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resign? Indeed, many people with considerably less important failures to record have shot themselves in despair.

Mr. Mellor : It is astonishing that Labour Members think that they are on to a good point about investment when the only way they can jeer at the Government's achievements is to compare this 12 months with the record levels established under the Government in the late 1980s. On the question of business investment, any comparison with Labour years will make only too clear how much of an advance there has been since then. In the 1970s, business investment in this country was stagnant. That is the key point which everyone should bear in mind.

Interest Rates

11. Mr. David Evans : To ask the Chancellor of the Exchequer when interest rates were last at 10 per cent.

Mr. Norman Lamont : Bank base rates last stood at10 per cent. in July 1988.

Mr. Evans : I thank my right hon. Friend for his reply. Will he tell mortgage payers and businesses, in language that they can understand, why interest rates are not 2 per cent. lower? Is he aware that every time he reduces interest rates the banks put them up by 0.5 per cent. or 1 per cent. so that businesses are not at present benefiting from his policy on interest rates? Is he running the economy, or is it being run by the Governor of the Bank of England?

Mr. Lamont : On the first point, it is not true that the benefits of the reductions in interest rates have not come through to mortgage payers. As I explained earlier, the result of the 3 per cent. drop in interest rates since last October has been a payments reduction of about £50 per month for the average mortgage payer. That is a very dramatic improvement in take-home pay. Furthermore, as a result of competition between the banks and the building societies, the first-time buyer has seen an even bigger decrease. The market is working, and it is following interest rates down.

Mr. Wigley : If the inflation rate is coming down as rapidly as the Government believe, if sterling is so strong against the deutschmark and if consumer demand and manufacturing investment are low, surely the time has come to reduce the base rates further in order to stimulate the economy.

Mr. Lamont : I do not believe that it would be right to reduce interest rates in order to stimulate the economy, as the hon. Gentleman puts it. Interest rates should, indeed, bear a relationship to inflation.


12. Mr. Squire : To ask the Chancellor of the Exchequer what representations he has received recently from the CBI about business expectations.

Mr. Norman Lamont : I am in regular contact with the CBI. The latest CBI quarterly industrial survey shows a marked improvement in the trend of forward-looking indicators for business optimism, orders and output.

Mr. Squire : Did my right hon. Friend notice two particularly salient points in that survey--first, that the number of firms expecting higher unit costs was the lowest

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for three years and, secondly, that the overall level of business optimism was the highest for a year? Do not he and the country expect from the merchants of doom and gloom on the Opposition Benches some recognition of this improvement?

Mr. Lamont : The Opposition seem to have a vested interest in failure and seem to want bad developments. My hon. Friend is absolutely right. Another point that he might have mentioned is that the CBI survey also shows that the number of firms expecting to increase prices is very low. As my hon. Friend says, the CBI survey has a good track record as a forward indicator of growth in the economy. Everything in the surveys is consistent with my Budget forecast that the recovery will begin in the second half of the year.

Mr. Boateng : Putting aside the merchants of gloom and doom, does the Chancellor of the Exchequer agree with the remark of the chairman of Marks and Spencer that business is in for a "longish, hardish, roughish time"? If the Chancellor does not agree with that, let him answer this question : who knows more about running a business in these times--the chairman of Marks and Spencer or himself?

Mr. Lamont : I am sure that the chairman of Marks and Spencer knows much more about running Marks and Spencer--that is his job. I have always said that business is difficult and tough at the moment. But, equally, I have said--and I have given my reasons for this belief--that business will turn up in the second half of the year. All the indications are there. Surveys by the CBI, the Institute of Directors and the Association of British Chambers of Commerce, as well as the 3i's survey of business, including small businesses, all indicate that the business climate is slowly but definitely improving.


13. Mr. Burns : To ask the Chancellor of the Exchequer what is the latest year-on-year rate of inflation ; and if he will make a statement.

Mr. Mellor : All-items RPI inflation was 8.2 per cent. in March. It is expected to fall sharply over the coming months to 4 per cent. in the fourth quarter of 1991.

Mr. Burns : In welcoming the improving inflation figures, may I ask my right hon. and learned Friend to confirm that inflation is on target to reach 4 per cent. in the fourth quarter of this year? Does he agree that it ill behoves certain individuals constantly to talk down the improving inflation figures, given that between 1974 and 1979 inflation increased by more than 100 per cent. and that the best year-on-year rate of inflation in that period was only 7.4 per cent.?

Mr. Mellor : It is certainly true that during those years average inflation was 15 per cent. Indeed, the lowest point that inflation reached in those years is equivalent to the average that it has been during 12 years under us. I confirm, as I did in my original answer, that we are on course for a 4 per cent. level at the end of the year.

Mr. Douglas : How does the Minister explain, apart from the statistical measures of inflation, the traditional view that inflation is a measure whereby the claims on resources in terms of money exceed those resources in real

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terms? Therefore, how does he explain that the resources that we have available to call into use, in terms of labour and capital, are under-utilised? How does he propose to alter that situation?

Mr. Mellor : I find that an utterly inexplicable question. I shall read the record and write to the hon. Gentleman.



Q1. Mr. Hinchliffe : To ask the Prime Minister if he will list his official engagements for Thursday 16 May.

The Prime Minister (Mr. John Major) : 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.

Mr. Hinchliffe : Does the Prime Minister agree that today's unemployment figures prove conclusively that the Conservative party has one economic policy only--that of mass unemployment? Is it true that the Government intend to introduce some form of compulsory work scheme to reduce the numbers of jobless people in this country, or will he be following the example of his predecessor by adding to the 30 or so fiddles in the calculation of the number of unemployed? Or will he-- [Interruption.]

Mr. Speaker : Order. The hon. Member is taking a great deal of time from his colleagues.

Mr. Hinchliffe : Or will the Prime Minister do what is in the best interests of his country, by resigning and making way for a Labour Government with a genuine strategy on jobs and industry?

The Prime Minister : The hon. Gentleman is being both silly and graceless. I am as concerned about unemployment as the hon. Gentleman is, and it is precisely for that reason that I propose to continue with the policies to get inflation down, to ensure that there is a stable basis for the creation of jobs. There are a million extra jobs today than there were when the Conservative Government came to power and, in so far as making way for a Labour Government is concerned, as the right hon. and learned Member for Monklands, East (Mr. Smith) has said, because of Labour policy on the minimum wage people will lose their jobs.

Sir Geoffrey Finsberg : Will my right hon. Friend give me an assurance that it is not part of his policy to increase taxation on earnings, unlike the Leader of the Opposition who proposes to increase tax on earnings for one in 15 people, the shadow Chancellor who intends to increase it for one in eight, or the people who are really master-minding the hidden Labour party agenda, who intend to increase taxes for everyone who earns?

The Prime Minister : My hon. Friend is certainly correct that Labour Members seem to be in something of a muddle over their tax and spending figures. As the hon. Member for Blackburn (Mr. Straw)--who, alas, is not here at the moment--has said :

"Yes, of course, in an ideal world we would like to do what the Liberal Democrats are saying and say yes, we'd increase taxation."

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That is their official policy.

Mr. Kinnock : If, as the Prime Minister claimed last Friday, his economic policies are working, why are 2,175,000 people in our country not working?

The Prime Minister : The right hon. Gentleman is aware that the intention--and it is beginning to show clear signs of success--is to reduce inflation so that we may begin, yet again, to add to the 1 million jobs that we have created during the period of this Conservative Government. There is only one stable and sure way to create jobs and keep them--to keep inflation low, a policy which we shall pursue and he never could.

Mr. Kinnock : The Prime Minister seems to forget that today's unemployment figures show the highest April rise in unemployment since the war, that since he has been Prime Minister 3,000 people have lost their jobs every working day, that output is down and that investment has plummeted by 20 per cent. over the year. When the Prime Minister's policies are responsible for causing that huge damage, and when he has no answers and no policies to get out of it, is it not time that he went?

The Prime Minister : If the right hon. Gentleman is genuinely concerned about unemployment, he should not advocate policies that will artifically increase it, such as the minimum wage. The Institute of Fiscal Studies said of his minimum wage policy :

"If the point is to avoid people being poor this is an extraordinarily stupid way of doing it."

If he does not like the IFS, perhaps Mr. Joe Haines of the Daily Mirror is more to his taste. He said :

"The minimum wage proposals won't work and if they do, won't help."

Sir Gerard Vaughan : Will my right hon. Friend visit, in the near future, a hospital that has opted out? Does he agree that yesterday Lord McColl explained clearly the benefits to patients when a hospital opts out-- putting patients before bureaucracy?

The Prime Minister : I am grateful to my hon. Friend. I will also explain to people in the vicinity that when a hospital opts out, it opts out of bureaucracy and not out of the national health service--contrary to the dishonest literature passed around by the Labour candidate for Monmouth, which the right hon. Member for Islwyn (Mr. Kinnock) should repudiate.

Q2. Mr. McAvoy : To ask the Prime Minister if he will list his official engagements for Thursday 16 May.

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

Mr. McAvoy rose -- [Interruption.]

Mr. Speaker : Order. Let us settle down.

Mr. McAvoy : Conservative Members seem very nervous. In 1979, the Tories promised that, if elected, they would not double VAT, but once elected they increased it from 8 to 15 per cent. On Tuesday, the Prime Minister failed to answer a question on future levels of VAT. Can this simple and honest Prime Minister give a simple and honest answer to the question? If the Tories are re-elected, will they further increase VAT?

The Prime Minister : The hon. Gentleman graciously concedes that we shall be in a position to decide that at the

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next general election, but I want no lectures on value added tax from the party which put tax on children's sweets, even though its leader did not know it.

Mr. Stevens rose -- [Interruption.]

Mr. Speaker : Order. I ask the House to settle down.

Mr. Stevens : Does my right hon. Friend agree that the right way to raise the status of teachers is by giving them a pay review body, rather than reducing their take-home pay by increasing their tax?

The Prime Minister : I entirely agree with my hon. Friend. Our purpose in introducing a review body was to raise the status of teachers, and I believe that teachers across the country will accept that. The Opposition's policy, on the other hand, is entirely clear--to take away parental choice and, as the hon. Member for Derby, South (Mrs. Beckett) has admitted, to increase taxation on a large number of teachers.

Q3. Mr. Salmond : To ask the Prime Minister if he will list his official engagements for Thursday 16 May.

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

Mr. Salmond : Has the Prime Minister heard of the great gas robbery? Is he aware that, last week, the Government gave permission for the development of up to 12 North sea fields to take gas from off the coast of Aberdeen straight to the north-east of England to generate cheap electricity, and that that will be done with public support through offsets against petroleum revenue tax? Why, under the right hon. Gentleman's Administration, is Scotland set to become the first country in history to pay international oil companies to take away its most valuable natural resource?

The Prime Minister : The hon. Gentleman might make some acknowledgement of the tremendous asset to Scotland that investment there has been--not least by the oil and gas industries.

German Chancellor

Q4. Mr. Hunter : To ask the Prime Minister when he will next meet the Chancellor of Germany ; and what subjects he intends to discuss with him.

The Prime Minister : I expect to see the Chancellor next at the European Council in Luxembourg on 28 and 29 June, when we shall discuss whatever business is before the Council.

Mr. Hunter : In the course of his continuing dialogue with Chancellor Kohl, has my right hon. Friend found grounds to believe that effective common European foreign, defence and security policies are attainable, or have the events of a few months ago demonstrated that, at least for the time being, they are unattainable?

The Prime Minister : What is entirely clear is that, whatever may be decided, NATO must remain the core of our defence for the future, and that includes beyond any doubt the continued presence in Europe of United States and Canadian forces. But I think that there is scope for improving the co- operation of European views within

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NATO and the effectiveness of the European response outside the NATO area. We have put forward detailed proposals for both in the intergovernmental conferences.

Mr. Wareing : As it is believed that Herr Karl Otto Poehl is about to offer his resignation as president of the Bundesbank, will the Prime Minister be telling the German Chancellor that he is about to offer a free transfer to Mr. Leigh-Pemberton, the Governor of the Bank of England, and offer him to the German Chancellor free of charge?

The Prime Minister : No, Sir.

Mr. Ian Taylor : When my right hon. Friend meets the German Chancellor, will he discuss the implications of the recent European Commission decision to intervene in German industry to remove the subsidies that the west German Government have been paying to west German industry for some years? And is not that a sign that the Single European Act and the single market are working very effectively and levelling the playing field for the benefit of Britain?

The Prime Minister : I hope and believe that that is the case. We certainly wish to see the continued reduction of subsidies throughout Europe.


Q5. Mr. Loyden : To ask the Prime Minister if he will list his official engagements for Thursday 16 May.

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

Mr. Loyden : Does the Prime Minister agree or disagree with the chief executive of Alderhey hospital, who has told the district health authorities that any district health authority paying an additional £7,500 will be guaranteed not to wait more than 12 months for surgery to be performed on children sent to that hospital? Is not that a clear indication that the Government have completely abandoned the national health service principle of treatment when it is needed and also any pretence of providing other than a two-tier service that will deprive children of surgery at the time when they need it?

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The Prime Minister : The hon. Gentleman is being very cheap and wholly inaccurate. There is no question of a two-tier health service. The hon. Gentleman may find what was said recently by a doctor on "Newsnight" interesting. He said :

"I don't accept that there'll be any priority given"--

[Interruption.] I know that right hon. and hon. Members do not like listening to alternative views, but it would do them good to do so occasionally. The doctor said :

"I don't accept that there'll be any priority given in where the patients are treated at all. My enthusiasm for GP fund-holding is based on"--

[Interruption.] The hon. Gentleman should listen. The doctor said :

"My enthusiasm is based on the belief that because I know my patients and because I know the resources in the health service and because I care about the patients, I'm in the best position to use the resources in a wise and helpful way".

That is the view of people treating patients, and it is better than the hon. Gentleman's.

Mr. Burt : Bearing in mind the adverse criticism directed so often in the past against English football supporters, does my right hon. Friend share my pleasure not only in Manchester United's excellent result last night against Barcelona but in the behaviour of its supporters? Does he agree with me that, good though the quality of the play was, it is likely to be bettered on Sunday in the third division play-off by Bury football club against Bolton Wanderers?

The Prime Minister : I think that I should be in very considerable danger if I answered the last part of that question. With regard to the first part, however, I am glad to join my hon. Friend in congratulating Manchester United, and not only on the performance of its team

Mr. Kinnock : "Up the Reds!"

The Prime Minister : Well, on some occasions, maybe. I congratulate Manchester United not only on the performance of its team but on the behaviour of its supporters, which gave an excellent example in Europe that I look forward to seeing followed by British teams throughout Europe when they lift, I hope, a number of trophies next year.

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