To ask the Chancellor of the Exchequer what account he takes in setting the corporation tax rate in Britain of that of the United Kingdom's major competitors; and if he will make a statement.

My right hon. and learned Friend the Chancellor of the Exchequer pays careful attention to the corporation tax rates in the United Kingdom's major competitor countries. The United Kingdom's main rate of corporation tax is the lowest of any major industrial country.

Will my hon. Friend confirm that not only do we have the lowest rate of corporation tax for larger firms of any country in the European Community, but our corporation tax regime for smaller firms is also the most generous in the whole of Europe? Is it not also true that the Labour party is pledged to increase the rate of tax on businesses and make them closer to the levels in other Community countries, which would increase business costs and destroy jobs?

My hon. Friend is right on each count. The socialist manifesto for the European elections made precisely the commitment to which he refers. My hon. Friend is also right to say that our corporation tax rates compare well with those elsewhere in the world. That is partly why we have such a successful record in attracting inward investment, which has created more than half a million jobs in Britain over the past 14 years.

If everything is so wonderful, why do we have a trade deficit?

Part of the reason why we have falling unemployment, and inflation under better control than at any time for a quarter of a century, is that the Government have taken the decisions necessary to put economic disciplines in place. That is why the economic forecast published this week gives one of the best outlooks for the British economy in living memory.

To ask the Chancellor of the Exchequer what is the current rate of inflation in the United Kingdom; and what is the rate for France, Germany and Italy.

Inflation in the United Kingdom is currently 2.6 per cent. That compares with 1.7 per cent. in France, 3 per cent. in Germany and 4.1 per cent. in Italy.

I thank my hon. Friend for that helpful reply. It is clear that the policies being pursued by my right hon. and hon. Friends in the Government have resulted in inflation falling significantly below the European Community average. Does my hon. Friend agree that low inflation is the foundation for economic growth and that economic growth equals more jobs and greater prosperity for all the British people?

Yes, I agree. Our economic performance, not least on inflation, is the envy of the rest of Europe. Certainly the European Commission expects the United Kingdom to be the only country to combine stronger growth with low inflation both this year and next.

To ask the Chancellor of the Exchequer what is the current policy on interest rates.

To ask the Chancellor of the Exchequer what recent discussions he has had with the Governor of the Bank of England regarding interest rates.

The minutes of my discussions with the Governor which precede my decisions on interest rates are now published. I refer both hon. Members to the minutes published on 22 June.

If there is any confidence in the Chancellor's policies, why are longer-term interest rates in this country rising faster than those in Italy, America, Germany, France and other comparable countries?

There has been some rise in long-term interest rates throughout the western world. In my opinion, that has happened because the markets have overreacted to fears of inflation in north America and across western Europe. The best reaction that I can give is the one that I am giving—to introduce the most open system of monetary policy in the world, so that people can see that we are setting our monetary policy on a basis that will deliver the low inflation target to which the Government are committed. The exchanges a few moments ago made it clear that we are well on the way to delivering that.

At the beginning of this year, the interest rate on 10-year bonds in Britain was just over 6 per cent. It is now almost 8½ per cent. That is a massive increase by any standards, and higher than that in most industrialised countries. Does that not mean that the next move in interest rates will be up and not down? That will mean more unemployment. We have more taxes at the end of this year and more taxes next year. The best advice that I can give the Chancellor is to take the Chief Secretary with him to the meetings with the Governor of the Bank of England because the Chief Secretary is telling a story in other parts of the world different from the one that the Chancellor is spreading here.

Apparently, the Chief Secretary and I have to go to Spain and Germany respectively before anyone takes any notice of our speeches. Leaving that to one side, however, the fact is that we have the lowest short-term rates in this country since 1972. Since the beginning of this year, long-term rates have gone up, for the reasons I have just given. As the hon. Gentleman knows, however, they have come down again to the present level of about 8½ per cent., and they will stay down if we can make it clear to the markets that we have control of inflation, as we most undoubtedly have. We do not have a problem, because the fundamentals are more sound than they have been here for a generation. Indeed, I have just revised upwards my forecast for economic growth and revised downwards my forecast for inflation because we have the best combination of circumstances for the medium future that we have had for many years.

Will my right hon. and learned Friend continue to remind his advisers, especially those in the Bank of England, that the present weakness of the United States dollar against the Japanese yen and European currencies is not a cause for a fundamental reappraisal of our policy of trying to get lower short-term interest rates? The weakness results from the delay, caused by the Japanese financial year window-dressing—[Interruption.]

Order. A question, please.

Does my right hon. and learned Friend understand that the weakness results from the repatriation of Japanese yen on the sale of US Treasury bills, some of which funds are now being put into European investment instruments, because the Japanese expect European interest rates to continue to fall?

I am sure that my hon. Friend and the hon. Member for Bolsover (Mr. Skinner) will take that point forward in long conversations for the remainder of the afternoon. Our position in the exchange markets has been extremely steady. Our position is well appreciated abroad because we have the fundamentals right. I will continue to set British monetary policy on the basis of British conditions, looking at our money supply, our asset values and our exchange rates, and getting the balance right in strengthening recovery which can be sustained because it is based on a low target for inflation. We are well on course for that at the moment.

After those long exchanges, I would like a direct question from Mr. Taylor.

I will endeavour to oblige, Madam Speaker. Does my right hon. and learned Friend agree that stability in interest rates at the short end is entirely dependent on his maintaining the current fiscal balance to avoid there being a return of inflationary fears? That means not only a restraint on public expenditure, but a continuation of the current policy towards taxation.

Yes, Madam Speaker.

To make that absolutely clear, does the Chancellor agree that the pressure to use higher interest rates to restrain inflation will be very much greater if, at a time when the economy is becoming more active, there is the expectation of tax cuts? Had he better not warn those of his hon. Friends, other than the hon. Member for Esher (Mr. Taylor), that the expectation of tax cuts could damage his chances of keeping interest rates down?

The need for brevity has prevented me from being as expansive as I would have wished, both to my hon. Friend the Member for Esher (Mr. Taylor) and to the right hon. Member for Berwick-upon-Tweed (Mr. Beith). There is a very great deal in what they say. That is why I keep reiterating my determination to deliver our fiscal policies and to return to this Government's agenda of tax cutting only when it is sensible to do so because we have public spending and public borrowing under control through the prudent combination of policies that we are now pursuing.

Will my right hon. and learned Friend acknowledge that many of us are very relieved to hear that monetary conditions in this country will be set according to British conditions? If there were ever such a disaster as a single currency, for which my right hon. and learned Friend has been campaigning for the past 30 years, would we not then have our monetary policy set according to European conditions?

I missed my hon. Friend in Bonn, as he has heard me on that subject many times before over the past 20 or 30 years, but he will be glad to know that I did not take the matter any further yesterday. I made it clear that we would address the subject only in the context of the views of the British Parliament of that time and that I thought that the Bundestag and the Bundesrat of the day would expect the same right if ever the same situation arose. I believe that the German constitutional court would insist on that. I said to my German audience that in my opinion we were right to opt out of the artificial timetable towards economic monetary union, and that events have proved us right. I also said that it was a waste of time going back to blueprints for economic and monetary union, and that we should get on with the business of convergence on low inflation and healthy public finances. As usual, I was commended by my German audience for my frankness and candour in explaining the British position to them.

On the Chancellor's speech in Bonn last night, and on the question not so much of a Britain at the heart of Europe as of divisions at the heart of the Treasury, will the Chancellor now take the opportunity to disown the view of the Chief Secretary to the Treasury that

"a single currency threatens our sovereignty, is unwanted, is impossible and the principle unacceptable"

My right hon. Friend the Chief Secretary tells me that that is not an accurate quotation. [Interruption.] The hon. Gentleman is obviously doing myself and my right hon. Friend the courtesy of actually reading our speeches, as opposed to the interpretation put on them. He will profit by doing so and he will see clearly from both our speeches what the consistent policy of the Government is towards the kind of arrangements in the European Union that we British Conservatives want to see and which we demonstrated last weekend that we are determined to attain.

To ask the Chancellor of the Exchequer how many years it will take, on current tax and growth rates, to eliminate the budget deficit.

In the Budget, the public sector borrowing requirement was projected to fall rapidly over the next few years and to be broadly in balance by 1998–99.

That is a simple calculation on certain assumptions and not a forecast which, of course, would be subject to the same vagaries and infirmities as are normal in Treasury forecasts. Is it not the case that if we have to wait until 1998–99 to get the Budget under control, there will be no scope for the sort of tax cuts on which the chief Secretary's friends are dependent, unless there is either an increase in the rate of growth or a significant reduction in expenditure?

The hon. Gentleman is right to refer to vagaries; that is why the Budget Red Book sets out a series of different cases with higher and lower growth. If we had higher growth, the PSBR would obviously be eliminated somewhat earlier. The hon. Gentleman is simply underlining what my right hon. and learned Friend the Chancellor has already said—that there can be no question of tax cuts until it is prudent for that to be considered by the Government.

Does my right hon. Friend think that growth rates in this country will be helped by yesterday's disgraceful rail strike and does he agree with the Labour Front-Bench spokesman who recently described Jimmy Knapp as a hero?

It is most extraordinary to have a rail strike being inflicted on the British travelling public and to see the failure by those people who are contending for the Labour party leadership to condemn outright the strike, the damage that it is doing to the British economy and the inconvenience that it is causing to the British people.

Given the impact of the European economy on domestic growth rates, does the Chief Secretary believe in a single currency in principle —yes or no?

I have nothing to add to what I said on that subject before. My right hon. Friend and learned Friend the Chancellor and I have both made it perfectly clear from the Dispatch Box that that will be a matter for decision by this Parliament if and when the matter is put to Britain, which will not be in this Parliament but in a future British Parliament.

To ask the Chancellor of the Exchequer which were the last two calendar years in which the retail prices index remained below 2 per cent. for the entire year.

To ask the Chancellor of the Exchequer in which last two years the retail prices index last remained below 2 per cent. for the entire calendar year.

Only two calendar years since the war have seen the headline inflation rate below 2 per cent. in every month; 1993 was one, and we have to go back almost 50 years to 1946 for the other.

Will my right hon. and learned Friend confirm that since 1990 the average family mortgage bill has fallen by £37 per week? Does he agree that new house buyers and the housing market in general are being severely hampered by high interest rates on long-term borrowing? When will the financial market wake up to our policy of low inflation and reduce interest rates on long-term borrowing?

I agree with my hon. Friend. The main practical impact so far of higher long-term rates as a result of the fall in bonds has been a raising of the level of fixed-rate mortgages, which are becoming very popular, which has flattened off demand—temporarily, I am sure—in the housing market in this country. Obviously, we need to see stability in the financial markets for that reason and for many other reasons. Our best contribution to stability is to keep emphasising that the fundamentals are right in this country and that we are committed both to healthy public finances and to continuing to meet our low inflation target. I repeat our commitment to do that.

I congratulate my right hon. and learned Friend on his record on inflation. Inflation expectations are lower than they were at the time of the last Budget, and lower again than at the time when public expenditure totals were settled in last year's public spending round. At a time of such low inflation, how can we justify such large prospective increases in public expenditure as 4.6 per cent. next year and 6.2 per cent. the year after that? Should we not put the brakes on?

My hon. Friend is right about the direction of inflation. Everyone has been revising downward their forecasts for inflation—not only the Treasury, but independent forecasters, my panel of advisers, and so on —as the year has gone on. Among other things, that offers beneficial prospects for the level of public spending. Last year's public spending round took £15 billion out of our then public spending plans, and the Cabinet has just agreed to confirm the figures that we have published as ceilings for the coming round. We are all determined to ensure that we deliver as tight a fiscal policy as is consistent with unavoidable expenditure and our policy commitments in the coming autumn round.

Will the Chancellor recall the evidence given by the Governor of the Bank of England to the Treasury and Civil Service Committee when my hon. Friend the Member for Hackney, North and Stoke Newington (Ms Abbott) called the Governor an "inflation nutter"? Without agreeing with the words used by my hon. Friend on that occasion, does the Chancellor agree that by publishing so fully the details of his discussions with the Governor he has put much of the weight on the Governor of the Bank of England, to his own discredit and disadvantage? Is it not clear that there are other matters, such as investment incentives for manufacturing industry, which should be playing a larger part in the Government's policies?

We believe that low inflation is an essential prerequisite for growth, prosperity and jobs in this country. That is why we are aiming at sustained recovery, but with low inflation to underpin it and give it a better chance of permanence. I commend to the right hon. Gentleman the minutes of the exchanges that I have with the Governor, from which he will see how much we agree on the conditions that we have to balance and bear in mind. The right hon. Gentleman may then better understand why we have been so successful over the past 12 months in getting the balance so right that the rate of growth exceeded the rate of inflation last year, which has happened in only four years since 1970 and plainly will do so again in 1994.

Does the Chancellor agree that there has been a huge rise in those items that could be termed the basic necessities of life, such as water rates, council house rents and, of course, energy costs as a result of the imposition of value added tax on fuel, which affect people on low incomes disproportionately and are not affected so much by the retail prices index?

Within the retail prices index at any given stage, some items go up faster than others. In fact, energy prices have gone down compared with other prices in most of the past few years. The poorer sections of society and all retirement pensions have, of course, been cushioned against the effects of VAT on fuel by the compensation in the Budget.

Is not the Government's excellent record threatened by the ever-increasing and inflationary demands from Brussels? Has the Chancellor seen the paper put privately before the Select Committee this week which said that our gross contribution in 1995 will rise by £2,000 million—or £3 per week per family—and that it has been calculated that the agricultural budget will break through the legal limits imposed at Edinburgh by more than £1,000 million. Is there nothing that we can do to contain that extravagance and the inflation coming to us from Brussels?

The Edinburgh ceilings are tight—much tighter than those that the Commission was demanding, and far below its minimum expectations—and they will be strictly adhered to. I say that not just on behalf of this Government, but on behalf of other Governments who are determined to ensure that we see those ceilings applied in practice.

Given the interrelationship between European monetary policy and the rate of inflation, will the Chancellor now stop shuffling around and tell the House whether he agrees with the Chief Secretary, who said in a GMTV interview on the question of a single currency that for him, "That's impossible"? Does the Chancellor agree or not?

I did not hear the interview, but my experience is that quotations from interviews by the hon. Gentleman and other Opposition Members are likely to be wildly misleading and are unlikely to be accurate.

Against the background of low inflation, is it not clear that inflationary pay demands in the public sector simply cannot be accepted? Would it not support the international perception of sterling as a strong currency if Opposition Front-Bench Members would condemn inflationary pay demands?

The level of pay settlements in the public sector is consistent with our success in getting inflation under control, our control of public spending and our developing better quality services as private industry recovers with the same level of settlements also.

To ask the Chancellor of the Exchequer if he is proposing to relax the current restrictions on the proportion of local authority capital receipts which can be applied for investment in housing and other capital projects.

I understand that my right hon. Friend the Secretary of State for the Environment has no such plans.

Why are the Chief Secretary and his colleagues at the Department of the Environment so negative? The Prime Minister rightly pointed out that too many people are begging on our streets because they have no homes. Is it not time to get the unemployed back to work building the homes needed for the homeless and to release local authority capital receipts to make that possible?

We are not in the least bit negative. The fact that 179,000 social housing units are being provided over three years, which is well in excess of our manifesto commitment, rather proves that point. What we are positive about is controlling public sector borrowing. We are positive about establishing stable economic conditions, but the Labour party does not even understand that terminology.

Does my right hon. Friend agree that local authority receipts should first be applied to paying off the appalling debts of local authorities controlled by the Labour party? Does he agree that it is those spendthrift authorities—put in power by the supporters of the Labour party, who frequently do not pay their council tax—that are unable to budget properly and provide proper housing, which should be condemned?

My hon. Friend is right. The local authorities whose spending of receipts is being controlled are those authorities that have large debts. They ran up those debts generally in the 1930s and the 1960s in order to build houses. When those authorities sell those houses again, it is not appropriate for them to retain the same level of debt. That is rather like saying that if someone borrows to buy a house he can have a large mortgage, but that if he sells that house and does not buy another one, it is, of course, no longer appropriate for him to continue to hold that level of mortgage. It is absolutely absurd for the Labour party to believe that those receipts can be spent without increasing public spending and public borrowing.

To ask the Chancellor of the Exchequer what is his latest estimate of the impact of the rate of inflation on negative equity in the housing market.

House prices have clearly increased since their trough in the first half of 1993, reducing negative equity. The latest estimate is that the number of households with negative equity has fallen by nearly 30 per cent. since the first quarter of 1993.

The housing market continues to bump along in the depths of the recession. Is not the Minister aware that 800 families lose their homes through repossession every week? Is not he aware that one in 17 families are in serious arrears with their mortgages and that 1.5 million families have negative equity on their homes? Does not he accept that the Chief Secretary's proposals to abolish or further restrict income support payments to home owners who lose their jobs will not only kill off the housing market but throw thousands of families on to the streets?

The hon. Gentleman should check his facts, particularly about the number of people with negative equity, because there are now 500,000 fewer people with negative equity and he should welcome that. The fact is that court repossessions have fallen by 55 per cent. since 1991 and arrears have been reduced by nearly 10 per cent. The hon. Gentleman should welcome those improvements instead of suggesting that we should in some way inflate the property market to try to get rid of negative equity. That would be no answer to the problems of those with negative equity.

Does my hon. Friend agree that one of the major reasons why the level of negative equity and debt overhang is coming down so rapidly, contrary to what the hon. Member for Leeds, West (Mr. Battle) has suggested, is that many people have prudently maintained their monthly payments at the same level even though interest rates have been falling?

Yes. Many people have been able to reduce their negative equity, not so much because house prices have increased but because they have been able to reduce their indebtedness. The fact that we have been able to get interest rates down by such a significant extent is worth £160 a month off mortgage payments. That has meant that, in many cases, people have been able to reduce the negative equity in their property. That is reflected in the excellent figures and progress to which I referred earlier.

Does the Chancellor agree with the Governor of the Bank of England's assessment that interest rates are likely to rise? If that is the case, what will that do to the housing market and to the recovery?

I never speculate, and nor will my right hon. and learned Friend the Chancellor of the Exchequer, on the future level of interest rates. What we do say is that the prospects for a revival in house prices—a gentle, not a massively inflationary increase—and the prospects for improving activity and transaction in that market are more likely to be served by a sound and steady recovery in the economy. We are seeing just that and it is clearly illustrated in the summer economic forecast published earlier this week. All that suggests that the forecasts, not just of the Government but of outside organisations such as the house builders, that house prices will continue to rise this year and next, will be met to the health and welfare of the housing market and home owners.

In view of the Chancellor's two most recent speeches, will my hon. Friend convey to him my particular congratulations on his Mansion House speech? Does he accept that the question calls for a dangerous regime in which people will be deluded about the value of their assets? They will consider their houses as a source of riches on which they can regularly draw, but, in reality, they will achieve an economy in which productive resources are denied the long-term investment which this country so desperately requires.

I very much agree with my hon. Friend. I hope that nobody in the House would seek to sustain the argument that the price of properties should consistently rise by more than inflation or the economy as a whole. Such a course would simply divert resources into fixed rather than productive assets. There would also be serious implications for first-time buyers, for whom properties would become much less affordable. There must be a relationship between the growth of the economy, the level of inflation and house prices. We do not want that to get out of synch.

To ask the Chancellor of the Exchequer what consideration he has given to introducing measures to reverse the increase in VAT on fuel in April 1995.

Parliament considered that matter and legislated last year.

As the Government are committed to reducing taxation when economic circumstances allow, will they give a commitment to the House today that, when that happy day is reached, their first priority will not be to attract headlines by cutting income tax but rather to reduce VAT on domestic fuel?

We give no commitments of that sort in advance. In any case, is it not interesting that only a few minutes ago the right hon. Member for Berwick-upon-Tweed (Mr. Beith) was urging caution on my right hon. and learned Friend the Chancellor as regards tax cuts?

Bearing in mind the generous compensation that has been provided to all pensioners for VAT on fuel, will my right hon. Friend have a word with the Secretary of State for Social Security to ensure that it is presented separately on pension books, because that would help me with my constituency correspondence?

I agree with my hon. Friend that the compensation is generous. I will pass on his suggestion to my right hon. Friend the Secretary of State for Social Security.

Does not the Minister understand the tremendous hardship already being caused by the imposition of VAT on domestic fuel? If that is not to be reversed, the Government should at least not impose the further measure in 1996, which will cause untold hardship, despite the Government's claims that those who need help are receiving it. The measure has been a great burden, which helps to explain the Tories' deep unpopularity in the country.

I do not quite follow the reference to 1996. Whatever the hon. Gentleman was thinking about, I understand the point that he makes. But he knows as well as anyone else that we do not make comments before the Budget.

Will my right hon. Friend remind those European enthusiasts on the Opposition Benches that an energy tax is part of Europe's policy? Will he also remind them that the Government have been elected since 1979 on a policy of diverting direct taxes to indirect taxes, and that VAT is an indirect tax?

My hon. Friend is right. The carbon energy tax supported by the Opposition, particularly by the Liberals, would be a severe imposition on ordinary people.

To ask the Chancellor of the Exchequer what assessment he has made of the effect of Government policies on changes in disparities in income levels during the 1980s.

Government policies are focused on improving incentives and encouraging business enterprise. That is the only way to ensure improved living standards for all.

Has the Chancellor read any of the reports produced recently which show that income disparities grew during the 1980s? For example, the "Economic Trends" survey shows that the poorest 20 per cent. of the population saw their share of disposable income fall from 10 to 7 per cent. during the 1980s; and the Institute of Fiscal Studies report shows that the poorest 10 per cent. of the population saw their real incomes fall by 15 per cent. during the 1980s. Does the Chancellor accept that all those reports show that the increase in unemployment, the transfer from high-paid skilled jobs to low-paid unskilled jobs, and the switch to indirect taxation have hit the poorest in the community the hardest and are responsible for the increased disparity? Will he accept Government responsibility for those matters, and will he explain to the House whether they are a result of Government incompetence or a deliberate result of their economic policies, for which he and his colleagues should be thoroughly ashamed?

Many of the studies to which the hon. Gentleman refers in his question are, in my opinion, a complete misuse of the statistical information available to us. Average incomes have increased by 35 per cent. in the time that the Conservatives have been in office. The increase has obviously varied at different levels, but average incomes for all sections of society have increased by about 35 per cent. in real terms. That is after a period when they were very static, in the 1970s. It is true that there has been a widening of incomes, although there have been increases at all levels

There have not.

It is true. That is why we are giving such priority to raising education standards, raising the level of skills and putting in place the new system of national vocational qualifications. In a modern economy, there will be a widening of that gap, and one has to give more people the skills that they require.

Is not what really matters to those people on lower incomes the absolute income, not the comparison with higher levels, which is simply the politics of envy? Can my right hon. and learned Friend tell me whether there is anywhere in the world where a policy of making the rich poorer has succeeded in making the poor richer?

I can remember one country, which is the United Kingdom, where a policy of trying to do that did immeasurable harm to the economy, and immeasurable harm to the incomes of most groups in the country, during the 1970s. It is obvious, from the questions that Labour Members ask, that the Labour party would revert to that policy again if ever it had the chance.

In view of the anger and dismay in the country about the prospect of VAT on gas and electricity increasing from 8 to 17.5 per cent. in April, is the Chancellor prepared to reconsider that increase on VAT on gas and electricity, or is he still determined to press ahead with it?

The increase has already gone ahead. It has been accompanied by compensation for poor groups and all retirement pensioners, although, as my right hon. Friend the Paymaster General said, not all of them appreciate that it was added to an uprating which was quite low because inflation is now so low. Parliament has approved the second stage of the introduction of VAT on fuel, and it will be accompanied by a parallel package of compensation, which will again ensure that all retirement pensioners and all people on benefit will be compensated for the costs.

To ask the Chancellor of the Exchequer what representations he has received in support of tax reductions.

I receive representations on many aspects of taxation.

My hon. Friend will be aware that Britain's gross contribution to the European Community Budget is already the equivalent of more than 3p on the standard rate of income tax. He may also be aware that the amount of Britain's net contribution to the European Budget almost exactly equates to the amount that the Irish Republic draws out of the Community. Does he agree that curbing expenditure in that area would not only be extremely popular with the electorate, but would create the scope for the tax cuts to which the Government are committed?

I entirely agree that curbing European Community expenditure is an important part of total budget discipline. That is why my right hon. Friend the Prime Minister took the line that he did at the Edinburgh summit, where, as the Chancellor said earlier, we achieved a substantial reduction in the ceiling on the Budget that the Commission were seeking. It is also the reason why our party negotiated the rebate in the early 1980s under my right hon. Friend Baroness Thatcher, which was opposed by the Labour party. It is also why we oppose, root and branch, the proposals adopted by the Labour party in the recent European election—to increase Community expenditure.

Does the Minister accept that arguably the greatest success of the policies that the Government have pursued in forcing down wages has been that the poorest paid people have been made increasingly dependent on means-tested benefits, and are paying marginal rates of tax of 97p in the pound? Does he accept that that is the strongest argument now for paying those people decent wages, instead of inflicting punitive marginal rates of tax on them?

If the Labour party were seriously interested in improving the living standards of people on the lowest incomes, I believe that it would recognise the obvious truth that has been shown by every report on the subject: the way to improve the living standards of the low income groups is to promote job creation, and any Government who are serious about that must conclude that to adopt the social chapter and a minimum wage is to march resolutely in the wrong direction. This Government are serious about wanting living standards to rise across the income scale, and we are pursuing policies that will deliver that.

To ask the Prime Minister if he will list his official engagements for Thursday 30 June.

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.

Given the 16 per cent. increase in productivity since the last pay settlement achieved by the signalling staff, how does the Prime Minister justify spending £500 million and cramming money into the pockets of already wealthy bankers and PR men, when a mere 1 per cent. of that would give those signalling men a living family wage?

The hon. Gentleman has overlooked the fact that the signalling men are demanding an 11 per cent. pay rise with no productivity or restructuring. That is self-evidently not a reasonable claim in present circumstances. I very much regret the fact that they rejected the Railtrack offer, and that therefore there has been continued suffering for rail travellers.

Does the Prime Minister recall the speech that he made at the Conservative party conference in 1992, when he asked who had ever heard of a cricketer, Len Hutton, turning out to play for the county of Humberside? Is he aware that on the table of the Secretary of State for the Environment is a recommendation to the Local Government Commission, supported by just about every Labour and Conservative Member representing Humberside, and every Labour and Conservative councillor in the area, welcoming the report? Will he urge the Secretary of State for the Environment to get rid of the county of Humberside and to implement the recommendations as soon as possible?

I am sure that my right hon. Friend will have heard that plea. I think that there are many hon. Members on both sides of the House who would like the return of traditional areas and areas of local government that people will recognise and understand as having historical interest.

How can the Prime Minister justify a reported pay increase of £800 a week for the chief executive of National Power, at a time when the Institute for Fiscal Studies has shown that the gap between the best paid and the lowest paid in Britain today is wider than it has been for 100 years?

The hon. Lady yet again tends to concentrate on every occasion on the politics of envy and redistribution instead of the politics of growth and job creation. When she learns that there is more to prosperity than envy and redistribution, she may be in a position to lecture others.

I am sure that the whole country will note that the Prime Minister failed to condemn either the pay increase or the widening pay gap. But surely he is aware that Government figures show that every ordinary British family, including the lowest paid of all, are paying more taxes now than they were when the Government came to power—with the sole exception of the kind of people who award themselves pay increases of £800 a week. How can that be right?

Of course, average real incomes are substantially up for people at all levels of income, as the right hon. Lady should know. But since the right hon. Lady returns yet again to tax, perhaps she would care to comment on the remarks of the hon. Member for Kingswood (Mr. Berry) who said recently:

"We"—

"cannot put trust and tax on top of the agenda and then duck the economic issues."

What are certainly up for every ordinary British family are the taxes that they pay under this Government. As a result of the Government's economic failure, Britain today is a country of low wages, low skills, high crime and higher taxes. Whatever happened to the Prime Minister's promise to build a nation at ease with itself?

It is actually a nation of low inflation, increasing growth and falling crime. The right hon. Lady has been promising to set out her position on a number of issues and today she certainly has. She has published her own policy document and it enlightens a great deal. If any hon. Member would like to know more about it, I invite them—

Answer.

Order. It is right that an answer should be given, but to the right hon. Member for Derby, South (Mrs. Beckett) who has every right to question the Executive about its policy.

The right hon. Lady has invited anybody who wishes to know more about her programme to phone her campaign hotline and ask for Kevin or Ian who will explain her policies.

Will my right hon. Friend give a clear and categorical assurance to the House that he will not allow himself to be discouraged from his pursuit of a classless society by the growing probability that both the leading opposition parties will be led by public schoolboys?

The essence of the society that I wish to create lies in the fact that it does not matter whether they are or not.

To ask the Prime Minister if he will list his official engagements for Thursday 30 June.

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

Does the Prime Minister remember those happy Labour days of 1969 when he came to live in my Streatham constituency at the charming Primrose court when the unemployment rate in Streatham stood at one in 50? Thanks to his Government's policies it now stands at a shocking one in five. Is the Prime Minister be surprised to learn that there is no great demand in Streatham for a blue plaque to commemorate his stay at Primrose court?

I do not know how much the hon. Gentleman knows about Lambeth at that time in the late 1960s, but if he had checked a little more carefully he would have known that just a few months before the date that he quotes the Labour-controlled Lambeth council was swept from office, going from 57 to three in the local elections.

To ask the Prime Minister if he will list his official engagements for Thursday 30 June.

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

Is not it the case that being at the heart of Europe and fighting one's corner for Europe are not mutually exclusive and, if the Opposition say that it is, is not that both false and weak? Is not it also the case that when it comes to exercising the veto or the threat of veto, other countries have used it far more often than we have and, when it comes to abiding by European directives, in the league of large countries, Britain comes top, France comes third and Germany comes bottom? Is not Germany's threat of the beef embargo a good example of that?

As my hon. Friend intimated, there is a long history of vetoes by other member states —some on the Commission presidency itself. Being at the heart of Europe means fighting for the best interests of this country and of Europe. It emphatically does not mean agreeing with everything that our partners propose. Frankly, that is not the way that Europe works. It is not how our partners behave, how they expect us to behave or how we will behave. Wherever appropriate, we will stand up for the interests of this country and of Europe, and for the nature of Europe that we believe everyone across the continent wants.

To ask the Prime Minister if he will list his official engagements for Thursday 30 June.

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

Is the Prime Minister aware that figures provided by the Department of Social Security clearly show that the number of miners who fail tests for bronchitis and emphysema is well over 90 per cent? Does he share my concern that there is a need to review the regulations, not in five years or two years but immediately? Will he tell the House that he is prepared to set in train an immediate review of the bronchitis and emphysema regulations?

As the hon. Gentleman may know, the Government accepted and implemented in full the Industrial Injuries Advisory Council recommendation to add those diseases to the prescribed list. I am sure that was right. The recommendation was made and accepted.

Is my right hon. Friend aware that President Reagan never looked back after he fired striking air traffic controllers? In view of the wilful neglect by Labour Members to do anything to help the travelling public, will my right hon. Friend consider doing the same with the striking signalmen?

We are currently hoping to see a settlement that would end those unnecessary strikes at the earliest date possible. At the moment, Railtrack and the Rail, Maritime and Transport union are in negotiation and I hope that they will reach agreement soon.

To ask the Prime Minister if he will list his official engagements for Thursday 30 June.

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

Does the Prime Minister share the sense of horror felt by right hon. and hon. Members in all parts of the House at the massacre of half a million Rwandans and the displacement of 2 million others? Is there not some personal initiative that he could take to ensure that the 5,000 troops promised by the United Nations one and a half months ago are now all deployed, refugees are evacuated and those responsible for the genocide are brought before international courts and tried for war crimes?

Anyone who has seen the dreadful pictures from Rwanda will share the hon. Gentleman's sense of horror and revulsion. I strongly support the proposal currently being considered by the Security Council, to establish a committee of experts to investigate allegations of war crimes in Rwanda and then take appropriate action. As I am sure the hon. Gentleman knows, the special rapporteur on Rwanda appointed by a special session of the European Commission of Human Rights is now in the country. We expect his report tomorrow and I hope that action can swiftly follow.

To ask the Prime Minister if he will list his official engagements for Thursday 30 June.

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

My right hon. Friend will be aware of our ambition to continue on the path of cutting the basic rate of tax. Has he contrasted that with the ambition of the hon. Member for Kingston upon Hull, East (Mr. Prescott)?

Our policy is entirely clear. Our overriding aim is to sustain the recovery that is now clearly evident—but when it is prudent to do so, we will certainly seek to cut tax rates again. I heard what the hon. Member for Kingston upon Hull, East (Mr. Prescott) said about tax a day or so ago. I am delighted that he set out his position —something of a novelty, in respect of tax, for Opposition Members. I hope that all other contenders will honour their previous promises and set out what they would do about tax.

To ask the Prime Minister if he will list his official engagements for Thursday 30 June.

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

Does the Prime Minister recall telling his right hon. Friend the Member for Old Bexley and Sidcup (Sir E. Heath) last Monday that he regretted using the veto on Mr. Dehaene, and that it would have been avoided if the pre-conference preparations had been as thorough as they were in 1984? Was the Prime Minister suffering from selective amnesia or being economical with the truth in failing to tell the House that in 1984 his predecessor vetoed Claude Cheysson and supported Jacques Delors, who, unlike the Prime Minister, believes in giving workers legal protection from sweatshop employers?

The hon. Gentleman—perhaps by accident—is not telling the whole story. In 1984, there was a great amount of private consultation, and a number of countries—not just this one—indicated privately, not openly in the Council meeting, that they were unable to accept a particular candidate. My point was that if that sort of negotiation had taken place it would not have been necessary to apply the veto publicly, as I did. I hope that the hon. Gentleman now understands that.

Business question—Mr. Nick Brown.

On a point of order, Madam Speaker. Before the Prime Minister leaves—

Order. I take points of order after business questions.