My Lords, it is a pleasure to follow the noble Lord, Lord Macpherson, not least because he started his speech on exactly the same point I was going to make, referring to Iain Macleod’s famous dictum that a Budget that looks good on Budget day may look a lot less good a few weeks later. It has never been clearly established whether the reverse of that is true: that a Budget which is unpopular on Budget day turns out to be a lot better on reflection.
In any event, the issue that caused the most controversy the day after Budget day—NICs—needs to be considered very carefully, not least because the Chancellor got support from both the Institute for Fiscal Studies and the FT leader on the subject. I think there is some justification for what he did. Some little while ago I had the honour and pleasure of serving on your Lordships’ Select Committee on Personal Service Companies. We came to the clear view that there was a strong case for integrating national insurance and taxation altogether. Alas, that is very complicated and not something we can do at present.
I will make one other point on the controversy over national insurance contributions. It is unfortunate that the Prime Minister intervened in this matter because it is very important indeed that in the present circumstances and against the background of Brexit, we should give the Chancellor every possible support we can.
I am worried that there is insufficient integration between fiscal policy and monetary policy at the moment. The Governor of the Bank of England has been very good in responding to the position as far as Brexit is concerned. He thought there was a danger of a decline in activity and adjusted interest rates accordingly. His problem, of course, is that the effect of Brexit has been to lower substantially the rate of exchange. This is bound to have an inflationary effect and he may have to put up interest rates in the opposite direction.
The same situation is broadly true as far as fiscal policy is concerned. But, to my surprise, in the Budget the Chancellor did not really outline what he thought the challenges of Brexit were. In fact, very little reference was made to Brexit in the speech and clearly there is going to be a very real problem. It would have been helpful if the Treasury and Chancellor had spelled out the real dangers. I believe they are very profound.
The noble Lord who spoke immediately after the Minister said that in the referendum people did not vote to be poorer. Regrettably, that is probably precisely what they have done. Therefore, getting the right balance and the right Budget judgment at the present time presents a very real challenge for the Chancellor. I hope that he can subsequently spell out these issues in more detail, and integrate them more with monetary and fiscal policy.
Other points can be argued both ways. I find it rather strange to change the dividend allowance so soon after the proposals in last year’s Budget. On the other hand, I particularly welcome the proposals on social care: this will be the greatest challenge—other than Brexit—we face in the future.
Overall, therefore, this is very much a neutral, standstill Budget. We shall have to see how things develop in the background. However, it is clear from the excellent report recent report from the European Union Committee, Brexit and the EU Budget, that as a result of Brexit, a lot of costs will not have been adequately analysed. We are going to go through a very difficult period as a result.
I am running out of time. I thought that today I was going to make a speech on what the Chancellor has rightly described as his last spring Budget. It will indeed be the last spring Budget. I discovered that I had spoken in not a mere 50 spring Budgets but 53, other than this one. We must wish the Chancellor well. I hope that he succeeds, not least on the very important matter—also raised by others—of reducing the deficit. When the Chancellor of the day first tried to cut the deficit, I said that it was going to be immensely difficult. I have been through that experience at the Treasury. None the less, the deadline for getting things in balance is moving ever further forward. It is essential, despite the unpopularity of austerity, for the Chancellor to continue that line of attack.