of that part of my right hon. Friend's speech in which he said that economic convergence among member states is a mirage? Does he welcome the apparent change of mood before the forthcoming intergovernmental conferences, at which uniformity will no longer be demanded but instead there will be new emphasis on two-speed or even multi-speed progress towards economic and monetary union?

I am grateful to my hon. Friend. There is a wide variety of growth and inflation rates in the European economy, and a number of member states now acknowledge that one cannot move to a single currency without first achieving much closer convergence than currently exists.

To ask the Chancellor of the Exchequer what steps he is taking to prevent tax avoidance.

The Government have introduced several measures to limit the scope for tax avoidance and are prepared to introduce further measures as and when necessary.

What is the estimated total loss of tax revenues to the Exchequer through artful dodgers using offshore trusts as a way of avoiding tax?

By the very nature of the tax avoidance mechanism to which the hon. Gentleman refers, it is impossible to make such an estimate. We blocked up some loopholes in the Finance Act 1981, but others remain. All questions of tax avoidance are under constant review. Labour tabled a new clause to this year's Finance Bill that would have dealt with one minor aspect, but it is a complex matter. I am advised that simply to introduce an exit charge on trusts to foreign jurisdictions would involve more than six pages of legislation.

Does my hon. Friend agree that the most effective way of reducing tax avoidance is to lower general taxation, which is something that Labour never understands?

My hon. Friend is completely right. One reason why Britain has such a widespread and sophisticated tax avoidance industry is the ridiculously high marginal rates that we suffered under a Labour Government.

To ask the Chancellor of the Exchequer what assistance he is providing to small companies for the collection and payment of value added tax.

Small businesses are able to take advantage of special facilities for dealing with VAT, including the cash and annual accounting schemes and particular schemes for retailers.

What help will the Minister give to well-established and respected firms such as Multiflex in my constituency, which is being surcharged £30,000 at the 25 per cent. rate as a consequence of the problems that it is experiencing in obtaining payments from its customers in the construction industry? The Minister will appreciate that such companies cannot lean on valued customers and that many of their problems have been created by the high interest rates that flow from Government policies. Given the poor state of the economic climate, should not the Government allow more flexibility and help rather than hinder small businesses?

Some smaller firms dependent on bank borrowing are experiencing difficulties and I greatly regret that. I believe that the hon. Gentleman was referring to the serious misdeclaration penalty. The company that he mentioned can give reasonable excuse to satisfy Customs or the VAT tribunal and I advise the company to take that action.

I add my congratulations to those already expressed to my hon. Friend on her excellent promotion. She will be aware, as she represents a neighbouring constituency to mine, that firms in west Norfolk are pleased about the recent increase in the VAT threshold. Does she agree that Customs and Excise must show the utmost sensitivity and understanding in erasing arrears incurred by small firms?

I thank my hon. Friend for his kind welcome. The Government will continue to examine ways in which procedures can be simplified and we shall of course deal sympathetically with companies of the type that he described.

To ask the Chancellor of the Exchequer when he last met the Governor of the Bank of England to discuss Britain's economic performance.

My right hon. Friend the Chancellor expects to meet the Governor of the Bank of England from time to time to discuss a variety of matters.

May I congratulate the right hon. and learned Gentleman on his elevation to the Cabinet? Having sat with him through proceedings on the Police and Criminal Evidence Act 1984 and the Children Act 1989, I can well understand and appreciate his grasp of detail. Will he confirm that he will need that grasp when he considers the inflation rate of 10·9 per cent., as opposed to that of our European partners, which is half that rate, and when he sees that unemployment is rising for the seventh consecutive month, that our interest rates are the highest of all of the Group of Seven industrial countries, and that bankruptcies are 90 per cent. up on this period last year? Will not that give food for sombre thought when the Chancellor next meets the Governor of the Bank of England?

I am grateful to the hon. Gentleman for his typically generous words at the beginning of his questions. He has obviously chosen some statistics, but there are plenty of others that pay testimony to the real and sustained improvement in the British economy and in British industrial performance in the past decade. I shall try to be up on all of them.

Will my right hon. and learned Friend report to the Governor of the Bank of England that there is growing support throughout the House for greater independence for the bank and that those arguments exist independent of whether there is any sort of monetary union?

I am aware that there are those who hold that view—I think that quite a lot of other people hold a contrary view. It is by no means demonstrable that a more independent bank would enable the British economy to function more effectively. For instance, the Bank of Japan is one of the least independent banks in the world.

What action do the Government and the Bank of England propose to take to sort out the appalling mess surrounding "swaps" and to prevent any future repetition of that sort of affair in the interests of the City's international reputation?

That matter is under consideration and we are awaiting reports on it. I cannot add anything to that.

What discussions has my right hon. and learned Friend had with the Governor, as the Bank of England is the sole bank of issue south of the Scottish border, about printing its ecu value on one side of a £1 note? If he has had such discussions, will he ask the Governor of the Bank of England for an undertaking that, if such an endorsement is made on every note printed by the bank, the words "Stockton-on-Tees" will not be removed from the back of a £5 note?

With respect to my hon. Friend, the issue of European monetary union is rather more fundamental than what is printed on a note, but I shall bear that matter in mind when we have our future discussions.

To ask the Chancellor of the Exchequer what proportion of their disposable income the bottom quintile group of non-retired households, ranked by original income, paid in total in indirect tax in 1987; and what proportion the top quintile paid using the same method as in "Economic Trends", December 1988.

Calculating the figures on the basis requested, the relevant proportions are 29·4 per cent. for the bottom quintile and 19·2 per cent. for the top quintile.

Does not the Government's record on the amount of direct and indirect taxation paid by some of the poorest members of our community contrast remarkably with the new Prime Minister's professed aim to establish a classless society? Is not it a fact that the Government's policies have set out deliberately to widen the gap between the richest and the poorest?

The fact is that real take-home pay levels have increased under this Government for every income group, and real take-home pay is what matters.

Does my hon. Friend agree that because real take-home pay has increased for the people of the United Kingdom, not least for the people of Scotland—where there are more people in work today than at any time in history—they are now able to spend their money as they wish and to enjoy holidays abroad, which their parents never even dreamed of?

My hon. Friend is absolutely right. The fact is that people have more choice in the way in which they spend their money, and indirect taxes take up broadly the same proportion of household expenditure for households on all levels of income. That is why the Government have chosen to shift some of the burden from direct to indirect taxation.

To ask the Chancellor of the Exchequer what is his most recent forecast for the proportion of non-oil gross domestic product that taxes and national insurance contributions will represent in 1990–91.

The figure is 371¼per cent.

Will the Minister confirm that, in the year 1978–79, the figure was only 34 per cent? While we appreciate that the Government have reduced personal income tax, that has tended to benefit the rich and in the past 10 years the overall tax burden has increased. Is not that rather different from the impression that the Government tend to give the country?

I am glad that the hon. Gentleman admits that we have reduced the burden of income tax. What his question left out was the fact that in 1978–79 the Labour Government were running a public sector borrowing requirement amounting to 5½ per cent. of gross domestic product. If that is added to the tax burden, the total comes to over 40 per cent., as against the present figure of under 37 per cent. If our public sector borrowing requirement were now at the same level as it was then, it would be £30 billion.

Does my hon. Friend accept that what matters to ordinary families is how much money they have, and that that aspect has improved? Does he agree that tax receipts are affected by tax expenditures and that a couple with a mortgage and above-average earnings will continue to receive the equivalent of 12 child benefits? Perhaps the Department of Social Security and the Inland Revenue could get together and concentrate as much on that as they have on the level of child allowance and child benefits.

My hon. Friend is quite right: what matters to most families is the amount of their take-home pay. Under the present Government, the take-home pay of a person on average earnings has risen by more than 30 per cent., or the equivalent of £58 a week. Under the previous Labour Government, it rose by 1 per cent.

To ask the Prime Minister if he will list his official engagements for Thursday 6 December.

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.

Does the Prime Minister recall that only two days ago he appealed to his party to close ranks? Can he explain why so many of his colleagues refused to support him in the poll tax debate last night? Can he also explain why the British people, many of whom have suffered hardship as a result of this tax, should be expected to have any confidence in the Conservative party, when it is now clear that Tory Members who originally voted to impose the poll tax on us clearly did not believe in it all along?

The hon. Lady is slightly mistaken. A large number of my ministerial and Back-Bench colleagues were abroad unpaired yesterday, and my right hon. Friend the Chief Whip saw no need to bring them back, because we are united.

Is my right hon. Friend aware that it has not gone unnoticed on Teesside and in the north-east that, on Tuesday night, he supported the Tees and Hartlepool Port Authority Bill in the Lobby, and that the Leader of the Opposition did not oppose it? My right hon. Friend will be most welcome throughout the north-east when he makes his frequent visits—unlike the Leader of the Opposition, who has occasionally dropped in on the Durham miners' gala and then scarpered back to the south.

I am grateful to my hon. Friend. I look forward to visiting Langbaurgh and the north-east on many occasions.

When he knows what he knows, why does the Prime Minister refuse to abolish the poll tax now?

Unlike the right hon. Gentleman and his party—who have, on the latest count, changed their policy on this matter on 52 occasions—we are conducting a comprehensive review to determine how best to deal with it.

Will the Prime Minister confirm for the British people that the poll tax will still be in place at the time of the next general election?

My right hon. Friend the Secretary of State for the Environment made it perfectly clear yesterday that we were undertaking a fundamental review, and a fundamental review is what we shall undertake. We shall see how long that will take. I think that the country will notice that, although he professes to oppose the system, the right hon. Gentleman will make no constructive moves towards a constructive dialogue to correct it.

When the right hon. Gentleman's proposal last night did not even convince his hon. Friends, how does he seriously expect it to convince anybody else? Will he now answer the question? Will he confirm that the poll tax will still be in place at the next general election—yes or no?

The right hon. Gentleman might confirm that he has made it clear that under his plans the time scale for change may be considerable.

Will my right hon. Friend win the hearts of Londoners today by endorsing the proposals for leasehold reform put forward last week by the Lord Chancellor? Does he accept that the draft Bill for commonhold will allow London flat dwellers to own their flats on freehold for the first time, thereby ending the injustices of leasehold that make so many London flat dwellers into second-class home owners?

As my hon. Friend will know, over the past 10 years we have done more to increase owner-occupation, with the personal security that that offers, than any previous Government. It is noticeable that that is not the policy of the Labour party.

Does the Prime Minister realise that we welcome the proposal made last night for discussions with Opposition parties on a replacement for the poll tax? My party will contribute constructively to those discussions. We shall not play parliamentary games while millions out there are suffering from the effects of this unjust tax. In that context, may I ask the right hon. Gentleman to remember the promise that he made in his 1974 election address, in which he said that he would abolish the rates——

Order. I do not think that we need visual aids.

—in which he said that he would abolish the rates——

Order. The right hon. Gentleman can make his point without the visual signs.

He said that he would abolish the rates and replace them with a tax related to the ability to pay. Does he still agree with that and does he realise that the only tax properly related to ability to pay is a local income tax?

On the last point, the right hon. Gentleman knows that we are considering local taxation at the moment. On the first point, I share what I think is implicit in what the right hon. Gentleman said, which is that the House of Commons need not necessarily be a perpetual cockpit of confrontation. I regret very much that Labour Members, despite all that they said, have no intention of helping to determine common principles for the role of local government. If they do not wish to do so, that is a matter for them, but others will.

Mr. Michael Lord. [HON. MEMBERS: "Who?"] Order.

As our new Prime Minister will have considerably fewer problems to deal with on taking over his appointment, may I urge him to bring to the top of the list the problem of haemophiliacs who have been infected with the AIDS virus through no fault of their own? He would earn the undying gratitude of the victims, their families and the House if he could take steps to bring about an out-of-court settlement as quickly as possible.

As my hon. Friend knows, my right hon. Friend the Secretary of State for Health has made it clear that we are spending a considerable amount of money to deal with that problem, which we shall continually keep under review.

To ask the Prime Minister if he will list his official engagements for Thursday 6 December.

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

Is the Prime Minister aware that in the past 12 months a baby has been abducted from a hospital in London, an 11-year-old girl has been raped at a hospital in Surrey, a 77-year-old woman has been indecently assaulted at a hospital in Leeds and last week two doctors were murdered at a hospital in Wakefield? As the Government are committed to spending about £200 million on allowing hospitals to opt out, but a mere £20,000 on hospital security, does the Prime Minister feel that he has his priorities right?

The hon. Gentleman should bear it in mind that the direct management of hospitals lies with health authorities and, in the case of national health service trusts, with the management of those trusts in due course. I am sure that they will take note of what the hon. Gentleman says.

Is my right hon. Friend aware that there would be almost universal delight and gratitude if, before Christmas, the problem of the haemophilia AIDS victims were solved by adequate compensation being paid without liability being admitted?

As my hon. Friend knows, we have already made a payment into the Macfarlane Trust. I understand the sensitive nature of the matter, but I have nothing further to add today.

To ask the Prime Minister if he will list his official engagements for Thursday 6 December.

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

Is the Prime Minister aware that of the 181 children who left Pennywell comprehensive school in my constituency earlier this year, only 10 found some form of employment, 32 went on to higher education, and of the remaining 150 or so, half went on to Government training schemes, which will lead to the dole, and the other half went directly on to the dole? What hope can he offer the children of Sunderland that life in John Major's Britain will be any different from life in Margaret Thatcher's Britain?

As the hon. Gentleman knows, there have been considerable improvements in every aspect of life in the past 10 years, and that will continue. On the specific point that he made, a larger percentage of our youngsters now go on to further education than ever before, a higher percentage of our population is in work than ever before and there is a higher level of opportunities and training than ever before. That bodes well for the young people of Sunderland and indeed for young people everywhere.

Will my right hon. Friend comment on the fact that many local education authorities, including mine of Kirklees, are holding back far more of their education budgets for central administration than was originally intended by the Government? As the Government have announced that they intend to carry out a full review of the structure of local government, does he think that we should consider taking the control of education out of the hands of local education authorities and giving it to schools?

I have considerable sympathy with that point of view, not least because of the enormous success of local management of schools. I hope that education authorities will release as much money as possible to go directly into the classroom.

To ask the Prime Minister if he will list his official engagements for Thursday 6 December.

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

Will the Prime Minister tell us whether, as a result of the frantic trawling for options and ideas that is under way in the Department of the Environment, there will be any reduction whatsoever in the poll tax bills that people will receive in April, or will the amounts be precisely the same as they were always going to be?

As for trawling for options, I remind the hon. Gentleman that his party has had 52 changes of mind on local government. That is not so much a U-turn as a merry-go-round.

Does my right hon. Friend accept that manufacturing industry is the only genuine source of non-inflationary growth and that the continuing use of high interest rates is damaging to investment and to competitiveness? Will my right hon. Friend look again at an alternative industrial manufacturing strategy?

As my hon. Friend knows, the central core of economic policy is to bear down on inflation. As it reduces—and I expect that it will reduce, which is the general view of external commentators as well—the options may exist for a reduction in interest rates. I can give no indication of when that may be.

To ask the Prime Minister if he will list his official engagements for Thursday 6 December.

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

Does the Prime Minister agree that given that two of the Polaris submarines are no longer seaworthy and that the other two were on the Clyde earlier this week, he is the first Prime Minister for 20 years not to have had a nuclear deterrent at his fingertips? Does he further agree that that did not cause him or the country any problems? Will he now agree that, rather than trying to patch up the remaining Polaris submarines, he should abandon the whole programme and give a clear lead to the non-proliferation talks in January that we want to have a non-nuclear world?

Our nuclear capacity remains a deterrent and remains an important part of our defence.

As my former area Whip—which until now has, no doubt, been his greatest claim to distinction—will my right hon. Friend comment on the possibility of some change being brought to the hours that the House works? Will he tell me why, having had that matter raised on many occasions in the 20 years in which I have been in the House, I remain skeptical? What can my right hon. Friend do to reassure me?

I have fond memories of being my hon. Friend's Whip some years ago. The hours of work in the House are essentially a matter for the Procedure Committee and for hon. Members themselves. Each will have his own individual views. If the House were to express views, I do not think that I would stand against them.