To ask the Chancellor of the Exchequer what is his latest assessment of the United Kingdom's export performance.

United Kingdom exports are at record levels.

I am grateful to my right hon. Friend for that answer. Does he agree that the fiscal imperatives necessary for successful manufacturing exports are low inflation, stable exchange rates and low unit costs? Does he further agree that it is necessary and important that those remain at the core of Government policy, and that that is vindicated by the news that in the past three months exports in the manufacturing sector increased by 4·5 per cent. to a new record level?

I am grateful to my hon. Friend, who is right to stress that British exports can do well in competitive markets provided that we keep our inflation down, that it is not merely equal to, but better than the average and that it compares well with the rates of the Germans, French, Japanese and Americans. Unless we do that, we shall not gain our market share. Our manufactured exports have increased our share of world trade in the past three years, so I accept and am grateful for what my hon. Friend said.

Why does the Chancellor of the Exchequer not admit when he talks about exports increasing that imports are also increasing? The latest trend suggests a £9 billion deficit this year on the balance of trade. If the right hon. Gentleman really wants to do something about Britain's export performance, he should cut interest rates by 2 or 3 per cent. and get out of the exchange mechanism.

I do not expect that the current account will be a constraint on growth. Even the figures that the hon. Gentleman mentions, which I do not accept, are a small portion of gross domestic product. The only way that this country can increase exports is by becoming more competititive year by year, by increasing productivity and by keeping increases in earnings and wages down to the levels of our competitors. There are no quick fixes. The idea that we can help this country's economy by depreciating the exchange rate is pure illusion, pure fool's gold. The only way to do that is by improving productivity and competitiveness.

Is my right hon. Friend encouraged by the work of Edinburgh economists, which shows that during the 1980s there was a marked shift in the destination of British exports from third world to more sophisticated markets, which is a good omen for our competitiveness in the 1990s?

My right hon. Friend is absolutely right. Our largest export customer is Germany, our second largest is France and the third largest is the United States. I do not know how people who believe that there is some easy answer through depreciation think that we are going to compete unless we get our inflation rate down to the levels that pertain in those countries.

Will the Chancellor confirm that, although he said that exports are at record levels, imports are at even more record levels and that our balance of payments is showing a record deficit, even in the depths of the recession? Furthermore, our share of world trade in major manufactures is less than it was in 1979. Do the Government propose to do anything at all about that?

Our imports have risen, but some pick-up in imports is certainly expected as the economy recovers. I repeat what I told the hon. Member for Bolsover (Mr. Skinner): any prospective current account deficit is of a size that can be easily financed. The only way that we can increase our share of world trade is by becoming more productive and more competitive. The hon. Lady does no one any service by pretending that there is some easy way out.

To ask the Chancellor of the Exchequer if he will make a statement on the moratorium on stamp duty.

When my right hon. Friend the Chancellor announced the increase in the stamp duty threshold last December, he made it quite clear that it was a temporary measure for eight months only. We have no plans to extend it beyond 19 August.

My hon. Friend will know of the importance of the housing industry in pulling Britain out of the recession. Can he offer any hope and further assistance to that sector? Does he agree that the stamp duty has some basic flaws? Can he forecast its total demise?

I must point out that stamp duty on property alone raises about £1 billion, which is a considerable sum to the Exchequer. On the problems of the housing and property industry, my right hon. Friend the Chancellor introduced a significant package last December which included payments to building societies for those in receipt of income support. In the longer term, it is the reduction in interest rates, brought about by the economic policies to which the Government are committed, that will bring about the firmest and surest revival of the property market.

Will the Minister confirm that the stamp duty holiday, which gave some limited help to home buyers and the building industry, was sabotaged this week when a group of Conservative Members did not have the guts to vote in the Lobby in accordance with their declared beliefs?

I do not accept that for a moment. My right hon. and hon. Friends voted clearly, firmly and unanimously for the reintroduction of stamp duty because they recognised that that was an essential part of the public expenditure programme and the resources that must be raised through it to meet that balance.

I wish to offer my support to my hon. Friend for his suggestion that interest rates are the most important thing in reviving the housing market. May I suggest, as a matter of convenience, that he arrange for the Bundesbank to communicate direct to the House, because it seems sad that he should have to second-guess what it says and go through the humiliation of being a mere messenger for that foreign body.

I am not sure that my hon. Friend's point arises out of this question, but no doubt his comments will be heard as clearly by the Bundesbank as they have been by the House.

The Economic Secretary is more or less admitting that his initiative on stamp duty has failed, but we are still in recession, we still have a huge balance of payments deficit and an astronomic public sector borrowing requirement and the Budget forecast of growth is so much pie in the sky. If the Chancellor says that we must be more competitive and more productive, how exactly will that be achieved by Treasury Ministers?

I do not accept that the stamp duty moratorium was of no help, because 540,000 property transactions took place during that time and the benefit gained was equivalent to £400 million. That real benefit has been left with home purchasers. To extend the moratorium, as the hon. Gentleman suggests, would cost another £430 million, which would be a significant burden on the PSBR this year.

To ask the Chancellor of the Exchequer what plans he has to use tax incentives to encourage companies to invest in environmentally friendly projects.

The existing tax regime already gives relief for capital investment by companies on machinery and plant or industrial buildings, including investments in environ-mentally friendly projects.

In the light of what the Prime Minister said 12 months ago at Olympia about energy efficiency and promoting measures to help that, is it not about time that the Chancellor did a little more about that and did something useful, through the tax system, to promote energy efficiency? As a start, perhaps we could get rid of VAT on energy-efficient products.

It is interesting that the hon. Gentleman concentrates on energy efficiency, because that is a good example of an environmentally friendly investment which any company can make and which is justified by the costs that are saved by saving that energy. Saving energy is not only green but saves costs. It does not need a tax incentive to justify that.

Is it not eloquent testimony to the lack of interest in putting the environment at the heart of economic policy that not a single Conservative Member has risen on this question to participate? The Government, for all their fine words, have done precious little to include environmental concerns in their taxation policies. There have been no differentials on VAT, no real incentives for industry and no action on vehicle excise duty. There is an existing green agenda in which the Government should be interested—why are they not?

It is eloquent testimony to the fact that the Labour party is uninterested in reducing tax rates that right through the passage of this year's Finance Bill a range of alternatives for tax allowances—for example, against corporation tax—were pressed on us. The only way to pay for all those proposals, had we accepted them, would have been by raising the marginal rate of corporation tax and making this country uncompetitive with other developed countries.

To ask the Chancellor of the Exchequer what assessment he has made of recent trends in manufacturing productivity; and whether he will make a statement.

Manufacturing productivity stood at its highest ever level in April this year.

Does my right hon. Friend agree that our successful economic policies during the 1980s promoted a vast improvement in manufacturing investment towards that end of the decade? What positive conclusions does he draw from that and from his reply?

My hon. Friend is right to say that manufacturing investment grew by about 31 per cent. from 1986 to 1989. Manufacturing productivity today, as we come out of recession, is higher than it was when we went into recession. That is a reason for having a good deal of optimism about the future.

In considering the issue of manufacturing productivity, which is vital, does the Minister recognise the role that has been played by workers in manufacturing in reaching targets? Is he aware for example, that 1,300 people are to be made redundant at Ardersier yard in Scotland by the end of September, representing the largest single redundancy measure in the onshore oil engineering industry every recorded in the United Kingdom? If the right hon. Gentleman really cares about productivity and production, will he examine what is happening in the oil fabrication industry and, in particular, consider the possibility of the Government's giving some direction on where the construction of the Claymore jacket for Elf Caledonia is to take place?

I share the hon. Lady's regret about individual redundancies. At the end of the 1980s and at the beginning of the 1990s, we had the highest ever level of manufacturing output, yet about 5 million people were employed in manufacturing, compared with 9 million in the 1960s. Manufacturing productivity has risen steeply and the number of people employed in manufacturing has declined, yet manufacturing output has recently been at its highest ever level. That does not help with the individual redundancies to which the hon. Lady referred, but I want to set the role of manufacturing in the context of the economy as a whole

Does my right hon. Friend agree that it has been an enormous achievement to increase productivity at a time of recession, when one would have expected it to go down? To what extent does he think that that increase in productivity has been due to improved industrial relations, with the number of days lost through strikes being at an all-time low? Does he agree that that has been due to the industrial relations reforms introduced by the Conservatives in the past 13 years?

The improvement in industrial relations has played an important part. I am pleased to note that earnings are responding to the economic cycle and that the earnings increase has recently been at its lowest level for 25 year. That means that the prospects for employment growth in the future are much better than they would have been.

it is something of a novelty to hear a Treasury Minister boast about manufacturing industry, and I congratulate the Chief Secretary on his nerve. Will he confirm that about 2 million jobs have been lost in the manufacturing sector since 1979? In those circumstances, is he now willing to revise his forecast of unemployment at 2·4 million to a more realistic 2·7 million for this year?

I thank the hon. Gentleman for his congratulations, although I do not congratulate him on how carefully he may have been listening to what I said. I go further than the figure that he gave. I have told the House that employment in manufacturing has decreased by 4 million since 1966. We are talking about a very long-term trend in this country under various Governments which has occurred in all advanced industrialised countries around the world. My answer to the hon. Gentleman's question about forecasting unemployment is that the Government make no such forecasts.

To ask the Chancellor of the Exchequer what is his latest assessment of the trend in manufacturing investment.

Manufacturing investment rose strongly during the late 1980s and has fallen back during the recession.

Does my right hon. Friend agree that the record investment of British manufacturing companies such as the engineering and lace business in Erewash is now serving those companies well in the difficult world trading climate? Does he agree that the successful conclusion of the talks on the general agreement on tariffs and trade will help world trade and the British economy? Will he press European Finance Minister colleagues to conclude a successful deal—especially the French?

I am happy to join my hon. Friend in congratulating business men and women in her constituency on their investment performance. During the first quarter of this year, business investment rose by 3½ per cent., including a 3¼ per cent. increase in investment in plant and machinery. My hon. Friend is absolutely right to say that a successful conclusion of the GATT round will be in the interests of all of us. As she will know, my right hon. Friend the Prime Minister stressed that point strongly at the Group of Seven discussions in Munich.

Is it not clear that one of the great barriers to manufacturing investment is the high level of interest rates? Why does the Chancellor of the Exchequer consider himself so bound to act as the poodle of the German Bundesbank on interest rates? Why does he not listen to my hon. Friend the Member for Derby, South (Mrs. Beckett) and think about a reduction in interest rates, which he could well get away with?

First, I repeat to the right hon. Gentleman that, in the first quarter of this year, business investment showed a sharp and welcome improvement. If he considers the underlying rates of inflation, he will find that real interest rates in the United Kingdom are a little lower than those in Germany. He should take that fact into account in his calculations.

Coming as I do from a business background, may I ask my right hon. Friend whether he will accept from me that it is time that the Government and the House realised that the British economy is in a serious state, unemployment between now and the middle of next year is likely to rocket through 3 million and that, unless the Government reduce interest rates, they will compound the problems facing this country and hinder its ability to recover?

I believe that my hon. Friend, who is indeed a great friend of manufacturing industry, will be pleased that manufacturing output reached its highest ever level in the early 1990s. He will be pleased at the figures that I have given this afternoon on manufacturing productivity, which was at its highest ever level in April. I do not accept what my hon. Friend says about the rising rate of unemployment. If the Government were to give up trying to control inflation—which I fear is the outcome of what my hon. Friend would like us to do—the economy would be in grave difficulty and we would face much higher unemployment.

Does the Chief Secretary realise that the call from the hon. Member for Macclesfield (Mr. Winterton) was relatively moderate compared with the call for a large cut in interest rates that came from the former Prime Minister? What went wrong with the policies which she followed and carried out and which were meant to lead to generally lower interest rates? Was she just plain wrong?

The policies that we followed have led to lower interest rates. Interest rates have been cut on nine separate occasions. They are now 10 per cent. and were previously 15 per cent. That cut has been of tremendous benefit to both business and householders. The right hon. Gentleman is trying to imply that if we had followed a different set of policies, we could have had lower interest rates today. I see no evidence for that.

Does my right hon. Friend agree that, whereas the money supply is under Government control, where that money is lent is wholly under the control of the banks? In the late 1980s some banks lent to businesses that should never have been allowed to get off the ground in the first place. It is ridiculous to suggest that the matter is a Government responsibility—it rests with the clearing banks.

I take my hon. Friend's point. She speaks with the experience of having spoken to some of her business people. Any of my hon. Friends will understand that it is the Government's responsibility to maintain downward pressure on inflation. All our hopes for the recovery of industry in general and for the improvement of our employment prospects rest upon there being absolute certainty that the Government will continue the fight against inflation. I am pleased to say that the markets can have that absolute certainty.

Is the Chief Secretary aware that the most recent report of the Organisation for Economic Co-operation and Development shows that manufactur-ing investment in Britain fell by 11·9 per cent. in 1991 and that, even worse, it is predicted to fall by another 3·8 per cent. during the current year? Is that a satisfactory state of affairs? What action will the Government take to promote manufacturing investment, without which there is no prospect of recovery from the recession?

The right hon. and learned Gentleman has just quoted a forecast, and he is often sceptical about forecasts. I shall give two facts. First, manufacturing investment rose by 30 per cent. between 1986 and 1989: therefore, we are starting from a high base. Secondly, business investment rose by 3½ per cent. in the first quarter of this year, 3¼ per cent. of which was in plant and machinery.

To ask the Chancellor of the Exchequer what representations he has received concern-ing the abolition of the National Economic Development Council.

To ask the Chancellor of the Exchequer what representations he has received concerning his announcement on the abolition of the National Economic Development Office.

I have received a small number of letters commenting on my announcement.

Does my right hon. Friend agree that this apparently massive outburst in public concern shows that the only tears that have been shed for the abolition of the National Economic Development Council are the crocodile tears of Opposition Members who are as out of touch with popular sentiment on this issue as they are with economic reality? Does he further agree that he was absolutely right to abolish the NEDC?

I am grateful to my hon. Friend. As I explained to the House when I made the decision, I did not think that the National Economic Development Council any longer reflected the needs and realities of the United Kingdom economy in the 1990s. Of course, we want to talk to industry and to hear its concerns, but I do not think that discussions in the council were helpful or enlightening. In terms of the work carried out by the sectoral working parties, my right hon. Friend the President of the Board of Trade has announced plans for the reorganisation of his Department and the sponsoring divisions. That is a much more sensible way to listen and talk to industry about the future as industry sees it.

Does my right hon. Friend agree that his decision puts the final seal on the former way of running the British economy—the corporatist way?

As I have repeatedly said, the only way to improve our living standards and increase our share of world trade is by improving our competitiveness and keeping down inflation. That is the responsibility of Government. The discussions at the National Economic Development Council did not contribute to policy in any way.

Does the Chancellor nevertheless agree that one of the unfortunate side-effects of the abolition of the National Economic Development Council is that the Chancellor will no longer have the opportunity to hear views on economic policy that do not coincide with those of the Treasury? On the same lines, does the right hon. Gentleman agree that the study by the National Institute of Economic and Social Research of economic modelling during the 1980s, which was paid for by the Treasury, showed that the Treasury's performance in such modelling was disastrous? The Treasury's thought police attempted to ban from public funding institutions such as Wynne Godley's outfit at Cambridge university, which correctly forecast the appalling levels of the previous depression and this one. Does the right hon. Gentleman agree that there should no longer be an attempt to create a monopoly on economic policy by withdrawing public funding from universities whose ideas are different from those of the Treasury?

The hon. Gentleman must surely know that decisions about funding individual universities, individual research bodies and individual eocnomic groups are not taken by the Treasury or by the Government. As for the hon. Gentleman's first point, of course I have made it clear that I am prepared to talk to the Trades Union Congress and to hear its views, but I do not believe that the confrontational talks which took place so regularly in the National Economic Development Council were of any use to anyone—indeed, many people who attended them were sheer bored by what went on.

Why, then, do the Japanese and the Germans find it valuable to have continuing dialogue with their trade unions when their countries are a damned sight more successful economically than ours? Why will the Chancellor not treat the trade unions as valuable partners within the economy and start talking to them and stop treating them like traitors?

Unlike the hon. Gentleman, I do not believe that decisions in the economy are made at the level of the sector. They are made by individuals and by firms. That is the way the economy of this country works. If there are such institutions in Germany or Japan —I am not sure whether what the hon. Gentleman says is right—perhaps that is a comment on the nature of the discussions that take place.

To ask the Chancellor of the Exchequer whether he will review the current VAT liability placed on fishermen buying fresh fish for bait.

The Government have no current plans for a formal review of the VAT liability of supplies of bait generally. However, Customs and Excise have been asked to contact the fishermen's representatives with a view to identifying specific problems that they may be experienc-ing in the application of the current rules and exploring possible solutions.

The problem is very simple. If an old lady goes to buy some fish for her cat from the fish trader, she pays no VAT. If the same fish is delivered to the quay on a shell fishermen's boat, immediately the fish is delivered for bait he has to pay VAT. That seems a crazy arrangement as anything to do with shell fishermen's boats is zero rated, so why should they pay VAT on that fish when the little old lady does not? More importantly, will the Minister do something to stop the terrible cash flow problems of shell fishermen who face serious difficulties on the south coast of Devon?

I know that my hon. Friend the Member for South Hams (Mr. Steen) has championed the cause of crabbers in south Devon and a particular case of arrears of tax. I am pleased to advise him that Customs and Excise will not be calling for arrears of tax in the particular case about which I know that he is concerned, nor in others where a genuine misunderstanding has arisen as to the correct treatment of supplies of bait. However, VAT is applicable to fresh fish when it is bait and is held up for sale as such.

To ask the Chancellor of the Exchequer what progress has been made towards joining the narrow band of the exchange rate mechanism and if he will make a statement.

Sterling will move to the narrow band of the ERM in due course at the current central rate of DM2·95.

If the Minister is so confident in what he is doing, when will he bring down interest rates?

They have already been brought down nine times from 15 to 10 per cent.

As the former Prime Minister whose Government forced the ERM business through the House now appears, according to The Evening Standard, to be having second thoughts about the ERM business, would it not be wise and helpful for the Government in a quiet and scholarly way to reconsider the whole ERM business and ask where is the logic of pretending that the pound is worth something that it is not when it is being accompanied, and probably partly caused by, huge Government borrowing, massive unemployment and a chronic balance of payments problem? Is there not a case for the Government quietly and thoughtfully to ask whether there is any sense in that at all?

The logic of our determination to maintain our position within the ERM is our wish to match our standards of monetary control and discipline not, like the Labour party, to the average but to the highest standards in Europe. Our determination to do so is based on our recognition of the fact that not to do so would be to impose a quite unnecessary competitive disadvantage on British industry.

Regardless of when we shall be joining the narrow band of the ERM, can the Financial Secretary share with the House the Treasury's views on a general realignment of currencies within the mechanism?

Our policy is clearly to move to the narrow band at DM2·95. There is no realignment in prospect and we do not seek one.

Does my hon. Friend agree that those who wish to cut and run on interest rates would once again inflict on this country the inflationary problems which have made us uncompetitive and would, through inflation, once again try to disguise the failure to adjust to international markets? Will he therefore reaffirm the Government's intention to maintain the central rate against the deutschmark and to move to the narrow band as soon as possible so that this country can once again be competitive in the international arena and British industry can flourish?

Yes, I can give my hon. Friend that absolute affirmation. If we consider 30 years of economic history, we should be conscious that not to provide that discipline is to provide a background which is a needless impediment to the development of investment and long-term planning in British industry, especially the manufacturing sector, which is so often espoused by hon. Members.

Will the Minister be kind enough to tell the House who was responsible for increasing interest rates to 15 per cent. in the first place?

This Government have always made clear their determination to use interest rates to bring inflation under control to match, as I said earlier, our standards of monetary control with the highest in Europe.

To ask the Chancellor of the Exchequer what representations he has received concern-ing the reform of financial services regulation.

I have received a number of such representations.

Does my hon. Friend recall Sir David Walker, on his retirement as chairman of the Securities and Investments Board, saying that the regulatory organisation is too fragmented, especially as it relates to enforcement and policing? Does my hon. Friend accept that there is a growing feeling among practitioners and members of the public that the Financial Services Act 1986 needs revision, and will he apply himself to that?

The overall effectiveness of the regulatory structure is a matter of great importance, as my hon. Friend acknowledges. Following the Treasury's assumption of responsibility for regulating financial services, I intend to keep the arrangements carefully under review. This is a matter which I shall want to discuss with the new chairman of the SIB in due course.

Is the Minister aware of the reports of Sir Jeremy Morse and Sir David Walker in respect of the Lloyd's insurance market? There have been more than half a dozen such reports in the past 20 years, each followed by small reforms and further scandals. The latest report shows evidence of financial mismanagement, insider dealing and fraud. Is it not time for the Government to introduce proper statutory regulation of Lloyd's to ensure that it stops acting as a law unto itself and that there is modernisation of Britain's financial services sector?

I take careful note of what the hon. Gentleman says. I have read the reports to which he refers. Matters relating to the insurance industry are more properly the concern of my right hon. Friend the President of the Board of Trade.

Does my hon. Friend agree that we are fortunate to have the most developed financial services market in Europe? Regulatory regimes are essential for consumer protection, but is it not also essential that we have a simple regulatory structure to ensure that we maintain our European competitiveness in financial services?

I am obliged to my hon. Friend for reminding the House of the signal importance of the financial services and banking industries to the economy and to the balance of payments. The expertise, prosperity and ingenuity of the financial services and banking industries are of tremendous importance, and very often we denigrate them to the great disadvantage of the national interest.

Given that more than 40,000 old and vulnerable people stand to lose their homes as a result of the home income plan scam and the Minister told us yesterday that some building societies are refusing to co-operate with the building societies ombudsman and he has no power to compel them to do so, will the hon. Gentleman consider bringing forward measures to extend the powers of the ombudsman so that he can protect all vulnerable consumers?

As I made clear to the hon. Gentleman during our extensive debate on this important issue yesterday, the majority of building societies are permitting investigations by the ombudsman concerned. It is to be hoped that the expressions of opinion from both sides of the House will be heard by those few remaining building societies which are having difficulty accepting the inquiries. That is the proper line to pursue for the time being.

To ask the Chancellor of the Exchequer what is his policy on forecasting public spending planning totals in the proposed new budget cycle.

Next year the public expenditure planning totals will continue to be agreed by the Cabinet following discussions between ministerial colleagues and the Chief Secretary.

In the Budget last March, the Chancellor forecast a public sector borrowing requirement of £28 billion. What is the forecast today?

We publish forecasts twice a year and we shall publish our next forecast when it falls due.

In last autumn's expenditure statement, my right hon. Friend the Chancellor said that the net contribution of the United Kingdom to the European Community this financial year would be £2·5 billion, with slightly higher figures for the two subsequent years. Is that still the forecast or can my right hon. Friend give us any hope that there will be an alleviation of that unnecessary burden?

I have no change to announce to the published forecast. The flows vary from time to time. If my hon. Friend is saying that it is important to continue to bear down on the expenditure of the European Community, and hence on the contribution that we make, I entirely agree with him. Indeed, my right hon. Friend the Chancellor has been engaged upon that exercise. It was good that we negotiated an abatement at Fontainebleau, which so far has resulted in a saving to the United Kingdom of £12 billion.

Is it still the Government's policy to reduce the public sector borrowing requirement to the percentage level—3 per cent. of gross domestic product. I believe—established by the Maastricht treaty?

Yes, it is our intention to meet the criteria for convergence set out in the Maastricht treaty. Indeed, it is our intention to reduce borrowing to about zero over the medium term.

To ask the Chancellor of the Exchequer which EC country had the largest fall in retail price inflation in the year to May 1992.

To ask the Chancellor of the Exchequer which EC country had the largest fall in retail price inflation in the year to May 1992.

Of all EC countries, Greece had the largest fall in its headline inflation rate in the year to May 1992; the United Kingdom had the largest fall of the major EC countries.

I welcome that news. Is my right hon. Friend aware that producer output inflation is now down to 2·7 per cent? As that is the lowest figure since 1969, does he agree that it puts British industry in a strong position to emerge from the recession and to prove increasingly competitive in world markets?

My hon. Friend is absolutely right. Producer price inflation is a good forecast of the headline rate of inflation. My hon. Friend will be aware that the underlying rate of inflation—the retail prices index minus mortgage interest payments—has already fallen sharply recently. All that is good news for exports, for competitiveness and for recovery.

Does my hon. Friend realise that whatever the mixed feelings about the exchange rate mechanism, his answer shows what an effective weapon it is in the battle against inflation? At the same time, does it not provide a stable platform for smooth recovery, with no necessity to resort to the stop-go policies advocated by the Opposition?

There is no doubt that the exchange rate mechanism has been extremely effective in lowering inflation in those countries that are members of it. Furthermore, my hon. Friend makes the good point that if this country were ever to leave the ERM, we should still have to compete against countries with a low level of inflation gained from membership of the ERM. That is why we should stick with the discipline of the ERM, which we believe is good for recovery and will be good for the medium-term competitiveness of this country.

Does the right hon. Gentleman agree that he is talking a load of bilge when he claims a reduction in the inflation rate? Was not the high level that it reached a result of Conservative policies? Is it not nonsense for the Government to claim credit for bringing down the inflation rate when they were responsible for its rise?

If I had compared the level of inflation with that of previous Labour Governments, the hon.Gentleman would not have found that a very happy comparison either.

Does the Chancellor accept that if a Government who fail to bear down on inflation are financially dodgy, a Government who have no policy for full employment are morally bankrupt?

The fallacy in the hon. Gentleman's approach is thinking that we can have growth in employment without an inflation rate equal to or better than that of our competitors. Britain is dependent upon trade. More than 30 per cent. of Britain's GDP is exported and imported. Britain cannot compete, cannot have growth in employment, unless it has a level of inflation equal to the best in the EC and among our major trading partners.

I agree with my right hon. Friend that the exchange rate mechanism is an external discipline bearing down on inflation, but is it not possible to legislate for internal independent bodies which can perform the same function? Bearing in mind the history of the Bretton Woods agreement, the gold standard and the sterling area, each of which collapsed for good reasons, does my right hon. Friend think that it may be prudent to have alternative domestic policies in place in case the same thing should happen to the ERM?

If my hon. Friend looks back at the period of fixed exhange rates, he will find that the inflation performance, not just of Britain but of many other countries, was a lot better than during the period of floating exchange rates. The ERM has a proven track record in reducing inflation. I repeat: even if we were not part of the ERM, we would have to compete with those countries that have succeeded the hard way in reducing inflation, and we must do that if we are to provide for small businesses, to provide for employment and to achieve growth in the future. That is the way the Germans and the French have done it. I do not know why my hon. Friends think that this country cannot succeed where other countries have.

To ask the Prime Minister if he will list his official engagements for Thursday 9 July.

I have been asked to reply.

Will the Leader of the House be so kind as to ask the Prime Minister whether he agrees that the prompt and efficient administration of public money is his responsibility and therefore, that it is his and his Government's responsibility that many of my constituents are waiting more than six months to have their disability living allowance claims processed? Will he ask the Prime Minister to join me in commiserating with Mr. Michael Bichard who has had no fewer than 26 parliamentary questions and hundreds of letters of complaint referred to him from hon. Members?

I am not sure that I shall invite my right hon. Friend to agree with all that, but I am sure that my right hon. Friend will agree about the duty that we all have to ensure the proper administration of public money, about the satisfaction, which the hon. Lady has not expressed, in the level of demand for the extremely successful new disability benefits, and about the Government's determination to ensure that those benefits are effectively delivered.

To ask the Prime Minister if he will list his official engagements for Thursday 9 July.

I have been asked to reply.

Is my right hon. Friend aware of the tremendous success of the health service reforms, especially in my part of Devon where the general practitioner fund holdings and the trusts are working for the benefit of staff and patients? Will he welcome the changed attitude of the British Medical Association, which shows the popularity and success of the reforms?

Yes, I very much welcome that. It reflects the fact that practical experience throughout the country is demonstrating the benefits of those reforms. There is clearly also a wide welcome for the announcement made yesterday by my right hon. Friend the Secretary of State for Health, which will build further on their success.

What reasons does the Leader of the House give for the Prime Minister's failure to achieve his objectives at the economic summit in Munich?

An economic summit, whether it takes place in Munich or anywhere else, is a gathering of people designed to achieve agreement on the pursuit of common objectives. No one member of such a gathering can force the others to agree. It is clear, however, that useful progress was made at Munich on key objectives relating both to western relations with Russia and to advancing the objectives of the GATT round. Progress was also made in a number of other ways.

Is it not clear that no amount of vacuous communiques can disguise the fact that, for the second year running, Britain is bottom of the G7 league in relation to growth, investment and job creation? As even Lady Thatcher is now warning of economic catastrophe in Britain, is it not time for new economic and industrial policies for our country? Will the Government act now or will they simply continue to wring their hands and do nothing?

It is clear that the action taken by the Government in recent months is creating a secure foundation for the country to emerge from the recession in the latter part of this year. If the hon. Gentleman is in a quoting frame of mind, he may wish to know that in a press release issued only three or four days ago the Institute of Directors said that half the directors questioned in June were more optimistic. That is the highest level of sustained optimism since August 1988.

Twelve months ago, the Prime Minister claimed a triumph for the economic summit in London, and the Government did nothing. Will they do nothing again about the appalling misery that they are creating in this country?

The Government will continue with the sustained application of policies which are producing the conditions for recovery, and doing so successfully.

To ask the Prime Minister if he will list his official engagements for Thursday 9 July.

I have been asked to reply.

Will my right hon. Friend join me in welcoming this week's announcement of an order for the fourth Trident submarine? Does he agree that the three best recent additions to the future security of the nation are the ordering of the submarine, the re-election of a Government who had the consistency and good sense to proceed with the order, and the defeat of Opposition parties whose recommendations vary from scrapping this important deterrent altogether to sending submarines out to sea with no weapons on board?

In a word, I agree with everything that my hon. Friend has said.

Can the Leader of the House explain how we can take the proposals on health promotion seriously when the Government are presiding over the collapse of national health service dentistry?

It is absurd to suggest that the Government are presiding over the collapse, as the hon. Lady puts it, of NHS dentistry, given the increases in NHS treatment, the number of dentists and their remuneration over the past few years.

To ask the Prime Minister if he will list his official engagements for Thursday 9 July.

I have been asked to reply.

In the light of the targets set in the Government's White Paper, published yesterday, will the Government consider removing tobacco products from the calculation of the retail prices index? If we believe that price is the main deterrent to smokers, is it not ridiculous that the Chancellor should feel any inhibition about increasing duty on tobacco products because of the effect that that would have on the cost of living and on benefits related to it?

My hon. Friend will know that an advisory committee looks carefully and independently at the proper make-up of the RPI. I would not wish to dictate to that committee how it should do its work. I should point out, however, referring to the figures given yesterday by my right hon. Friend the Secretary of State for Health. that the increases in tobacco prices in recent years do not suggest that my right hon. Friend the Chancellor has been suffering from any inhibition in that respect.

To ask the Prime Minister if he will list his official engagements for Thursday 9 July.

I have been asked to reply.

At 4 o'clock this afternoon in the Jubilee Room the Spastics Society will launch a report on the problems of disabled people in the 1992 general election. Is the Leader of the House aware that many disabled people could not gain access to polling stations in the election and also had problems with the postal voting system? Will he ensure that the report, entitled "Polls Apart", is studied at the highest level and that action is taken to ensure that everyone, able-bodied or disabled, who is entitled to exercise the franchise, is given access to the procedure?

As a former Minister for disabled people myself, I would not wish to do anything with such a report other than to examine it carefully and draw it to the attention of those concerned, returning officers and others. The hon. Gentleman's concern is legitimate.

To ask the Prime Minister if he will list his official engagements for Thursday 9 July.

I have been asked to reply.

Now that Germany has made it clear that it intends to continue for a long period in the maintenance of economic policies which are driving the rest of Europe from recession into slump, so as to re-equip its eastern provinces, is it not more than ever necessary for British Ministers to show the same resolution in supporting British industry? As this country has determined its own money supply for several centuries, why do Ministers suddenly find that they can no longer do that without having their hands held by a group of German bank clerks? Has not the time now come for us to leave the exchange rate mechanism, at least until such time as German interest rates are reduced to a level compatible with the needs of the whole of the rest of Europe?

The British Government—with support from both sides of the House, in my recollection—accepted the disciplines of the ERM as the essential basis for a British policy designed to bring down inflation and to create the conditions for a sound economy. I see no basis for departing from that.

To ask the Prime Minister if he will list his official engagements for Thursday 9 July.

I have been asked to reply.

Will the Leader of the House explain why, under the citizens charter, someone whose train is late is entitled to claim compensation, but when the Government fail to ensure that people's applications for disability allowances are speedily processed, those people are not entitled to claim compensation against the Government? Will the right hon. Gentleman suggest to the Prime Minister that proposals for such compensation should he produced as a matter of urgency, to ensure the efficiency of government?

As I believe the hon. Lady knows, in certain fairly limited circumstances compensation may he payable for a failure of the Department—for negligence, perhaps. The key is to ensure, as the Department is actively seeking to do, that the high level of demand for the new disability benefits—having introduced them myself, I welcome that high level of demand—is met by the administration. That is what my colleagues in the Department are seeking to do.

To ask the Prime Minister if he will list his official engagements for Thursday 9 July.

I have been asked to reply.

Will my right hon. Friend join me in welcoming yesterday's White Paper on "The Health of the Nation"? Will he also welcome the fact that, at a time of vastly increased resources for the health service, the Government are pushing ahead to make further improvements to the health of the nation and will continue to do so?

I agree with my hon. Friend. Yesterday's White Paper is a significant development in the success of the national health service and in its further success for the rest of this century and beyond. It marks a significant move from the health service's being, in old-fashioned terms, an illness service, to its being a genuine health service.

To ask the Prime Minister if he will list his official engagements for Thursday 9 July.

I have been asked to reply.

Why did the Government forget to mention in their manifesto of just three months ago that they intended to privatise water supply in Scotland?

The hon. Gentleman is aware that my right hon. Friend the Secretary of State for Scotland has had those matters under consideration. He will also be aware that my right hon. Friend will set out the basis of Government policy in the appropriate way, at the appropriate time.

Is the Leader of the House aware that this is national housing week and that housing provision and the construction industry are gripped in a crisis? Would not this be an appropriate time to organise the phased release of the £7 billion of local authority capital receipts to solve the housing crisis and the crisis that the Government have engineered in the construction industry?

I am tempted to refer the hon. Gentleman to a reply that I myself gave on that point on Tuesday. The Government are in the process of making £6 billion available to housing associations over the next three years. That will produce about 150,000 new homes for rent or low-cost ownership.

Recalling the visit to London by thousands of fishermen earlier this week, does my right hon. Friend agree that it is wrong to ask Parliament to impose tough restrictions on British fishermen which will not be applied to Common Market fishermen—including those who fish in British-controlled waters, with some taking British quota? As the proposals are clearly unfair and will almost certainly be doomed to failure without the industry's co-operation, will my right hon. Friend consult his colleagues about withdrawing them now and starting new consultations?

I certainly cannot undertake to enter consultations with a view to withdrawing proposals which are most important in relation to the conservation of fish stocks and, therefore, to the long-term future of our fishing industry. Other member states will be subject to Community targets. Our aim is, and will remain, to ensure that the burden of adjustment is fairly shared.