§ Q2. Mr. William Hamiltonasked the Prime Minister what are her official engagements for 15 November.
§ The Prime MinisterThis morning I presided at a meeting of the Cabinet. In addition to my duties in this House I shall be having further meetings with ministerial colleagues and others. This evening I shall be attending a banquet given by President Soeharto of Indonesia.
§ Mr. HamiltonWas the Cabinet meeting this morning happy and agreeable? When the right hon. Lady was appointed to her high office last May, did she imagine that she could produce such a shambles in such a short time? Can she give an assurance that we will not be plunged much deeper into the mire before she does a U-turn on incomes policy?
§ The Prime MinisterAs usual, the Cabinet was united this morning—[Interruption.]
§ Mr. SpeakerOrder. Hon. Members are merely reducing the time for questions.
§ The Prime MinisterAs usual, the Cabinet was united this morning in its determination to carry through those policies upon which the Conservative Party fought and won the election. The question behind the supplementary question of the hon. Member for Fife, Central (Mr. Hamilton) perhaps refers to the interest rates announced today. With the expansion in borrowing that we are facing, the alternative was either to raise interest rates, as we did, or to print money. We would not print money, and it was necessary to raise interest rates to conquer inflation. With Government borrowing as high as it is—it would have been higher had the Labour Party been in office—we must have interest rates high enough to get in the money to pursue existing expenditures. I shall be grateful for the hon. Gentleman's support in getting down public expenditure so that we may get down interest rates.
§ Mr. HannamWill my right hon. Friend take time off today to explain to the British miners that it is impossible to reconcile their complaints about the importation of cheaper coal from abroad with the exorbitant pay demands that they are now making?
§ The Prime MinisterThe issue of importing cheaper coking coal is vital for the British Steel Corporation, which already has many difficulties. Coking coal from the National Coal Board costs about £40 a ton. The imported coking coal costs about £30 a ton. It is necessary for the steel industry to have minimal raw material costs to stay competitive.
§ Mr. FootIn view of the reply that the right hon. Lady gave a short while ago, will she say when she mentioned a 17 per cent. minimum lending rate during the election? If she does not have the date handy, will she publish it in the Official Report?
§ The Prime MinisterMay I welcome the right hon. Gentleman back? The right hon. Gentleman knows that our policies about fighting inflation were never in doubt. We do not flinch from taking the steps necessary to tackle inflation. There were times when my predecessor had to increase interest rates. With borrowing expanding as it was, we had to put up the rates. With the present level of public expenditure, we must have the interest 1499 rate high enough to get in the necessary amount in gilts. If the right hon. Gentleman, too, will support us in getting down public expenditure, the interest rates, too, can come down.
§ Mr. FootAs the right hon. Lady says that her policies for dealing with inflation were never in doubt, will she tell us when she mentioned a 15 per cent. rate of VAT in the election?
§ The Prime MinisterIf the right hon. Gentleman read the Conservative Party manifesto, no doubt he found that it stated that a number of decisions on public expenditure had to be taken, that public expenditure had to be reduced, and that we would take the necessary decisions. We also said that we would transfer from direct taxation to indirect taxation, and that we did. I believe that in the end it will result in incentives that will increase the national income.
§ Mr. David SteelDoes the Prime Minister recall the occasion almost a year ago when she told—
§ Mr. SkinnerShe ought to.
§ Mr. SteelShut up. [Interruption.] I am sorry, Mr. Speaker. Does the right hon. Lady recall the occasion a year ago when she told the House that a Prime Minister who had to shove interest rates up to over 12 per cent. was quite hopeless at handling economic affairs? If she still sticks by that view, will she advise this young man how he should regard the economic competence of the present Prime Minister?
§ The Prime MinisterI seem to remember that the reply that I received on the occasion to which the right hon. Gentleman refers, or a similar occasion, was that there was no alternative in the light of the increase in borrowing. If that applied then, it applies now. I must react to the circumstances that face us now. Conditions would have been much easier for us if there had not been the value added tax strikes and problems, and if there had not been the strike that prevented the issuing of telephone bills, which means that we are—[Interruption.]
§ Mr. SpeakerOrder. The House is being unfair. It must listen to the right hon. Lady's answers.
§ The Prime MinisterThat strike means that we shall be short this year of about 1500 £400 million, which means extra borrowing.
§ Mr. BurdenWhen my right hon. Friend took office, did she expect to find foreign overseas borrowings raised by the previous Government amounting to $26.133 billion?
§ The Prime MinisterThe borrowing that took place under the previous Government was of a record amount. Borrowing more than doubled during the lifetime of the previous Government. The whole of the public sector borrowing requirement this year has to go to paying interest on previous borrowing.