To ask the Chancellor of the Exchequer what are the latest figures for the PSBR since 1 April; and if he will make a statement.

To ask the Chancellor of the Exchequer if he will make a statement on the current level of public sector borrowing.

In the first two months of the financial year, the public sector borrowing requirement was £9·3 billion. A deficit of that magnitude is too high and we intend to reduce it.

During the 1992 Budget debates, the Chancellor's predecessor, the right hon. Member for Kinston upon Thames (Mr. Lamont), published Treasury forecasts of a borrowing requirement of £32 billion this year, falling to £25 billion next year, £19 billion the following year and £6 billion by 1996–97. In reality, we have a deficit of £50 billion this year and, far from falling away as was predicted, it is a recurring deficit, the Chancellor's biggest problem and an albatross around the neck of the country's economy, perhaps for years to come. Can he explain to me, and to the people of this country, why we were so misled at the time of the general election, and how the Government have got us into this mess?

The hon. Gentleman will find that all forecasts for the PSBR tend to be hedged around with uncertainty. A range of forecasts is being made about next year and £50 billion is the Government's current forecast, which is at the upper end of the range. One thing of which I am quite sure is that the forecasts will all have changed by the time that I get to the Budget, let alone at any other time. I propose to make a judgment in the light of the circumstances prevailing when we get to the November Budget.

Will my right hon. and learned Friend confirm that, unlike the right hon. Member for Yeovil (Mr. Ashdown), the Conservative party has no intention of further expanding the PSBR and placing a greater burden on future generations? Also, was it not the last Labour Government who had to run to the International Monetary Fund because they could not control public spending either?

My hon. Friend is correct. Quite rightly, we face questioning about the size of the PSBR from the Opposition as well as from our own supporters. I get pressed by Conservative Back Benchers to take vigorous action to deal with it. It is impossible for either the Liberals or the Labour party to make a speech from the Opposition Benches without advocating measures that would increase the amount of public sector debt and borrowing. That makes their contribution to debate on the issue seem somewhat irrelevant to real life and to the task of sustaining our recovery and getting out of the recession.

In the light of the horrendous PSBR, why is the Chancellor of the Exchequer excluding the one area that is easy for him to handle—the level of higher rates of income tax? Those were reduced at a time when the Government thought that the economy was doing well. Now that he understand the reality, why does he not reverse the process?

Because throughout the 1980s extremely valuable supply-side effects resulted from reducing direct taxation from the disgraceful and punitive level at which it was left by the previous Government. I have made no decisions about taxation for the Budget.

In the same spirit that I heretically urged his predecessor, in the salad days of Friedmanite monetarism, to show caution about the Treasury's capacity accurately to measure sterling M3, may I now counsel—it may not be necessary, but, as I have already prepared the question, I shall go ahead—a little caution to my right hon. and learned Friend before he prostrates himself before the altar of a £50 billion PSBR estimate, because that notoriously unreliable statistic could lead us into unnecessary difficulty? As experience has shown, the outcome may prove to be billions wide of the mark—no pun intended—either way.

My hon. Friend, who knows me well, realises that I have never drunk of the pure milk of monetarism, any more than he or Lord Lawson did. That remains my view, which is why I dealt with some scepticism with the question about previous forecasts of the size of the public sector borrowing requirement.

Will the Chancellor tell the House that he totally repudiates the proposals of the Tory 1992 Group, particularly its proposal that he should cut 5 per cent. of the public sector work force? Given that that is 300,000 people and that making them unemployed would add £2·7 billion to the dole bill, does he agree that the way to reduce the deficit is not to put more people out of work but to bring unemployment down?

I had an extremely friendly and useful discussion with the executive of the 1992 Group, who presented me with proposals to deal with the problem. Their proposals were infinitely more worked out than any yet produced by the Labour or Liberal parties. I share the instincts of my colleagues in the 1992 committee working group—I think that they call it that—that, in the interests of the economy and taxpayers, we should look first at means of restraining public expenditure. It is hopeless to regard public services, as the hon. Lady always has, as a kind of job creation agency. We can deliver high-quality public services in a more cost-effective way. One has only to look at the effects of contracting out on local government services, and the amount that that is now saving council tax payers in various parts of the country, to see what can be achieved.

To ask the Chancellor of the Exchequer when he last discussed with his ministerial colleagues from other member states of the European Community the question of additional financial assistance being given to the Court of Auditors and the European Court of Justice; and if he will make a statement.

The last formal meeting of the Budget Council of Ministers was on 16 November 1992, when we discussed the 1993 Community budget, including provision for the Court of Auditors and Court of Justice. Since then, discussions have proceeded informally and through officials.

Are Ministers aware of the serious difficulties encountered by the European Court of Justice in ensuring the timeous translation of cases submitted to it by member states, the opinions of its advocate-generals and its own judgments? Does he agree that there is no point in seeking to ensure that the European Court of Justice and the Court of Auditors carry out their work in ensuring compliance with Community law if they are so badly financed by member states by way of the budget?

I am certainly aware of some of the delays that take place in the Court of Justice, although they do not occur so much in the Court of Auditors. Both institutions have had increases in financial assistance of an average of 10 per cent. a year for the past couple of years. I do not think that is bad and it means that they do not need such a large increase this year.

Will my right hon. Friend consider ceasing financing the antics of the European Court of Justice altogether and does he think that it is right for it to sit in judgment of the tourist beaches in Britain, especially when so many Mediterranean coastlines and beaches are awash with sewage?

One cannot agree with all the judgments that courts make, but that is not a reason for ceasing to finance them or abolishing them altogether.

To ask the Chancellor of the Exchequer what comparisons the European Commission has made between Britain's projected growth rate over the next two years and the growth rate in other countries of the EC.

The European Commission expects that Britain will be the fastest growing major Community country in both this year and next.

On the day when unemployment is continuing to fall in my constituency of Norwich, North and throughout the country, does my right hon. and learned Friend agree that over-regulation of the social and labour markets can damage growth, as has happened in Spain, for example, which has one of the highest unemployment rates in Europe? Will he comment on the folly of those in the House who seek to add to the burdens on industry at a time when business is reviving and unemployment is falling?

I entirely agree with my hon. Friend. We have the highest proportion of population in work of any country in the European Community with the exception of Denmark and, I think, Luxembourg. We have always shown the capacity to create jobs more quickly than other European countries because we have avoided the tightly regulated labour markets and the excessive burdens on industry, which are part of the tradition of some continental countries. It is a pity that that tradition is being reinforced by the social chapter making problems worse, in my opinion, in Germany, Spain and elsewhere. It is extremely important that we in Britain stick to our opt-out from the social chapter, which is helping to achieve a much more buoyant recovery in our labour market.

It not it the case that better prospects for the United Kingdom growth rate are due to the fact that we were ejected from the exchange rate mechanism and were thus able to reduce interest rates and reduce the level of sterling? Is not the last thing that we want now either to see interest rates maintained at a higher level than necessary or to see sterling appreciate? Is not there a case for some action on that front?

The answer to the hon. Gentleman's first question in my opinion is no. The five-points reduction in interest rates that we achieved before we left the ERM was as important a contribution to our recovery as the four-point reduction in interest rates that followed. We were seeing the beginnings of recovery before we left the ERM and we are now seeing the results of many of the supply-side changes that we made in the British economy.

Does my right hon. and learned Friend agree that the way in which to create real jobs is to have sustained economic growth, rather than the Keynesian-inspired spending sprees supported by the Opposition parties?

What is now called Keynesian does not often bear much resemblance to the work of John Maynard Keynes, who was very good on monetary policy. I agree that I do not think that John Maynard Keynes or anyone else would have advocated a spending spree to boost the economy at a time of a large fiscal deficit of the kind that we are carrying and is being forecast. That is not an option open to us. Unfortunately, it is an option which is usually seized by the Labour and Liberal parties because they are so detached from the real world.

Should not the Chancellor be alarmed rather than complacent about the finding of the competitiveness unit published this week that British productivity is 25 per cent. below our main competitors, that what it calls our low skills base and research effort are among the worst in Europe, that our national income per head is falling behind that of Finland, Iceland and Italy and that it is now falling to the levels in Spain and Portugal? Amid all those challenges, and now that we have a new Chancellor, where are the new policies?

The hon. Gentleman has taken some selective readings from the extremely valuable document on competitiveness produced yesterday. At least it has enabled him to ask a question without adding to the public sector borrowing requirement, as far as I noticed. He comments on our level of productivity. My right hon. Friend the President of the Board of Trade is right to point out that our productivity is still below that of some of our major competitors, most notably the Japanese.

Has my right hon. and learned Friend seen the latest statistics on the rapid and dramatic decline in car sales in EC countries? Sales there have dropped by no less than 17 per cent. over the past six months, whereas in this country which, thank goodness, is out of the exchange rate mechanism and can again enjoy the benefits of low interest rates and growing demand, we have had double-digit increases in car sales. Would not the French and the Spanish industrialists, for example, agree that the British are much luckier than they are because we are not constrained by artificially high interest rates?

There are other countries that were forced out of the ERM and not all of them are enjoying a British recovery. In terms of the ERM, my hon. Friend is right to point out that the buoyant state of car sales in this country is not matched in other major centres in the European Community. The fact is—let me be cautious again—that we are showing some signs of recovery and it is being sustained at the moment, although we must persevere to keep that up and trust that it strengthens.

To ask the Chancellor of the Exchequer what is his policy regarding payment for work carried out at the Bank of England by sub-contractors; and if he will make a statement.

Under the Bank of England charter of 1946, such management matters are for the court of directors of the Bank and not for the Chancellor of the Exchequer. I understand that the Bank maintains a policy of prompt payment against validated invoices for work carried out by its contractors.

I thank the Chief Secretary for that reply and I also thank him on behalf of R. M. Simpson, a small heating contractor in my constituency, which has been waiting two years for the settlement of a £250,000 bill for work carried out at the Bank of England. The company eventually received a reply from the Chief Secretary once I raised the question in the House.

The hon. Gentleman is right to say that we have been in correspondence. Mr. Simpson carried out work for Taymech; in turn, Taymech worked for Bovis, and Bovis was doing some work for the Bank of England. There is a dispute about a claim for loss of expenses. The matter certainly does not rest with the Bank of England and is certainly not a matter for the Chancellor of the Exchequer. There is no valid invoice from Simpson to the Bank of England; nor could there be, because the contract rests not between Simpson and the Bank of England, but between Simpson and Taymech.

As to work carried out in the Bank of England by contractors, has the Governor got a contract and is it in his contract that he must try to stifle comment in the House on the rate of interest?

No. That is not one of the Governor's responsibilities. He plays an important part in the vital matter of controlling inflation and I pay tribute to his dedication in that matter.

To ask the Chancellor of the Exchequer what plans he has to increase income tax and national insurance contributions; and if he will make a statement.

I shall be considering options for tax changes in the next Budget over the summer and in the autumn.

I know that the Chancellor is not readily given to embarrassment, but does he feel a tiny twinge of guilt at having been elected on a promise of lower taxes and now to be presiding over some of the largest increases in our country's history. Or am I being naive?

Yes.

I am not frequently embarrassed and the hon. Gentleman is not frequently naive. As he knows, we have made spectacular progress, beyond what anyone in his party would have thought possible, in reducing direct taxation. We did so for supply-side reasons and, when we first began to get rid of the extraordinarily high levels of direct taxation that we inherited, we found that revenue actually increased as we reduced the level of tax. We have now cut marginal rates of income tax to 25 per cent. and introduced a lower rate of 20 per cent. as well.

Does my right hon. and learned Friend agree that, with the basic rate of income tax at 25 per cent. and national insurance at 9 per cent., the working man has to pay over one third of his income in tax? Is not that level sufficiently high? Is not the big difference between the Labour party and our party the fact that we believe in taking as little as possible from the pay packet of the working man, whereas the Labour party believes in caning taxpayers, particularly those who are hard-working and enterprising?

I agree with my hon. Friend. If I were a Labour Chancellor of the Exchequer, my Back Benchers would be urging on me a rapid increase in taxation of all kinds. However, I am a Conservative Chancellor, and my hon. Friend reminds me of the basic commitment of the party. I will bear that in mind when I prepare my Budget in the autumn.

The Chancellor said on Monday that no Chancellor could bind himself on taxation, yet at the time of the general election the Prime Minister said that there would be income tax cuts "year on year". Whom are we to believe—the present Prime Minister or the Chancellor, who clearly hopes to be the next Prime Minister?

I have related the Government's record on income tax. I do not recall the Labour party voting for any of the reductions in income tax, so the idea that those tax cuts are suddenly being held against us or are being adopted by the Labour party strikes me as unlikely. The commitment of the Government is to continue to cut direct taxation and income tax when economic circumstances permit and when it is prudent to do so.

To ask the Chancellor of the Exchequer what the current level of corporation tax is in Britain and in other industrialised countries; and if he will make a statement.

The main rate of corporation tax for 1993 is 33 per cent. That is the lowest main rate in any EC or G7 country.

Does my hon. Friend agree that the low rate of business tax, coupled with a massive increase in manufacturing productivity since 1979, is a key reason why Britain has become the most popular of the European countries for inward investment? Does he also agree that that inward investment is creating jobs in the United Kingdom?

My hon. Friend is precisely right. The figures show that the United Kingdom attracted one third of all inward investment into the European Community in 1991. That is a vote of confidence from the internationally mobile business community. It is also an expression of what Mr. Delors called our policy of turning Britain into a paradise for Japanese investment.

Corporation tax is, obviously, one of a number of taxes. Will the Minister confirm that the share of national wealth paid to the Government in overall taxation is now higher than it was in 1979? Does the Minister agree that, after 14 years of a Government committed to reducing taxation as a proportion of national wealth, that is an abject failure on the Government's own terms?

The hon. Gentleman's question is yet another illustration of the total failure of the Labour party to understand how a tax system impinges on the wealth-creation process. What matters is the marginal rate at which tax is collected on wealth creation.

I congratulate my hon. Friend on the Government's determination that this country should be allowed to set our own rate of corporation tax without interference from the EC, because it is so vital to our competitiveness. Will he undertake to maintain that right, come what may?

That is indeed the Government's position. It was endorsed during the British presidency of the European Community when the subject was under discussion last year. It was not a controversial view among any of the member states of the Community.

The Chancellor has said that he may have to increase taxes in the autumn to meet the growing public sector borrowing requirement deficit. How much of that deficit do the Government estimate is structural, and how much cyclical?

The Chancellor has said that he will make his Budget judgments and announce his conclusions in November, and I am certainly not going to pre-empt those conclusions.

To ask the Chancellor of the Exchequer with which organisations he has held discussions on the impact on charities of VAT on fuel and power.

My right hon. and learned Friend the Chancellor and I have received representations from a number of charities and I have particularly had discussions with the Charities Tax Reform Group.

I thank my right hon. Friend for the courtesy that he has shown the representatives from the charities at those meetings. Will he take into account the fact that in recent years charities have faced an ever-increasing burden of non-recoverable VAT, and the £25 million in VAT on fuel and power in addition to that is presenting them with major problems? Will he therefore give sympathetic consideration to the proposal for a tax refund system for charities; and will he give the Charities Tax Reform Group an opportunity to meet him between now and the Budget?

The allowances against VAT given to charities have increased since 1979 from about £23 million a year to about £150 million a year—a fact which my hon. Friend should bear in mind. Of course, I will consider any proposals put to us, and I will be pleased to see the Charities Tax Reform Group again before the Budget, if it should so wish.

Is the Minister aware that the imposition of VAT on charities and on the people of this country would not have been necessary if the Government had collected the £1·7 billion that the Inland Revenue wrote off in uncollected taxes last year? That was about 20 times the amount uncollected in the last recession. Does he believe that this recession is 20 times as bad, or is it time for the Government to start looking at collecting taxes from those who owe them instead of imposing new burdens on charities and others who cannot afford them?

Both on VAT and on the Inland Revenue side, we go to great efforts to collect all the taxes due, and we shall continue to do so. Of course, it is to be expected that that is more difficult in a recession, when the figures, of course, go up.

Will my right hon. Friend call in the charities again and discuss with them the thinking of the Labour and Liberal parties as set out in their policy documents, so that he can make it clear to them that a carbon tax or a tax on energy would be what those parties would advocate were they in government now?

I will certainly make that point clear.

At the general election, the Government gave an absolute commitment that there would be no increase either in the level or the range of VAT. They have broken that commitment by imposing VAT on domestic fuel, to the detriment of the elderly and the poor. Is any consideration being given to the imposition of VAT on public transport, which was also ruled out at the general election and which would be a move that would also disadvantage the poor, the elderly and the young, and create traffic congestion in our cities?

The hon. Gentleman exaggerates what was said before the election. He has obviously not paid attention to the many debates that we have had on the subject recently

To ask the Chancellor of the Exchequer what has been the level of growth for the United Kingdom economy for the last 12-month period for which figures are available; and what was the average figure for the rest of the EC.

In the first quarter of this year, GDP in the United Kingdom was 0·9 per cent. higher than a year earlier. Over the same period, GDP in Germany fell by 2·8 per cent. and GDP in France fell 0·6 per cent. In the year to the fourth quarter of 1992—the latest period for which complete figures are available—GDP in the EC as a whole fell by 0·1 per cent.

I am grateful for that answer. Does my right hon. and learned Friend agree that increasing exports are vital to our economic recovery, and that the Prime Minister's championship of free trade and his excellent achievement in putting the general agreement on tariffs and trade negotiations back on the rails are the best tonic that our economy and its recovery could have?

I do agree. It is encouraging to see British industry performing so well in non-European Community markets. We would perform even better in the EC if demand there were not dropping because our partners are still going into recession.

In the light of the Prime Minister's comments on Tuesday, when he made his statement following the G7 summit, that the Government were working on new ideas and initiatives to contribute to President Clinton's employment summit in the autumn, will the Chancellor tell the House what specifically new policy ideas and initiatives are being worked out in the Treasury?

I am glad to say that the Treasury is closely involved in discussions with my right hon. Friends in the relevant Departments, such as Employment and Education, to continue to work out policy on education and training, particularly for those between the ages of 16 and 19. As we now spend two and half times as much as was spent on those sectors before we came to power, and as we have introduced a series of training initiatives, all of which were opposed—as far as I can recall—by the Labour party, it is likely that we can be expected to build on an excellent record, having inherited a somewhat bare cupboard.

The Chancellor has every reason to be satisfied with our relative performance on economic growth as compared with our partners in the Community in recent times. However, does he recognise, and will he therefore take steps to push forward the idea, that we must be competitive internationally with the new super-competitive countries in the Pacific rim, where growth rates are significantly higher?

My hon. Friend makes an extremely valuable point. For the next generation, we will remain at the forefront of developed and prosperous countries only if we are able to compete with our most challenging competitors—the Japanese and the countries of the Pacific rim and, probably, the north American economies if they recover their normal powerful growth. That is why we have not only to ensure that our own climate is right, but to persuade our European Community partners that Europe as a continent will fall behind if we saddle ourselves with costs on employment and restraints on economic change, which they do not impose on themselves when they are trying to earn their living in Japan or north America.

As 60 per cent. of Britain's exports are to the rest of the EC, is not there a real danger that recession there will knock back the export-led recovery, which we need to sustain us here? Does not that make it all the more important that everything possible is done jointly with our European partners to get economic recovery going in Europe and not have further deflation? What new proposals will the Chancellor put to the European Commission, which is producing the White Paper that will be the basis for the joint economic policy under the Maastricht treaty? Is not it an indictment of the new Chancellor that he has not been able to tell us one new proposal for recovery this afternoon?

I agree with the first part of the hon. Gentleman's question. It is extremely important to us that the rest of the Community comes out of recession, because it is our most important market and we need to see demand revived there. That is why I was glad to take part in the convergence process. I was glad that the Community welcomed the steps that the Government are taking to cut the public deficit and public finances and to improve prospects for recovery. That is why I look forward to urging the Community to take the necessary measures to tackle exactly the same problems, particularly of fiscal deficits, which many member states face.

Will my right hon. and learned Friend accept that the manufacturing sector of the United Kingdom can make a major contribution to continued economic growth? Therefore, will he consider not only extending capital allowances, which run out at the end of October, but increasing them—they could either run on immediately from 31 October or be introduced in his Budget—because manufacturing industry, particularly epitomised through the Machine Tool Technologies Association, can make a major contribution not only to increasing efficiency and productivity, but to aiding our economic growth?

I agree with my hon. Friend about the importance of manufacturing industry. That is why, when asked about other matters, I kept putting stress on the figures for manufacturing output that we had two days ago. They show that, in the past few months, we have already recovered about half of the drop in output that we suffered in the depths of the recession. My hon. Friend made a Budget representation about capital allowances, which I shall carefully bear in mind. I hope that he will consult his friends in manufacturing industry about his views on the social chapter and his proposed voting intentions in the light of what I have just said about placing burdens on manufacturing industry.

To ask the Chancellor of the Exchequer what plans he has to increase manufacturing investment; and if he will make a statement.

The Government will continue to foster an economic climate which will encourage investment.

Is the Minister aware that many industrialists and business men in manufacturing do not share that complacent view of his policy? Is it not the case that manufacturing investment at constant prices year on year is still at a level below that at which it was when the Government came to office in 1979? Does he agree that that is not a good record? When will we have new policies that will start to increase manufacturing investment?

It is extraordinary that we have been on Treasury Questions for 35 minutes and not a single Labour Member has chosen to refer to the fact that, today, we announced that unemployment has fallen for the fifth month in succession. The hon. Gentleman thinks that he has a point that will embarrass the Government, but he is wrong. If we compare business investment in 1992 with that in 1979–1979 being the top of the nearest thing that the Labour party got to a boom and 1992 being a poor year in our record—that in 1992 was 37 per cent. higher in real terms than that in 1979.

Will my hon. Friend join me in welcoming the drop in unemployment in my constituency, which is down to 7·5 per cent? Will he keep paramount in his Department the interests of manufacturing industry and the people who work in it and in commerce because it is on them that we all depend?

Yes, I am glad to join my hon. Friend in welcoming the fact that his constituency, among many others, is enjoying a fall in unemployment and has been for five months this year. That is, at least in part, because business investment through the 1980s grew faster than in any other G7 country, with the single exception of Japan. That is in sharp contrast to the record of business investment growth in the 1970s when the country was at the bottom of the league—seventh out of seven. In the 1980s, it was second out of seven.

Is the Minister aware that, while the House welcomes his commitment to a general economic climate that will promote growth, the two essential ingredients necessary to achieve that are a competitive exchange rate and low interest rates? While we do not expect from him or from the Chancellor any commitment on those points, could not there be a general sign from the Government that those two quintessential requirements for sustained economic growth, which we are now witnessing, will be foremost in their minds, not only as they formulate the Budget later in the year, but in the next few weeks and months?

If devaluation were the path to economic expansion, the 1970s would have been glory years rather than locust years. The Government believe that the best backdrop that we can deliver to allow business to invest, expand and create jobs and wealth is to provide monetary stability and price stability, which give the opportunity for long-range planning, rather than the short-termism that was imposed on the private sector when the hon. Gentleman tried to run a company against the impossible background created by the then Labour Government.

Does my hon. Friend recognise that the good employment figures in my own constituency of Harborough are to be welcomed? They are the lowest in the county, as he, as a Leicestershire Member, will recognise. Does he accept that one of the reasons for that is that manufacturers in my constituency have continued to invest in manufacturing industry, and that we have the fullest order books for some time, both domestically and in the export market? Would he care to comment on the good performance of Leicestershire manufacturing industry at the moment?

My hon. Friend is quite right to draw attention to the success of manufacturing and, indeed, all other forms of economic activity in the county that both of us have the honour to represent. I have referred to investment as being one of the things that brought that about. Another thing, of course, is the fact that productivity has grown in the last 12 months by 8·7 per cent. That has made possible a decline in unit wage costs in British manufacturing that is the best on record.

To ask the Prime Minister if he will list his official engagements for Thursday 15 July.

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

Will my right hon. Friend join me in welcoming not only the lowest inflation rate for 30 years, but the fifth successive monthly fall in unemployment? Does he agree that the House deserves an apology from the hon. Member for Dunfermline, East (Mr. Brown) for predicting a steady rise in unemployment over the spring and summer?

My hon. Friend is unkind to remind the House of the predictions by the hon. Member for Dunfermline, East. There have been a great deal of them—all wrong. If it would be for the convenience of the House, I will place a copy of them in the Library. The further fall in unemployment and inflation is very good news indeed. Unemployment has fallen by over 80,000 since the beginning of the year, and, taken with the remarkable figures on Tuesday for manufacturing output, we can now say with some certainty that there is clear evidence of recovery gathering pace.

Does the Prime Minister accept that it should be for the House to decide whether the social chapter is included in the British version of the Maastricht treaty?

The House has examined the whole of the treaty. I expect to ratify the treaty that I signed at Maastricht. The House has shown its support for the treaty; I expect that it will do so again.

The Prime Minister has carefully not answered the question. Let me put it to him plainly and clearly. Whichever way the House votes on the social chapter, will the Government accept the decision?

I have said to the right hon. and learned Gentleman before, and I repeat, that I expect the Government's motion to be carried, and I expect to ratify the treaty that I signed.

The House and the country will have noticed another failure to answer the question directly. Does the Prime Minister understand that, were he to defy the will of the House of Commons, it would be a monstrous violation of the rights of the House, and would at one fell swoop undermine our parliamentary democracy?

The right hon. and learned Gentleman perhaps does not understand the answers. I will make them more clear for him, so that he is in no doubt. We expect to ratify the treaty that I signed at Maastricht. The House has shown its support for the treaty; I expect it to do so again.

This month, like last, has seen a remarkable catalogue of good economic indicators. Is it not the case that, in addition to the fifth fall in monthly unemployment, we have seen the largest increase in industrial production for four years and the lowest inflation record for nearly 30 years? When one puts that into a European context and sees that Britain has a lower than average rate of inflation in the European Community, is the only country in the European Community in which unemployment is falling, and is the only country in the European Community in which industrial production is rising, I congratulate the new Chancellor on the rapid success of his policies.

I know that my right hon. and learned Friend the Chancellor of the Exchequer will be most grateful for my right hon. Friend's support for his policies. It is entirely clear that we are coming out of recession and into recovery. It is equally clear that we are leading Europe into recovery.

Will the Prime Minister reflect on the fact that the Government have said to their rebels that nothing will stop them from ratifying the Maastricht treaty, but they have said to the House that adopting the social chapter would jeopardise the treaty? Both statements cannot be true; which is?

I think that the right hon. Gentleman has forgotten what he said about the social chapter. [Interruption.] I am glad that the right hon. Gentleman has not forgotten, but perhaps I can remind the House what he said:

"I believe what is now being put forward in the social chapter may well lead to a form of Euro-sclerosis."

"The social chapter in the Maastricht agreement, it seems to me, is a really worrying attempt by Europe to try and rebuild in Britain the things that we have dismantled over the last 12 or 15 years."

To ask the Prime Minister whether he has plans to pay an official visit to Portsmouth.

I have no immediate plans to do so.

Does my right hon. Friend recall that he has not visited Portsmouth since the general election, at a time when the so-called poll experts were predicting not only a Government defeat in general but, even more shamefully, the loss of my seat in particular? Will my right hon. Friend visit us again soon, preferably in the 50th anniversary year of D-day? Such a visit would not only mark the premier naval port of Portsmouth's vital contribution to our defence needs in the past, but mark its present contribution and the efforts it will make for many years in the future.

My hon. Friend is an extremely forceful advocate for Portsmouth, and I am grateful for his invitation. I understand how important the defence industry is to his constituents, and I hope that he will take every opportunity to remind them of two facts: that the Labour party would cut defence spending by a quarter, and that the Liberal Democrats would cut it by half. We hear a lot from the leader of the Liberal Democrats about taking military action in Bosnia; we hear rather less from him about how we would be able to take that action after his policy had dismantled the Army, the Navy and the Royal Air Force.

To ask the Prime Minister if he will list his official engagements for Thursday 15 July.

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

Is the Prime Minister aware that, because of the legal shackles on British trades unions, this week sacked Timex workers were banned from taking part in the national launch of the Timex boycott campaign, and banned from calling on the support of other British trade unionists?

The sort of behaviour that we saw from trade unionists at Timex is nothing for the hon. Gentleman to be proud of. I dare say that the jobs lost at Timex as a result will stand as the clearest evidence that the hon. Gentleman's policy is utterly the wrong way to look at labour and trade union relationships.

To ask the Prime Minister if he will list his official engagements for Thursday 15 July.

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

Will my right hon. Friend thank and congratulate the anti-terrorist branch and MI5 for its continuing efforts to protect the public from terrorist crimes, and especially their efforts yesterday? Does he agree that had we failed to pass the prevention of terrorism Act and gone down the path of giving away Northern Ireland—the policy of the Opposition—the anti-terrorist branch and MI5 might as well have been told by us to pack up their things and go back to traffic duty?

The police and the Security Service deserve our congratulations on their professionalism and vigilance. They have demonstrated that in fighting terrorism over many years. It is clear, and it has been endorsed repeatedly by the House, that we need the prevention of terrorism Act to defeat the terrorists. With the greatest goodwill in the world, I cannot understand why, year after year, Opposition Members have voted it down.

In view of the Prime Minister's utterances in recent days `bout nuclear weapons being defensive measures, may I ask him to take this opportunity to assure the House, the country and the world that Britain will never use them first?

The hon. Gentleman should know better than to ask such a daft question.

To ask the Prime Minister if he will list his official engagements for Thursday 15 July.

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

My right hon. Friend has announced this afternoon dramatic improvements in a number of economic indicators which are of immense interest to the House and the country. Will he continue to encourage manufacturing industry as a way of improving our economy, and will he ensure that in the Budget to be announced in December, the fragile recovery of our manufacturing base, which is vital to our future, will continue to be encouraged and that measures will be introduced to ensure that recovery and continued economic growth?

The whole House knows and respects my hon. Friend's advocacy of manufacturing, so he will be as pleased as I am about the growing success of British manufacturers. As he knows, my right hon. Friend the Member for Kingston upon Thames (Mr. Lamont) introduced measures in the Budget and autumn statement to help manufacturing industry. I say also to my hon. Friend that the one thing that would do great damage to manufacturing industry would be the provisions of the social chapter.

Does the Prime Minister realise that 500,000 of the present unemployed are aged between 18 and 24 and that, because of the cuts that he helped to introduce, they are having to manage on £4·97 a day? Does he think that that is enough to keep them in food and on which they can live? Will he take action now to end the discrimination against that age group, instead of making cheap political points at the expense of the unemployed?

I do not think that the hon. Lady has grasped the training opportunities that exist for young people. I want youngsters to take up those training opportunities. That is what they are there for and it is in their interest to take them up.

To ask the Prime Minister if he will list his official engagements for Thursday 15 July.

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

Does my right hon. Friend agree that the Government's trade union reforms have made a significant contribution to Britain's increased industrial competitiveness over the past 10 years, while the trade unions have made a significant contribution to the Labour party's electoral uncompetitiveness over the same period?

I agree with my hon. Friend, and I came across an interesting quote last week from a delegate at a Transport and General Workers Union conference, who said:

"We are not the tail wagging the dog. We are the dog."

To ask the Prime Minister if he will list his official engagements for Thursday 15 July.

I refer the hon. Member to the answer I gave some moments ago.

What is the Prime Minister going to do about corruption in his flagship council in Westminster? When will he stop crooks financing the Conservative party? Why did he allow 44 of his own Members to vote themselves tax privileges in the Lloyd's amendments on Tuesday? Is that why he is the most unpopular Prime Minister on record?

The best that can be said about that compendium question is that it is worthy of the hon. Gentleman.

In welcoming the unemployment figure, will my right hon. Friend also take time to express vividly to all those in employment the cost of the social security budget, currently running at more than £60 a week for every worker? Does not that large sum justify the Government's intention to re-examine that budget?

My hon. Friend is right about that for the reasons that I have set out on a number of occasions in recent weeks. That problem is faced not only in Britain, but right across the European Community, in Japan, the United States and other industrial countries.