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Mr. Dorrell : The hon. Lady, not for the first time, is misunderstanding an answer that she has been given by a Treasury Minister. It is perfectly true that we expect there to be more income tax payers next year, for a simple reason : we expect incomes to rise next year so that more people are brought into the income tax bracket.

Interest Rates --

10. Mr. Pawsey : To ask the Chancellor of the Exchequer what is the estimated saving to British industry of the per cent. fall in interest rates.

Mr. Kenneth Clarke : Every per cent. reduction in interest rates, when fully passed on, is estimated to lower United Kingdom companies' interest bills by well over £ billion a year.

Mr. Pawsey : I thank my right hon. and learned Friend for that extremely helpful good news. Does he agree that a low-inflation, low-tax and low-interest rate economy, such as that of the United Kingdom, is better able to attract inward investment, particularly compared to our EC competitors, which, for example, maintain the social contract ?

Mr. Clarke : I agree entirely. At the moment, we get about a third of all inward investment in the European Union. We do so because everyone agrees that Britain is the most attractive country in which to invest because of our low rates of taxation, our low rates of corporate taxation, our deregulated economy and our much more flexible labour market.


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Mr. Sheldon : Will the Chancellor send a clear message to those voices in the City asking him to increase interest rates ? Does he accept that the present interest rates should come down if we are to sustain any improvement in manufacturing industry ?

Mr. Clarke : I shall continue to set interest rates according to British conditions, taking a view about the medium-term prospects for inflation, looking at the monetary aggregates that we use, the exchange rate and asset values. That has guided all my decisions on monetary policy so far, and will certainly continue to do so.

Mr. Mans : Does my right hon. and learned Friend agree that although industry always welcomes a reduction in income rates, it welcomes consistency more, so that it can plan ahead, knowing that rates will not rise again ? That will give industry the necessary confidence to invest in the future.

Mr. Clarke : Industry wants low inflation and a stable environment so that it can do what it has to do to produce the sound growth that we all want. That is why I state so clearly our objectives for monetary policy. I am glad that British industry has benefited from the steady reductions in interest rates since 1990. Altogether, if they are passed on, they are worth about £13 billion to British industry. That has obviously contributed quite a lot to our recovery from the recession, which is steadily becoming stronger.

Mr. Geoffrey Robinson : Is the Chancellor aware that the House has been reassured this afternoon by what both he and the Chief Secretary have said about having regard to British circumstances in determining British interest rates ? Could he be pushed just a little further on that to see the interrelationship between interest rates and the value of sterling, and the implications of both for British industry ? Is he aware that the disinflationary pressures in the British economy make it possible for him both to move downwards on inflation rates and interest rates and to maintain a competitive rate for sterling, the importance of which he referred to a few moments ago ?

Mr. Clarke : I shall add that to all the advice that I get when making these monetary decisions, which I usually do at my monthly meeting with the Governor of the Bank of England. We have been consistently reducing interest rates since 1990. We have been able to do so because we have been so successful in getting inflation down. That is one reason why the outlook for investment is now so good. We have been able to cushion the blow to those who rely on interest from their savings by introducing the new national savings bond with a fixed rate of 7 per cent. for pensioners who want to take it.

Inward Investment --

11. Mr. Jacques Arnold : To ask the Chancellor of the Exchequer if he will make a statement on the effect on the balance of payments now and in the future of inward investment into the United Kingdom.

Mr. Portillo : Inward investment encourages competition and innovation, boosts productive capacity and is good for the balance of payments.

Mr. Arnold : Can my right hon. Friend confirm that, of all the Japanese investment into the 12 countries of the European Community, more than 40 per cent. has come to


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the United Kingdom and that, likewise, more than 40 per cent. of United States investment into Europe has come to the United Kingdom ? Does that not contrast with the dark days of the last Labour Government when multinationals were leaving Britain in droves ?

Mr. Portillo : It is indeed 40 per cent. in both cases. However, my hon. Friend need not only look back ; he can look forward to what Labour would do in office. The Opposition are supporters of the European socialist manifesto which proposes that tax rates in Britain should be levelled up to European Community levels. Our rate of corporation tax is 33 per cent., whereas in Belgium it is 40 per cent., in Italy 52 per cent. and in Germany 60 per cent. The implication is that Labour would wish to raise corporation tax to the levels of the Community.

Mr. Cryer : If that inward investment has been so beneficial to our balance of payments, why are we running at a deficit of about £12 billion a year ? Is it not true that the economic policies of this wretched Government have created 2.5 million job losses in manufacturing industry, so that we cannot actually supply any demand for our exports from our own manufacturing industry because of the wasteland that the Government have created--worse than any wastelands created by Hitler during the 1939 to 1945 war ?

Mr. Portillo : The hon. Gentleman was talking absolute rubbish, even before he took off at the end of his sentence into hyperbole. I should remind him that the United Kingdom invests more abroad than is invested in this country. We, of course, have all the benefit of that flow. This country believes in free trade, in investing heavily abroad and in allowing people to invest in this country. Free trade is good for this country. It is a pity that the Labour party has not yet recognised that.

Mr. Riddick : Has my right hon. Friend had an opportunity to see the latest issue of "In Yorkshire and Humberside", which reveals that, in the 12 months to March 1993, 42 foreign companies invested in that region, creating 6,500 new jobs ? Do not foreign companies come to Britain to invest because we do not have the social chapter, the job-destroying minimum wage and an interfering Government imposing a corporatist-style, bogus, so-called business plan on industry ?

Mr. Portillo : Yes ; and if I may broaden that out to the national scene, total inward investment in this country over the past five years has been about £91 billion, and about 275,000 jobs have been created--for all the reasons that my hon. Friend gives, and particularly because we still retain low marginal rates of taxation, which the Labour party wishes us to do away with.

Growth --

13. Mr. Nigel Jones : To ask the Chancellor of the Exchequer what advice he has received on the levels of investment in education, research and development and transport required to sustain economic growth in the longer term.

Mr. Portillo : A great deal of advice.

Mr. Jones : As we find ourselves near the bottom of the Organisation for Economic Co-operation and Development league for investment in infrastructure and


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education, what evidence can the Minister give that the Government are prepared to invest in areas that will secure Britain's economic future, rather than concentrate on pre-election tax bribes ?

Mr. Portillo : Over the next three years, we will spend, on average, nearly £2 billion on trunk roads and motorways. Over the same period, our total railway investment will be around £3 billion. The hon. Gentleman is quite wrong to say that we are at the bottom of the OECD league. Let me remind him that, as a share of our gross domestic product, the United Kingdom spends more on education than either Germany or Japan.

Mr. Fabricant : Is it not the case that, by having the lowest corporation tax in Europe, firms have the necessary flow of funds to enable them to invest ? Is it not also the case that, by not having a punitive taxation system, we do not suffer the brain drain that we had in the 1970s ?

Mr. Portillo : My hon. Friend is right to draw attention to the fact that what matters is not only public sector investment but private sector investment. That is one of the reasons why the Government are concentrating so hard on the private finance initiative, which enables private finance and private expertise to be brought into areas that previously were the preserve of the public sector.

Balance of Trade --

14. Mr. Spellar : To ask the Chancellor of the Exchequer what are the figures for the balance of trade for the last 12 months for United Kingdom and for Germany.

Mr. Portillo : The United Kingdom had a visible trade deficit of £13 billion in the 12 months to November 1993, while Germany had a surplus of £20 billion. But looking at the current account overall, the United Kingdom had a deficit of £10 billion in the 12 months to September, while Germany had not a surplus but a deficit of £17 billion.

Mr. Spellar : Does not the first part of the answer--the real answer about manufactured trade--show that, in spite of all the huffing and puffing from Conservative Members, in the real test of who can sell what in the world market, Germany, with its social market economy and many elements of the social chapter, is competitive and we are slipping behind in the world trade race ?

Mr. Portillo : The hon. Gentleman was obviously stunned by the answer. Let me remind him that, taking the current account overall, Germany has a bigger deficit than the United Kingdom. The hon. Gentleman did not anticipate that answer and obviously did not like it when he got it.

Mr. Anthony Coombs : Will my right hon. Friend confirm that not only are current manufactured exports from the United Kingdom at a record level but our proportion of world trade is rising, and has done so for the past four years ? Will he also confirm that European statistics show that, last year, while the German economy fell in industrial production terms by 7 per cent., ours was the only economy in Europe to grow by 2.5 per cent ?

Mr. Portillo : We look forward to a rise of about 5.5 per cent. in exports this year. In contrast, we reckon that consumption will rise by about 2 per cent. My hon. Friend is absolutely right to point out that, after a long period


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following the 1960s in which the United Kingdom's share of world trade in manufactures was falling, the position has now stabilised. I am hopeful that the figure will rise.

Value Added Tax --

15. Mr. Connarty : To ask the Chancellor of the Exchequer what representations he has received on the proposed VAT increases from senior citizens' organisations.

The Paymaster General (Sir John Cope) : Treasury Ministers have received a number of representations.

Mr. Connarty : Has the Chancellor of the Exchequer received the kind of representations that most of us have received, which express the anger of pensioners who will have to pay 8p more in the pound for their fuel come April, and 17.5 per cent. more next year ? Is any sense of pensioners' despair getting through to the Minister--despair at the arrangements that will enable those with money in the bank to pay their VAT in advance, thereby avoiding the burden that will fall on most pensioners ?

Sir John Cope : Forestalling arrangements are a familiar part of changes in indirect taxation, and that applies in this case. However, 80 per cent. of the net yield of VAT on fuel will come from households with incomes of more than £15,000 a year, as a result of the massive package of benefit measures that we have also introduced.

PRIME MINISTER --

Kashmir --

Q1. Mr. Cox : To ask the Prime Minister how many independent observers have been allowed by the Indian authorities to visit the Indian occupied area of Kashmir since his visit last year.

The Prime Minister (Mr. John Major) : A number of independent observers have visited Kashmir since January 1993. They include parliamentarians, jurists, diplomats, journalists and human rights groups. The Indian Government have also recently agreed to a visit by the International Committee of the Red Cross.

Mr. Cox : I note that reply. Is the Prime Minister aware, however, that the Indian Government are reluctant to allow independent observers to visit the occupied area ? Indeed, they refused to allow an all-party group from the House to go there.

Is the Prime Minister aware that the forthcoming visit of the Indian Prime Minister gives him an opportunity to make known to that gentleman the deep revulsion felt by many hon. Members about the on-going attacks and brutality perpetrated by the Indian security forces against men, women and children in occupied Kashmir ? Will the right hon. Gentleman assure the House that he will make that known ?

The Prime Minister : I look forward to Prime Minister Rao's visit to this country. We have excellent relations with the Indian Government, and I look forward to discussing a range of matters with him. As for access for independent national groups, we have encouraged the


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Indian Government to allow independent access to India. There have been steps towards greater openness in recent months, and I thoroughly welcome that.

Mr. Jessel : Is this not just one more attempt by Opposition Members to wreck Britain's excellent relationship with a most friendly Commonwealth country ? Will my right hon. Friend not only welcome India's own decision to set up a human rights commission but remind all the independent observers that terrorists are murderers, and that the most important human right is the right to stay alive ?

The Prime Minister : As my hon. Friend says, we have an excellent relationship with the Indian Government, both politically and in terms of a greatly increased flow of two-way trade with India. As for my hon. Friend's second point, I think that we shall soon have a report from the Indian human rights commission, and I look forward to that. I understand that it will deal with a wide range of issues that have been drawn to the commission's attention.

Engagements --

Q2. Mr. O'Hara : To ask the Prime Minister if he will list his official engagements for Thursday 3 March.

The Prime Minister : 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. O'Hara : Does the Prime Minister share the President of the Board of Trade's low opinion of the legal advice offered by the Attorney- General ?

The Prime Minister : That is not the position of my right hon. Friend the President of the Board of Trade.

Mr. Thurnham : Does my right hon. Friend welcome the news that nearly 2 million North Western electricity board--NORWEB--customers are to benefit from a 6 per cent. cut in the price of their electricity from 1 April ? Coming on top of a cut of nearly 2 per cent. last summer, does that not prove that privatisation works ?

The Prime Minister : I believe that that is certainly the case. There have been significant reductions in fuel prices in recent years, and I welcome that.

Mr. John Smith : Madam Speaker-- [Interruption.]

Madam Speaker : Order. What a total waste of valuable time in Prime Minister's questions.

Mr. John Smith : Concerning the excessive pay awards of top executives, does the Prime Minister agree with the Chancellor of the Exchequer's comments today, or does he maintain his own response of a few weeks ago, that it is not a matter for him ?

The Prime Minister : I set out in the House, from memory, to the former right hon. Member for Blaenau Gwent and, before that, to the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley), my view that excessive pay awards are not justified. I equally maintain the point that that is a matter between employer and employee or company and management rather than a matter for the Government, but my personal view remains as first set out in the House to the right hon. Member for Sparkbrook in 1991.


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Mr. John Smith : The Prime Minister has clearly said contradictory things, because he told us that it was not a matter for him. Whatever he says, does he not notice that those top executives do not pay a blind bit of notice ? They carry on regardless, relentlessly increasing their pay and their perks. At the same time, pay restraint is imposed on millions of people with modest incomes. Is that not inconsistent, unfair and hypocritical ?

The Prime Minister : My right hon. and learned Friend the Chancellor and I have said precisely the same thing on that issue and, as I indicated to the right hon. and learned Gentleman and he might have the grace to acknowledge, I first said it in 1991.

Mr. John Smith : Does not the Prime Minister yet appreciate the anger felt throughout the country at massive pay increases for top people occurring at the same time as massive tax increases for the rest of the country ? Why are the Government so soft and indulgent on the very rich but hard and unfair on everyone else ?

The Prime Minister : As the right hon. and learned Gentleman has returned to the same point three times after having two answers, I will now quote to him what I said to the right hon. Member for Sparkbrook in 1991 :

"I made it perfectly clear when I was Chief Secretary that I do not believe that excessive salary increases are right."--[ Official Report , 1991 ; Vol. 193, c. 857.]

That still remains my view. [Interruption.] For the hon. Gentleman who shouts, "What are you going to do about it ?" may I say that this happens to be a free capitalist country, in which companies determine their wages. I take it from this that the right hon. and learned Gentleman would himself interfere with companies in the payment of employees and the payment of management by the companies themselves. If that is so, it blows out of the water any of the Labour party's modernising ideas of understanding free enterprise.

Mr. Churchill : Is my right hon. Friend aware that last week's sacking of 7,000 British soldiers from the Army is deeply regrettable, and indeed mistaken, bearing in mind that the British commander of the UN force in Bosnia has now repeated three times his request for more troops ? Can my right hon. Friend now give a positive response to that request by a British general in the field ?

The Prime Minister : As my hon. Friend knows, we set out the position in "Options for Change" some time ago and the redundancies that were announced--

Mr. Churchill indicated dissent .

The Prime Minister : My hon. Friend may shake his head, but it happens to be a matter of fact and record. We set out the decisions on "Options for Change", and this measure implemented that decision, taken some time ago.

As for the request for troops in Bosnia, my hon. Friend will know that we have a significant contingent already in Bosnia, who have done magnificent work. If a request is made to the United Kingdom, we would of course consider providing more forces proportionately as part of a wider international effort.

Mr. Ashdown : May we take it from that answer that our Prime Minister and our Government really are prepared to let go to waste the peace that has been obtained by General Rose in Sarajevo during the past two weeks,


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rather than this country backing a request, made by a British general and supported by his own chiefs of staff, for more troops to ensure that that peace succeeds ?

The Prime Minister : The right hon. Gentleman yet again mistakes the position. It was the British Government who moved troops in to Sarajevo to ensure that the peace negotiated by General Rose and the corralling of weapons brought about by General Rose was able to be properly monitored. For once, the right hon. Gentleman might have the grace to acknowledge what we have done rather than carp and criticise inaccurately.

Mr. French : Does my right hon. Friend agree that, if the British economy is to remain competitive in the future, it is essential that our children are trained now in the skills that they will require in the 21st century ? Will he therefore join me in welcoming the announcement of the 12 technology schools, one of which is in my constituency and one of which I attended ?

The Prime Minister : My hon. Friend is right in his diagnosis. We certainly face greater competition in the years ahead and we will certainly need greater skills. One of the ways of obtaining them is the greater diversity in education brought about by the new technology colleges. I hope that many other schools and businesses will follow the lead set by those colleges.

Q3. Dr. Wright : To ask the Prime Minister if he will list his official engagements for Thursday 3 March.

The Prime Minister : I refer the hon. Member to the answer I gave some moments ago.

Dr. Wright : In the light of the Prime Minister's emphasis on the importance of personal responsibility, does he welcome the clear statement from the Chancellor of the Exchequer that he will resign if his conduct is criticised by Lord Justice Scott's report ? Will the Prime Minister make an equally clear statement and will he expect the same of other Ministers ?

The Prime Minister : I have said repeatedly that I propose to make no comment on Lord Justice Scott's report. I propose to make no comment of any sort on Lord Justice Scott's report until he has reported. I set up that report and I gave it very wide terms of reference. I have assured Lord Justice Scott-- [Interruption.]

Madam Speaker : Order.

The Prime Minister : I am grateful-- [Interruption.]

Madam Speaker : Order. Ms Armstrong.

The Prime Minister : I am grateful to you, Madam Speaker. I have assured Lord Justice Scott that he will have the power and authority that he needs to complete his report satisfactorily, and I believe it follows from that that I should make no comment until I have that report.

Q4. Mr. Anthony Coombs : To ask the Prime Minister if he will list his official engagements for Thursday 3 March.

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


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Mr. Coombs : Does my right hon. Friend welcome recent surveys which show that council tax bills this year will rise less than the rate of inflation ? Does he agree that the revenue support grant settlement was correct in estimating needs for local councils, and is not that in stark contrast to the waste, inefficiency and nepotism of many Labour-controlled councils, especially that in the constituency of the Leader of the Opposition ?

The Prime Minister : I believe that the news that council tax bills are on average likely to rise less than the rate of inflation is very welcome indeed and I believe that it shows that the local government settlement was very finely judged. That is, of course, very different from what was said by the hon. Member for Blackburn (Mr. Straw) who predicted at the time that the council tax would rise by four times the level of inflation. Clearly, he was scaremongering or wrong, or both.

Mr. Galloway : Does the Prime Minister have a message for Nabil Shaath, the chief Palestinian negotiator, who is in Parliament this afternoon ? In view of the fact that, since last Friday's massacre in Hebron, the Israeli army has shot down more people than were shot by the murderer in the mosque, will the Prime Minister support a protection force made up from the United Nations or at least the co-sponsors of the peace process to protect the Palestinians under illegal Israeli occupation ?

The Prime Minister : I think that violence from any source in that powder keg of the middle east is to be regretted, whether it comes from the dreadful massacre at Hebron or any other source. There are some United Nations observers there and I believe that they are doing an extremely good job. I had the opportunity of discussing that with the Secretary-General just the other day. What would be most helpful would be if, as soon as it seemed politically practicable, the two sides were to sit down again and continue with the negotiations that have made more progress in the past 18 months than for many years past. I believe that everyone wishes to see a comprehensive peace settlement that will enable the people who live there to live a decent, civilised and safe life.

Q5. Sir John Hannam : To ask the Prime Minister if he will list his official engagements for Thursday 3 March.

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

Sir John Hannam : During his visit to the United States, and remembering his excellent record as a former Minister with responsibility for the disabled, did my right hon. Friend observe the remarkable increase in the number of disabled people in America who are now attaining full, normal employment as a result of President Bush's anti-discrimination legislation ? Will my right hon. Friend support our efforts in the House further to remove the barriers facing disabled people ?

The Prime Minister : I share my hon. Friend's desire to end discrimination against disabled people. I have asked my right hon. Friend the Minister for Social Security and Disabled People to identify further practicable and affordable ways to combat discrimination. There is much that may be done and I have asked my right hon. Friend to examine that matter.


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