§ Mr. John Garrett
asked the Chancellor of the Exchequer how many covenants in respect of public school fees do not run for seven years; how many therefore forfeit the tax benefit available; how much forfeited tax was recovered in the last recorded year; and how much was not recovered.
§ Mr. Peter Rees
I am afraid the information requested in the first part of the question is not available. As regards the rest of the question, I should explain that to be effective for tax purposes a deed of covenant has to provide for a payment period which is capable of exceeding six years, but when payments under such a covenant cease before that period has expired any tax benefit already obtained is not forfeited.
§ Mr. Austin Mitchell
asked the Chancellor of the Exchequer, further to his reply of 4 February concerning the relationship between public expenditure and the rate of inflation, whether the principal objective of the proposed further reductions is to raise the exchange rate to make British industry less competitive at home and abroad; and if he will describe in the Official Report the transmission mechanism between the borrowing requirement, monetary growth and the exchange rate on the assumption (a) that the requirement is fully funded and (b) that it is not.
§ Mr. Lawson
The principal objective of the proposed further reductions in public expenditure below the plans of the previous Government is to assist in the battle against inflation. The borrowing requirement has a lesser impact on monetary growth if it is fully funded than if it is not, while the relationship between monetary growth and the exchange rate is broadly inverse.