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Mr. Brooke : The best guide to the underlying rate of inflation is provided by the RPI excluding mortgage interest payments-- [Interruption.]--

Mr. Speaker : Order.

Mr. Brooke --which currently stands at 5.9 per cent.

Mr. Duffy : Why did not the right hon. Gentleman's right hon. Friend receive a more encouraging response today from sterling and the market in view of his very sturdy reaffirmation in last night's debate of his well- known and well-tried counter-inflationary policy?

Mr. Brooke : That, if I may say so, seems to be a question more for the markets than for me. The markets have, in fact, been thoroughly calm.

Mr. Gow : Will my right hon. Friend reaffirm his commitment to maintaining high interest rates until we abate the rate of monetary growth? Will he reaffirm the commitment of the Government to move towards stable prices at the earliest possible moment?

Mr. Brooke : My right hon. Friend the Chancellor of the Exchequer made that wholly clear yesterday. I am delighted to echo him today.

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Mr. Nicholas Brown : Is it the Government's view that shadowing the deutschmark has helped to cause inflation in the past?

Mr. Brooke : That question, again, goes somewhat wide of the original question that I was asked. As the hon. Gentleman has risen from the Opposition Front Bench, let me say that one of his Front Bench colleagues earlier this week said on television that inflation was higher now than when the Labour party went out of office. As the RPI was then 25 per cent. higher, and the RPI without mortgage interest payments was 50 per cent. higher, it seems to me that the Opposition Front Bench is seeking to rewrite history.

Manufacturing Investment

11. Mr. Arbuthnot : To ask the Chancellor of the Exchequer what is the latest official projection for the growth of manufacturing investment in 1989.

12. Mr. Gerald Howarth : To ask the Chancellor of the Exchequer what is the latest official projection for the growth of manufacturing investment in 1989.

Mr. Lawson : The latest DTI investment intentions survey, published in December, projected manufacturing investment in constant prices to rise by a further 11 per cent. in 1989 on a year earlier. The latest CBI "Quarterly Trends Survey", published in April, confirms this buoyant outlook.

Mr. Arbuthnot : Is it not clear that it is the policies of the Government that have created the climate where manufacturing investment, output, profits and productivity are all increasing satisfactorily? Can my right hon. Friend say how long and to what extent that trend is likely to continue?

Mr. Lawson : As far as I can tell my hon. Friend the prospects are very good indeed. We now have a situation in which business investment is at the highest proportion of GDP that it has ever been in our history. Company profits are high ; company confidence is high. Therefore, the prospects for further investment are also excellent. As for manufacturing industry, it is interesting that during the period that I have been Chancellor of the Exchequer the average annual growth of manufacturing investment has been 9 per cent. compared with the period of the whole of the last Labour Government, which was roughly the same period of time, or a little bit less, when the growth of manufacturing investment was only 2.3 per cent.

Mr. Howarth : While welcoming the record rate of investment in manufacturing industry that has taken place under the Conservative Government, may I tell my right hon. Friend that nowhere in the United Kingdom is there more evidence of the revitalisation of British manufacturing industry than in the west midlands where the latest quarterly report of Walsall chamber of commerce shows that no fewer than 46 per cent. of companies are revising upwards their plans for manufacturing investment this year.

Mr. Lawson : I am particularly glad to hear that from my hon. Friend. Indeed, as a Member representing a midlands constituency myself, I am well aware of the successful economy of the midlands and the reinvigoration of the midlands and the high degree of investment that is

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going on there. Of course, as my hon. Friend will be the first to admit, it is not something confined solely to the midlands ; this is now occurring nationwide.

Mr. Pike : Does the Chancellor recognise that his complacency hides the wide regional discrepancies between investment in manufacturing industries? Is it not a fact that, if there were more investment in our key manufacturing regions, the Government would do a lot more to improve the unemployment figures and our balance of payments? Does he recognise that investment in the north-west region--a key manufacturing region--according to the Government's latest available figures, is 38 per cent. below the 1979 level?

Mr. Lawson : There have always been differences between different regions, and there always will be. This is not something new. But what I find extraordinary in the question asked by the hon. Gentleman, and, indeed, by most, if not all, Labour Members, is their exclusive concern with manufacturing industry and manufacturing industry's investment. Manufacturing industry and manufacturing industry's investment are indeed very important, but the whole of the rest of British industry is important too. Some time hon. Gentlemen should recognise that the other 75 per cent. of the economy does in fact exist.

Mr. Orme : Will the Chancellor address himself to the fact that, if we are going to do anything about the balance of payments deficit, we have to manufacture to export? What has happened to our manufacturing exports over recent years? How does he explain those?

Mr. Lawson : I am glad to say that our manufacturing exports over recent years have done extremely well. Indeed, total exports, in which manufacturing accounts for a very large part, in the last three months were 8 per cent. in volume terms above a year ago.

Mrs. Peacock : Does my right hon. Friend agree that investment in manufacturing industry, which is important to many of us who represent such areas, has been absolutely tremendous in recent years, especially in Yorkshire? Does he agree that that is a sign of confidence in the future economic success of the country, and that, instead of decline and dereliction, we now have many new factories and many new jobs?

Mr. Lawson : My hon. Friend is quite right, and I know the very great concern and interest that she has always shown in business and industry in her own constituency. It is indeed a striking fact, as I pointed out a moment ago, that over the past five years manufacturing investment has been growing at the rate of 9 per cent. a year, and it is set to grow still further.

Mr. John Smith : Can I ask the Chancellor the same question that I asked him yesterday, but which he did not answer? By how many percentage points has investment in manufacturing industry increased since 1979?

Mr. Lawson : Investment in manufacturing industry in quantum is only slightly above what it was in 1979, but it is, of course, heading still further up. Manufacturing output has also risen very sharply indeed under this Government, unlike under the last Labour Government, when manufacturing output actually declined.

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Manufacturing Output

15. Mr. Ward : To ask the Chancellor of the Exchequer what has been the annual rate of growth of manufacturing output over the last two years.

Mr. Major : In the two years to the first quarter of this year, manufacturing output grew at an average annual rate of 7.1 per cent.

Mr. Ward : Does my right hon. Friend agree that the news about investment in manufacturing that we have just heard is good news for tomorrow? However, the answer that he has just given indicates that the supply side boom, which the Government have been working for, is with us today.

Mr. Major : My hon. Friend is right. The strength of manufacturing output shows clearly that the supply side changes of recent years are working. My hon. Friend will be pleased to know that the levels of investment that we have seen recently will ensure that that continues.

Mr. Mullin : In view of the lavish claims being made about the level of manufacturing investment, will the Chancellor have another go at explaining the figures that I put to him yesterday--that according to the latest figures from the Department of Trade and Industry, manufacturing investment in the north-east stands now at 53 per cent. of what it did in 1979?

Mr. Major : That relates to manufacturing output. In fact, manufacturing investment has risen by 14 per cent. in the last year to a record level.

Economic Growth

16. Mr. Oppenheim : To ask the Chancellor of the Exchequer what was the rate of economic growth in the latest year for which figures are available.

Mr. Major : Gross domestic product is estimated to have grown by 4 per cent. in 1988.

Mr. Oppenheim : Is it true that, whereas a great deal of investment in manufacturing in the 1970s was directed by politicians into uneconomic enterprises or into uncommercial capacity, it is now being directed by private industry into proper jobs and proper industry? Perhaps that is why, whereas under the last Labour Government manufacturing output fell, it has risen sharply under this Government.

Mr. Major : That is right, and it is why we are now well into the eighth successful year of sustained growth of more than 3 per cent. During the past seven years there has been a combination of strong and steady growth that has not been matched since the war.

Mr. Campbell-Savours : Would there not be a substantial increase in growth if the Government adopted a positive policy of import substitution? Will the Minister reflect on my modest contribution to last night's debate, when I set out a scheme for private sectoral support for industry that would lead to a substantial number of jobs, cost the state very little and, to some extent, reduce the trade deficit? Will the Minister read what I said last night and, perhaps, drop me a line about it?

Mr. Major : I always read carefully what the hon. Gentleman has said, although some of the ideas that he advanced yesterday were tried not wholly successfully in

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earlier years. I welcome the efforts many industries are now making to provide goods to be sold at home at competitive rates as an alternative to imports. I hope that they will continue to do that.



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

The Prime Minister (Mrs. Margaret Thatcher) : This morning I presided at a meeting of the Cabinet and had meetings with ministerial colleagues and others. In addition to my duties in this House I shall be having further meetings later today.

Mr. Thurnham : During the course of my right hon. Friend's busy day, will she find time to read Paul Twyman's excellent pamphlet entitled "1992, Crossroads for Free Enterprise"? Will she use her best endeavours to ensure that Europe takes the road of free enterprise so that we can look forward to the day when the whole of Europe, from the Atlantic to the Urals, is rid of creeping Socialism and tyrannical Communism?

The Prime Minister : I have indeed read that pamphlet and I agree with its conclusion that we face a choice in Europe between corporatism, central control and regulation--as is supported by the Opposition--and the creation of a genuine single market in which enterprise can flourish and the energies and talents of people be set free to generate wealth and bring about further social improvement. That is the sort of Europe that the Conservative party wants and for which we shall be campaigning in the forthcoming election.

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

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

Mr. Barron : Will the right hon. Lady confirm that on Monday evening she will be joining me and my right hon. Friend the Leader of the Opposition in voting in favour of the televising of the proceedings of this House?

The Prime Minister : I must disappoint the hon. Gentleman, in that I shall not be here on Monday evening. I wish to make it clear that if I were here, I should be supporting the Lord President.

Mrs. Currie : Has my right hon. Friend noticed that the right hon. Member for Yeovil (Mr. Ashdown) is missing from the Chamber this afternoon as he has buzzed off to Hong Kong? He is not, therefore, here to ask his usual silly questions-- [Interruption.]

Ms. Short : The hon. Lady is not in order.

Mr. Speaker : Order. It must be a question for the Prime Minister.

Mrs. Currie : Does my right hon. Friend agree that although there is considerable sympathy with and understanding of the worries of the people of Hong Kong,

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it would be wrong to give anyone the idea that millions of people could come and settle in this country overnight? Does not the future of the colony lie with China?

The Prime Minister : As both my right hon. and learned Friend the Foreign Secretary and I have said, we are deeply concerned about Hong Kong and the natural feelings of its people. We have said that we are prepared to consider ways of obtaining greater flexibility under the present rules to allow an increasing number of people to come to this country under the several different limbs of the immigration rules and the British Nationality Act 1981. We shall consider that matter carefully in the coming days and, if need be, come to the House if we need additional powers.

Q3. Mr. Nigel Griffith : To ask the Prime Minister if she will list her official engagements for Thursday 8 June.

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

Mr. Griffiths : How does the Prime Minister justify the shameful decision of Tayside Tories to support the Nationalists where SNP means "sacking 900 people"?

The Prime Minister : I do not think that I should get involved in that. I am sure that Tories support Tory policy.

Q4. Miss Widdecombe : To ask the Prime Minister if she will list her official engagements for Thursday 8 June.

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

Miss Widdecombe : Will my right hon. Friend find time in her busy schedule to visit Maidstone general hospital, which was built under the aegis of this Government after years of obvious neglect and which even now is just expanding to include a mass radiography unit? Does she agree that this is tangible proof of the Conservative commitment to the National Health Service?

The Prime Minister : Yes, and I am delighted to hear of its success from my hon. Friend. It is an example of the improvements that are occurring throughout the country in the NHS because we are spending three times as much on the NHS as was spent under Labour. Whereas Labour cut the capital programme for hospital building, we have increased it by 40 per cent., and I am glad that my hon. Friend's constituency is a beneficiary.

Mr. Kinnock : Is the Prime Minister aware that the chief executive of London Regional Transport says that the only way to reduce rush hour overcrowding on the Underground is substantially to increase fares so that people cannot afford to travel at those times? Does the right hon. Lady agree with those views?

The Prime Minister : If there are requests for increased fares and they are designed to lead to increased service, of course those would be considered. I would point out that on transport matters, as on most other things, the Government have put an increasing amount to the capital spent on transport.

Mr. Kinnock : Why does not the Prime Minister stop wriggling and simply say whether she thinks-- [Interruption.]

Mr. Speaker : Order.

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Mr. Kinnock : Will the Prime Minister say whether she thinks the ability of people to get to their work in London should be rationed by fares regulated by price?

The Prime Minister : I thought that on a previous occasion the right hon. Gentleman had agreed with me that if one gets increased service, one should expect to have to pay for that improvement. He seems totally to have forgotten that.

Mr. Kinnock : Can the Prime Minister explain how, if one is charging fares that stop people travelling, one is increasing service to them?

The Prime Minister : There have been a number of proposals from London Underground for increasing the standard of service. The right hon. Gentleman, as usual, wants something pretty well free, provided that someone else pays.

Q5. Mr. Roger King : To ask the Prime Minister if she will list her official engagements for Thursday 8 June.

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

Mr. King : I congratulate my right hon. Friend on her recent visit to the west midlands. Will she confirm that no Conservative Euro-candidate is opposed to our membership of the European Economic Community? What message does she have for the numerous members of the other parties in respect of their attitude to the hard Left campaign group of the Labour party?

The Prime Minister : Yes, of course I confirm that, unlike the Labour party, all our candidates in the Euro-elections believe that Britain's future lies in the European Community. A Conservative Government led by my right hon. Friend the Member for Old Bexley and Sidcup (Mr. Heath) had the vision to take Britain into the Community-- [Interruption.]

Mr. Speaker : Order. Interruptions waste a lot of time.

The Prime Minister : A successor Conservative Government have made such a success of Britain's membership.

Mr. Maginnis : Has the Prime Minister been informed by the Secretary of State for Northern Ireland that at a dinner party in Hillsborough castle, the deputy chairman of the Police Authority for Northern Ireland described the former Chief Constable--and I apologise to the House for the language--as a "black bastard", accused him of having previously kicked the --I will not use the four letter word beginning with "f"--out of Roman Catholics, and that the deputy chairman further described the police as "black thugs"? Is that the sort of behaviour the right hon. Lady expects from the deputy chairman of the Police Authority for Northern Ireland? When the right hon. Lady has verified what I have said, will she take steps to ensure that that person is removed from the authority?

The Prime Minister : I am in no position to know whether or not the account of the hon. Gentleman is accurate. My right hon. Friend the Secretary of State for Northern Ireland says that the answer to the first part of the question is no, Sir. It is monstrous to try to repeat an

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alleged account of a conversation under such circumstances, and I totally condemn it. The hon. Gentleman knows that we fully stand behind the police in Northern Ireland in the excellent and wonderful work that they do.

Mr. Nicholas Winterton : Is my right hon. Friend aware that an increasing number of industries in this country are concerned about the policy of high interest and exchange rates, and that those two policies are torpedoing the very sector of the British economy which could reduce our balance of trade deficit and assist in reducing inflation? Will she look at other policies, particularly that of asking the Bank of England to request the clearing banks to place substantial deposits, which would be very beneficial for Britain's manufacturing industry?

The Prime Minister : There are two points. As my hon. Friend is aware, increases in interest rates are not readily acceptable, but are far less damaging than a perpetual increase in inflation. Secondly, as he will also be aware because he takes much interest in industrial matters, a 1 per cent. increase in wages is about four times as damaging as a 1 percentage point increase in interest rates. There has been an increase in wages of 9 per cent. in the past year.

Q7. Mr. Knapman : To ask the Prime Minister if she will list her official engagements for Thursday 8 June.

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

Mr. Knapman : Has my right hon. Friend seen press reports stating that a mother of three, a Lambeth Labour councillor, has claimed £20, 000 expenses in one year? Does my right hon. Friend agree that that is absurd, and a backdoor way of appointing full-time councillors?

The Prime Minister : I have seen such reports. In the White Paper responding to the Widdicombe report, we announced our intention to introduce a flat-rate allowance to prevent councillors exploiting an attendance-based allowance system.

Rain Forest

Q8. Mr. Dalyell : To ask the Prime Minister if she will seek to include on the agenda of the Madrid summit, European Economic Community policy towards debt-for-nature swaps in relation to conservation of the rain forest.

The Prime Minister : I welcome the debt-for-nature swaps agreed voluntarily between commercial banks, conservation organisations and debtors, although their role is likely to remain small in relation to both developing

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country debt and environmental problems. The agenda for the European Council has not yet been agreed, but environmental issues may well be raised.

Mr. Dalyell : May I ask the Prime Minister a question of which I gave her Office a little notice? Does she support the European Parliament's resolution of 26 May on tropical timber products?

The Prime Minister : I am grateful to the hon. Gentleman for giving me notice. The resolution, which is addressed to the Commission for initial consideration, deals with a number of aspects relating to trade in tropical timber. My right hon. Friends in the DTI, with their officials, are looking at its full implications.

Mr. Bell : In relation to the Prime Minister's earlier response as to our success in the European Community

Mr. Speaker : Is this related to rain forests?

Mr. Bell : In relation to rain forests and the European Economic Community, should we not have a proper social contract throughout Europe?

The Prime Minister : It is much more practical for us to do what we do to assist the continuation of the rain forests and that is one of the reasons why we should be proud of being British.


Q9. Mr. Ken Hargreaves : To ask the Prime Minister if she will list her official engagements for Thursday 8 June.

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

Mr. Hargreaves : As tickets for the West German national lottery are now circulating in Britain, is it not time to consider the setting up of a national lottery here so that the proceeds of such a lottery can benefit the British people?

The Prime Minister : As my hon. Friend knows, that question comes up from time to time, but we have never set up a national lottery. People want a national lottery for many different reasons, but I would be slow to consider setting one up because enough money already goes to gambling of one sort or another and such a lottery would be damaging for a number of local fund-raising occasions which are far more profitable.

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