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Governments are pouring excess demand into the economy there will always be those who are unwise enough to applaud that because they personally enjoy its benefits? Does he also agree that the case against inflation is not economic, but social, because of the corrosive effect that it creates for all those who lose by inflation-- whether council tenants, pensioners or savers?

Mr. Lamont : My hon. Friend is absolutely right. Those who suffer most from inflation are those on fixed incomes, savers and the elderly. A major part of our recent inflation has been caused by our very fast rate of growth. Despite the advantages of that rate of growth, we must do justice to those who are disadvantaged by inflation. That is why we have acted promptly and are determined to bring down inflation. That is why we have a Budget surplus, which is the best possible background for bringing that about.

Mr. Gordon Brown : Is the Minister aware that the Chancellor told both the House and the Treasury Select Committee last week that inflation would rise to 5.5 per cent. in 1989 if mortgage costs were excluded? Will he confirm that with mortgage costs included--a real burden that millions face--the new Treasury forecast is that inflation will rise towards 7 per cent. during 1989? Does he now forecast inflation rising above 7 per cent.? Will he say yes or no?

Mr. Lamont : The hon. Gentleman makes his calculations, but my right hon. Friend the Chancellor has published the figures both with and without mortgage costs being included. We are determined to bring down inflation and we have taken firm action to achieve that. The results of that policy will show fairly soon.

Following is the information :

Percentage increase in consumer prices over 12 months to October 1988 Per cent

United States 4.2

Japan 1.1

Germany 1.3

France 3.0

United Kingdom 6.4 (5.1)

Italy 4.7

Canada 4.2 (4.2)

Bracketed figure excludes mortgage interest payments. Source : OECD, Department of Employment.

Company Profits

11. Mr. Jack : To ask the Chancellor of the Exchequer by how much in percentage terms company profitability has changed in the north-west of England in the last five years.

Mr. Major : The net rate of return of non-North sea industrial and commercial companies in 1987 was two and a half times its level in 1982. I am glad to say that the north-west of England has fully participated in the economy's strong growth over the past six years.

Mr. Jack : My right hon. Friend's answer will bring enlightenment and knowledge to the dark recesses of the Opposition Benches. Will he confirm that the growth in profitability has enabled Fox's Biscuits in my constituency to invest £14.5 million in a new factory which will create

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400 jobs in the next five years? Will he further confirm that improved profitability has benefited company liquidity in the north-west with continuous extra investment?

Mr. Major : I am delighted to hear of that particular investment by Fox's Biscuits. I had the opportunity of visiting United Biscuits at Stockport and was delighted to see how well that company was doing. It is true to say that there is a substantial degree of capital investment, most noticeably in manufacturing industry. That has contributed substantially to the fall in unemployment.

Mr. Ashton : The Government have been in power for nine and a half years, not five years. For how much longer are we to see this charade of staged Conservative party political broadcasts using the best figures and the best times? Is it not a fact that if a company in the north-west made £1 profit in 1982, and now makes £2 profit, the Government would say that it had doubled its profits or increased its profits by 100 per cent.? For how much longer will we have to put up with phoney figures being trotted out in the House? Give us the figures since 1979.

Mr. Major : I shall do better than that. I can tell the hon. Gentleman that private-sector investment in 1988 as a percentage of GDP is at the highest level since statistics were first collected.

Mr. Goodlad : Has my right hon. Friend read the latest regional survey of the chambers of commerce of Manchester and Merseyside, showing the high level of confidence in future profitability? Is that not indicative of the state of the economy throughout the north-west?

Mr. Major : I entirely agree with my hon. Friend. I have seen the survey and it shows, among other things, that expectations have risen in the third quarter over the second quarter.

Confederation of British Industry

12. Mr. Turner : To ask the Chancellor of the Exchequer when he next expects to meet representatives of the Confederation of British Industry ; and what matters will be discussed.

16. Mr. Buckley : To ask the Chancellor of the Exchequer when he next expects to meet representatives of the Confederation of British Industry ; and what matters will be discussed.

Mr. Lawson : This evening I shall be meeting the economic and financial policy committee of the CBI, where a wide range of subjects will be discussed.

Mr. Turner : In view of the hostile resolution at the CBI conference -- [Hon. Members :-- "Reading."]--and the fact that the base rate increases-- [Interruption.] I shall not give way. As, since May of this year, industry has lost £700 million in base rate increases, and manufacturing companies' overseas order books are the lowest since April as a result of the Government's sterling policy, why does the Chancellor not take the Edinburgh Hundreds?

Mr. Lawson : I must tell the hon. Gentleman that he has been sadly misled by the brief which someone has handed to him. In fact, the CBI acknowledged that British business today is doing better than ever before. Manufacturing productivity has been rising faster in this country than ever before and faster, indeed, than in any

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other major industrial country. Investment this year is running at some 12 per cent. growth in real terms--twice as fast as the growth in consumption--and there will be further substantial growth in investment next year. As my right hon. Friend the Chief Secretary pointed out a moment ago, private-sector investment this year as a percentage of GDP is at the highest level since figures were first collected in 1955.

Mr. Buckley : Will the Chancellor take the opportunity tonight to dispel the fear of the chairman of the CBI, who is worried about the high interest rates that the Chancellor has brought into the economy? These are seriously undermining small companies. Is he aware that a £1 billion increase in costs to British industry is a direct consequence of the increase in interest rates that he has brought about since May? Does the right hon. Gentleman accept that, according to the CBI conference, his current policy is gravely undermining the Government's policy on business starts and expansion?

Mr. Lawson : That is untrue. The CBI recognises that the Government's policy has provided a better climate for business and industry to prosper than ever before. It knows that profitability this year is expected to be at the highest level since 1960, and it knows, too, that the Government's insistence on getting inflation down is the most important safeguard for British industry in competing throughout the world.



Q1. Mr. Battle : To ask the Prime Minister if she will list her official engagements for Thursday 8 December.

The Prime Minister (Mrs. Margaret Thatcher) : This morning the Soviet ambassador called on me to deliver a message from President Gorbachev. Later 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 and will be addressing the annual meeting of the Per Cent Club.

Mr. Battle : Knowing the Prime Minister's fondness for photo opportunities with British tanks, can she now tell the House that she is prepared to go for the British Challenger II tank, which is the best value for the Army and the best deal for the taxpayer? Such an announcement would reassure 14,000 workers that they will still have jobs after Christmas. Is she going to blast the Leeds tank industry in the way that she sank Sunderland's shipbuilding industry?

The Prime Minister : A decision will be made on that by the end of the year. Naturally, the Army must have the best possible tanks for its purposes.

Q2. Mr. Oppenheim : To ask the Prime Minister if she will list her official engagements for Thursday 8 December.

The Prime Minister : I refer my hon. Friend to the reply that I gave some moments ago.

Mr. Oppenheim : Does my right hon. Friend agree that yesterday's troop reduction proposals by President Gorbachev, which have been warmly welcomed by one of

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the Opposition's leaders as a great initiative, would never been made if the Government had followed the one- sided disarmament proposals advocated by the Opposition and CND?

The Prime Minister : First, I am sure that the whole House would wish to join me in offering sympathy to the victims and the bereaved following the earthquake that afflicted the Soviet Union. I can tell my hon. Friend that we have welcomed the unilateral reductions in forces and armaments proposed by Mr. Gorbachev as an important step towards securing a better balance of forces in Europe, in view of the Soviet Union's present overwhelming superiority. But we need to keep the matter in perspective. Even after the reductions, the Soviet Union will have 41,500 tanks compared with 16,500 for NATO, 35,000 artillery pieces compared with 14,000 for NATO, and 7,400 aircraft compared with 4,000 for NATO. Therefore, there will still be a major asymmetry in the Soviet Union's favour. There is still much tough negotiating to do.

Mr. Kinnock : First, I join the Prime Minister in offering our deepest sympathy to the people of Armenia at this time of great suffering and loss of life. I also strongly support the offer that she has made elsewhere to provide whatever help may appear to be necessary.

Mr. Gorbachev has taken another major and historic step towards the time when the use or threat of force will no longer be an instrument of foreign policy. May I ask the Prime Minister to ensure that, in deeds as well as in words, her responses match President Gorbachev's realism and vision?

The Prime Minister : First, I thank the right hon. Gentleman for his words at the beginning. We all join in extending sympathy to the Soviet Union. As he knows, we stand ready with the disaster relief unit at the Foreign and Commonwealth Office to offer any help that we can. We have had an urgent request from the Soviet authorities for the use of thermal imaging equipment, which was used so successfully to locate people trapped under collapsed buildings in the Mexico earthquake. We have offered to assemble a team of London firemen, who were also used in Mexico, together with the equipment, and we stand ready to fly them out to the Soviet Union later today. We have also had many other offers which we shall follow up.

With regard to what the right hon. Gentleman said, I described the remaining figures for conventional forces as a great asymmetry. As he is well aware, we were very anxious to get talks on conventional armaments going to try to secure asymmetrical disarmament. There is still plenty of scope to do that, and we shall be pursuing it together with NATO later.

Mr. Grocott : It is mean-minded.

The Prime Minister : It is very far from mean-minded. I am absolutely certain that President Gorbachev is very well aware that I am as determined to defend our way of life as he is to defend his. I repeat that the superiority of the Soviet armed forces over ours is more than two to one in their favour.

Mr. Kinnock : President Gorbachev said at the United Nations : "We are witnessing the emergence of a new historic reality, a turning away from the principle of super-armament, to the principle of reasonable defence sufficiency."

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Will the Prime Minister take this opportunity to give us her view of what for Britain is reasonable defence sufficiency? Does it include the purchase of a new generation of nuclear weapons?

The Prime Minister : It consists of making an accurate assessment of the nuclear, chemical and conventional weaponry, which the potential aggressor still has, and making certain that we are in a position to deter aggression. I am quite ready to believe--indeed, I already know--that the Opposition would throw away the defence of this country. The approach that I have described is the one that we shall follow. We shall look at the weaponry that they have and make certain that our defence is strong enough to deter.

Mr. Hind : Does my right hon. Friend agree that British spending on defence is about 5.1 per cent. of gross national product, compared with 13 per cent. that the Soviet Union spends on defence? Does she agree also that President Gorbachev has made a virtue out of necessity in order to bring the standard of living of his people up to that enjoyed in the West?

The Prime Minister : We all know that the proportion of GDP spent on armaments in the Soviet Union is greatly in excess of what any democratic country can do. Our own is about 4.2 per cent. of GDP. In the Soviet Union it is very much more. I believe that the proposals made by President Gorbachev at the United Nations were made genuinely to reduce conventional weapons and the dissymmetry on his side, and no doubt also because, quite naturally, he wishes to raise the standard of living of people in the Soviet Union. Our task is to make certain that we always have a sure defence while trying to extend the hand of friendship across the European divide.

Mr. Ashdown : Will the Prime Minister assure the House that she recognises that President Gorbachev's remarkable speech yesteday could mark a significant historical turning point? Now that President Gorbachev's attention is rightly directed to the tragedy in his own country, I beg the Prime Minister to realise that she must use her influence to ensure that there is an effective and substantial response from Western leaders to maintain the momentum for international disarmament and to ensure that President Gorbachev's position in his own country is strengthened.

The Prime Minister : As the hon. Gentleman is aware, I was the first leader in the Western world to welcome Mr. Gorbachev's reforms. I welcomed them publicly because I believe that any possibility of enlarging freedom in the Soviet Union is to the advantage not only of the people there but of the whole world. I welcome the words that President Gorbachev used at the United Nations. He said : "The principle of freedom of choice is mandatory."

I wish that all Opposition Members believed in that principle. He went on to say :

"Freedom of choice is a universal principle that should allow for no exceptions."

I agree with that, too. [Interruption.] I am responding. He went on :

"The new phase requires de-ideologising relations among states. We are not abandoning our convictions but neither do we have any intention to be hemmed in by our values."

I welcome all that. I was among the first to welcome his movement towards increased freedom and increased

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responsibility, but always, as he knows, making certain that our defence is sure. I agree with my hon. Friends. It is because of that--and the same view is taken by NATO colleagues--that we have got far more disarmament than we ever could have thought possible.

Mr. Churchill : In appreciation of President Gorbachev's most significant gesture at the United Nations yesterday, and out of humanitarian concern for the people of Armenia, will my right hon. Friend specifically offer an air-lifted field hospital and assistance from the Royal Engineers? Is she aware that the Manchester fire brigade would most certainly also wish to be associated with any civilian offer of thermal imaging and personnel?

The Prime Minister : As my hon. Friend probably heard earlier this morning, we will offer whatsoever we can to the limit of our ability. When we were informed of what they wanted, we responded immediately. The disaster relief unit in the Foreign and Commonwealth Office is standing by. Our ambassador to Europe has already been to the Commission. We have already had offers of help from the British Red Cross, and it is in touch. We have already-- [Interruption.] I am sorry that Opposition Members do not seem to be interested in the help that we are prepared to offer. We have already had-- [Interruption.] We have already had messages and offers of help from surgeons in this country, who have said that they could quite easily put together an operating team, if that is needed, to relieve the stress and strain in the Soviet Union.

Q3. Mr. Tom Clarke : To ask the Prime Minister if she will list her official engagements for Thursday 8 December.

The Prime Minister : I refer the hon. Gentleman to the reply that I gave some moments ago.

Mr. Clarke : Is the Prime Minister aware that there is genuine and widespread concern in Scotland about the way in which we deal with Scottish affairs in the House? Does she accept that there is to be a concentrated and orchestrated attack on Scottish Question Time, because 27 English Conservative Members have tabled questions for the next Scottish Quesion Time? That makes a mockery of the failure to provide a handful of hon. Members to allow the Scottish Affairs Select Committee to continue.

The Prime Minister : Scottish Members play a very full part in all matters that are debated in the House. We are a united kingdom. I trust that the hon. Gentleman is not resiling from that. Is resiling from the United Kingdom a new Labour party policy? So long as we are a united kingdom, we should deal with our affairs as a united country.

Sir Anthony Grant : Does my hon. Friend agree that it is very much in the nation's interests that the Civil Service should maintain its traditional role of serving whichever Government are in power and that, if a civil servant wishes to pontificate on party political matters, he should resign from the service and stand for Parliament, like the rest of us?

The Prime Minister : I am sure that my hon. Friend will agree that we get extremely good service from the Civil Service, which, in general, upholds the highest traditions of the service. If that is not so, it is a matter for the head of the Civil Service to deal with.

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