Budget Statement

Lord Lang of Monkton Excerpts

Friday 12th March 2021 Lords Chamber

[Lord Lang of Monkton (Con) [V]]

My Lords, I welcome the five new noble Lords, who are joining us unmuted today. It is also a pleasure to follow the noble Lord, Lord Campbell-Savours. Just over 40 years ago, when he and I had been elected to the other place for the first time, we were invited to subscribe to the introduction of a tight monetary policy to tackle the nation’s severe problems and send the IMF packing. I cannot speak for the noble Lord, but I supported it fervently. This was not because I supported the ideology; I do not believe in ideologies where money and the economy are concerned—there are too many variables, and change can be sudden and unexpected. But I believe in doing what seems the right thing at the right time according to the circumstances.

Today, the circumstances are wildly different, and I think my right honourable friend the Chancellor’s handling of both the pandemic itself and now, as we hope, the aftermath, has been absolutely right. The Keynes doctrine of changing one’s mind when circumstances change has never been more apt. We must now capture the tide of an expected growth rate in the economy of 4% this year and 7.4% next year: the coiled spring of pent-up demand. Spending and investment become very important indeed at that stage in forming, we hope, a sustained recovery. That is what the Budget should do, with powerful incentives for companies on investment and public duty. At the same time, the Chancellor has to signal strongly to the wider world that he is determined to tackle our debt when our exposure is serious, and bring things back towards a steadier discipline. The future of corporation tax changes and the freezing of personal allowances signal that, and they should not affect the recovery.

The biggest threat to recovery is inflation. Loose money supply, once thought to be disinflationary with low interest rates, is now seen as the reverse, especially if its velocity of circulation grows as the economy expands. As we all know, where inflation rises, interest rates follow. I hope and feel sure that the Chancellor is already watching this carefully, as inflation could be the next enemy.