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Interest Rates

Volume 975: debated on Monday 3 December 1979

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asked the Secretary of State for Wales what special attention he will give to the problems of the small companies and firms in Wales during the continuance of high interest rates; and if he will make a statement.

My Department and the agencies for which I am responsible recognise the important role of small firms in the economy and will do all we can to help them. High interest rates for a period are unavoidable if we are to succeed in controlling inflation, which is essential to a successful future for our small businesses.

Is my right hon. Friend aware that among the companies that have approached me recently there are many that recognise the paramount importance of containing inflation? However, will he bear in mind that many small firms have had a decade or more of difficult conditions and have not been able to acquire great reserves and are therefore peculiarly dependent upon overdrafts and other forms of borrowing?

I am sure that my hon. Friend is right, but it is a prime requirement that we defeat inflation. No one will suffer more disastrously from continuing inflation than the small business sector. We have taken, and are taking, a number of measures to help that sector. The Budget was an important first step in that programme, which will include many important measures to revitalise the small firms sector and to remove the unnecessary obstacles to their success.

Does the right hon. Gentleman agree that the increase in MLR from 12 per cent. to 17 per cent. was partially due to the Budget, which gave tremendous concessions to the wealthy? Will he consider restoring the regional development grants to Wales, because their absence is hitting small businesses? Will the right hon. Gentleman also consider the provision of small factories in the advance factory programme that we expect him to announce shortly?

I notice that the hon. Gentleman is again advocating higher public expenditure. The high level of that expenditure is the reason for present high interest rates. I have already told the hon. Gentleman that more than 90 per cent. of the advance factories being built by the WDA are being constructed for the small business sector.

Does the right hon. Gentleman accept that high interest rates have an adverse effect on the liquidity of small companies? Will he consider not lengthening the waiting period for payment of industrial development grants to companies that have already been given approval of grants and have gone ahead with investment programmes on the assumption of lower interest rates, but are now being caught in a trap because of the liquidity problem?

If any individual company is faced with a particular problem we shall look at the circumstances to see whether we can help, and the Welsh Development Agency will do likewise.

Since the Conservatives, in their election manifesto, posed as the friends of small business men, and since they rely on the notion of mandate, can the Secretary of State say where in the Conservative manifesto there is a mandate for the current high interest rates?

The policy for which we sought a mandate was to restore the economy and to defeat inflation. We always said that the defeat of inflation was our first and most immediate priority. The previous Government inreased expenditure in an effort to win the general election, and they left us with a rapidly rising rate of inflation. We are now suffering the consequences, and we shall take determined action to defeat inflation.