§ 15. Mr. Denzil DaviesTo ask the Secretary of State for Wales what assessment he has made of the effect of the recent increase in the minimum lending rate on the development of the economy of Wales.
§ The Secretary of State for Wales (Mr. Peter Walker)I am pleased to say that since interest rates have been at high levels two recent major surveys have both shown considerable confidence in the level of investment and job 20 creation within the Welsh economy. In the first five months of this year the excellent record of Wales for inward investment continued. As the right hon. Gentleman will know, in 1988 Wales achieved the record both for jobs and for finance for inward investment. Unemployment continues to fall, and last year's 2.5 percentage point reduction in the Welsh rate was the largest of all the United Kingdom regions.
§ Mr. DaviesDoes the right hon. Gentleman agree that inward investors might in the short term be able to cope with interest rates of 14 or 15 per cent. but that 95 per cent. of the Welsh economy is indigenous and is not concerned with inward investment, and that that sector has been damaged by high interest rates? Does the Secretary of State agree that it would be better to have a monetary and fiscal mix and to restore some of the cuts made in higher-rate taxes two years ago, thereby taking pressure off interest rates and to some extent redistributing wealth from the more prosperous regions of Britain to the less prosperous, such as Wales?
§ Mr. WalkerA great deal of the investment activity in Wales is very much concerned with the indigenous industries, and that is true in the hon. Gentleman's constituency. A recent survey carried out by the Institute of Directors in Wales showed that the majority of firms there expected an increase of 10 per cent. or more in their labour forces in the coming 12 months. Another factor of considerable importance to Welsh industries is the level of company profits that has enabled those investment programmes to take place.