To ask the Chancellor of the Exchequer if he will make a statement on prospects for improvement in the state of the domestic economy. [22225]

The outlook remains highly favourable. The economy grew by nearly 4 per cent. last year and inflation was at its lowest level for over 30 years.

If the outlook is really favourable, why did we have a £10.5 billion deficit on trade in 1994, why has the pound devalued by 35 per cent. since the Prime Minister took us into the exchange rate mechanism at DM2.95 and why is the weakness of our economy being reflected by a weakening of our currency, day by day?

First, our trade performance continues to improve. The hon. Gentleman will know that this morning's trade figures show exports up by 9 per cent. in volume compared with a year ago and he will also know that the current account last year was extremely favourable despite the strong recovery. We even showed a surplus in our dealings with Japan last year. The hon. Gentleman's sudden concern about the exchange rate is very reassuring. He will be glad to know that we are strengthening against the deutschmark today.

Does my right hon. and learned Friend accept that the unemployed, small business, the construction industry, many of the service industries and much of the retail trade are relieved and grateful that he did not put up interest rates? Will he confirm that the grounds for that decision were purely economic and based on factors such as low wage inflation, the flat housing market and the quarterly survey by the Forum of Private Business showing that for the past four quarters the rate of growth had gone down? Will he confirm that if inflationary pressures rise he would have no hesitation in putting up interest rates?

I confirm all those things. As my hon. Friend says, small businesses in particular want stability and certainty in the Government's policy. We are pursuing steady recovery with low inflation and every policy action that I take is aimed at that conclusion. I congratulate my hon. Friend on expressing an opinion on the decision that I took on Friday. Nobody in the Labour party has yet seemed to have formed an opinion one way or the other as to whether the decision was welcome.

Is the Chancellor of the Exchequer aware that no Government can allow the Governor of the Bank of England to determine economic policy in this country? The Government, of whatever party, must determine such matters, and they are judged right or wrong by the events as they unfold.

I do not know why the right hon. Gentleman should tell me that. His own shadow Chancellor needs to be told that. Everybody will discover in six weeks' time in the usual way the opinion of the Governor and myself at last week's meeting. Everyone can see from the Governor's speech this morning that the Governor of the Bank of England and I are entirely agreed on the object of policy and we believe that that policy has been delivered successfully.

Has my right hon. and learned Friend had time in his busy morning to read an article in today's edition of The Times headed

"Three cheers for Clarke, the best post-Jenkins Chancellor"?

I read the article and I am, of course, grateful to Mr. Kaletsky and to my right hon. Friend. I have no aspirations to be President of the European Commission.

Yet.

I am unlikely to be put forward for that post by my hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen).

Does the Chancellor agree with the Governor of the Bank of England and the chief economist of the Bank of England that interest rates will have to rise sooner rather than later? Is he still serious about keeping inflation under 2.5 per cent. by the end of this Parliament?

I shall set interest rates, as I have always said I shall set them, after discussion with the Governor of the Bank of England, to pursue the objective upon which we are both agreed of keeping inflation between the 1 to 4 per cent. range and getting it under the lower half by the end of the Parliament. I shall continue to do that.

"Notwithstanding the current excitements, I am convinced we remain in better economic shape than we have been for a very long time. The Chancellor has made it clear that the macro economic policies that have brought us to this point remain in place—and it is important, from my perspective, that they should."

Will the Chancellor answer the question put to him just a minute ago? The Bank of England said this morning that under the present policies, the Government's last remaining target—an inflation target of 2.5 per cent. by the end of the Parliament—will not be met. [Interruption.] That is what the Bank of England said this morning. Will the Chancellor now reaffirm in clear words that the inflation target of 2.5 per cent. by the end of the Parliament will not be changed?

I have just said that it will not be changed. There has been no change of policy. What the Bank of England's inflation report this morning says is that it has revised its forecast up slightly because of recent changes in the exchange rate. It stresses that the certainties about inflation are vague—it does not give a spot figure. We will continue to set interest rates to achieve the target that I have given. That is a clear policy.

May I congratulate my right hon. and learned Friend on his courage last week in not putting up interest rates? He knows my views about the importance to the country of the manufacturing and construction industries. Does he accept that a real guide to the true economic strength of the country is the strength of construction and manufacturing? If they are doing well, all the other indicators are, in my view, irrelevant. Would he comment on that?

Much as I would love to agree with every word of my hon. Friend, in the end he underestimates the complexity of delivering sustained recovery with low inflation, which has eluded the country ever since the war. We now have the best prospects of achieving that. The present recovery is being led by manufacturing and our export performance with the outside world is particularly encouraging, because we are rebalancing the economy in a much healthier fashion.

To ask the Chancellor of the Exchequer if he will make it his policy that an unmarried couple owning a house and who have jointly borrowed £60,000 or more are not penalised in terms of MIRAS. [22226]

Since 1 August 1988, mortgage interest relief has been restricted to a loan of £30,000 per residence, regardless of the number or marital status of the people buying together. That rule ensures that married and unmarried couples are treated in the same way. Unmarried people buying a house together before 1 August 1988 can keep any higher level of relief to which they were entitled, as long as their circumstances do not change. However, if they move, replace the loan, or marry, their limit for relief falls to £30,000 between them.

Does that mean that, if an unmarried couple who bought their house before 1988 get married, the Government put a tax on marriage and legitimacy? Surely that is not Government policy. Is it not about time that the law was changed, so that those cohabitees who do marry do not suffer a tax penalty?

The law was changed to remove exactly the injustice to which the hon. Gentleman refers, because, under the old rules, an unmarried couple could obtain as much as twice the amount of mortgage interest tax relief as a married couple. That was the injustice that we removed in 1988. We also gave transitional relief to those who had bought under the old rules, until such time as their circumstances changed.

Surely it is right that married couples should be in no worse a position than unmarried couples, and therefore the restriction that took place in 1988 was perfectly just and well thought out. In fact, we should have done it earlier.

I agree with my hon. Friend, and I find it perverse that a decision that we took in 1988, which I am not aware was criticised by Opposition Members at the time, has now come in for rather belated criticism from the hon. Member for Norwood (Mr. Fraser).

To ask the Chancellor of the Exchequer what was the effect on the Exchequer in the last financial year of industries privatised since 1979; and what was their effect in 1979. [22227]

In 1979, nationalised industries cost the taxpayer about £50 million each week. In 1994–95, privatised companies paid about £55 million each week into the Exchequer.

Does my right hon. and learned Friend agree that those figures demonstrate the outstanding success of our privatisation policy, which has been widely recognised throughout the world by such regimes as North Korea and Cuba? Does he not find it strange that the last bastion of socialism, the new Labour party, has yet to appreciate the effects of privatisation?

I agree with my hon. Friend. The Labour party held a special conference to try to pretend that it no longer agreed with the North Korean communists, but only a week later, when the first privatisation proposition came before Parliament, it was opposing it again and backing the keeping of nuclear fuel in state-owned hands, in spite of the fact that privatisation will bring a dramatic fall in electricity prices in England, Scotland and, indeed, all parts of the United Kingdom.

Does the Chancellor recognise that the Treasury will make about £5 billion from the two privatisations that the Government are pursuing—£5 billion for tax cuts before the general election, which will have to be paid for by the British people to the tune of £10 billion in the costs of decommissioning power stations and subsidies to British Rail? What sort of bargain is that for the taxpayer?

The hon. Lady has at least worked out that the proposal to privatise the nuclear electricity industry has nothing to do with tax cuts. It has to do with putting in place commercial disciplines and private sector management, which those in the industry want, and reducing the costs of electricity to consumers throughout the country. That is the purpose of the privatisation.

Does my right hon. and learned Friend agree that the capacity of the privatised and other industries to invest and deliver wealth to the nation, jobs to our people and revenue to the Exchequer depends critically upon the level of interest rates? Does he agree that choking off investment every time we fear a tremor of inflation is a formula for the progressive debilitation of our economy?

That is right, but I am sure that my hon. Friend also agrees that inflation has killed off fast recovery and poses the biggest threat to the confidence that people must feel before they will invest in increasing industrial capacity. That is why we make the judgments we do on the basis of a clear inflation target. That is why we look at the real economy, as well as the monetary aggregates and the exchange rate, when we make those decisions. I believe—judging from his speech today, the Governor believes it also—that we have been remarkably successful in getting the right balance over the past two or three years.

To ask the Chancellor of the Exchequer what currently available figures he has for the quantities and value of drugs seized at United Kingdom airports over any conveniently available recent 12-month period. [22228]

During 1994 Customs and Excise seized 47 tonnes of cannabis and four tonnes of cocaine, heroin and synthetic drugs, with a total street value of some £551 million. Some 10½ per cent. by value of these drugs were seized at airports.

May I ask a question of which I have given Treasury officials notice? Could they put in the Library an account of what a senior Customs official, Mr. Philip Connolly—whom I do not criticise in any way—said to senior Pan American airways security officers Michael Jones and Jim Berwick about controlled drugs delivery? Will the Minister consider asking a senior Treasury official to watch carefully the two-hour film about Lockerbie which is to be screened tonight on Channel 4? The significance or otherwise of my question will then become apparent.

The hon. Gentleman did me the courtesy of giving me notice of his intention to raise the Lockerbie case. A British Customs officer did give information to an American court about the Lockerbie bombing, and confirmed that bag-switching is a technique used by drug smuggling organisations. However, there is no evidence that that was the way in which the bomb was put on the flight in question; nor were British Customs involved in any controlled delivery of drugs on that ill-fated flight. I shall ask my officials to watch the programme to be screened this evening, and I will supply any additional information to the hon. Gentleman.

Will my hon. Friend agree to look at the Treasury's policy relating to foreign rewards paid to British police forces for drugs seizures overseas? Is he aware that the Drug Enforcement Administration is prepared to pay very large sums in return for information that leads to drug seizures abroad? Under Treasury rules, all of that money must go directly to the Exchequer whereas, under DEA rules, the money must go directly to the drug squads involved. Therefore, Britain is denying itself large sums of money that would be available from the United States in the fight against drugs.

I am not sure whether my hon. Friend is quite correct in what he says. The proceeds of international drugs seizures can be recycled to drug enforcement agencies, including those in this country. I will obtain the details and write to my hon. Friend about the matter.

To ask the Chancellor of the Exchequer what new proposals he is considering on banking and financial supervision. [22229]

Banking and financial supervision is a large subject. Therefore, with respect, this is a rather wide question. At any one time a variety of issues will be under consideration. For example, my hon. Friend the Minister of State announced at the beginning of the year the outcome of our review of the Building Societies Act 1986 and, more recently, the Treasury released a consultation paper on open-ended investment companies with proposals for legislation to allow their formation in the United Kingdom.

I thank the Chancellor for that answer. Does he accept that, following the rip-off of people on modest incomes who were persuaded to buy private pensions and mortgage-linked endowment policies, there is a need for more effective regulation of banking and financial services; or will those people simply become more casualties of the Government's indifference?

The response to the problems that have arisen with personal pensions shows how successful we are in having the right regulatory regime in place, and how responsive the authorities have been in making sure that individuals who might have suffered loss as a result of mis-selling are considered. We are going through a huge process of identifying any persons who may have experienced mis-selling of personal pensions and of making sure that those responsible put such people in the position in which they should be. Similarly, we already cover endowment-based mortgages under the Financial Services Act 1986.

As banking is affected by monetary policy, I congratulate my right hon. and learned Friend on not having increased interest rates, for two reasons. At long last, he understands the advantages of floating exchange rates, and he demonstrates that, under our constitution, the Chancellor of the Exchequer must be responsible for monetary policy and that it cannot be delegated to an independent Bank of England or, worst of all, to an independent central European bank.

My hon. Friend and I have always agreed on rather more of economic policy than he ever cares to concede. I do know that one has either a floating exchange rate or a fixed exchange rate, and that one should not have a target exchange rate when it is floating. The exchange rate is something that one takes into account when setting monetary policy. My hon. Friend gave an impeccable statement of the constitutional position when he said that the Chancellor is responsible for monetary policy in this country but acts on the advice of the Governor of the Bank of England. I have made matters more open than ever before, by allowing the Bank of England to publish an unedited inflation report and by publishing the minutes of meetings after six weeks, to give it more credibility with people, such as my hon. Friend and myself, who want to see such decisions taken on economic grounds.

While I welcome the Chancellor's statement that he does not want any more quangos, does he agree that it is time that the Treasury relaxed some restrictions on friendly societies, to allow them to give more benefits to their members, whom they have been looking after well for years?

That matter has been reviewed from time to time and we consider representations on the subject. We think that there is some scope for change.

Surely the most important purpose of banking supervision is to keep an eye on the overall level of lending and the money supply. Will my right hon. and learned Friend take it from me that many on this side of the House believe that when broad money is in the lower half of our range, 80 per cent. of bank lending to small businesses is secured on domestic property and there is still strong anecdotal evidence of tightness of credit in the economy, my right hon. and learned Friend is absolutely right to resist pressure to raise interest rates?

My hon. Friend is right. Broad money as well as narrow money, which has remained above its target range for some time, are two of the items that one considers. I repeat my congratulations to my hon. Friend. He gave an opinion that may provoke a response, but the entire Labour party is sitting there like a stuffed duck because Labour Members do not know whether they are meant to get up and say that they agree or do not agree with last Friday, because the man in front of them has not yet made up his mind. He is incapable of making up his mind on any aspect of economic policy.

I ask the Chancellor to return to the original question. Does he accept that pensions being mis-sold or people being given inappropriate advice about endowment mortgages is due in no small part to the fact that we live under a regime of self-regulation, where the public interest takes second place to the trade interest? Does he accept that public confidence in the industry will not be restored until the nonsense of self-regulation is brought to an end?

With the greatest respect, I do not agree that that case is made out at all. The statutory framework that we have is set under the Financial Service Act 1986. There is no evidence that making the whole regime statutory would improve a system in which the self-regulatory bodies contain a large number of people with detailed experience of how the industry works.

To ask the Chancellor of the Exchequer what was the reduction in public borrowing (a) in the United Kingdom and (b) in other EU countries in the last year. [22230]

The public sector borrowing requirement for 1994–95, was £10 billion lower than in the year before. Government borrowing is falling faster, here in the United Kingdom, than in any other major European economy.

Does my right hon. Friend agree that paying taxes is fundamental to keeping down the public sector borrowing requirement and to the financial well-being of everyone in the country? Will he therefore join me in deploring the fact that some of the newly elected Labour councillors on Castle Point borough council are facing committal proceedings—

Order. That is hardly the responsibility of the Chancellor of the Exchequer. Much as I am devoted to Castle Point, I doubt whether the Chancellor has any responsibility for activities there.

What would happen to the public sector borrowing requirement if, like the Labour councillors in Castle Point, the rest of us refused to pay our local taxes, as has Jim David of Canvey Island on Castle Point?

I believe that all citizens should pay the taxes to which they are legally liable, properly and on time. I also believe that taxation should be kept down to the lowest possible level consistent with the public spending required to provide good high-quality services.

Will the Chancellor compare and contrast the differing definitions of public sector borrowing in different countries in the European Union?

It is a perfectly fair point, and it is done as part of monitoring the convergence criteria under present arrangements within the European Union. Attempts are made to compare like with like across the European Union. We follow international definitions. The conventions that we follow are recognised to be in line with the best of international practice, and the PSBR figures that we produce are trustworthy and reliable, and show what remarkably good progress we are making in getting our public sector borrowing under control, in contrast to the total failure of the last Labour Government to deal with the public sector borrowing problems following recession when the International Monetary Fund eventually had to sort them out.

Does my right hon. and learned Friend agree with the European Monetary Institute that continuous efforts towards reducing—[HON. MEMBERS: "Reading."] I am quoting. [Interruption.] I am paraphrasing. Does my right hon. and learned Friend agree that continuous efforts towards public sector borrowing are needed if we are to have a growing economy and improve the supply side? Is it not the case that most European Governments are overspent and over-borrowed and that only the British Government have a clear programme for reducing spending and borrowing as a percentage of national income?

My hon. Friend is right. There is a growing international consensus that in current circumstances a low level of fiscal deficits, low inflation and low debt to gross domestic product ratios are essential to keep an economy on course. That is wholly consistent with the policy of the Conservative party over the years. All the members of the European Union are committed to achieving those goals. As I have just said, Britain is reaching them rather faster than any of the major economies on the continent.

To ask the Chancellor of the Exchequer what is the latest estimate of the Public Sector Borrowing Requirement for the present Budget year; and if he will make a statement. [22231]

To ask the Chancellor of the Exchequer if he will give his latest estimate of the public sector borrowing requirement. [22232]

The Budget forecast of the PSBR for 1995–96 was £21½ billion.

Given that the Bank of England is now calling into doubt the Chancellor's inflation forecast, and that the PSBR outturn was £1.3 billion more in 1994–95 than predicted, how can the British people be asked to have confidence in the Chancellor's predictions for the economy when he is turning into the Michael Fish of Budget forecasting?

The hon. Gentleman is in danger of misrepresenting the views of the Governor, who clearly said today that we are

"in better economic shape than we have been for a very long time."

Does the Minister accept that the PSBR is being reduced only by imposing more Tory taxes? The latest—the transport tax, which is to take effect from 1 January next year and will add £10 each to some 12 million holidays—is the 21st Tory tax. Why does the Minister not listen to businesses and ensure that those proposals are withdrawn?

The hon. Gentleman ignores the fact that one of the main reasons why the PSBR is falling at a satisfactory rate is that my right hon. and learned Friend and I managed to reduce public spending over the survey period by no less than £29 billion. That is a major contribution to bringing down the PSBR.

What representations has my right hon. Friend had from the Opposition about the need to reduce public expenditure—bearing in mind that their claim to be elected is now based on the fact that they can be safely elected because they are Tories as well?

My right hon. and learned Friend the Chancellor referred a few moments ago to Opposition Front Benchers as a lot of silent stuffed ducks. That strange characteristic is repeated exactly in the case of my hon. Friend's point about public spending. The Opposition will not tell us whether they want lower public borrowing or what they intend to do about public spending. Away from the Dispatch Box, however, they are still the big-spending party: currently promising to spend more money on income support for 16 and 17-year-olds, on regional assemblies and development agencies, on an emergency employment programme, and on a defence conversion agency, more money from capital receipts, and more money on a growth strategy for Europe. All that adds up to much more borrowing and higher spending. It is about time that they stopped being stuffed ducks and admitted it.

Does my right hon. Friend agree that reductions in public borrowing create resources which can be made available for other purposes? As the Opposition have called repeatedly for increased spending on education and hospitals, can my right hon. Friend think of any recent occasion when they have offered support for creating the economic circumstances that will make that possible?

I can think of no such example. I have listened to wave after wave of sound bite waffle emanating from the Opposition, and I am longing to hear a single constructive fact or proposal from them. They have indeed been well named the stuffed duck Front Bench by my right hon. and learned Friend the Chancellor.

Will the Minister confirm that, in 1994, public borrowing as a percentage of gross domestic product was higher in the United Kingdom than in any other European Union country, with the exception of Italy, Greece and Spain? Will he further confirm that that imprudent situation was dealt with only by the Government imposing on the typical British family extra taxes of £800, in breach of the Government's election promises?

The hon. Gentleman draws a one-sided and erroneous picture. In fact, the British Government's borrowing is falling faster than that of any other major European country. Among European Union countries, we have the lowest general Government debt-to-GDP ratio, with the exception of Luxembourg. So our record on public borrowing is good by European standards.

To ask the Chancellor of the Exchequer what representations he has received from the editor of the Financial Times about Britain's economic performance and that of the rest of Europe. [22233]

My right hon. and learned Friend and I are regular readers of the Financial Times.

Is my right hon. Friend aware that, according to the latest Financial Times survey of Europe's 500 largest companies, the United Kingdom accounts for no fewer than 16 of the top 25 by profitability, and no fewer than 11 of that 25 by market capitalisation? Does my right hon. Friend agree that that is yet another sign of the growing resilience and success of British business?

Yes, I agree with my hon. Friend. He is right to draw attention to that upbeat Financial Times survey, which showed that British companies are riding high in the European league table of successful businesses. In addition to the figures to which he has drawn attention in terms of profitability and market capitalisation, six British companies are in the Financial Times top 10, 21 in the top 50 and no fewer than 179 in the top 500. That is three times more than the German score and twice that of the French. The figures show that British companies are exporting more and growing faster round the world than most of our European Union competitors.

That is all very interesting, but why does Britain rank only ninth among the 15 European Union countries in terms of per capita gross domestic product? If there is such a great success story for Britain, why are Italy and France ranked above us in the per capita GDP league?

In fact, Britain is out-performing most European countries. We have the fastest growing economy in Europe right now. Last year, it grew two and half times faster than Germany's, one and a half times faster than the French, and eight times faster than the Japanese. Unemployment is falling by 1,000 a day. There is plenty of good news by any international comparison standard. Opposition Members should recognise that.

To ask the Chancellor of the Exchequer what is his latest estimate of spare capacity in the economy. [22215]

There is no unique measure of spare capacity in the economy. But recent data and evidence from business surveys all point to strong growth in business investment this year.

With three quarters of the economy outside manufacturing, will my right hon. Friend acknowledge that inflationary pressures remain subdued? Is it not ludicrous, therefore, to be talking about a boom-bust cycle and an interest rate increase to counter the threat of overheating?

My hon. Friend is right. The Confederation of British Industry survey of capacity covered about a quarter of the economy. As for the other three quarters, to which my hon. Friend has referred, there are sectors in which there is clearly spare capacity, such as housing, construction and retail. We must examine the entire picture when we come to decisions.

How does the Financial Secretary reconcile the Government's continued claim that the economy is in great shape with the Bank of England's view, as published today, that capacity constraints in manufacturing industry are prompting inflationary pressures? What do the Government intend to do about that conflict of interpretation?

As the hon. Lady will have heard, the Governor has said that the economy is in better shape than it has been for many years. I do not agree, therefore, with the analysis that she has outlined. Investors would like to know where the Labour party stands on taxing, spending and borrowing. We have had no responses from Opposition Members for three quarters of an hour on key economic questions.

To ask the Chancellor of the Exchequer what are his estimates for the retail prices index one month, six months and one year hence; and if he will make a statement. [22236]

The November Financial Statement and Budget Report forecast that underlying inflation would be 2½ per cent. both in the fourth quarter of 1995 and in the second quarter of 1996.

Whatever the absolute rate of inflation, does my hon. Friend agree that the relative inflation rate—that is, our rate of inflation against those of competing nations—is of equal importance? Does my hon. Friend further agree that it is the relative rate of inflation which defines our competitiveness and our ability to create jobs? That being so, what was the relative rate of inflation under the Labour Government when the average rate was 15.9 per cent., and what in my hon. Friend's estimation would be our current rate of inflation if we had committed £13 billion more public expenditure this year, as the Labour party had promised in 1992?

My hon. Friend is absolutely right. The underlying inflation rate of 2.6 per cent. for the year to April is lower than the comparable average for the EC as a whole. Between 1974 and 1979, the Labour party's inflation record was not only disastrous at home but extremely poor by international standards. All the clause IV waffle that we hear is less eloquent than the fact that Labour cannot be trusted on inflation. The real lesson that the British people have learnt is never to give it another opportunity.

To ask the Prime Minister if he will list his official engagements for Thursday 11 May. [22255]

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.

Today, with the publication of the Nolan report, will the Prime Minister take full personal responsibility for the tide of sleaze that has engulfed his Government? Will he now admit that it is quite wrong for Ministers to move seamlessly from the Cabinet room to the boardroom, lining their pockets in the process?

I invite the hon. Gentleman to read the report before he comments on it. He will then see what Lord Nolan has to say about the great majority of men and women in British public life, their standards and their ethics, and he may just regret the way in which he and some of his hon. Friends have attempted, time after time, to issue general smears about specific matters.

To ask the Prime Minister if he will list his official engagements for Thursday 11 May. [22256]

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

Does my right hon. Friend agree that the size and scale of public rejoicing on Monday stoutly reaffirmed the love that the British people have for this country? They were waving Union Jacks, not tatty-looking red roses. Is it not appropriate to remind people that Labour's devolution policy would split this country more irrevocably and fundamentally than all Hitler's armies could possibly have done?

As my hon. Friend makes clear, last week's celebrations were a remarkable occasion. They struck a perfect balance between commemoration and celebration, and I think that they brought a great deal of pleasure to the many men and women whom we were honouring for their service during the war so many years ago. I believe that they also showed that the sentiments that unite us as a nation are far stronger than those sometimes presented as though to disunite us. That is very healthy for the nation as a whole: it is an enormous strength for this country—a strength that should not be put at risk by misguided policy.

People of all political persuasions enjoyed VE day, and I do not think that political capital should be made out of it. Now—is 2.5 per cent. still the Prime Minister's inflation target?

We set out our inflation target some time ago. It is between 1 and 4 per cent., and in the lower half of that range by the end of this Parliament. It remains the same.

Does the Prime Minister then disagree with the Bank of England, which says that he will not meet that target?

The Bank of England has made it perfectly clear that it supports the policy that we are carrying out. If the right hon. Gentleman had read the speech by the Governor this morning—I will quote it to him if he wishes, for clearly he has not—he would have seen that the Governor makes very clear the importance of maintaining a strong control of inflation, saying that in recent years we have been very successful in that.

I do not think that the Government are in any position to talk of rigged figures—no, indeed. The Bank of England clearly does not agree that the Prime Minister will meet his target. How does a public rift between the Government and the Bank of England do anything other than damage the credibility of the economy? Does not the fact that rises in interest rates are even being contemplated at the moment, when for millions of people they have barely moved out of recession, show the fundamental weakness of the economy that the Government have never addressed?

I do not think that the Governor of the Bank of England thinks that it is a weak economy, as the right hon. Gentleman will see if he reads the Governor's speech. The reality is that, as usual, the right hon. Gentleman and his colleagues are playing both sides of the same policy. They criticise when interest rates go up and they criticise when interest rates do not go up. They simply do not know what they wish to do, except, whatever happens, to criticise it and to make short-term party political capital out of it; they do not give a fig for the long-term health of the British economy.

Is it not clear that the French people—[Interruption.]

Order. The hon. Gentleman must be heard in the House.

Is it not clear that the French people have no greater love of socialism than the British? Will my right hon. Friend neglect no opportunity to expose the fact that, behind the innocent cherubic face that the Labour party seeks to present to the world, is a party which, every time it has been in government, has wrecked the economy, destroyed business confidence and boosted taxes to very high levels on ordinary working people?

My hon. Friend is quite right about that. There is one matter in which Labour Governments have always been consistent: unemployment has always gone up, interest rates have gone up, taxes have gone up and prospects have gone down.

To ask the Prime Minister if he will list his official engagements for Thursday 11 May. [22257]

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

Can the Prime Minister confirm that, under the regulations governing the national lottery, the fingers crossed symbol is the property of the Secretary of State for National Heritage? Does he appreciate that it has come to represent the symbol of his party in that it is all that remains of his strategy for winning local government elections, his guarantee of emergency care beds for the people of London and his own prospects of leading the Conservative party towards its next electoral catastrophe?

During the past four years we have taken decisions that are in the long-term economic and social interests of Britain. Many of them have been difficult and unpopular, but as a result we have inflation lower than we have seen for a long time, unemployment falling faster than anywhere else in Europe, investment showing that British industry is growing and exports which show that in eight or nine months out of the past 14 we broke new records. When did the Labour party ever preside over an economic circumstance remotely like that?

When my right hon. Friend next meets Mr. Chirac, will he congratulate him on his presidential victory and remind him how much better it is to be outside the social charter, especially now that unemployment in France is 50 per cent. higher than in this country?

I agree with my hon. Friend about the problems of the social chapter. There is no doubt that right across the rest of the European Union the social chapter costs jobs. Here it does not cost jobs, because we are not part of it. I can reaffirm to the House that neither in the short term nor in the long term will we become part of it.

To ask the Prime Minister if he will list his official engagements for Thursday 11 May. [22258]

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

Is the Prime Minister aware of the announcement within the last hour that the Asea Brown Boveri train building works at York is to close with the loss of 700 jobs? Does he recognise that that is a demonstration of the dreadful chaos of rail privatisation and that investment in the railway industry is grinding to a halt as a result? What chance is there that our rail system will have investment and that trains will he built in this country at all?

Of course I know of the job losses at ABB, and I very much regret them. But privatisation is no more responsible for those job losses than it is for an outbreak of measles. The right hon. Gentleman is simply wrong to blame privatisation. It was the Government's private finance initiative which gave ABB the opportunity to hid for contracts such as the Northern line, the Heathrow express rail link and the Jubilee line extension. Unfortunately, ABB did not win any of those contracts, and that is the problem.

As unemployment has come down by 632,000 since the last general election, is continuing to come down by an average of 1,000 per day and is below the European Union average, would it not be absolute folly to reverse that progress by adopting a national minimum wage? If such a policy is to be offered to the British people, do they not have an unchallengeable entitlement to know the level at which it will be set and how many hundreds of thousands of jobs will be lost as a result?

There seems to be some dispute among Opposition Members about whether they should proceed with the minimum wage and what its level would be. Certainly, despite their clarity that they wish to have a minimum wage, they are less clear about the level at which they would set it, and I find that rather odd. The right hon. Member for Sedgefield (Mr. Blair) is keen enough to tell us that he would enter a single currency in many years' time, which is a major decision, yet he cannot tell us, even perhaps two years ahead, were he to win the election, what he would do on a relatively minor decision such as the level of the minimum wage.

To ask the Prime Minister if he will list his official engagements for Thursday 11 May. [22260]

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

Is the Prime Minister not shocked by the news that the number of children who were hit and killed by road vehicles increased last year by a staggering 28 per cent.? Is he aware that that was mainly because the fronts of some vehicles are designed for appearance and not safety, with the addition of rigid bull bars which concentrate and multiply the force of accidents at the level of a child's head? Does he agree with his Ministers that those bars are useless, macho fashion accessories, and will he move swiftly today to avoid future tragedies by banning these deadly bully bars from all public roads?

I was not aware of the statistics that the hon. Gentleman mentions or the reason that he ascribes to them. However, in view of what he says I shall certainly ask my right hon. Friend the Secretary of State for Transport to examine the matter and, having done so, provide me with his advice. If the hon. Gentleman's statistics are right, it is of course regrettable. I am glad to say that, overall, the position on road accidents is improving, and I hope that that will continue.

Is my right hon. Friend aware of the positive reaction in my constituency and throughout the country to yesterday's White Paper, "Tackling Drugs Together", which contains the most comprehensive anti-drugs strategy of any Government? Does he agree that the key message to young people should be that all drugs are wrong? Does he also agree that any move by the House to legalise even soft drugs should be rejected because it would fundamentally undermine that message?

I strongly agree with my hon. Friend on the question of drugs, and I take the view that the legalisation even of soft drugs would be a very substantial mistake, not least because soft drugs are so often the route towards people seeking to experiment with harder drugs. It is very unwise for people to experiment with any drugs and we have no intention of legalising them. The proposals that we set out yesterday on tackling drugs have been very widely welcomed. Many experts have commented not only on the comprehensive nature of our proposals, but on the fact that no country in western Europe now has such a comprehensive plan in hand to deal with the desperate problem of drugs.

To ask the Prime Minister if he will list his official engagements for Thursday 11 May. [22261]

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

Who is to blame for, and what is the cause of, all the negative equity that is blighting hundreds of thousands of households and families? What will be the consequences for the economy and for business if negative equity continues to grow, and what does the Prime Minister intend to do about it?

Fortunately, the amount of negative equity is now half the level it was at its peak and it continues to fall. Clearly, while there is negative equity, it is acting as a drag on the housing market. The more the economy grows, the more unemployment falls, and the more confidence begins to return, the sooner we shall begin to see the complete elimination of negative equity. When that occurs, it will be a very welcome development.